Case R22

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 22 March 1984.

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K.P. Brady (Chairman); J.E. Stewart and D.J. Trowse (Members)

The taxpayer in this reference, a tanker driver by occupation, was employed by an oil company during the year of income ended 30 June 1979. The gross wages paid to him in respect of that period amounted to $17,499 and included an amount of $276. The latter amount was not shown as a separate item in the taxpayer's group certificate; it was returned as assessable income by him as part of gross wages received by him.

2. However, the taxpayer claimed in his return that the amount of $276 was fully deductible on the basis that it was a ``travelling allowance included in gross income fully spent as per attached letter''. For present purposes, the relevant parts of that letter (prepared by the taxpayer's employer) read:

``We advise that an amount of $275.70 has been paid to this staff member as a Transport Location Allowance for the taxation year 1/7/78 to 30/6/79. This amount was included in the gross earnings as per the group certificate.''

3. The Commissioner disallowed the taxpayer's claim and the objection lodged by the taxpayer against that disallowance. Upon the request of the taxpayer that the decision on the objection be referred to a Board of Review, the matter has come before us for review.

4. From the evidence adduced, the following relevant facts emerge:

• • The taxpayer's normal working hours on each of five working days in each week, of the relevant period, were from 7.00 a.m. to 3.32 p.m.
• • It was nevertheless customary for the taxpayer to commence work on each work day at 4.00 a.m.
• • The taxpayer travelled some 10 miles on each of those days in making a trip each way between his home and workplace.
• • Public transport was not available to the taxpayer for travel in the early hours of the morning; he chose to use his private car rather than a taxi for the travel purposes mentioned.
• • It was not a condition of the taxpayer's employment that he should own and use a car for the purposes of travelling between his home and place of work.
• • Whilst the taxpayer estimated that the cost of running his car for the purposes mentioned would have amounted to $472 approximately, he limited his claim for a deduction to the abovementioned amount of $276.
• • The amount of $276 was said to have been calculated at the rate of $5.30 per each working week and was paid ``more or less for the inconvenience of working outside normal hours''.
• • The amount of $276 was not calculated with reference to the taxpayer's use of his car or to the distance between his home and place of work or to the time taken to travel between those two places.
• • We were given to understand that the amount of $276 was separate from, and additional to, payments made for overtime, shift allowances and other like payments payable under the relevant Award.
• • We were given to understand also that the taxpayer was paid for overtime worked during the 1979 year, that was inclusive of the hours worked between 4.00 a.m. and 7.00 a.m.

5. In the present case there is no dispute that the amount of $276 was correctly included as assessable income. However, we gained the impression from the taxpayer's submissions that his claims for a deduction were based principally upon the view, however misconceived, that the amount of $276, described by his employer as a ``transport location allowance'', was in the nature of a reimbursement for travelling expenses that were necessarily incurred by him either on his

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ATC 214

employer's behalf or in the course of deriving his own assessable income.

6. The notion that the expenses were incurred on the employer's behalf appears to be based upon the proposition that the employer's requirement that he should present himself for work each day at 4.00 a.m., when public transport was not available, also gave rise to a further requirement that he should own a car and incur running costs to the extent claimed, in order that he might comply with his employer's wishes.

7. The notion that the expenses claimed were outgoings incurred in deriving his assessable income appears to be based upon the alternative proposition, either that they were incurred in deriving the amount of $276 included as assessable income, or in deriving (in particular) payments received in respect of overtime worked daily between the hours of 4.00 a.m. and 7.00 a.m. and which, also, were included in his return as assessable income.

8. The fact that an allowance of a particular kind is paid to a taxpayer does not of itself impress an outgoing, ostensibly related to that allowance, with any greater degree of deductibility than that which it would have in the event that no such allowance was paid in fact. It is the character or nature of the allowance which determines whether it is properly to be included as assessable income; likewise, it is the nature of the outgoing itself, without regard to the nature of any allowance that might be received, that determines whether it is an outgoing or expenditure that properly falls for deduction under the provisions of the first limb of sec. 51(1) of the Assessment Act. As the taxpayer was an employee at the relevant time, his claims do not fall for consideration under the second limb of that section.

9. On the evidence, the taxpayer was not on duty while he was travelling to and from work and his remuneration was not calculated with reference to that time. He was paid only with reference to the time during which he carried out his official duties, and to the nature of the duties performed, between the hours of 4.00 a.m. and 3.32 p.m. In the circumstances, the expenditure in issue does not satisfy the requirement to be deductible, that it was incurred ``in the course of gaining or producing'' assessable income (see
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 8 A.T.D. 431; (1949) 78 C.L.R. 47). Although the expenditure was an essential prerequisite to the derivation of assessable income, its character as travelling expenses between home and place of work was neither relevant nor incidental to the tanker driver activities by which the taxpayer gained or produced his assessable income (see
Hayley v. F.C. of T., Lunney v. F.C. of T. (1958) 11 A.T.D. 404; (1958) 100 C.L.R. 478;
Lodge v. F.C. of T. 72 ATC 4174). The expenditure is therefore not deductible under the first limb of sec. 51(1). Furthermore, having regard to the observations of Williams, Kitto and Taylor JJ. in their joint judgment in the Lunney case, it would seem that they regarded expenses in travelling between home and place of work as being of a private nature. In the present case, the like expenditure appears to be essentially of a private nature and therefore precluded from being an allowable deduction under the excluding provisions of sec. 51(1).

10. In the circumstances of the taxpayer's case, we do not think that there could be any substance in any submissions that might be put concerning the application of sec. 53 and 54 of the Act. The grounds of objection do not appear to cover those sections, and no submissions were put in connection with them. We mention these matters only because they are referred to in the Commissioner's reasons for disallowing the taxpayer's claim, that were furnished to the Board in accordance with reg. 35(1).

11. For the above reasons we would uphold the Commissioner's decision on the objection and confirm the assessment in issue.

Claim disallowed