Case V39
Members:PM Roach SM
Tribunal:
Administrative Appeals Tribunal
P.M. Roach (Senior Member)
During 1985 the applicant, a member of the Parliament of the Commonwealth, became eligible for overseas travel assistance as provided for in the determination of the Remuneration Tribunal 1985 Review: a review made pursuant to the provisions of the Remuneration Tribunals Act 1973. The Remuneration Tribunal had provided for such entitlement in a section of its review which provided:
``OVERSEAS TRAVEL
9(1) A senator or member shall be entitled to financial assistance from the Government in order to enable him to travel outside the Commonwealth of Australia for the purpose of undertaking studies and investigations of matters related to his duties and responsibilities as a member of the Parliament.
9(2) The conditions upon which such financial assistance may be obtained and used are as follows:
- ...
- (ii) after becoming eligible for the entitlement a sitting senator or member shall be credited with an amount of money equal to the cost of a round-world (Canberra-London-Canberra via Eastern Hemisphere Route and Atlantic-Pacific Route) first class air fare, which credit may then be drawn upon by the senator or member for overseas study travel pursuant to these conditions;
- (iii) the credit as defined in sub-paragraph (ii) shall be made to an eligible sitting senator or member once only in the life of each Parliament...
- (iv) for the purpose of this entitlement `nominee' means a person with whom the senator or member has established a bona fide, stable domestic relationship;
- (v) this credit may be used by a senator or member for the cost of:
- (a) fares, including charter and hire transport charges,
- (b) fares of a spouse, or nominee as defined, accompanying the senator or member on an overseas study journey,
- (c) accommodation and subsistence costs actually incurred by the senator or member, spouse, or nominee as defined, up to a maximum of one third of the cost of fares, including charter and hire transport charges, and
- (d) travel by sea but not the cost of ship cruises;
- (iv) this credit is available for use on more than one overseas study journey;
- ...
9(4) The entitlement of a senator or member to travel at government expense within Australia on parliamentary or electorate business shall not be used to offset the cost of overseas study travel.''
2. The applicant placed in evidence a copy of an 1892 report of a committee of the Legislative Assembly for the State of New South Wales. It confirmed that the right of free travel for the wives of parliamentarians was already recognised in 1891. The same report, which related to railway travel for a couple between Sydney and Melbourne shortly prior to the first Tuesday in November 1891, also indicated that such privileges can be misused. The committee found that an unmarried member of Parliament had improperly obtained a travel pass for a lady by representing her to be his wife. No such misconduct arises in this instance.
3. The applicant arranged a flight itinerary for himself and another for his wife. Save that she would only depart Australia a week after the applicant departed and would then join him overseas, they were to travel together and they did so. While they were away they arranged for a qualified mothercraft nurse to reside in their home and there care for their children. (The eldest child was then 13 years.) The nurse was to be responsible for all matters pertaining to the running of the home which were ordinarily the responsibility of the applicant's wife. Those responsibilities of the wife, not surprisingly, extended to a wide range of activities supportive of her husband in the discharge of his responsibilities as a member of Parliament representing all the persons of his electorate. It was not suggested that the ``baby-sitter'' - the term used by the eldest child in giving evidence - would be able to carry out those
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responsibilities as thoroughly as the applicant's wife, but none the less, it was her responsibility to ensure that persons wishing to call on their elected representative should not find the door of his home simply closed to them. The applicant took the view that it was as important to provide service to persons calling for him at his home as it was to provide service to those seeking to establish contact at his electoral office. That office was serviced by three members of secretarial staff.4. Upon his return to Australia, the applicant presented details of most of the expenses he had incurred on account of his wife and himself to the Special Minister of State and, in due course, he received payment of the sum of $1,904. The amount he received was not attributed by the Minister to any particular item of the expenses the applicant claimed to have incurred.
5. On 15 August 1986 the applicant presented his income tax return and it was then that he presented to the Commissioner a claim for a deduction in the sum of $2,891 made up as follows:
Overseas expenses ................................... $2,751
Additional expenses (Australia) ..................... $2,044
------
Total ............................................... $4,795
Less reimbursement .................................. $1,904
------
Deduction claimed ................................... $2,891
------
The Commissioner analysed the detail presented in support of that claimed deduction and then set out to adjust the deduction claimed:
- (a) by reducing by one-half amounts claimed for accommodation and ground transport; and
- (b) by excluding altogether snow-shoes, meals and departure tax for the spouse; Inter-Parliamentary Union presentation items and gifts ($146); and the fee to the mothercraft nurse.
Having carefully done that analysis the deduction claimed was disallowed to the extent to which it exceeded the allowance received. However, even though the amounts to be disallowed had been calculated at $3,796, no portion of the allowance was treated as increasing taxable income. The result was that at that stage allowable expenses ($999) were treated as equal in amount to the allowance received ($1,904). In summary, the result then was:
Disallowed Allowed
$ $ $
Overseas expenses as stated in 1986 return 2,751 1,873 878
Additional Australian expenses stated in
1986 return 2,044 1,923 121
----- ----- -----
4,795 3,796 999
Less reimbursement by Commonwealth
Government 1,904 1,904
----- ----- -----
Deduction claimed 2,891 2,891 Nil
6. To complicate matters five foreign currencies were involved; and the only details available to me relate to a period before an error in conversion calculations was discovered and adjusted by an amended assessment. On the figures the amount which then came to be in dispute was $3,305, made up as follows:
Applicant's original claim to Minister $
- overseas 2,751
- Australia 2,044
-----
4,795
Plus - to correct error in conversion
rate 800
-----
5,595
Less - allowed $
Allowance received 1,904
Conversion factor 240
Gifts 146 2,290
------ ------
In dispute 3,305
------
As a result the items in dispute were identified and quantified as:
$
Departure tax - spouse 20
Children's nurse
The claim for ``snow-shoes'' was abandoned at the hearing.
7. As a result of the amended assessment and concessions made at the hearing, it is agreed that the issues to be resolved are:
- (a) whether the sum of $1,904 constituted assessable income of the applicant;
- (b) whether the amount to be allowed in relation to shared accommodation should be limited to half the cost, as contended by the Commissioner;
- (c) whether any amount should be allowed in relation to other expenses such as meals and transport relating to the applicant's wife;
- (d) whether any part of the $1,825 paid to the mothercraft nurse should be allowed as a deduction; and
- (e) whether the allowance of $1,904 should have been applied firstly by way of off-set against expenses incurred in respect of the wife or in the provision of the nurse with only the surplus, if any, to be brought to account in determining the deductions allowable to the applicant.
8. A notice of assessment issued on 9 September 1986 and, following objection made 30 October 1986, the Commissioner reviewed the objection and gave notice of partial disallowance of the objection on 6 February 1987. The applicant requested reference to the Administrative Appeals Tribunal for independent review on 1 April 1987 and 15 days later the request was complied with. I was informed at the hearing that that circumstance reflects current practice on the part of the Commissioner whereby requests for reference are transmitted as soon as possible. Having had recent experience in which applicants of less social status than the applicant in this reference have had to wait over nine years to have their requests for reference complied with, I can only commend the new practice.
9. At that point it might have been reasonable to expect that the matter would take its place in turn behind the vast number of undetermined requests for reference which had accumulated with the Commissioner over the years and had only been transmitted to the Boards of Review and to this Tribunal in more recent times.
10. However, with a proper persistence and probably a greater awareness of his rights as a citizen than most, on 6 May 1987 the applicant wrote to the Commissioner requesting information as to a hearing date in relation to his decision. The Commissioner promptly replied advising that the matter had already been referred to this Tribunal. On receiving that advice on 25 May 1987, the applicant wrote to the Tribunal making the same enquiry. In accordance with the common practice in this Registry, action was then taken in response to the initiative of the applicant. The matter was listed for a preliminary conference on 10 July 1987 and came forward for hearing before me on 25 September 1987. I had hoped that the matter would have been heard and determined within 12 months of the dispute arising. However, a back-log of other decisions caused delay in the delivery of these reasons with the result that more than one year has passed since objection was made; although less than one year since the request for reference was made.
11. The determination of taxable income required to be made for all taxpayers is that:
``... the total assessable income derived by (the taxpayer) during the year of income shall be taken as a basis, and from it there shall be deducted all allowable deductions''
in order to calculate the taxable income of a taxpayer (Income Tax Assessment Act sec. 48).
``Total assessable income'' includes all that falls within the concept of income expressed (but not defined) in sec. 25 of the Act, but excludes exempt income. It includes in appropriate cases ``the value to the taxpayer of all allowances... granted to him in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by him, whether so... granted in money, goods, land, meals, sustenance, the use of premises or quarters or otherwise,...'' (sec. 26(e)).
12. Before addressing directly the questions which need to be resolved it is appropriate to comment on two side issues. It was suggested that the provision of the journey for the wife at the expense of the community and her husband was by way of community recognition of her
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services to her parliamentarian-husband. Such a view of the matter invites the comment that the journey constituted a reward for her services to the electorate and the community and that, in consequence, she should be assessed to income tax upon the value to her of the journey. I am not persuaded that such an analysis is appropriate or correct. Secondly, it was suggested that the provision of the monetary allowance by Government was indistinguishable from the provision of air travel facilities for the husband on the occasion of this journey overseas and other such journeys and even in the course of providing for his routine attendance upon the Parliament in Australia. I reject that. That travel was provided to enable the applicant to carry out the duties of his office. It enabled him to discharge those duties and, to the extent to which he did so, conferred no taxable benefit on him. Whether a taxable benefit would have been derived had he availed himself of the facility to engage in merely recreational and private pursuits does not need to be considered in this reference. In this instance I accept that the applicant was diligent about the discharge of his responsibilities and that such pleasure and private satisfactions as he experienced were incidental to that.The travel allowance
13. However, the provision by Government of a monetary sum of $1,904 stands on a different footing. The applicant received $1,904. It was paid to him to enable him to recoup in part expenses he had incurred. It came to him by virtue of his office and the value to him was not to be distinguished from the amount he received. In my view the allowance constituted assessable income just as surely as the ``electoral allowance'' (returned as assessable income by the applicant) constituted assessable income. Further, I am of opinion that, in the case of both allowances, that view of the matter will be without tax effect if the allowance merely enables a taxpayer to recoup expenditure which has been incurred and which is allowable as a deduction pursuant to the provisions of the Income Tax Assessment Act 1936 (``the Act''). That that is so is reflected in the way in which the applicant accounted for his electoral allowance in his return of income. He recorded the electoral allowance received ($15,869) as assessable income and, in his return under Item 39 ``Deductions Relating to Allowances Included in Items 6(c), 6(d) and 6(f)'', claimed the like amount as a deduction, stating:
``Electoral allowance fully expended on purpose for which it was given.''
14. The claim so made was allowed and the correctness of that was in no way in dispute before me. However, I merely observe that if, perhaps in his last term of office, a member of Parliament had chosen to expend no portion of the electoral allowance so granted to him, there would have been no entitlement to any income tax deduction in relation to that allowance. That view accords with the reasoning which led to the conclusion in Case U148,
87 ATC 868. In that case, a medium-distance truck driver, working in New South Wales, was required to be on the road in the course of his duty for up to 18 hours in any one day. On such days he partook of meals ``on the road'' and claimed a tax deduction for the expenses incurred in doing so. The Commissioner disallowed the claims on the basis that the meal expenses were private although, it seems, the matter would have been thought to be of no tax significance if that applicant had been fortunate enough to have received a travelling allowance from his employer and had used it to buy the meals. In my view that approach was fallacious. Such an allowance would have been assessable to the extent not expended on the purchase of meals for which a deduction would have been allowable to a person who received no such allowance. In my view the latter principle applies in the circumstances of this applicant.
Shared accommodation
15. One reason for not delivering this decision earlier was a desire to first deliver a decision in Case V15,
88 ATC 177 on a similar issue. In that case a distinguished academic economist presented an ``economic'' argument as to the principles of apportionment to be applied in similar circumstances. (A copy of that decision will be provided to the applicant with these reasons.) Applying the principles expressed in that decision I am satisfied that, to allow only 50% of the expenses incurred by the applicant in providing for the accommodation of his wife and himself in the course of travel is not an appropriate finding of fact to be made on the question of apportionment. That that should be so is illustrated by the experience the applicant had in relation to the first hotel resorted to on the tour. He resided there for
ATC 340
some nights before being joined there by his wife. Following her arrival there was a small increase in accommodation charges per night. Despite that, the Commissioner would have it that the allowable cost of the husband's accommodation from that point fell by nearly half. The logic of the conclusion may be faultless, but there is more to life than logic. In my view common sense favours a view that, in those circumstances, the costs of the wife's accommodation were more accurately reflected by the additional costs so incurred rather than one-half of the whole. However, bearing it in mind that the accommodation charges commonly included charges for meals and laundry, I would allow only a further $A910.Meals, travel and other expenses
16. For the reasons which find expression in Case V15 (ante) I am not persuaded that the costs of the wife's meals, fares or other personal expenses (including departure tax) exclusively incurred in the course of travel are allowable at all. Accordingly, I would not adjust the assessment on that account. However, I think it appropriate to allow the applicant a full deduction for taxi-fares in the one instance where it was not allowed - as it seems on the exhibits before me. A further $A4 will be allowed.
Re mothercraft nurse
17. It is of fundamental importance in determining this issue to recognise that this is not a case in which Government provided the child-minding and other services which were provided for the applicant by the nurse. The applicant secured the services of the nurse in order to provide for and care for his children. He did so because, without that provision, his wife could not responsibly have accompanied him on his tour.
18. Having regard to the nature of the child-minding services which were provided, I consider that the claim is ``private'' in character within the meaning of sec. 51 of the Act. However, I have also considered whether some allowance should be made by reason of services rendered by the nurse in relation to the applicant's parliamentary and electorate responsibilities. Although the evidence is vague, I am satisfied that some services were rendered and I would allow on that account a deduction of $100.
Set-off
19. I find no merit in any thought that the set-off approach mentioned in para. 5(e) above should be applied. In my view the appropriate approach is that which has been set forth in the preceding paragraphs of these reasons for decision.
Quantum
20. Based on the foregoing considerations, I have concluded that the amounts considered to be allowable as deductions should have been determined to be $2,013 rather than $999 - an increase of $1,014. However, in the process of assessment, the allowance received ($1,904) was treated as the amount of deductions allowable. To the extent that that was done the assessment is not excessive. Accordingly, I would allow a further $109 ($1,014 less $905).
Conclusion
21. The order of the Tribunal will be that the determination of the Commissioner upon the objection under review be varied and that taxable income be reduced by $109.
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