Case U154

Members:
RK Todd DP

Tribunal:
Administrative Appeals Tribunal

Decision date: 20 July 1987.

---

R.K. Todd (Deputy President)

The applicant is a public servant who, in addition to his public service salary, derived assessable income from, inter alia, investments in the Hooker Property Investment Trust No. 2 and the Hooker Future Growth Fund No. 5.

2. Deductions were claimed by the applicant in respect of the year of income ended 30 June 1982 for $1,050 incurred in the form of a "service fee" of 7 cents per unit for each of the units which he had purchased in the Hooker Investment Trust, $374 for travelling expenses incurred when he visited some of the properties purchased by the Hooker Growth Fund, and $232 in relation to "home office" expenses for a room in his house from where, the applicant said, he managed his investments.

3. The facts relating to the "service fee" are very similar to those in Case U53,
87 ATC 351, with the only differences being the quantum of the sums invested and the fact that in Case U53 the Hooker Growth Fund No. 4, rather than No. 2, was invested in initially. I agree with and adopt the findings of Mr B.J. McMahon, Senior Member, in Case U53 at p. 354 that "the so-called service fee is no more than a thinly disguised addition to the capital cost and forms part of the capital cost of the acquisition of the assets".

4. Due to the exculsion of outgoings of a capital nature contained in sec. 51(1) the amount of $1,050 is not deductible.

5. The travelling expenses were made up of $60 repairs to the applicant's motor cycle, and $314 which was calculated on a per kilometre basis using a rate specified for vehicles of up to 1500cc engine capacity as set out in the 1982 Form A and B Instructions provided by the Australian Taxation Office.

6. The evidence relating to the applicant's journeys was that on one occasion he had gone to Sydney on his motor cycle, inspected a property owned by the Trust from the outside and then returned to Canberra. On another occasion he had gone to Melbourne, where he walked through the Royal Arcade, which was owned by the Trust. He was seemingly unimpressed by the Trust having invested in a "heritage" property. The applicant stayed at a caravan park in Geelong, some 75 km beyond Melbourne, and later returned to Canberra. On neither of these occasions did the applicant make his presence known to the management of the properties or inspect financial or other records relating to those properties. Considering the nature of these visits, I find that the expenditures incurred in relation to them were not incurred in gaining or producing assessable income but were rather for the private purpose of satisfying the applicant's curiosity in relation to properties owned by the Trust. I see little greater connection between the production of income and the expenditure incurred in relation to these trips than would have been achieved had the applicant instead gone to view the building in which Hooker had its head office.

7. As there is, in the Tribunal's view, no connection between the claimed expenditures and the gaining or producing of assessable income, neither the travelling expenses nor the expenses of repair of the applicant's motor cycle are available as a deduction to him.

8. In 1984 the Taxation Board of Review No. 3 heard an appeal in respect of the applicant's assessment in respect of the year ended 30 June 1981. In that decision the Board allowed an amount of $3 being a proportion of the amount incurred as contents insurance, but disallowed claims for repairs to the house. Reference was made by the Board to
Thomas v. F.C. of T. 72 ATC 4094,
F.C. of T. v. Forsyth 81 ATC 4157 and
Handley v. F.C. of T. 81 ATC 4165. While the applicant argued before me that these decisions did not apply in his case as his "office" was the only location from which he operated his investments, I find that the amount of use made of the room was insufficient to remove from the room that predominantly private and domestic nature which is due to its physical integration with the rest of the applicant's home.

9. The amount of use of the room for "business purposes", which according to the evidence was only a few hours per week, renders impossible a finding that any of the expenses incurred in relation to it were incurred in gaining or producing assessable income, and consequently no deductions are allowable under sec. 51, 53 or 74 of the Act.

10. For the above reasons the Tribunal affirms the objection decisions under review.