CASE 43/94

Members:
BH Burns DP
BC Lock M
DJ Trowse M

Tribunal:
Administrative Appeals Tribunal

Decision date: 5 August 1994

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BH Burns (Deputy President), BC Lock and DJ Trowse (Members)

The applicant, a Flight Sergeant with the Royal Australian Air Force, is attached to a squadron which undertakes tasks pertaining to search, rescue and reconnaissance. He is part of aircrew and his position is designated as Airborne Electronics Analyst. The applicant has requested this Tribunal to review a decision of the respondent which expressed the view that expenditure incurred on travel from home to work and within the air base did not qualify for deduction in terms of sub-section 51(1) of the Income Tax Assessment Act 1936 (``the Act''). The review relates to the 1992 tax year and the amount of expenditure in question, said, in the main, to concern the transportation of the applicant's work gear, is $2870. According to the objection lodged on behalf of the applicant, it was the carriage of the work related equipment that converted the private nature of home to work travel expenditure to expenditure incurred in the derivation of assessable income. Alternatively, it was argued that the home of the applicant was also a place of employment and thus the travel from home to base and return was travel applicable to that employment. For those reasons it was contended that the expenditure so incurred was deductible in terms of the first limb of the sub-section.

2. At the hearing the applicant was represented by his accountant, Mr N. Birdseye, and the respondent by one of his officers. Oral evidence was provided by the applicant; S (the leader of the squadron at the relevant time); and finally a fellow employee holding the same kind of position as that held by the applicant. In addition, the Tribunal had before it a copy of the documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975, together with eight exhibits, four tendered by the applicant (Exhibits A1-A4) and four by the respondent (Exhibits R1-R4).

3. The Tribunal makes the following findings of fact which are not in dispute. The applicant, as part of aircrew, was required to have available, when either on duty or standby, the following items of equipment:

   flying suit
   flying gloves
   flying socks
   cotton underwear
   knife
   squadron cap and badges
   torch
   dog tags
   personal survival gear
   passport
   needle book
   prescription sunglasses
   prescription glasses
   full dress uniform
   working uniform
   flying jacket
   flying boots
   ear muffs
          

The nature of the claim calls for a further explanation of several of those items:

• • the flying suit is made from a fire resistant material and requires laundering after each flight;
• • members of aircrew are responsible for the laundering of their flying suits and the cleaning and maintenance of their uniforms, all of which is performed in the respective homes of those members;
• • to facilitate laundering requirements additional flying suits are supplied upon request;
• • full dress uniform comprises pants, jacket - in this case both acquired at the same

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  time and worn together to ensure consistency of colour tone - shirt, tie and hat;
• • working uniform consists of pants, shirt, jumper and, as an option, a jacket.

4. The Tribunal further finds that a locker, located on base and measuring 1700 × 300 × 400 mms, was made available to each member of aircrew for the storage of the items listed above. Most of those lockers were lacking in security and yet it seems that some members had rectified that deficiency by either obtaining a replacement key or by the attachment of a lock latch. The locker allotted to the applicant remained unsecured and was used to house no more than the full dress uniform. The reasons for such limited use ranged from insufficient locker space, lack of security and to the personal choice by the applicant to keep the equipment in the boot of his car in which he travelled to and from work. In the end, the applicant confirmed the reason as being attributed to his personal choice and the belief that storage of the flying gear in the car added to the more efficient performance of his duties.

5. Subject to the exceptions of full dress uniform and working uniform, all of the listed items are taken by members when flying. In that regard the items are placed into a standard airforce issue duffle bag, measuring 75cm long × 55cm wide × 50cm deep and which, when packed, weighed 20 kilograms. Also it seems that the squadron was directed to operate repeatedly from other bases and that on those occasions aircrew were further required to have with them a pair of civilian trousers, shirt and their working uniform. Those latter items were carried in a suit bag, sometimes referred to as a hang-up bag, which when packed weighed approximately 10 kilograms.

6. The remaining piece of equipment possessed by the applicant was a brief case sized navigational bag which contained charts, work manuals and study materials. On duty days the bag was stored in the base crew room. It is accepted that the applicant took the bag to his home on most days so that he could make reference to its contents.

7. The applicant's in-flight role is to supervise the working of all sensor equipment, such as radar, acoustics and infra-red. The operators of that equipment are responsible to him and he, in turn, is answerable to the aircraft captain. During the year in question the applicant undertook 38 flights from base, some of which were of a daily exercise nature in local airspace, others were of a longer duration and involved overnight stays at other bases and the balance on deployment at bases, both within and without Australia, including Butterworth Air Base in Malaysia. It was estimated that the aircrew of the squadron to which the applicant was attached conducted flying assignments on approximately 100 days of the year in question.

8. A standby system is in place to cater for emergencies. In terms of that arrangement members of aircrew are rostered for duty one week at a time and three times in a year. Each crew member is furnished with a pager which he takes home with him. On the sound of the beep he is required to make immediate telephone contact with base for further instructions. It was agreed between the parties that the applicant, while on standby duty, would have been called out without prior notice on no more than six occasions during the 1992 financial year. When on standby, aircrew would be expected to take home the items of equipment previously listed and to be ready to fly when summonsed.

9. Excluding call-outs occurring during the standby periods, aircrew were as a matter of practice given notice of their flying assignments. Notice consisted of one to two weeks in respect of scheduled assignments and as little as 24 hours for those not so scheduled. The Tribunal accepts that on the rare occasion even shorter notice may have been given for the odd non-scheduled flight.

10. The applicant gave evidence that there were occasions when, in the performance of his duties, he made pre-flight telephone calls from his home to base and/or the operators under his direction and that the matters discussed included - enquiries as to whether the programmed flights were to proceed as planned; the availability of aircraft; the particular aircraft to be used; the supply of suitable recording tapes; confirmation that rations had been ordered; and the replacement of sick operators. The Tribunal accepts that that was the position and that calls were made for 11 of the 38 flights undertaken during the year. Furthermore, the Tribunal is satisfied that there were 6 other instances when the applicant rang base to be advised that flights had been cancelled.

11. The car trip from home to base and return was a distance of 65 kilometres and, according

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to the applicant, there were 133 such journeys undertaken during the period under review, that is, a total of 8645 kilometres. On all of those occasions the duffle bag containing the flying gear was carried in the boot of the applicant's car. When reporting for deployment the suit bag containing the working uniform and civilian clothing was also transported by car. The navigational bag was also a constant companion on the trips from home to work. All of this detail is accepted by the Tribunal as is the fact that, for this travel, the applicant was clothed in either his working uniform or his flying suit.

12. The claim for travel within the base relates to travel from squadron headquarters to other on-base sections, including trips to - clothing store for replacement and repair to uniforms and gear; pay section for flight cash advances; photographic section to collect cameras and films; doctor and dentist for required medical examinations and check ups, as well as for the treatment of ailments. The Tribunal is satisfied that travel of that kind was undertaken by the applicant and accepts his evidence that 98 such trips occurred during the 1992 year and that, subject to one reservation, each was of a distance of 7 kilometres. It appears that the journey between the base front gate and squadron headquarters, said to be 1.3 kilometres and travelled on all trips from and to home, was viewed by the applicant as being work orientated. For that reason the aggregate of 2.6 kilometres had been brought to account in calculating the on-base travel of 686 kilometres, that is, 98 trips each of 7 kilometres.

13. Notwithstanding that the distances travelled totalled 9331 kilometres, the claim of $2870 was based on 5000 kilometres at an agreed rate of 57.4 cents per kilometre. That method, which is provided for in s. 82KX of the Act, overcomes the need to ``substantiate'' and yet there still remains the requirement that the ``business'' kilometres be established by reasonable estimate. The current policy of the respondent is that the cents per kilometre basis can only be applied where a taxpayer has used the car to travel no more than 5000 kilometres for income producing purposes. However, this represents a change in policy and only has application for the 1994 and subsequent years of income. The respondent concedes that, in this matter, the method used by the applicant is available to him irrespective of the excess kilometres travelled.

14. Having considered all the evidence before it, the Tribunal makes the following additional findings:

• • although accepting that the storage of the fully laden duffle bag in the locker provided could create problems of space, the Tribunal considers that all of the items listed in para 3, when removed from the bag, were capable of satisfactory storage in the locker;
• • the decision to keep the equipment in the boot of the car was driven by personal choice and the Tribunal remains unconvinced that such a mode of storage resulted in any increase of work efficiency;
• • the duffle bag with its contents was not of a size or weight to impede facile transportation.

15. The relevant provisions of the sub-section are as follows:

``51.(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income,... shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature...''

The language of the sub-section has been the subject of careful analysis on many occasions and it is important to observe that whatever has been or will be postulated as to its interpretation represents a gloss on the words contained in the legislation. Subject to that reservation, a number of principles regarding the first limb have evolved. For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income, it must be incidental and relevant to that end. The words ``incurred in gaining or producing the assessable income'' mean in the course of gaining or producing such income (see
Ronpibon Tin N.L. v F.C. of T. (1949) 8 ATD 431 at p. 435; (1949) 78 CLR 47 at p. 56). Secondly, it is both sufficient and necessary that the occasion of the outgoing should be found either in whatever is productive of assessable income or, if none be produced, in whatever would be expected to produce assessable income (see Ronpibon Tin N.L. (supra) at ATD p. 436; CLR p. 57).

16. In the cases of
Lunney v F.C. of T.; Hayley v F.C. of T. (1958) 11 ATD 404; (1957-1958) 100 CLR 478, the High Court had cause to further consider the incidental and

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relevant test, and, in so doing, directed that attention should be focused on the nature and character of the outgoing under question. The decision in those matters gave rise to what is now commonly referred to as the essential character test. The joint judgment of Williams, Kitto and Taylor JJ (at ATD p. 413; CLR p. 499) makes it clear that in determining whether or not expenditure is incurred in or in the course of gaining or producing assessable income depends upon considerations which are concerned with the essential character of the outgoing. Applying that test, the majority formed the view that expenditure incurred in travelling to and from work was not by any process of reasoning a business expense and indeed it possessed no attribute whatever capable of giving it the colour of a business expense. On that basis it was held that expenditure of that kind did not qualify for deduction under sub-section 51 of the Act.

17. There are, however, exceptions to the rule that expenditure on travel to and from work is never deductible, one of which relates to the transportation of a professional musician and his instruments between his home and place of performance (see
F.C. of T. v Vogt 75 ATC 4073). Another is the expense incurred in travelling between home and work outside the normal daily journey by a computer consultant on call 24 hours a day and who had a place of work in her home (see
F.C. of T. v Collings 76 ATC 4254). Not surprisingly, the applicant placed substantial reliance on those cases and thus the need to consider them in some detail and to observe variances of any significance.

18. Mr Vogt, a professional musician, worked at a suburban RSL Club as a member of the Daly Wilson Big Band. He kept his musical instruments and their associated equipment (trumpet, flugelhorn, acoustic bass, electric bass and amplifiers) at home because it was essential to practise on them and because it was the only practicable place to keep them. He used his motor vehicle to transport himself and his instruments between his residence and the various places where he was engaged to perform. The instruments and equipment were very bulky and a station wagon was purchased to facilitate the constant moving of those items. At issue was the deductibility of the expenditure incurred in transporting Mr Vogt and his equipment to and from his place of residence. In the Supreme Court of NSW, Waddell J dismissed the Commissioner's appeal against a Board of Review decision that the outgoings in question were allowable deductions in terms of sub-section 51(1) of the Act. In reaching that decision the learned Judge placed particular emphasis on those matters which he considered relevant to a determination of the essential character of the expenditure. At [75 ATC] p. 4078 he described those matters in the following terms:

``Firstly, the expenditure was incurred as part of the operations by which the taxpayer earnt his income. Secondly, it was essential to the carrying on of those operations: there was no other practicable way of getting his instruments to the places where he was to perform. Thirdly, in a practical sense, the expenditure should be attributed to the carriage of the taxpayer's instruments rather than to his travel to the places of performance. The mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance, that is by carrying them in the motor vehicle which he drove. In the light of these matters it is my opinion that the essential character of the expenditure was such that it should be regarded as having been `incurred in gaining or producing the assessable income'.''

Interestingly, the Judge then turned to a consideration of whether the result would have been different for a violinist who kept his violin at home and took it with him to the various places where he played. In that circumstance he accepted that the motor vehicle expenses would not be deductible and gave as his reason that it could not be said that the expenditure arose from, nor could it be attributed to, the necessity of getting the violin to the place of performance. Obviously, the bulk of the items being conveyed is all important to the task of attribution.

19. The major factual differences as between Vogt and the current reference are twofold; first, the absence of suitable storage facilities in Vogt and, secondly and more significantly, the bulkiness of the items being transported. The Tribunal is of the view that the mode of transporting the duffle bag, the navigational bag, and occasionally the suit bag, was simply a consequence of the means adopted by the applicant in conveying himself to and from his place of employment. Merely putting those

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items in the boot of the car did not alter either the nature of the trip or the character of the expenditure. Against that background, the Tribunal concludes that the expenditure should be attributed to the applicant's travel to and from work rather than the carriage of the various items of flying gear, that is, a reversion to the Lunney/Hayley decisions that expenditure of this kind is not by any process of reasoning a business expense nor can it be said to be incurred in gaining or producing the applicant's assessable income. It is the view of the Tribunal that this conclusion obviates the need to further consider the questions pertaining to the provision of a locker at the base and the exercise by the applicant of a personal choice to carry the equipment in his car. It seems that those matters would be relevant where the primary finding is that the expenditure be attributed to the carriage of goods rather than to the person. In that circumstance, those factors would again precipitate a decision that the expenditure was of a private nature and thus not incurred in the gaining of assessable income.

20. In the case of Collings (supra), the facts, as taken from the headnote appearing at [76 ATC] pp. 4254 and 4255, read-

``Taxpayer was a highly trained computer consultant whose employment required her to be on call 24 hours a day. During part of the year under review, taxpayer was involved in supervising a major conversion in the computer facilities which her employer provided for its customers. It was usual for her to receive telephone calls and give telephone advice to workers at the office at any time of the day or night when trouble arose with the operation of the computer. If she could not resolve the problem over the phone, she would return to the office from wherever she happened to be in order to get the computer working. She estimated that she made at least several phone calls and generally one extra trip a day, including weekends, during the conversion period to the office to `revive the computer'.

In order to assist in diagnosing and correcting computer faults while at home, taxpayer was provided by her employer with a portable terminal which connected to the computer through the telephone line. She estimated that she used the portable terminal on 3 or 4 occasions per week. If the problem could not be dealt with at home, she was required to go to the office to rectify it.''

In those circumstances Rath J concluded that the expenses in respect of the travel between home and work, outside the normal daily journey, were incurred in gaining or producing the assessable income and were not of a private or domestic nature. In making that decision it is clear that the learned Judge placed considerable weight on the finding that the taxpayer had a double work location and the fact that the two places of work were a necessary obligation arising from the nature of her special duties.

21. Whether a taxpayer's home also becomes, ``in a real sense'' (see Lord Wilberforce at p. 262 of
Pook v Owen (1970) AC 244), a place of work depends, in our view, upon the nature and extent of the operations conducted in the home. If the home is a dual place of work, then the expense of travelling from that place to the other in the performance of his duties will qualify for deduction.

22. The Tribunal acknowledges that, during the year in question, the applicant when at home did telephone either his base station or operators under his control on seventeen occasions, and that, from time to time, he referred to flight manuals which related to his employment. The question is whether those activities had the effect of transforming the applicant's home to a place of employment. The Tribunal is of the view that those acts were of a peripheral kind and that by themselves are not sufficient to alter in any way the private or domestic nature of the home. The Tribunal does not believe that the applicant ``in a real sense'', had two places of work.

23. The alternative and yet seemingly related claim that the applicant was travelling in the course of his employment when, prior to undertaking the journey from home to base, he telephoned base and or operator under his control is now addressed. The notion of travel on work as distinct from travel to work had its genesis in the decision of the House of Lords in Owen v Pook (supra). Dr Owen carried on practice as a general medical practitioner at his residence and also held part-time appointments as obstetrician and anaesthetist with a hospital located fifteen miles away. Under the terms of those appointments he was on stand-by duty. This work was concerned with emergency cases at the hospital and he had to be accessible by telephone. On receipt of a telephone call from

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the hospital, his responsibility for the patient began immediately, and he gave instructions to the hospital and usually set out instantly for the hospital by car. At issue was the claim to deduct the expenses of travelling to and from the hospital from the emoluments of his appointments on which he was assessed to income tax under Schedule E of the English Income Tax Act 1952. Lord Wilberforce, at p. 262, opined that the essence of the doctor's duties was that he should give immediate and correct advice the moment he was contacted and that he should form a decision whether to set off at once, to wait for further information or to take no further action. In the event of his deciding to go at once to the hospital, his Lordship considered that Dr Owen was travelling on the duty of his office and that he was travelling not to his work but on his work. On that basis it was reasoned that the expenses in question were properly deductible from the remuneration received. In reaching that decision his Lordship made the following observations which are of interest-

• • the mere fact of being on stand-by duty is not enough;
• • nor is it sufficient that a taxpayer might be called upon or might volunteer to give some professional advice on the telephone before setting out to his place of employment.

Of greater moment is the reference to the continuity of Dr Owen's responsibility and function in the performance of his duties and the apparent weight given to this factor in arriving at the final conclusion.

24. Notwithstanding the variances in legislation, the Tribunal sees no reason to preclude the principles espoused by Lord Wilberforce in any determination involving the first limb of sub-section 51(1) of the Act. In fact, the Tribunal takes the view that, in the context of the current reference, the ``on work test'' will be met only where responsibility is assumed at the time of the call being made and what follows is related to an ongoing need to attend some facet of the operation that exists as a result of the telephone conversation and which forms part of the duties that are productive of the assessable income. The Tribunal rejects the suggestion that any responsibility passed to the applicant at the time of making the call and hence the failure to comply with the threshold requirement of the test being prescribed. It is on that basis that the contention of travel on work fails to find favour with the Tribunal.

25. It is convenient that the Tribunal now disposes of the submission, albeit faintly put, that the wearing of the uniform by the applicant on his journeys between home and base transposed the nature of the expenditure so incurred from travel to work to travel on work. The Tribunal is unable to perceive any connection between the wearing of that apparel on those occasions and the activities engaged in by the applicant in the gaining of his assessable income. Such a contention lacks both substance and authoritative support and is therefore rejected.

26. In the opinion of the Tribunal the claim for travel expenses incurred within the base requires apportionment. It is our view that the travel between the base front gate and squadron headquarters remains travel to and from work and as such the associated expenditure was not incurred in the production of assessable income. Furthermore, visits to the doctor and dentist for the treatment of medical conditions were of a private nature and thus the costs incurred on those trips are not allowable deductions. However, the Tribunal has formed a contrary view on all of the other on-base travel. In undertaking that travel, the applicant was engaged in the duties required of his employment. On those occasions the motor vehicle expenses were incurred in the course of gaining the applicant's assessable income and accordingly they are allowable deductions. On the information available, it seems that a reasonable estimate of the distances so travelled was 411 kilometres which, at the agreed rate of 57.4 cents per kilometre, extends out as an amount of $236.

27. For the reasons set out above, the respondent's decision on the objections is varied to the extent of allowing as a deduction an amount of $236.