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Case V60

Members:
Purvis J

Tribunal:
Administrative Appeals Tribunal

Decision date: 25 March 1988.

Purvis J. (Presidential Member)

The applications and the issues

These applications were heard together. In each matter a similar, but not the same set of facts, gave rise in the first instance to a common issue in respect of assessments for the years ended 30 June 1982 and 30 June 1983 in relation to NH, 30 June 1982, 30 June 1983, 30 June 1984 and 30 June 1985 in relation to JS, and 30 June 1983, 30 June 1984 and 30 June 1985 in relation to PN.

The taxpayers were, in the relevant years, with their families occupying accommodation provided by their employers. They had housing of their own where they would have preferred to reside. It was either as a condition of their employment, or a preferred situation that their domestic situations were so organised.

The respondent Commissioner of Taxation, so far as NH and PN are concerned, brought to tax pursuant to the provisions of sec. 26(e) and the then sec. 26AAAA of the Income Tax

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Assessment Act what was alleged to be the benefit accruing to the taxpayers from the occupation by them of the residential accommodation so provided by their employers. An ancillary issue, in the event of there being a taxable benefit, is as to whether the proper method of valuing the benefit is to commence with the rental value of the premises being so occupied and then apply the reduction factors detailed in sec. 26AAAA.

In the case of JS the alleged benefit was subjected to tax pursuant to the provisions of sec. 26(e) and the then sec. 26AAAB.

The issues are of principle. It was conceded on behalf of the taxpayers that if there be a benefit to the taxpayer, and if the proper method of valuing such a benefit is in the present circumstances to commence with the rental value of the premises, and then make discounts for the matters referred to in sec. 26AAAA of the Act, then the value of any such benefit is as assessed in each case. It is not conceded that there is, in the present circumstances however, any benefit to the taxpayer or that the method of valuation adopted by the Commissioner is correct. If the method used by the Commissioner is held to be the right approach, then the taxpayers have no quarrel with the figures that have been arrived at by the use of such method.

The issues are thus as to benefit to the taxpayers and the correctness or otherwise of the method of valuation adopted by the Commissioner.

The assessments

The assessments particularised in each of the subject years, and so far as is relevant to these applications, amendments to the returns as lodged, and to the following effect: 

      As to NH:
      1982
      Add -
      Value of accommodation provided increased from $26 to $4,940
      in accordance with subsec. 26(e) and sec. 26AAAA of the
      Income Tax Assessment Act                                          $4,914

      (in 1983 the increase was from nil to $4,940)

      As to PN:
      1983
      Add -
      Value of employer-provided accommodation increased from $26
      to $4,520 in accordance with para. 26(e) and sec. 26AAAA           $4,494

      Note:
      Value of quarters calculated as follows -
      Market rental value                                     $5,720
      Less discounts:
      Customary in industry                          $400
      No alternative                                  400
      Onerous condition                               400      1,200
                                                    -----     ------
                                                              $4,520

      (in 1984 and 1985 the increase was from $26 to $5,025 and from
      $26 to $5,306)

      As to JS:
      1982
      Add -
      Value of employer-provided accommodation increased from $104
      to $416 in accordance with para. 26(e) of the Income Tax
      Assessment Act


                                          $312

      Note:
      Value of quarters calculated as follows -
      1982 Market rental value                                $4,160
      X assessable amount                                      0.100
      1982 assessable amount                                    $416

      (in 1983, 1984 and 1985 the increase was from nil to $456 and
      from nil to $506 and from nil to $534)

The objections

NH by his objections placed reliance inter alia on the following grounds in respect of each of the subject years and in support of his opposition to the assessments as raised:

  • (i) that there is no value to the taxpayer of employer-provided accommodation to be included in his assessable income under sec. 26(e);
  • (ii) that the Commissioner has, in applying the provisions of sec. 26AAAA failed to have regard to all relevant matters and to take all relevant matters into account and make such reduction in the amount that would otherwise be the value to the taxpayer of that benefit as is appropriate in the taxpayer's circumstances and that the reduction should have been $4,940.

PN in his objection to the first of the relevant assessments relied inter alia upon the following grounds:

  • (i) that there is no value to the taxpayer of employer-provided accommodation to be included in his assessable income under sec. 26(e);
  • (ii) that the Commissioner has, in applying the provisions of sec. 26AAAA failed to have regard to all relevant matters and to take all relevant matters into account and make such reduction in the amount that would otherwise be the value to the taxpayer of that benefit as is appropriate in the taxpayer's circumstances and that the reduction should have been $5,720;
  • (iii) that the amount shown in the adjustment sheet as ``market rental value'' is not correctly calculated and that some smaller amount than $5,720 is the correct market rental value;
  • (iv) that the amounts allowed in the adjustment sheet as - 
          ``Discounts
          - Customary in industry          $400
          - No alternative                  400
          - Onerous conditions              400
                                           ----
                                                 $1,200''

are not correctly calculated and that some larger amount than $1,200 is applicable in respect of such discounts. The taxpayer claims that the ``discounts'' applicable pursuant to sec. 26AAAA are $5,720.

Similar grounds were relied upon in respect of each of the other assessments.

JS by his objection said that the grounds upon which reliance was placed were inter alia:

  • (i) There is no value to the taxpayer of employer-provided accommodation to be included in his assessable income under sec. 26(e) of the Income Tax Assessment Act and that accordingly, neither the provisions of sec. 26AAAB nor the provisions of sec. 26AAAA are applicable.
  • (ii) Although the taxpayer is provided with accommodation by his employer, the provision of such accommodation has no value to the taxpayer because the taxpayer maintains his own resident at... for his own use and he has done so prior to entering into employment as a mines rescue worker with... Mines Rescue Station and since that date. The taxpayer has retained his... residence and resides there during weekends and particularly long weekends and vacations, and the taxpayer has not let the residence at any time.
  • (iii) The taxpayer occupies the residence provided by his employer contrary to his personal preference which is to reside in the... residence because the taxpayer is required by the terms of his employment to reside at the mines rescue station and to be on call 24 hours each day of his employment which is in compliance with Mines Rescue Act Regulations 1925. When a position is advertised by the mines rescue

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    station the advertisement states that it is a term of the employment that the applicant reside in the accommodation provided in the mines rescue compound.

Reasons of the Commissioner for disallowing the objections of the taxpayers

The Commissioner in relation to the objections against the assessments by NH said that:

  • - The taxpayer an engineer employed by... was provided with free housing at... from 1 July 1981 to 30 June 1983.
  • - The value of the accommodation was increased from $26 to $4,940 and nil to $4,940 in the years of income ended 30 June 1982 and 1983 respectively in accordance with para. 26(e) and sec. 26AAAA of the Act.
  • - The Commissioner considers that the taxpayer has been correctly assessed under para. 26(e) after considering the concessions available under sec. 26AAAA.
  • - It is further considered that the provisions of sec. 26AAAB have not been satisfied.

In relation to PN the Commissioner particularised the grounds on which he disallowed the objections as:

  • - The taxpayer, a mining engineer, employed by... was provided with free housing at... for the whole of the years of income ended 30 June 1983, 1984 and 1985.
  • - The value of the accommodation was increased from $26 to $4,520, $26 to $5,025 and $26 to $5,306 in the years of income ended 30 June 1983, 1984 and 1985 respectively, in accordance with para. 26(e) and sec. 26AAAA of the Act.
  • - The Commissioner considers that the taxpayer has been correctly assessed under para. 26(e) after considering the concessions available under sec. 26AAAA.
  • - It is further considered that the provisions of sec. 26AAAB have not been satisfied.

The Commissioner in particularising the grounds on which he disallowed the objections of JS said:

  • - The taxpayer, a mine rescue worker employed by... Mines Rescue Station Committee was provided with free housing at... for the whole of the years of income ended 30 June 1982, 1983, 1984 and 1985.
  • - The value of the accommodation was increased from $104 to $416, nil to $456, nil to $506 and nil to $534 in the years of income ended 30 June 1982, 1983, 1984 and 1985 respectively in accordance with para. 26(e) after considering the concessions available under sec. 26AAAB of the Act.
  • - The Commissioner considers that the taxpayer has been correctly assessed under para. 26(e) and that the provisions of sec. 26AAAB have been satisfied.

The factual situation as to each applicant

Each of NH and PN was at the relevant time, employed by the same company, but at different locations; the one as a maintenance engineer, the other as a supervisor in charge. When NH was interviewed on his application for the position of maintenance engineer he was informed that it was a condition of his employment that he occupy a residence provided by the employer at Singleton. The taxpayer was permitted to remain resident in his home at Cessnock for the duration of his wife's pregnancy but on terms that following the birth of the baby the taxpayer and his family would take up residence in the company house at Singleton. The taxpayer took up residence in the Singleton property in December 1981. Under the terms of his employment the taxpayer was on call day and night 24 hours per day, seven days per week - except during his annual leave period. If the taxpayer wished to absent himself from Singleton or the colliery he had to make special arrangements with another engineer for that engineer to be available to answer any call which otherwise the taxpayer would have answered.

PN under the terms of his employment was on call except for periods of leave, 24 hours per day, seven days a week. If he wished to absent himself from the residence provided by his employer at Singleton Heights, or the Coal Preparation Plant where he worked, the taxpayer had to arrange for another official of his employer to be available to deal with any matters which arose in his absence.

From 1975 to 1982 NH and his family had resided in their own home at Cessnock. The

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house was amply sufficient for their needs and nearby to shops and public transport. The residence was about 64 kilometres, one hour travel by car, from the taxpayer's place of employment. Even be it that the employer provided a bus service that passed the Cessnock home, it considered the location to be too far distant from the work face and hence the obligation to reside at Singleton. The latter residence was not nearby to public transport, and shopping and other facilities were some distance away. The taxpayer installed floor coverings, heating and air-conditioning in the premises and carried out other work after taking up occupation.

Prior to taking up his present employment, PN together with his family lived in their own home at Medowie. The house was sufficient for their needs and situated about two kilometres from a shopping centre and one and a half to one and three-quarter hour drive from the taxpayer's work place. The nature of the duties required to be performed by PN made it necessary for him to live closer to his work than Medowie and hence the employer provided the residence at Singleton Heights, construction of such residence having only just been completed prior to the taxpayer and his family taking up occupation. PN furnished the house and carried out improvements, the cost of which was not recoverable from his employer, to a value of $5,000.

On moving into their respective employer-provided accommodation both NH and PN leased their own homes to tenants. Rents were received and expenses were incurred in relation to each of the properties in respect of the relevant years.

JS was, during the relevant years, employed by a mines rescue station committee as superintendent of a mines rescue station. As had been the case with superintendents of the mines rescue station since the 1920s, it was a condition of the employment of the taxpayer JS as superintendent, by the committee, that he should occupy the housing provided on the rescue station property and take part in rostered ``on call'' arrangements. The latter required the taxpayer to maintain a telephone and radio watch and on receipt of advice regarding an emergency to supervise the dispatch of equipment to, and to attend at, any mine where an emergency may have arisen.

The dwelling nominated by the mines rescue station committee and occupied by the taxpayer and his wife was located in an enclosed area, ``the compound''. Also within the compound was an office, a training room, and seven other dwellings occupied by other employees of the mines rescue station committee. All the dwellings within the compound were connected to a central alarm system and all after hours telephone calls were received in the dwelling occupied by the taxpayer.

The house itself was a cavity brick and tile residence erected in or about the 1920s comprising four bedrooms, lounge room, dining room, kitchen, front veranda, bathroom, lounge room, dining room, kitchen, front veranda, bathroom, was in its original condition. During the years of income the building suffered from water penetration. Curtains, floor coverings and ceiling fans were supplied by the taxpayer. The property was located fronting a busy main road in close proximity to heavy industry and to a licensed club. A sewerage treatment works was also close by.

Prior to his occupying the house within the compound and his employment by the committee, JS was employed by a colliery and had lived since 1978 in his own home at Dora Creek. He had previously lived in a company house but with permission of his employer had moved to Dora Creek. It was shortly thereafter that he was offered and accepted the position as superintendent. He regarded the Dora Creek property as his home. He would have preferred to live in his own home and commute to work, a distance of 20 kilometres taking about 30 minutes. The taxpayer and his wife regarded the Dora Creek property as their permanent residence, it was not let and they spent almost all of their time when the taxpayer was not on duty at the home. In consequence of residing in the compound house JS,

  • (a) is unable to spend the hours during which he is off duty, but on call (and so required to be present in the compound house) on attending to matters of maintenance of the house and garden comprising his Dora Creek property;
  • (b) has to divide his household possessions between the Dora Creek property and the compound dwelling, with the result that, for example, his leisure time activities cannot be continuously undertaken unless he carries

    ATC 440

    the necessary materials and equipment backwards and forwards between the two properties;
  • (c) is under a practical obligation to attend to matters of ordinary maintenance upon the compound house, although it is not owned by him;
  • (d) is, so long as he is at the compound dwelling, and regardless of whether he is officially on duty or on call, in practical terms at work, in that all rescue station decisions are referred to him.

In respect of each of the taxpayers the employer paid an amount referable to the use of electricity and the private use of the telephone connected to the employer-owned house.

Relevant statutory provisions

Sections 25, 26(e), 26AAAA and 26AAB of the Income Tax Assessement Act so far as they are relevant to these reasons provide:

Section 25

``(1) The assessable income of a taxpayer shall include -

  • (a) where the taxpayer is a resident -
  • the gross income derived directly or indirectly from all sources whether in or out of Australia; and
  • ...''

Section 26

``The assessable income of a taxpayer shall include -

  • ...
  • (e) the value of the taxpayer of all allowances, gratuities, compensations, benefits, bonuses and premiums allowed, given or 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 allowed, given or granted in money, goods, land, meals, sustenance, the use of premises or quarters or otherwise,...''

Section 26AAAA:

``In determining, for the purposes of the application of paragraph 26(e), the value to a taxpayer of a benefit granted to the taxpayer in respect of or in relation to his employment, being a benefit by way of the grant of a lease or licence in respect of residential accommodation that is occupied by the taxpayer or by the taxpayer and his family, the Commissioner shall have regard to all relevant matters and, in particular where -

  • (a) the residential accommodation is situated in a place that is remote from a major centre of population;
  • (b) it is customary for employers in the industry in which the taxpayer is employed to provide residential accommodation for their employees without charge or for a rent or other consideration that is less than the market value of the right to occupy the accommodation concerned;
  • (c) the taxpayer has no reasonable alternative other than to occupy the residential accommodation by reason of the unavailability on reasonable terms and conditions of suitable alternative residential accommodation (other than accommodation provided by or on behalf of his employer) within a reasonable distance from his place of employment;
  • (d) the residential accommodation is of a higher standard than could reasonably be expected to be provided for the taxpayer or is of a larger size than is necessary to accommodate the taxpayer or the taxpayer and his family; or
  • (e) any onerous conditions are attached to the lease or licence,

the Commissioner shall take that matter into account and make such reduction in the amount that would otherwise be the value to the taxpayer of that benefit as is appropriate in the circumstances.''

Section 26AAAB(1)(b):

``(1) Where a taxpayer has been granted by an employer of the taxpayer a benefit in respect of or in relation to his employment, being a benefit by way of the grant of a lease or licence in respect of a unit of residential accommodation that, at any time during the year of income, was occupied by the taxpayer or by the taxpayer and his family and -

  • (a)...
  • (b) the following conditions are satisfied:

    ATC 441

    • (i) it is customary for employers in the industry in which the taxpayer was employed during the period (in this sub-section also referred to as the `tenancy period') in the year of income during which the lease or licence in respect of the unit subsisted to provide residential accommodation for their employees -
      • (A) without charge or for a rent or other consideration that is less than the market value of the right to occupy the accommodation concerned; and
      • (B) at or in close proximity to the place or places at which their employees are employed;
    • (ii) in the opinion of the Commissioner, the taxpayer had no reasonable alternative to occupying a unit of residential accommodation provided by or on behalf of the employer by reason that -
      • (A) suitable residential accommodation (other than accommodation provided by or on behalf of the employer) was not available on reasonable terms and conditions at or in close proximity to the place at which the taxpayer was employed; or
      • (B) the taxpayer was required by the employer to reside at or in close proximity to the place at which the taxpayer was employed and to be on call for duty;
    • (iii) in the opinion of the Commissioner, the conditions under which the taxpayer occupied the unit during the tenancy period were onerous by reason that the unit was at or in close proximity to the place at which the taxpayer was employed;
    • (iv) during the tenancy period, the employer provided residential accommodation for not fewer than 5 other employees of the employer who were employed at or in association with, the place at which the taxpayer was employed; and
    • (v) the lease or licence in respect of the unit was not granted to the taxpayer in pursuance of -
      • (A) an agreement the parties to which were not dealing with each other at arm's length in relation to the agreement; or
      • (B) an agreement that was entered into by any of the parties to the agreement for the purpose, or for purposes that included the purpose, of obtaining for the taxpayer the benefit of the application of this section,

the value to the taxpayer of the benefit in relation to the year of income shall, for the purposes of paragraph 26(e), be deemed to be the amount calculated in accordance with the formula...''

Relevant differences in the position of the taxpayers

1. Whilst NH and PN had leased out their own properties, JS had not and indeed he occupied it as often as he could, consistent with his responsibilities to the mines rescue station committee.

2. NH and JS were both by condition of their employment, required to occupy employer-provided housing. Having in mind the nature of the work that they were required to perform, it was a real requirement from the point of view of the employer that they be constantly nearby to their place of work. The same to a lesser extent applied to PN, he however being also on call 24 hours a day.

3. The house owned by PN is a distance further removed from his place of employment than that of the other two taxpayers.

The real issues

The real issue for determination in these proceedings is:

``whether in any of the cases there was a `benefit' `allowed, given, or granted' to the taxpayer within the meaning of section 26(e).''

In the event, and only in the event, of a ``benefit'' being so discerned does the question as to quantification of ``value to the taxpayer'' and the meaning to be ascribed to these words arise.

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``Benefit'' to a taxpayer arising from provision of accommodation

On behalf of the taxpayers it was submitted that in no one of the subject cases was there a benefit within the meaning of sec. 26(e) - ``benefit'' being the only apposite word in sec. 26(e) - allowed, given or granted to the taxpayer. In a case where a taxpayer is required to live in a house which is provided by the employer and that occupancy is for the benefit of the employer, not of the employee and to enable the employee better to perform his services for the employer, there cannot be, it was submitted, a relevant benefit to the employee such as to be included as assessable income of the employee. What sec. 26(e) is designed to achieve is to include in the assessable income of a taxpayer benefits of an income nature, those being a part of the remuneration of the employee for the services rendered by him - an incident of his employment. The word ``benefit'' has a remunerative-type character. To exist there has to be something that is ``allowed, given or granted'' directly or indirectly in relation to employment or services.

Assistance in deciding whether the provision by the subject employer of housing can be regarded as a benefit to the taxpayer can be had, it was contended, by appreciating the context in which the word is used in the legislation and the use sought to be made of it.

An appreciation of context and use in aid of construing words in a statute is seen in
Mutual Acceptance Co. Ltd. v. F.C. of T. (1944) 69 C.L.R. 389. In considering whether arbitrary payments made to employees on account of estimated expenditure arising from use of their own motor cars were ``wages'' within the meaning of sec. 3 of the Payroll Tax Assessment Act 1941-1942, Latham C.J. at p. 396, after noting that the definition in the Act defined ``wages'' as meaning ``any wages, salary, commission, bonuses or allowances paid or payable... to any employee as such, and, without limiting the generality of the foregoing, includes... '' said:

``The payments (in cash or kind) which are included in `wages' are payments made `to any employee as such'. They therefore comprehend only payments made to an employee in connection with and by reason of his service as an employee or in respect of some incident of his service... It is contended, however, that they are not `allowances' within the word [allowances] is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of service.''

At p. 402 Dixon J. said:

``The question we must decide turns, in my opinion, upon the meaning in this context of the word allowance. For I cannot think that the ordinary meaning of the word `wages' would cover the payments with which the case is concerned.

`Allowance' is one of the many words which take their meaning from a context rather than affecting or controlling the meaning of other words of the context in which they occur. For considered alone and at rest rather than at work with other words it means the allowing of a thing or a thing allowed. It is only by its application that you discover the kind of thing in mind.

In the present case I think that the whole context and subject matter shows that the definition of wages is dealing with the emoluments of employment paid in money or made over in kind to an employee by an employer. The figure of speech `pay-roll' used to describe the tax and supply a title to the Acts give some indication of the subject taxed. In the definition of `wages' the two first words `wages' and `salary' refer to ordinary forms of remuneration for work done. `Commission' covers percentage rewards and `bonuses' occasional or periodical additions whether contracted for or voluntary. The next word `allowances', seems to me naturally to follow as an attempt to make sure that any other kind of gain or reward allowed or conceded by the employer to the employee for his work is brought within the definition.''

Thus it is said on behalf of the taxpayers that sec. 26(e) applies only to benefits allowed, given or granted to an employee which have the ordinary conceptual characterstic of income. The accommodation provided in the subject

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cases does not. In support of this construction to be placed on the wording in the section reliance was had inter alia on dicta appearing in
Hayes v. F.C. of T. (1956) 96 C.L.R. 47;
Scott v. F.C. of T. (1966) 117 C.L.R. 514;
Donaldson v. F.C. of T. 74 ATC 4192;
F.C. of T. v. Cooke and Sherden 80 ATC 4140 and
Smith v. F.C. of T. 87 ATC 4883.

In Hayes (supra) the issue arose as to whether the value of shares given to an employee accountant was assessable as income in the ordinary concept or under sec. 26(e). At p. 53 Fullagar J. said:

``The receipt of the shares in question here was not, in my opinion, a receipt of income by Hayes. What was done, as I think, amounted to a simple gift of property and nothing more...

The Commissioner contended that the receipt was an income receipt because it fell within the general conception of income, or alternatively that it fell within the terms of s. 26(e) of the Act. Section 26 provides... I doubt very much whether s. 26(e) has the effect of bringing into charge any receipt which would not be brought into charge in any case either by virtue of the general conception of what constitutes income or by virtue of the definition of `income from personal exertion' in s. 6.''

[In Smith (supra), Toohey J. at p. 4891 and with reference to what Fullagar J. had here said, stated:

``Because of the way in which this appeal has been argued, it is unnecessary to try to resolve the doubt raised by Fullagar J. The matter must remain open though, having regard to the breadth of language used in sec. 26(e), there are strong arguments for the conclusion that receipts that might not ordinarily be regarded as income are included...]''

``The words `directly or indirectly' are doubtless intended to cast the net very wide, but it is clear that there must be a real relation between the receipt and an `employment' or `service'. In
Federal Commissioner of Taxation v. Dixon ((1952) 86 C.L.R. 540) Dixon C.J. and Williams J. said: `We are not prepared to give s. 26(e) a construction which makes it unnecessary that the allowance, gratuity, compensation, benefit, bonus or premium shall in any sense be a recompense or consequence of the continued or contemporaneous existence of the relation of employer and employee, or a reward for services rendered given either during the employment or at or in consequence of its termination ((1952) 86 C.L.R. at p. 554).' If the receipt in the present case does not fall within the general conception of `income', it is not, in my opinion, caught by s. 26(e)...''

All this, although Mr Hayes was not then an employee but had been; there being deemed a relationship between the shares and the employment. It was not there possible however, to relate the receipt of the shares to any income-producing activity on the part of the recipient.

Scott (supra) was concerned with the assessability or otherwise of a gift by a client to her solicitor. Windeyer J. in holding the amount not to be subject to tax said at p. 524:

``Counsel for the Commissioner pointed to the wide words `in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by him' and said that they must be given their full meaning and effect. This of course, is so. But what is their full meaning and effect? That is the question. It is no doubt an orthological question. But it is not to be answered by reading the words in the abstract with the aid of a dictionary. Their meaning and the limits of their denotation must be sought in the nature of the topic concerning which they are used. They are in an income tax statute...''

His Honour then makes reference to the extract from Dixon's case (supra) and continues at pp. 525 and 526:

``This remark was inverted in the argument for the Commissioner to support a proposition that if a payment could be said to be in any sense directly or indirectly a consequence of services rendered its receipt was income. But so put the proposition merely shifted the question into a new semantic area in which emphasis was placed upon the words `indirectly' and `consequence'. It was said that if a testator left by will a legacy to a servant in his employment whose wages had been fully paid, and by his will expressed the legacy as

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given because of long and faithful service, it would be within the words of s. 26(e) and thus be income of the legatee. I do not think that a legacy given by a grateful testator to, say, his physician would ordinarily be income in his hands. And the position would, it seems to me, be no different if the same gifts were made, not by will but by the donor in his lifetime. That is not because the words of s. 26(e) could not describe such gifts but because it stands in an Act the purpose of which is to impose a tax on income. To take another illustration: suppose members of a society made a gift to a man because he had rendered some special services to the society. In terms such a testimonial gift, whatever form it took, money or plate or a picture, although the product solely of the donors' appreciation of the donee's services would be within the words of s. 26(e). But would it therefore necessarily be income of the recipient liable to tax? I think not. And would a person who on restoring lost property to its owner was given a reward for his services be taxable on the basis that the reward was part of his income? Again I think not, but again the words of s. 26(e) would cover the case.

As I read s. 26(e) its meaning and purpose is to ensure that certain receipts and advantages which are in truth rewards of a taxpayer's employment or calling are recognised as part of his income. In other words the enactment makes it clear that the income of a taxpayer who is engaged in any employment or in the rendering of any services for remuneration includes the value to him of everything that he in fact gets, whether in money or in kind and however it be described, which is a product or incident of his employment or a reward for his services.''

[In Smith (supra) and with reference to what Windeyer J. had here said, Toohey J. at p. 4895 said:

``What his Honour said concerning sec. 26(e) was obiter. But if this passage be thought to impose a test different to that which asks whether the benefit allowed, given or granted was a consequence of the employment of the taxpayer, I respectfully adhere to the latter test.]''

``If, instead of being paid fully in money, he is remunerated, in whole or in part, by allowances or advantages having a money value for him they must be taken into account. The enactment does not bring within the taxgatherer's net moneys or moneys' worth that are not income according to general concepts. Rather it prevents receipts of moneys or moneys' worth that are in reality part of a taxpayer's income from escaping the net.''

Thus, relying on Scott it is contended that it is a taxing statute that is here being considered; purported income is being subjected to tax. Inherently one is construing an Act it is said which is concerned with assessing people to tax on income; thus recognising of course, that the legislature if it so chooses may nevertheless tax other than income.

Donaldson (supra) was concerned with an employee who was granted share options, the exercise of which was dependent upon completion of a qualifying period of service with the employer. The Commissioner assessed the employee on the value ascribed by him to the options. It was held that the rights acquired by the taxpayer constituted a benefit of an income nature allowed, given or granted to him under sec. 26(e). In the course of delivering his reasons for judgment Bowen C.J. in Eq. (as he then was) said at pp. 4205-4206:

``Counsel for Mr Donaldson argued that sec. 26(e) is concerned only with items which -

  • (i) are of an income nature according to ordinary concepts;
  • (ii) can be valued and the value of which can be cast in money terms; and
  • (iii) have a present value to the taxpayer and are enjoyed or capable of being enjoyed by him in the income year.

Counsel for the Commissioner was disposed to agree with (i) and (ii), but not with (iii). He argued that sec. 26(e) looks first to see what is `allowed, given or granted' to the taxpayer, and then includes in the taxpayer's assessable income the value to him of the benefit so conferred. If it appears there is conferred a benefit of an income nature which can be given a monetary value, then it is assessable income of the taxpayer.

Forensic or judicial glosses upon the section are no substitute for its words, which seem plain enough. However, the points raised do concentrate attention on specific areas of

ATC 445

contention in the application of the section. As to (i) the words of sec. 26(e) suggest that any item which falls squarely within its terms is rendered assessable income. So far as the words of the section are concerned, it seems to matter not whether the item would otherwise be of an income or capital nature according to ordinary concepts. There is little difficulty with meals. They operate in relief of the taxpayer's purse as well as his stomach. So too, I think, the use of premises or quarters, which also operate in relief of his purse and save him from having to pay rent, would be regarded as being of an income nature, at least in these days, if not eighty years ago. (cf.
Tennant v. Smith, (1892) A.C. 150; 3 Tax Cas. 158)... Counsel for both parties are agreed that sec. 26(e) applies only to items of an income nature, and they are strongly supported by what was said by Fullagar J. in Hayes v. F.C. of T. (1956) (96 C.L.R. 47, at p. 54) and by Windeyer J. in Scott v. F.C. of T. (1966) (117 C.L.R. 514 at pp. 525-526). Did the rights which Mr Donaldson acquired in the present case constitute a benefit allowed, given or granted which was of an income nature? It is not unusual for companies to give to senior employees rights of varying kinds to take up shares upon terms which are beneficial to the employee. Methods vary. It may be by way of allotment of shares for an amount less than market value in pursuance of a particular offer to the employee without any legally enforceable option having been conferred upon him (see
Weight v. Salmon (1935) 51 T.L.R. 333; 19 Tax Cas. 174;
Ede v. Wilson (1945) 1 All E.R. 367; 26 Tax Cas. 381; cf.
Bridges v. Hewitt (1957) 1 W.L.R. 59, 674; 37 Tax Cas. 306). It may be by way of legally effective option rights which entitle the employee to take up shares in the future at a time when their market value may exceed the price fixed by the option agreement; (
Abbott v. Philbin (1961) A.C. 352; 39 Tax Cas. 120). These cases turn upon the provisions of the English Income Tax Legislation - in particular Schedule E of the Income Tax Acts, ranging from the Act of 1842 to the Act of 1918, and later the Act of 1952. The wording of these provisions is markedly different from our sec. 26(e) particularly with its reference to `perquisites' of office or employment. But in its practical application in many respects it is not dissimilar. I think it is fair to say that in these days, such benefits are regarded as being in the nature of a bonus or an addition to salary and are of an income nature, where they are conferred in relation to the employment or to services rendered. My conclusion in the present case is that a benefit was allowed, given or granted to Mr Donaldson of an income character.''

Thus, what Bowen J. was saying, it was submitted, was that when the words of sec. 26(e) are fairly read, it is seen the subsection covers what in fact is income in any event - things that are of the very nature of income. The Commissioner would contend that Bowen J. was here proposing an objective test as to valuation in the same sense as valuations are performed for the purpose of a resumption. One is to look to the value of the premises, not to the particular taxpayer, but to a prudent person in that taxpayer's position.

In Cooke and Sherden the taxpayers were the recipients of a free holiday given to them as retailers by a manufacturer and as a consequence of their reaching an allotted sales quota. The holidays were provided on a discretionary basis, they were non-transferable and could not be cashed in. An employer/employee relationship did not exist between the retailers and the manufacturer, the relationship was that of buyer and seller. The benefit of the holidays was not income within sec. 25, it not being capable of being converted into money or money's worth (Tennant v. Smith (1892) A.C. 150 at p. 164; Abbott v. Philbin (1961) A.C. 352;
Heaton v. Bell (1970) A.C. 728). The use in sec. 26(e) of the words ``value to the taxpayer'' took the question beyond that of money or money's worth. It was held that the holidays were not compensation for services rendered to the taxpayer. At p. 4150 in the reasons for judgment it was said:

``It has been suggested that sec. 26(e) applies only to receipts within the general conception of income. See for instance, Hayes v. F.C. of T. (1956) 96 C.L.R. 47 per Fullagar J. at p. 54, Scott v. F.C. of T. [117 C.L.R. 514 at p. 525]... Or as was said by Bowen C.J. in Eq. in Donaldson v. F.C. of T.74 ATC 4192 at pp. 4205... [and as] was explained by Windeyer J. in Scott v. F.C. of T. (supra) at pp. 525...

ATC 446

Whether or not sec. 26(e) widens or strengthens the net cast by sec. 25(1) - a question which it is unnecessary now to resolve - the former provision applies, in the circumstances of the present cases, only if the benefit received by the taxpayers was in respect of or for or in relation directly or indirectly to services rendered by them.''

Smith was a case that concerned an employer/employee relationship and the assessability or otherwise of an amount received by a bank employee consequential on his completing a bank-related course of study. The employee was contractually required to participate in the employer bank's ``encouragement to study'' scheme. The receipt was held to be assessable.

At p. 4886 Wilson J. said:

``Before leaving these cases, it is to be observed that the several judgments therein contain references to the fact that the benefit then under consideration did not bear the character of a reward or remuneration for services rendered. This is, of course, one test relating to the operation of sec. 26(e). But it is not the only test. The paragraph will be attracted if the benefit bears the necessary relation either to the employment of the taxpayer or to services rendered by the taxpayer. The phrase `services rendered' describes work actually performed by the taxpayer, whether in the capacity of a servant, independent contractor or otherwise. The breadth of operation of the phrase must `draw in situations not encompassed by the term `employment'': F.C. of T. v. Cooke and Sherden 80 ATC 4140 at pp. 4150-4151; (1980) 29 A.L.R. 202 at pp. 214-215. In such situations, in order to constitute income, the benefit must represent, directly or indirectly, a reward or remuneration for those services. On the other hand, there may be benefits which are taxable under sec. 26(e) because of their relationship to the ongoing `employment' relationship of the taxpayer to his employer... It will be sufficient if it is allowed, given or granted to the taxpayer in respect of, or for or in relation directly or indirectly to, his employment...

But, however, helpful such criteria may be, it is unwise to expect any paraphrase to provide a final or overriding test. Ultimately, it is the words of the statute that must prevail. Toohey J. finds it helpful to ask whether the benefit allowed, given or granted is a consequence of the employment of the taxpayer (see also Dixon C.J. and Williams J. in Dixon at p. 554). So do I. I also find it helpful to ask whether the benefit is a product or incident of the employment, as did Fullagar J. in Hayes at p. 57, and Windeyer J. in Scott, at pp. 525-526...''

It was submitted on behalf of the taxpayers that the cases above detailed end up by saying inter alia that when one finds that there is a relationship direct or indirect with the services rendered in the sense that the benefit is a product or incident of such services, then the benefit received is assessable. This conclusion still leaves unanswered the question as to whether a benefit has in fact been received, given or granted, that is of value to the taxpayer.

Accepting that the latter proposition of Wilson J. correctly states the law as it now stands, then the taxpayers say that the occupation of the houses the subject of these references is not by way of remuneration for services or an incident in the relevant sense of their employment, but is for the purpose of performing the service for the employer. Thus, the necessary relationship that has to exist under sec. 26(e) between the benefit on the one hand and the employment on the other does not exist. There is not a benefit, it is said, that is of value to the taxpayer in the relevant sense.

Reliance in this regard was placed on behalf of the taxpayers on a number of United Kingdom cases including Tennant v. Smith (1892) A.C. 150;
Read v. Cattermole 21 T.C. 35;
Gray v. Holmes (1949) 30 T.C. 467.

The legislation considered in the United Kingdom decisions was somewhat different to the Australian income tax legislation, but the cases were said to be relevant in that questions there arose relating to the imposition of a tax in respect of employee-occupied homes, the same being an emolument of employment.

Tennant v. Smith (supra) concerned an agent for a bank and the Surveyor of Taxes, the latter seeking to assess the taxpayer in respect of his occupancy of a bank house as custodier of the whole premises belonging to the bank. The taxpayer was not entitled to sublet or use the premises for other than bank business. He

ATC 447

could not leave the premises without another being put in his place. He resided in the building as the servant of the bank and for the purpose of performing the duty which he owed to his employer. The benefit was held not to be assessable, the taxing Act referring to money payments or money's worth, the benefit not being so convertible. However, Lord Halsbury does say obiter at p. 156:

``I have designedly avoided considering the question whether in any sense the occupation of this house is a benefit or a burden to the recipient of the advantage or disadvantage, whatever it may be, though I doubt very much whether such considerations on the one side or the other are relevant to the question which your Lordships have to determine...''

Lord Watson at p. 158 said:

``... Even according to the Respondent's argument the assessable value of a servant's residence in premises which he does not occupy is not the price which other persons might be prepared to pay for the privilege, but the benefit which he personally derives from it estimated in money.''

Read v. Cattermole was concerned with whether a minister should be liable to tax in respect of expenses borne by another but referable to his occupation of a manse. Lord Wright at p. 50 said:

``The essence of the matter I think is that the enjoyment which the minister has of his house, the enjoyment in the sense that he uses it as a dwelling house and therefore in the sense that it is a benefit to him is subsidiary and ancillary. He dwells in the house not for his own convenience - we do not know in this case whether it would have been more convenient for him to live in a house or in a residence of a simple character - but in fact he lives there for the purposes of the church as part of the obligations which he owes to the church as part of his service, and under the compulsory requirement of the church as it is said whether it is suitable for him or not in order that he may perform his duties. Under those circumstances the authorities as well as the principles which have been laid down to my mind involve the view that he is not the occupier for revenue purposes.''

Lord Wright in his reasons referred to
I.R. Commrs v. Miller (1930) A.C. 222 and to Tennant v. Smith (1892) 3 T.C. 158 and continued by saying:

``There again I think the same principles are stated, though no doubt with reference to the particular facts there in question and with reference to the case of a caretaker; all those different illustrations are there merely instances of a general principle, namely, was the occupation of the bank by the agent his own occupation, or was it in truth the occupation of the bank employer or the occupation of the persons who were being served by the agent.''

At p. 56 Roma L.J. said:

``... In these circumstances I am of the opinion that the principle to be applied to this case is the principle applicable to the case of master and servant. That principle has been enunciated in several cases but probably in no case more clearly that it is enunciated by Tindle C.J. in... Hughes v. Overseers of Chatham (5 Man. and G. 54). In his judgment in that case Tindle C.J. said this (at page 78) `A master may pay his servant by conferring on him an interest in real property either in fee for years at will or for any other estate or interest; and if he do so the servant then becomes entitled to the legal incidents of the estate as much as if it were purchased for any other consideration. But it may be, that a servant may occupy a tenement of his masters, not by way of payment for his services, but for the purpose of performing them; it may be that he is not permitted to occupy as a reward in the performance of his master's contract to pay him but required to occupy in the performance of his `contract to serve his master'...' In my opinion on the facts to which I have referred the appellant in this case occupies the manse, not by way of payment for his services but for the purpose of performing them. He is not permitted to occupy as a reward in the performance of his masters contract to pay him but is required to occupy in the performance of his contract to serve his master...''

On behalf of the taxpayers it was submitted that assistance is obtained from Tennant v. Smith and Read v. Cattermole in that the concern evidenced by such cases is the taxing

ATC 448

of someone who is receiving rent-free occupation. What is essential, it is submitted, and to be borne in mind when considering sec. 26(e) of the Income Tax Assessment Act is the question ``Is there a benefit that has been allowed, given or granted?'' It is odd, it was submitted, to talk about an employer granting premises when what he is doing is requiring someone to occupy them for the employer's purposes. In the subject applications there has to be someone near the mine to attend to any emergency. There has to be someone at the colliery to ensure that the maintenance work is done 24 hours a day. It is essential, it was submitted, from the employer's point of view, that this occupation exists. It is not a matter of saying here is an employer who has granted something to his employee or given something to his employee. It is something that is required by the employer of the employee. It is therefore the performance of the employer's services rather than an additional remuneration or benefit, of the employee.

In Gray v. Holmes (supra) the taxpayer was employed in a managerial capacity by a colliery company and was required by it to occupy a house provided to him free of rent. It was contended on behalf of the taxpayer that he was not in beneficial occupation of the house. The contention was upheld and the principle relevant to the facts stated at p. 472 as:

``If an employee occupies premises merely as part of his remuneration or because his employers say: `Well, we have a cottage and you can have it', or `In due course we shall have a cottage free and when we have you shall have it', then he may be held to be a tenant. But if it turns out that he is required to live in the place not merely by the whim of the employers but required to do it because it is necessary for the performance of the duties which his contract of service imposes upon him, then he is not in beneficial occupation and in that case the assessment in question in this case ought to be discharged...''

Consequent on the principles enunciated in the above recited United Kingdom cases it was submitted on behalf of the taxpayers that where the occupation of a house is not part of the remuneration in the sense of being a product of employment, or the incident of employment services, but is for the performance of the work which the employer requires an employee to perform, then it is not appropriate to say that the employee is granted, given or allowed something which it is proper to call a benefit to him, and having a value to him so that sec. 26(e) applies. It was submitted that even more so is this the position, namely that there is no benefit in a relevant sense to a taxpayer, where not only is the employee required to reside in the place, but where he has his own home which is adequate to his needs and in which he would prefer to live and in which it is possible for him to live. The taxpayer JS had not leased out his property and lived in his own home as often as possible consistent with his obligations to his employer. His own home is where he would prefer to live all of the time. There is no advantage to him of a material kind in his being provided with the house. Indeed no one of the taxpayers was relieved of paying rent that otherwise would have to be met. They each had homes available for occupation and that they would prefer to occupy.

The Commissioner submitted that the cases of Read v. Cattermole (supra), and Gray v. Holmes (supra) are concerned with the concept of occupancy of premises in the context of the United Kingdom legislation and as to whether an occupier was a tenant or otherwise for revenue purposes. Not only, it was submitted, is the legislation quite different in Australia, but the issue under consideration in those matters was not as to, whether or not what the taxpayers received was a benefit as that word is used in the context of sec. 26(e). On the basis that the question of, what is a benefit under sec. 26(e), requires close analysis in the context in which it arises it was submitted that little assistance is to be gained by ``looking at the analysis of a different word in an entirely different statutory scheme''. The question here is ``whether what has been received by the taxpayers by way of their accommodation can in the ordinary meaning of the word `benefit' as it appears in sec. 26(e) be treated as a benefit''. As a matter of ordinary parlance the receipt of housing accommodation, or shelter for use of a family should be regarded subject to valuation, it was submitted, as such a benefit.

The Commissioner contends that the proposition, namely, where the occupation is not part of the remuneration but for the performance of the work required of the employee, then there is no ``benefit'', is far too general. It requires a logical distinction that

ATC 449

simply does not arise. There may well be circumstances, where the provision of the accommodation is solely for the employment required to be performed; e.g.: that of a ship's captain. There is no reason whatever, it was submitted, for saying that because there is some requirement of attendance in a particular place or living at a particular place on the part of the employer that the accommodation provided in answer to that requirement might not also be a benefit to the employee.

The Commissioner says that is is only necessary to examine the taxpayer's proposition in the light of a number of possible circumstances to observe that it is not a proposition of universal application. Taking a person who like JS is required to live at a mines rescue station in accommodation of the style provided for him, who is occupying a home which is overcrowded with children which is not proper accommodation for himself or his family and there may be other defects in the premises - it may be in an undesirable area - and JS has the opportunity to apply for a position where a home such as that provided at the rescue station is available. In the submission of the Commissioner it could not be denied that that person, notwithstanding the existence of his own accommodation, received a benefit from the provision of the accommodation provided by the employer albeit that the reason or a reason actuating the employer in the provision of that accommodation was the necessity that a person be on hand at the rescue station. I interpose by hastening to add that this is not the factual situation in the present references.

The question of whether or not accommodation constitutes a benefit is, according to the Commissioner, something that can be looked at more objectively than was submitted on behalf of the taxpayers. One does not need to accommodate the considerations of whether the person involved had no home at all to start with, had a home which was inferior from the accommodation provided, or a home which was better than the accommodation provided, or indeed, as would have been open to any of the taxpayers involved in this appeal, to sell their original home upon acquiring the accommodation provided by the employer. Whether or not that provision of accommodation is a benefit to the taxpayer can be examined without any reference at all to the various permutations and combinations that might exist in relation to the existing possessions by way of homes of any particular taxpayer. If one reaches the view that the provision of such a home can be regarded as a benefit, then it simply becomes a question of valuation.

Can it then be said that there is a benefit granted, given or allowed where a taxpayer has his own home in which he desires to live and has other accommodation imposed on him? A case somewhat similar on the facts to that in the present applications was considered by the Tribunal in Case T76 (
86 ATC 1076). The taxpayer was there the superintendent of a mines rescue station and required by his employer to occupy a residence on a rescue station site. The taxpayer owned his own home where he would have preferred to reside. The questions for determination concerned the operation of sec. 26(e), limited by the provisions of sec. 26AAAA. As in the present matters it was there submitted on behalf of the taxpayer that the Act did not operate to bring the applicant within its purview. Alternative submissions were advanced as to the calculation of a value. It was held that sec. 26(e) was applicable even where the occupation was as the result of a condition of employment subject to the determination of a value pursuant to sec. 26AAAA. At p. 1087 of the Tribunal's reasons it was stated:

``... it may be said that the Australian legislation can operate to levy tax `upon what an individual may be able to save by holding a particular office', unlike the U.K. section concerned in the 1892 case [Tennant v. Smith (supra)]. There still remains of course the question of `value' and whether the necessary connection exists. The first can be presently put to one side.

43. The terms of the subsection are very wide covering items `allowed given or granted to him in respect of, or for or in relation directly or indirectly to any employment or services rendered by him'; and are apt to cover `savings' or `benefits' arising from the obligation to reside in a particular property as a condition of employment. It may be that the obligation is so onerous that the `value' would be affected but it would not operate to prevent the subsection being otherwise applicable.

ATC 450

44. It follows that the subsection is applicable even where the occupation is the result of a commission of employment subject to the determination of the value (if any) for the purposes of the provision. If the value is nil then there is nothing to be included in the employee's assessable income. If the value is a positive figure, then the subsection operates to include that amount.

45. As indicated the subsection is in very wide terms and on the circumstances of the present case, it is considered that the necessary connection required exists. Accordingly, it is found as a fact that the applicant was receiving a benefit...''

The Tribunal, with respect, there appears to be not directing its attention to the proper question, namely, whether in a case where a taxpayer is obliged to occupy a residence for the benefit of the employer and against his own will, and he has his own home, the taxpayer has a ``benefit'' allowed given or granted to him at all.

The conclusion there reached by the Tribunal, namely that the subsection is applicable even where the occupation is consequent upon a condition of employment, does not appear to follow upon the dicta or the reasoning earlier detailed. The conclusion would be apposite only if it is accepted that compliance with a condition or requirement to occupy premises being something that a taxpayer does not want to do and which does not give the taxpayer any measurable reward or remuneration or something of value to him is nevertheless a benefit allowed given or granted to the taxpayer. It is clear that a prerequisite to the application of sec. 26(e), 26AAAA and 26AAAB is the existence of a benefit. Sections 26AAAA and 26AAAB are concerned with the calculation of the value to be given to such a benefit. The sections cannot apply where a benefit is not seen to exist at all.

Very little assistance at all may be obtained by looking at sec. 26AAAB and 26AAAA save that those sections are to be considered in a particular context. They do not assist at all in determining the meaning to be ascribed to ``benefit'' and ``value to the taxpayer''. There is not, in my opinion, any ambiguity in the words ``value to the taxpayer''. Nor is there any ambiguity in the word ``benefit''. Such words are ordinary English words and they bear their ordinary English meanings. Sections 26AAAA and 26AAAB are statutory directions to be taken into account in considering the circumstances of a taxpayer but once a ``benefit'' is discerned to exist.

Put simply the taxpayers contend that if they are required to live in a house provided by their employer and in the circumstances of these matters then that occupation is for the benefit of the employer not one allowed, given or granted to the employee and there can be no relevant benefit to be included as assessable income for that employee.

The Commissioner would be heard to say that the placing of such a construction on the statute imposes a test not really required, and one that does not follow by or from its wording. It is recognized by the Commissioner that there may be circumstances in which accommodation is provided to an employee for the purposes of the employer but such a circumstance does not preclude the possibility or even the probability that the provision of that accommodation is also of benefit, to the employee. It is not open to say that where there is a benefit to an employer, he needing people on site, that there cannot be at the same time a benefit to the employee under sec. 26(e). The provision of accommodation, the like of that in these matters, is on the Commissioner's submission ``prima facie a benefit'', the extent of which may well be a question of valuation. Section 26(e), it was submitted, is intended to overcome the situation that arose in Tennant v. Smith (supra) (see Smiths case (supra) for an analysis of the relationship between Tennant v. Smith and sec. 26(e)) and where accommodation is provided as an adjunct to employment. Otherwise, it was said the subsection would only apply to accommodation provided as part of an employment package and for no purpose or benefit of the employer. It was submitted that it simply does not follow that because an employer gains some benefit from the provision of housing that an employee does not and that there is then no benefit for the purposes of sec. 26(e). The benefit to an employer of attracting a workforce as a consequence of providing them with appropriate accommodation is a case in point. In such a situation the employee is so attracted, partly at least, because of the housing provided.

ATC 451

That however is not the case under consideration in these references.

Findings and decision

I am inclined to the view that the proposition put forward on behalf of the taxpayers namely, that sec. 26(e) of the Income Tax Assessment Act is designed to include in the assessable income of a taxpayer a benefit of an income nature and being a part of the remuneration of the employee, for services rendered by him to, for, or on behalf of his employer is well founded.

Sections 26(e), 26AAAA and 26AAAB are found in a part of the Act dealing with employment and they comprehend in my opinion something allowed, given or granted to an employee in connection with and by reason of, or incidental to, the service he renders as an employee. To allow, give or grant something to an employee, an employer is to confer something additional to ordinary wages and something for the purpose of meeting a requirement particularly connected with the service rendered by the employee or as a compensation for unusual conditions experienced by the employee and associated with the work he is required to do for the employer. It is in this context that the word ``benefit'' finds itself, and it is this benefit that is to be allowed, given or granted to an employee. The benefit as I see it, has to embrace something allowed, given or granted, having the ordinary conceptual characteristic of income, of something acquired or additional to, a wage or salary.

Some assistance in this regard is obtained from the cases of Tennant v. Smith; Read v. Cattermole and Gray v. Holmes (supra). The concept of burden and benefit necessarily being personally derived are germane to the present issue. The concepts of occupation being essentially by an employer and not by a person other than in his capacity as an employee, occupation being for the purpose of performing services and not by way of payment for them, and occupation being in performance of a contract to serve and not as a reward for services, are all relevant to an appreciation of the meaning to be given to the word ``benefit'' allowed, given or granted. The statutory scheme applying in the United Kingdom cases was indeed different to that applicable in Australia. Nevertheless, the reason underlying the provision of the accommodation by the employer was there relevant, as is it in the matters now before the Tribunal.

The reference by Fullagar J. in Hayes (supra) at p. 53 to what Dixon C.J. and Williams J. had said in F.C. of T. v. Dixon (1952) 86 C.L.R. 540 is supportive of the benefit being a recompense or consequence of the existence of the relationship of employer and employee or a reward given during the employment. The conceptual meaning of ``recompense'' and ``reward'' is to add something to what an employee is already receiving. The meaning to be ascribed to ``benefit'' must be sought inter alia then in the nature of something that is a ``recompense'' or ``reward''. But still it must be such as would ordinarily be income in the employee's hands (Scott (supra) p. 525). As Windeyer J. said in Scott (supra) p. 626, the meaning and purpose of sec. 26(e) is to ensure that ``certain receipts and advantages'' which are really rewards of a taxpayer's employment are included as part of his income. The income of an employee taxpayer is to include the value to him of everything that he in fact gets, whether in money or kind, being a product or incident and a consequence of the employment, or a reward for services (see Smith (supra) per Toohey J. at p. 4895). The allowances or advantages and hence the ``benefit'' must, in order to be liable to tax, have a money value for the taxpayer (Scott (supra) p. 526).

In my opinion a taxpayer needs to have had conferred upon him a benefit being something of value to him. Bowen C.J. in Donaldson (supra p. 4205) in referring to the use of premises or quarters spoke of their operating in relief of a purse and saving a taxpayer from having to pay rent. That is the ``use'' was to be beneficial to the taxpayer being in the nature of a bonus or an addition to a salary or wage.

The Commissioner would have the Tribunal look to the value of the bonus or addition objectively for the purpose of determining whether it constitutes a ``benefit'' within the meaning of the section regardless of the position of the individual taxpayer. I am of the opinion that this is not the correct approach to be adopted. The section requires that in order for there to be a benefit to a taxpayer he must be allowed, given or granted something that is of value to the taxpayer. This orientation is confirmed by what was said in Cooke and

ATC 452

Sherden (supra) (p. 4150) where reference is made to sec. 26(e) and the need for the benefit to be received by the taxpayer. It must be a reward or remuneration for services and an incident in the relevant sense of the employment.

For the above reasons I am of the view that a benefit was not allowed, given or granted to the taxpayers by their employers in these references within the meaning of sec. 26(e) of the Income Tax Assessment Act.

Accordingly, the order of the Tribunal is that the decision of the Commissioner upon the objections of NH, JS and PN under review be varied and that the objections be allowed.

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