Case T76

Members:
HP Stevens SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 10 October 1986.

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H.P. Stevens (Senior Member)

The questions for decision in these applications concern the operation of sec. 26(e) as affected by sec. 26AAAA in relation to the provision of a residence for the applicant - the superintendent of a mines rescue station - for the years of income ended 30 June 1982 and 1983.

General

2. Following mine disasters in 1887, 1902 and 1923 the New South Wales Government introduced legislation in 1925 enabling the establishment of a mines rescue station in each of the State's four coal mining districts. The Mines Rescue Act 1925 provided, inter alia, for a Mines Rescue Board (Pt IA of the Act) and for rescue stations to be erected by and under the control of district committees (Pt II of the Act). The Board controls the financing of each rescue station obtaining funds through a levy placed on each colliery proprietor in the State (sec. 6). Funds received by the various district committees from the Board are under each committee's direction and control (sec. 7(1)) and are to be applied (sec. 7(2)) towards, inter alia:

``(a) the cost of provision, maintenance, upkeep and administration expenses of the central rescue station...;

(b) the salary of the superintendent and of any person employed to assist the superintendent;

(c) the wages of persons employed as instructors...;

(d) the purchases of apparatus, accessories, appliances, requisites...''

3. Section 12(1) provides that ``every central rescue station shall be in charge of a superintendent, to be appointed by the committee''. This person is to have certain qualifications and in terms of subsec. (3) and (4):

``(3) The superintendent shall devote his whole time to the duties of his office, and shall perform all such duties in the instruction of persons who engage in rescue operations and the maintenance and working of the central rescue station and any subsidiary rescue station as may be prescribed.

(4) Whenever the superintendent of a central rescue station shall receive notification that an explosion or accident has occurred at a mine within the district whereby life or property is or is likely to be endangered, he shall -

• (a) proceed immediately with suitable equipment to the mine; and
• (b) on arrival co-operate with the management of the mine in rescue work; and
• (c) superintend the work of the rescue corps or persons employed in rescue operations.''

4. In terms of sec. 13(1) the committee shall appoint ``upon the recommendation of the superintendent,... instructors who are competent to instruct and train a rescue corps or persons to engage in rescue operations'' and they shall (subsec. (2)) ``subject to the direction of the superintendent, perform such duties as may be prescribed''. The committee shall by direction of the Minister (sec. 14(1)) ``establish at a central rescue station a permanent rescue corps, subject to'' certain conditions:

• (a) the corps shall consist of not less than six;
• (b) each member shall be thoroughly trained in accordance with a scheme approved;
• (c) a member shall -
  • (i) reside within immediate call of the station;
  • (ii) not go beyond immediate call without notifying the superintendent and giving intended whereabouts during the period of absence;
• (d) the superintendent to ensure not less than two members are within immediate call of the station at all times.

Each district mine manager is to select two or more competent persons for the purpose of acting with the rescue corps when summoned and such persons ``shall attend for training with the rescue corps when required by the superintendent'' (sec. 13(2)).

5. The regulations made pursuant to the Mines Rescue Act 1925 provide, inter alia, that ``suitable accommodation shall be provided so as to permit the superintendent, instructors and members of the corps to reside at or be within immediate call of the stations'' (reg. 40) and

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that the central rescue station shall consist of a building or buildings in which provision has been made for, inter alia:

``(i) a suitable office,

(ii) a lecture room,

(iii) a suitable training gallery provided with sufficient emergency exit doors opening outwards, an observation corridor fitted with sufficient windows to enable the work of training to be observed, means of rapidly flooding the gallery with fumes and rapidly clearing the same, and also adequate obstructions to enable the practical training to be undergone.''

(reg. 39(f))

The regulations outline the courses of training for members of the permanent rescue corps (reg. 31) and for men other than the permanent corps at a central rescue station (reg. 32 and 32A). Records are required to be kept (reg. 33). Regulation 28 sets out the duties of the superintendent - (a) to (k) inclusive - with (a) providing that he shall as far as is reasonably practicable ``reside and shall arrange his movements and those of the instructor so that either one or the other shall at all times be within immediate call of the central rescue station''.

The Returns of Income

6. In his 1982 and 1983 returns the applicant described his occupation as Rescue Station Superintendent and his employer as the Southern Mines Rescue Station and included under item 6(a) ``Value of board, quarter or residence provided free or for less than full value by employer for 52 weeks'' the amounts of $520 and $780 respectively.

The Assessments

7. For the 1982 year, the figure of $520 returned was increased by $3,237 to $3,757. The explanatory advice attached to the notice of assessment of 29 September 1983 indicated the sum of $3,757 had been calculated on the basis of an estimated weekly market rental value of $85 discounted by a factor of 15%, i.e. $4,420 reduced to $3,757. For the 1983 year, the figure of $780 returned was increased by an amount of $3,334 (total $4,114). Subsequently an amended assessment issued for 1983 reducing the total figure of $4,114 to $3,271. The adjustment sheet accompanying the notice of amended assessment dated 21 May 1985 revealed the sum of $3,271 had been arrived at in the following manner.

      ``Market Rental Value ($85 pw)                    $4,420
      Less Section 26AAAA Discount
          customary in industry              $309
        No reasonable
          accommodation                      $309
        Onerous conditions                   $531     $1,149
                                             ----     ------
                                                      $3,271
                                                      ------''
        

8. No reason has been given as to why a similar recalculation for the 1982 year was not made. The result is that in identical circumstances 9see later) a discount rate of 15% has been applied for 1982 and a discount rate of 26% (7% + 7% + 12%) for 1983. Both assessments (the amended 1983 assessment being the one before the Tribunal - sec. 191) cannot be correct.

The Objections

9. Except for the figures, the applicant's objections to the original assessments were in identical terms but the 1983 objection attached ``a Statement concerning the Superintendent's housing & duties at the Rescue Station, prepared by the Rescue Station Committee''. Accordingly reference will be made herein only to the 1983 objection and statement attached. The objection claimed:

``An amount of $3,334 was added to his assessable income described as `value of meals, board and/or quarters'. This amount should not form part of his income as it is not income according to ordinary concepts of income as per s. 25(i) and it is not an `allowance(s)..., allowed given or granted to him in respect of..., any employment of or services rendered by him' as required by S. 26(e).

(The applicant) is required to reside at the Rescue Station so as to be on call at all times to deal with any emergency arising from an accident at any of the Southern Coalfield Mines and it is a condition of his employment that he reside at the Station & provide an on-call service in the event of any emergency. He owns a house at Coledale adjoining the beach and would be perfectly happy (in fact prefer) to reside there except for the conditions of his employment requiring him to provide a 24 hour on-call service for mine rescue work.

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Consequently, to relate any measure of the benefit provided by living at the Rescue Station to an assumed market value is completely inappropriate. The residence at the Rescue Station is for the use of the Superintendent and cannot be sub-let or let on the market in any way, thus, it has no money value and could not be turned into money.

The figure of $3,334 described as `value of meals, board and/or quarters' on the adjustment sheet attached to the assessment is not explained by reference to any economic criterion and cannot be justified. Consequently, the amount should be removed from the applicant's assessable income.

(The applicant) currently receives a gross rent around $80 per week for his house let at Coledale and pays agent's fees, maintenance & other running expenses of the let property. He also pays tax on the net income from the property. Thus, any value attached to any benefit arising from the board at the Rescue Station should be related to & have regard for the net amount received from the Coledale property & the impossibility of turning the residence at the Rescue Station into an amount of money.

These factors suggest a taxable benefit to (the applicant) of $520 p.a. as disclosed in the original return. Such a figure properly reflects the limited benefit derived from the board at the Rescue Station & the fact that it is a condition of employment for (the applicant) to reside at the station and be on 24 hour call.''

10. The committee's statement opened by claiming the action taken was considered to be unreasonable and in support said:

``(A) It is, as has been customary, since the inception of the Southern Mines Rescue Station in 1926, a condition of employment laid down by the Committee that the Superintendent shall:

• (i) occupy the housing provided on rescue station property, and
• (ii) take part in rostered `on call' arrangements.

It is the belief of the Committee that this is necessary to fulfil the requirements of the N.S.W. Mines Rescue Act 1925 Part III Section 14(f) and (g) and Regulation Section 28, 28(a) and 30 and to provide an all hours reliable emergency response to calls for assistance.

Officials `on call' are required by the Committee to maintain a telephone and radio watch and on receipt of advice regarding an emergency are to supervise the despatch of equipment to, and to attend at, any mine where an emergency may have arisen.

In addition officials are required to maintain property security and to arrange attention to any matters which may arise outside working hours.

In connection with the above, all residences are fitted with alarm bell systems and the residences occupied by officials are connected to the business and emergency telephone lines and to the Mines Rescue Service radio network.

It is a prerequisite of employment by the Committee that the Superintendent:

• (a) occupy the housing provided
• (b) take part in rostered `on call' arrangements.

(B) The Committee draws attention to the fact that it is a condition of employment (in addition to any rostered `on call' arrangement) that all personnel are to attend for duty at any time that an emergency situation arises.

It is the belief of the Committee that this is the prime reason for the provision of housing adjacent to the Station and the requirement that certain employees occupy these houses as a condition of employment.

(C) It is the opinion of the Committee that the requirement of the N.S.W. Mines Rescue Act, 1925, preclude the use of any alternative accommodation by the employee.

(Regulation 28(a) quoted)

Even if this were not to be the case, the requirement that the employee in question live `on-site' limits considerably the availability of alternative accommodation. It would be unusually fortuitous that a home owner within close vicinity of the work place would be prepared to sell or let his

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residence whenever an employee is engaged to work there. The only way in which an employer could reasonably expect that an employee be accommodated in very close vicinity of the work place would be by the Station acquiring and retaining residences there to ensure that they would be available to satisfy the requirements. No alternative approach to the problem would be applicable in the circumstances.

(D) The Committee has found on numerous occasions that prospective employees are very often reluctant to reside on the Rescue Station premises and have accordingly experienced difficulty in obtaining suitable employees. In this regard it should be pointed out that the site of the Rescue Station was chosen with the view to a central location within the coalfield rather than an environment suitable for residential purposes and that at the present time persons residing on site suffer the disadvantages (among others) of proximity to a main road, the main railway line and dust and noise from an adjacent colliery.''

11. It might be noted in relation to the above statement that whilst it accords with the general thrust of the relevant legislation (para. 2 to 5 above) no evidence was led from any member of the committee and certain contentions or assertions in the statement, e.g. Pt D, were neither the subject of evidence nor referred to in argument before the Tribunal.

Relevant Income Tax Provisions

12. The fundamental provision is sec. 26(e) which provides that the assessable income of a taxpayer shall include:

``(e) the value to 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:

Provided that this paragraph shall not apply to any allowance, gratuity or compensation which is included in paragraph (d), which is an amount to which section 26AC or 26AD applies or which under any provision of this Act is deemed to be a dividend paid to the recipient;''

There is no dispute that the proviso does not apply in the present instance.

13. Where sec. 26(e) applies in relation to residential accommodation, regard must also be had to the provisions of sec. 26AAAA and 26AAAB. Section 26AAAA inserted by Act No. 19 of 1980, effective from 1 July 1977, sets out certain criteria to be taken into account. Section 26AAAB inserted by Act No. 175 of 1981, effective from 1 July 1977, is also applicable where its provisions are satisfied (sec. 26AAAA then having no application). In the present case it is conceded that one of the requirements of sec. 26AAAB is not satisfied and it may be put to one side.

Section 26AAAA states:

``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

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  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 the 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.''

Unlike sec. 26AAAB, which provides a formula to calculate the deemed ``value to the taxpayer of the benefit,'' sec. 26AAAA takes as its starting point the ``ordinary'' value in terms of sec. 26(e). It has no regard to the provisions of sec. 26AAAA with the Commissioner (and the Tribunal standing in his place) then to reduce that value where the specified matters are present - such reduction being ``as is appropriate in the circumstances''.

Facts

14. The applicant, a qualified colliery manager, acquired jointly with his then wife a residence at Coledale on 22 May 1962. This residence, described as a contemporary weatherboard, was situated on the beachfront with a full 150 degree ocean view which could not be built out. The area was relatively quiet and pollution free whilst the residence of 13 ``old'' squares comprised three bedrooms, an L-shaped lounge and dining room and the usual facilities. He occupied the residence whilst employed at Wongawille colliery situated 20-25 km from Coledale. In 1968 the position of superintendent of the relevant rescue station, situated 8 km from his then residence, apparently became vacant and the applicant (then colliery manager) applied for the position (salary said to be comparable to that for the colliery manager). Whether the position was advertised and if so, terms of advertisement, are not known. He was interviewed by the committee and was told it was a requirement that he live on the station. The applicant thought that 8 km away at Coledale was close enough but the committee made it clear that he had to live there if he wanted the position. He accepted the committee's stipulation and upon his appointment moved into the then superintendent's residence at the station - the jointly owned premises at Coledale being leased. A new superintendent's residence was built in about 1971 and the applicant has lived in it since its erection.

15. Occupation is covered by a licence agreement which, inter alia, incorporates the Obligations of Licensees included in a standard provisions for staff housing information sheet. This sheet gives the following details in relation to the superintendent's accommodation:

``SUPERINTENDENT

Above average standard of size and furnish.

Basic house to be maintained in a structurally sound condition.

Internal fittings to have minimum life of 15 years and includes:

• Venetian Blinds
• Light Fittings
• Basic fixtures in toilet, bathroom, laundry and kitchen
• An oil heater (or similar appliance)
• Simple curtain supports

Painted surfaces to be repainted as appropriate but not more often than every three years.

External lighting, access paths and shrubs to be provided once and maintained. No additions to be made.

External fencing to be maintained.

Telephone rent free with a limit on private calls, Electricity, heating oil (or equivalent) and basic garden maintenance to be provided free.

Not provided

Curtains and fancy supports (tracks, pelmets, etc.) Floor covering (carpets, etc.)''

It also sets out the following ``Obligations of Licensees'':

``The staff member who is also an occupant of a dwelling under Licence from the Committee shall:

• (a) ensure that the premises are only used as a private residence for himself and his immediate family.
• (b) make no alterations or additions to the premises.
• (c) estimate and pay for the cost of telephone calls of a private nature where a Rescue Station installed telephone is connected.

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In addition the staff member, other than the Superintendent, shall:

• (a) maintain the grounds and gardens surrounding the dwelling or licensed premises in good order and free from weeds and rubbish.
• (b) pay all charges for the use of fuel and heating oil.''

16. The licence agreement itself recites, inter alia, that the licensee is an employee of the licensor, required ``to reside at or within immediate call of the Southern Mines Rescue Station'' and that the licensor ``is prepared to agree to the Licensee occupying and using the said dwelling while he is so employed'' upon certain terms and conditions. Clause 2 grants a licence to use and occupy the dwelling, cl. 3 provides for the licence's termination in the following terms:

``(a) Upon the determination in any manner and for any reason of the employment by the Committee of the Licensee.

(b) Otherwise upon the expiration of one week's written notice given by one party to the other.''

Clause 4 is in elaboration of (a) whilst cl. 5 states:

``Nothing in this Agreement shall be deemed to confer on the Licensee any right of exclusive possession of the premises or to create as between the parties the relationship of lessor and lessee and the Committee its servants and agents shall at all times have free access thereto and rights of ingress and egress thereto and therefrom and to exercise all its rights in respect of the whole or any part of the premises save in so far as such rights shall prevent the operation of the licence hereby granted.''

Clause 6 reinforces item (a) of the Obligations of Licensees, i.e. use for private residence only. Clause 7 deems the obligations ``to be incorporated in and form part of this agreement''. Clause 8 sets out that the licence granted ``is personal to the licensee and shall not be assigned''.

17. In relation to cl. 5 the applicant's evidence was that at no time since he had been occupying either the new or old superintendent's residence had the powers given to the committee been attempted to be exercised - an attempt at another residence was stopped by the applicant. In respect of the provision that he was not obliged to maintain the grounds and garden the applicant said that he did in fact do gardening. Despite obligation (b) the applicant has had installed at his own cost an above ground swimming pool (size and cost unknown). In addition to free electricity and heating oil the applicant also for practical purposes, has the use of a telephone for private purposes without charge.

18. As indicated the applicant has resided at the station since his appointment in 1968. In the late 1970s the applicant had family difficulties - his then wife ``was a very fussy housekeeper; a very emotional type'' who could not cope with conditions at the station (see later) - and he made application to the committee (because of this situation) for permission to reside in the jointly owned house at Coledale. Such application was refused and in about 1978/1979 his marriage broke down (conditions ``just one of the number of factors which contributed to the breakup'' - other factors not canvassed). During the years of income in question the residence was occupied by the applicant, a lady to whom he is now married, her daughter (now aged 19) and his son (now aged 22).

19. Turning now to the property in question it is a dwelling of brick veneer construction and comprises 4 bedrooms (or 3 plus study) - ensuite to main, family room, lounge room, dining room, and usual facilities plus a large double garage under the main roof with internal access from the garage (total area approximately 25 squares - somewhat larger than the Coledale house). The residence faces south to Kerrong Avenue with a wire mesh fence and shrubs along the front boundary. A paling fence is constructed on the other three ``boundaries'' providing privacy to the rear yard. The property is within the confines of the rescue station which comprises approximately 1.5 hectares of land situated on the corner of Kerrong Avenue and Princes Highway Russell Vale - the zoning is special uses 5(a). The surrounding development is mixed comprising established residential cottages (good to fair condition), light industrial and extractive industries. The residence is about 100 m east of Princes Highway and about 500 m east of the South Bulli Colliery and 7.8 km from Wollongong. Present on the colliery site,

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adjacent to its boundary nearest to the residence are significant stockpiles of coal.

20. There are also a number of other structures on the station's 1.5 hectares. The superintendent's residence occupies the south-east corner of the property and directly to the north of the rear of the house about 50 m away is an open fire training bay. To the west of the side of the house about 25 m away is the fire training gallery which adjoins the main rescue station building that continues almost to the western boundary fronting Princes Highway. Between these two structures and the northern boundary are three residences for other permanent members of the rescue station; a garage for residences 2 and 3 and a gas lab (not there in the years in question).

21. The open bay and the enclosed gallery are used for training purposes and are in use basically Monday to Friday throughout the year. The fires lit in the gallery are wood, lit around 7.30 a.m. and allowed to heat up before training commences. Supplemented by artificial smoke bombs, the wood fires are used for training in the use of breathing apparatus for about two hours' duration and then the fires are allowed to die out, smoke dispersed by an exhaust fan system. The open bay fires are either tray fires to be put out using extinguishers, converted tank oil fires to be extinguished with foam and gas pipe fires to be put out with foam and/or dry chemical powder. The chemicals used to produce artificial smoke cause a dense white cloud which can affect the lungs (therefore need breathing apparatus) and whilst not a hazard to the health of the occupants of homes can be an irritant when the wind is in the wrong direction. Similarly unburnt carbon and the fine chemical powder from the open bay can cause some irritation to the respiratory tract. A witness who had been called in to do an investigation on behalf of the Department of Mines indicated that it had been decided training should continue (with warnings) as training without smoke would be of a lesser value. Photographs tendered showed the effect of wind or lack of it and it is fair to say that the residents of all dwellings would be affected, to a lesser or greater degree, upon the wind prevailing on the days fires were lit. Homes in close proximity to the station are also affected. Despite attention to trees around the perimeter of the station to minimise this interference complaints are still received on certain days. Most women consequently ``wash'' at weekends.

22. In addition to affectation from the training fires the area ``suffers'' from coal dust when a westerly wind blows emanating from the adjacent colliery coal stockpiles. This is not peculiar to the rescue station residences. As the valuer called on behalf of the applicant (see later) said:

``Dust does fall in most suburbs of Wollongong and many properties are subject to similar type problems.''

23. As a rescue station warrants there is an emergency telephone and radio system. The telephone is like a normal phone except it has a larger bell and also has a bell attached to the outside of each residence. When it rings it rings in each location simultaneously and can be answered at any location. The system has two lines - one for normal calls - but it is not until it is answered is it known whether it is an emergency or normal call. The telephone is in constant use and is also an irritant. Similarly the radio receiver, located in the residence, operates twenty-four hours a day (separate speaker outside). A lot of trouble has been experienced (mainly in last few months) with static and picking up on the so-called ``exclusive emergency frequency'' of C.B. traffic and this irritates as well. Colliery working shifts were from 7.30 a.m. to 9.30 p.m.

24. The applicant is not covered by any industrial award but there are two awards applying to other individuals. One, The Coal Mining Industry (Permanent Mines Rescue Staff) Award provides in cl. 13 that ``where an employer requires an employee to occupy a station residence he shall provide such residence rent free''. The other, The Coal Mining Industry (Permanent Mines Rescue Corps) Award provides in cl. 12 that ``where a house is not provided at the station for any employee to live rent free a rent allowance of $9.70 per week shall be paid to any and every such employee'' - currently allowance $20.60.

25. In the relevant years of income the applicant, whilst on call at all times, tried to get away from the station most weekends. The evidence did not establish whether this was for the whole weekend.

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26. Before the Tribunal, evidence was led from two valuers - one from the applicant and the other from the Commissioner - in relation to the rental value of the superintendent's residence. Although, if some of the submissions advanced on behalf of the applicant (particularly the primary argument) were upheld this evidence would be irrelevant, it can nevertheless be dealt with as part of the ``factual'' material to be taken into account in considering the submissions.

Commissioner's Valuer

27. Aged 26 the valuer obtained a Diploma in Business (Valuation) from Hawkesbury Agricultural College in 1980, was admitted as an Associate of the Australian Institute of Valuers on 14 December 1983 and registered in March 1986 as a Practising Real Estate Valuer for the whole of New South Wales with the exception of licensed premises and land within the boundaries of the Sydney City Council. He commenced as a Valuer Grade 1 with the Australian Taxation Office on 2 November 1981 becoming a Valuer Grade 2 in March 1985. He has undertaken valuation work throughout the State and his ``experience'' in Wollongong and surrounding areas was gained through a constant allocation of work in this area for a period of approximately 12 months from May 1983.

28. The valuer received instructions in around August 1983 to drive past the property and others, to take a note of construction and to make a conservative estimate of a fair market rental. To assist he obtained rental figures for ``comparable properties'' from one firm of real estate agents. He did not check the individual lease documents but relied on the figures given him by the agents. He arrived at a conservative value of $85 per week. In December 1983, after the issue of the 1982 assessment, he obtained further comparative figures from another firm of real estate agents - again lease documents not checked. Later he was asked to prepare a report setting out a full valuation of the property. For the purposes of this report he made a full inspection of the premises on 19 August 1986 and took photographs of it and each of the ten (10) properties (all from his December 1983 enquiries) contained in his schedule of ``Summary of Rentals'' - such photos formed part of his report. He formed the view that whilst the ``residence provides an excellent standard of accommodation and would normally compare favourably with the best houses disclosed herein and the general locality... a discount was warranted due to the smoke problem which exists as a result of the neighbouring Rescue Station'' and he ``confirmed'' the drive-past figure of $85 per week. The valuer's report does not show his method of calculation but in evidence he said he considered without the dust and smoke factors a comparable rental would be $105 per week which he reduced by $20 per week. He made no allowance for the radio and telephone noise which he regarded ``as onerous conditions related more to the employment'' having been instructed to ignore the matters referred to in sec. 26AAAA, because they were a matter for legal argument.

29. He was pressed in cross-examination concerning his valuation and whilst it is fair to say his research was not as comprehensive as it might have been nevertheless it could not be said his views were discredited. Consideration of the photographs attached to the report in conjunction with the summary of rentals, type of construction and remarks appended thereto does not lead to the conclusion his comparable rental figure of $105 per week is overstated. The station residence is much larger than any of the ``comparable'' properties in the valuer's list and placed elsewhere would prima facie command a higher rental than the dwellings currently on those other blocks of land. His range of properties covers $68-$80 per week for five properties (either weatherboard and tile or fibro and tile) described as ``generally offer inferior accommodation but consider these locations to be comparable to the subject'' to $100 for a brick and tile providing ``ample accommodation - noisy location'' and $100 for another ``comparable residence in superior location''. He was aware the applicant had erected the pool at his own cost and its existence was ignored in his valuation. He was also of the view that the residence was very well shielded from the rest of the station apart from the smoke.

Applicant's Valuer

30. Also a graduate of the Hawkesbury Agricultural College (diploma April 1981) he obtained registration in February 1984 and became an associate of the Institute in September 1984. He worked with the State Bank of N.S.W. from January 1981 to January 1986 covering various regions including

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Wollongong and since February 1986 has worked for a firm of property consultants and valuers in Wollongong.

31. He was requested to make a rental value of the residence as at 30 June 1982 and 1983. He inspected the property on 19 August 1986 (same date as Commissioner's valuer) and, inter alia, extracted a cross-section of rents in the area. He then assessed its rental value on the assumption that it was covered by a normal residential lease agreement (initial term of six months and then upon expiry of that, conversion to monthly tenancy with either party having the right to terminate the agreement giving one month's notice in writing) and was situated in Russell Vale but not affected by the conditions at the rescue station. This value he subsequently reduced due to three factors viz.: emission of smoke and various substances, restricted tenancy terms and conditions and telephone and radio transmission in order to arrive at a final ``Affected Market Rental Value''.

32. The valuer's report listed 23 properties in a schedule of comparable rentals and the rents ranged from $46 per week in 1982 and 1983 for a ``modest, two bedroomed weatherboard/C.G.1 cottage next to golf course. No garage, near garbage tip'' (on basis of maps tendered within 300-400 m of station residence) to $110 per week in 1983 for an ``elevated position, view to north-east, four bedrooms, large, log cabin fibro/concrete tile family home with single garage'' at Mt Ousley. Another property at Mt Ousley at $100 per week for 1981, 1982 and 1983 was ``three to four bedrooms with double garage. Large full brick/concrete tile, family home, opposite busy road'' - effect on rental of busy road $5-$10 per week - represented one of the larger properties on the schedule but at 15 squares was considerably smaller than the station residence. He agreed that the larger residence would attract a higher rental but suggested only $105-$110 per week. He made no allowance for the effect of coal dust because as previously stated it falls over a large part of Wollongong. Although his schedule shows no rentals decreased between 1981 and 1982 and only three decreased between 1982 and 1983 (one increased) the valuer determined a ``non-affected'' estimated fair market rental for 1982 of $95 per week and $90 per week for 1983.

33. No photographs of the properties included in his schedule of comparable rentals were tendered and as none were common to those included in the list of the Commissioner's valuer no comparisons can be made.

34. From this ``non-affected'' value allowances were deducted for detrimental features. ``The emission of the smoke and noxious substances (was) considered to severely detract from the property's rental value'' and a figure of $25 per week was deducted cf. $20 per week for Commissioner's valuer. Clause 5 of the licence giving ``the Committee its servants and agents, free access to the premises at all times'' was ``considered to reduce the rental value as the amenity and peaceful occupation of the residence is adversely affected'' - reduction $20 per week. The telephone and radio resulting ``in a significant reduction in the peaceful enjoyment and amenity of the residence'' was considered to adversely affect the rental value to the extent of $20 per week. Taking these reductions into account ``affected market rental values'' of $30 and $25 per week respectively were attained.

35. The valuer agreed the $25 was very subjective - he had regard to a reduced value on account of a major road (said re another property to reduce value between $5 and $10 p.w.) and considered the smoke, etc., to be worse. In arriving at the first $20 the valuer, whilst making no enquiries as to whether ``intrusions'' had occurred, had had regard to the fact a reduced rental can be charged when tenants are put in pending a sale (to cover agent's inspections with prospective purchasers). When asked whether, now having heard the evidence that no inspections had in fact ever been made, he would change his view he said ``I valued the property having respect to the licence''. In relation to the final $20 this was the very first occasion he had ever been required to make such an allowance. He did so on the basis of his inspection when he experienced discomfort but presumably made no allowance for the fact that the radio interference is worse currently.

36. The station according to the map tendered is in an established residential suburb with houses adjoining the station residence and opposite it on the other side of Keerong Avenue and it is unfortunate that the comparable rental schedules did not contain one of these close by houses which are also affected (depending on

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ATC 1086

the prevailing winds) by the smoke, etc., and presumably also by the noise from the outside bells, etc. As it is, one valuer has given a completely ``unaffected'' figure of $105 (agreed 83 same) whilst the other has arrived at $95 and $90 respectively.

37. Before turning to the arguments it should be observed that whilst basically both valuers proceeded from a consideration of comparable rental values, the Commissioner's valuer in his report arrived at an ``estimated fair market rental value as at 30 June, 1982'' only and in this valuation had ``no regard to onerous conditions as specified under S. 26AAAA''. Thus there was no evidence before the Tribunal in relation to how the Commissioner arrived at the 15% discount factor for the 1982 year nor the more complicated three tier 26% discount factor for the 1983 year. Such discounting was apparently performed by another of the Commissioner's officers. It might also be noted neither valuer had any regard to the provision of free electricity, oil and telephone (in practice) nor to the right to have the gardening done.

Argument

38. Mr Hill Q.C. put forward a number of submissions which can be set out as consisting of a primary submission that the Act did not operate to bring the applicant within its purview and a number of alternative submissions as to how ``value'' should be calculated if the applicant was within the purview of the Act. It is convenient (indeed necessary) to deal with the primary submission first.

39. The primary argument advanced was that sec. 26(e) did not apply because the subsection only applied to items that yielded a profit or advantage to a taxpayer as opposed to something that was an obligation imposed upon him. In support reference was made to a dictionary definition of ``benefit'' and to the cases of
McIntosh v. F.C. of T. 79 ATC 4325,
Mutual Acceptance Co. Ltd. v. F.C. of T. (1944) 69 C.L.R. 389,
F.C. of T. v. Smith 86 ATC 4463,
Hayes v. F.C. of T. (1956) 96 C.L.R. 49,
Donaldson v. F.C. of T. 74 ATC 4192,
Tennant v. Smith (1892) A.C. 150 and
F.C. of T. v. Cooke & Sherden 80 ATC 4140.

40. It was submitted the first four cases demonstrated the section related to what is a profit or advantage from service whereas here it was a condition of the employing body and therefore was not a fringe benefit. Hayes' case (supra) was said to reinforce the need for there to be a reward which question was a factual matter (Smith's case (supra)). The submission continued that the reason why the subsection was irrelevant could be seen neatly by what was argued in Tennant v. Smith (supra). In that case reference was made in argument to the position of the Archbishop of Canterbury in relation to Lambeth Palace and here reference was made to the position of the Prime Minister in relation to the Lodge. It was said the occupation of the residence was not a reward for service but was itself the performance (or part thereof) of that service.

41. Persuasive as the argument is the Tribunal is unable to accept it. There is no doubt that under the United Kingdom legislation then in force the occupation of the bank residence was not taxable because the occupant could not turn the advantage or benefit into money - Lord Halsbury L.C. at p. 151, Lord Watson at p. 159, Lord Macnaghten at p. 162 and Lord Field at p. 164. In the argument advanced in that case it was submitted in the next sentence after the reference to Lambeth Palace and the Archbishop of Canterbury that ``the tax is to be charged on profits and gains, and not upon what an individual may be able to save by holding a particular office'' and this submission was clearly accepted - cf. Lord Macnaghten who found at p. 164 ``that the occupation of the bank house rent free, though not unattended with some inconveniences, is on the whole, a considerable advantage to the applicant''. He continued at p. 164 ``a person is chargeable for income tax... not on what saves his pocket, but on what goes into his pocket. And the benefit which the applicant receives from having a rent-free house provided for him by the bank, brings in nothing which can be reckoned up as a receipt or properly described as income''. However the legislation there under consideration is different in terms to that contained in subsec. 26(e).

42. Section 26(e) was enacted in 1936 in substitution for the previous subsec. 16(g) and for the first time made specific reference to ``meals'' and to ``the use of premises or quarters''. Footnotes (A) and (B) at p. 44 of the Explanatory Handbook issued by the Commissioner showing the difference between

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ATC 1087

the 1936 Act and the previous Act were as follows:

``(A) The word `meals' has been included to cover allowances received in the nature of board. It was thought that allowances in `sustenance' as set out in the previous Act covered meals supplied, but the High Court has determined otherwise. It is to be remembered that the cost of such meals is an allowable deduction to the employer.

(B) The section has been amended to assess an employee in respect of the rental value of a residence provided by an employer for the use of the employee. Under the previous Act, an employee was not liable in respect of such an allowance for residence or quarters unless a specific deduction on that account was made from his salary or wages or unless the employee had the right to let the premises and thus convert the advantage into money. It is considered that income tax should be based upon the true remuneration of employment, including subsidiary benefits arising out of such employment.

It is to be noted that the value to be assessed is the value to the taxpayer. In the case of a residence this would normally be annual rental value. In the absence of evidence of rental value a reasonable percentage of the capital value would be adopted. If a residence in excess of the requirements of the employee were provided, the full rental value would not be assessed, but only the amount which represented the value to the employee.

In regard to quarters the value fixed under arbitration awards will, generally speaking, be adopted.

The proviso refers to amounts received under conditions set out in section 109.''

Whilst no reliance is placed upon these notes (it is unknown what was said in the relevant parliamentary speeches) they do indicate that prior to the enactment regard was had to the U.K. ``convertibility'' criterion and that so far as the Commissioner was concerned this criterion ceased to have effect for Australian income tax purposes. This view of the Commissioner does not seem to have been challenged and in Donaldson v. F.C. of T. 74 ATC 4192 where the issue was whether option rights constituted a benefit within sec. 26(e) Bowen C.J. at p. 4205 commented in relation to the added words as follows:

``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.)''

In view of these comments of the Chief Justice which, although obiter, the Tribunal accepts as being correct 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. 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.

44. It follows that the subsection is applicable even where the occupation is the result of a condition 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 which to paraphrase Fullagar J. in Hayes' case (supra) at p. 57 ``was in (a) true sense a product or an incident of (his) employment''. This leaves the question of ``value'' to be considered.

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ATC 1088

46. Before doing so reference might be made to the provisions of sec. 26AAAA and 26AAAB and to the fact that they proceed on the basis that subsec. 26(e) is applicable and lays down matters, etc., to be taken into account in determining the ``value'' for sec. 26(e). They or some of their provisions may be unnecessary if sec. 26(e) were inapplicable whenever as a condition of employment, employees lived in employer provided residences and it was suggested on behalf of the Commissioner, that use could be made of this regard reference was made to Pearce's Statutory Interpretation 2nd ed. at para. 87 and to
Grain Elevators Board (Vic.) v. Dunmunkle Corporation (1946) 73 C.L.R. 70 at pp. 85-86.

47. In view of the opinion reached earlier it is unnecessary to place any reliance on the introduction of later legislation that proceeds on the basis of earlier legislation having a particular meaning and this argument is mentioned merely for completeness.

``Value''

48. What has to be determined here is ``the value to the taxpayer'' of the residence provided by his employer. It was counsel's first submission under this head, that this could be determined with precision as being the amount by which the applicant was better off by virtue of receiving a half-share of the rent from the leased Coledale house. This approach was claimed, on behalf of the Commissioner, to be wrong and reference was made, inter alia, to the position of someone who instead of renting his own house sold it and invested the proceeds on the stock exchange making very large gains. He said these gains just as clearly as the rent received represented the amount by which that person was better off by virtue of being provided with a residence by his employer. Accordingly counsel for the Commissioner submitted that the total provisions of the Act required the actual accommodation provided to be looked at on their own and a value thereof to be determined having regard to the matters set out in sec. 26AAAA and 26AAAB (where applicable).

49. On balance it is thought that the latter view is to be preferred. Although it is ``value to the taxpayer'' that must be determined, it is considered that such value should not be affected by the personal situation of taxpayers which can vary enormously either at the point immediately before acceptance of a position carrying with it staff housing or at points during the occupancy of that housing. A person can at the initial point own a house and then determine either to rent it out (as here), or allow a relative to occupy it rent free (as in Case P46,
82 ATC 218) or to leave his family behind to live in it for a variety of reasons, e.g. education of children or to sell it and invest the proceeds. On the other hand a person can be renting a property and then determine either to give up the tenancy or to continue it and allow a member of his family to occupy it. Additionally a person can be occupying a house rent free - his wife may own it - or he may be living with his parents in which case what happens to that property is someone else's decision. In all these situations a person who applies for and accepts a position that involves leaving where he is presently residing and going to occupy staff housing has exercised a choice to leave his present residence and alter his current situation and it seems illogical to say, for example, that to a person who was previously renting a residence there is a value equivalent to the saving in the rent he was previously paying whereas to a person previously paying whereas to a person previously receiving rent free accommodation there is no value because he has not been saved anything. The foregoing are some of the pre-existing situations that can appertain but later events also need to be added for the ITAA operates in respect of each individual year of income. One can instance, in respect of a marriage break-up (not referring to the present case where details are not known), circumstances where a person occupying staff housing is better off as compared with someone else who might be forced to sell his previous residence as part of a property settlement and then to rent accommodation for himself. The view contended for on behalf of the Commissioner yields a common basis to be applied to all yet, depending upon the circumstances applying to each residence, allows an individual value to be arrived at for each occupant. Thereby two identical residences in the same location could both have a common starting point but, when adjusted for the prescribed matters which might have disparite effects on each, yield very different values to the respective occupant.

50. Two further submissions under this head might be mentioned before proceeding. The

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ATC 1089

first is that when considering what is customary in the industry regard should be had to the political background, etc., leading to the introduction of sec. 26AAAA by Act No. 19 of 1980 which was said to be for the purpose of maintaining the status quo. This was, inter alia, claimed to require a heavy discounting if not a nil value. Unfortunately the relevant parliamentary material provides no assistance and regard must be had to the words of the provisions themselves which certainly do not suggest a nil figure. The provisions of sec. 26AAAB inserted by Act No. 175 of 1981 would be ``anomalous'' if sec. 26AAAA had the meaning contended for - the occupant of a residence in say a remote location being assessable in respect of 10% of the annual rental value of the accommodation provided by his employer whereas on the argument advanced an employee outside sec. 26AAAB is assessable on nil. Once again there is the difficulty of later legislation but taking the provisions as a whole it is thought the contention is untenable.

51. The second further submission was that because the employer also receives a benefit from the provision of housing (has staff available) the value to the employee should be arrived at by apportioning the overall benefit, i.e. to both employer and employee. Whilst no doubt there is a benefit to the employer and this is specifically included in the sec. 26AAAB criteria it is not made a particular matter in terms of sec. 26AAAA to be taken into account in determining ``such reduction in the amount that would otherwise be the value to the taxpayer of that benefit as is appropriate on the circumstances''. It could be said to be embraced by ``all relevant matters'' but here there was no evidence of what might be the value to the employer and apportionment could not be made even if it were accepted as proper.

52. Summing up to this point it is considered that the applicant was receiving a benefit which requires valuation. It is also thought that in determining such value to the applicant regard should be had initially to the property itself as distinct from whether an individual who already had a residence he owned either rented it out or sold it and invested the proceeds thereof. It is necessary to now turn to the provisions of sec. 26AAAA.

53. Section 26AAAA, which applies for the purpose of determining a value for sec. 26(e), is not an easy provision to follow particularly in its relationship to sec. 26(e) for there might be said to be an overlap between them and also an overlap within its own requirements. Some of the matters set out in sec. 26AAAA(a) to (e) inclusive would be relevant matters in relation to sec. 26(e) if sec. 26AAAA did not exist. However this ``overlap'' can be removed if the provisions of sec. 26AAAA are viewed as the mechanism by which a figure is produced for sec. 26(e) purposes regardless of what amount the provisions of subsec. 26(e) on their own would yield. The more difficult ``overlap'' is in sec. 26AAAA itself whereby the Commissioner is to ``have regard to all relevant matters'' and then where matters (a) to (e) inclusive (or some of them) are present ``to make such reduction in the amount that would otherwise be the value to the taxpayer of that benefit as is appropriate in the circumstances'' (emphasis added). As indicated some of (a) to (e) inclusive would be taken into account under sec. 26(e) standing on its own and presumably would be within the ``all relevant matters'' for sec. 26AAAA purposes. The section would not appear to countenance a ``double dipping'' and it is thought that what is envisaged is that ``the amount that would otherwise be the value to the taxpayer'' is a figure to be arrived at by excluding the (a) to (e) inclusive matters. It is this figure that is then to be reduced in order to arrive at the amount to be included in terms of sec. 26(e). The above views operate it is considered to give effect to the provisions of the Act as a whole.

54. In so far as the present circumstances are concerned in relation to the particular matters set out in (a) to (e) inclusive of sec. 26AAAA the first can be set aside for the station residence is not ``situated in a place that is remote from a major centre of population''. Matter (b) is satisfied but (c) would seem not to be satisfied despite the Commissioner's discounting for this factor in the 1983 assessment (para. 7). Counsel for the Commissioner argued it was not satisfied - the applicant having residential accommodation ``nearby'' - unless (c) was read as incorporating the requirement that the applicant lived at his place of employment. He suggested that this should not be done and referred to sec. 26AAAB where subsec. (b)(ii)(B) thereof sets out a condition that ``the taxpayer was required by the employer to reside at... the place at

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ATC 1090

which the taxpayer was employed''. Matter (c) does not seem apt to cover a requirement by an employer that a person live at his place of employment for the criterion set out is ``by reason of the unavailability on reasonable terms and conditions of suitable alternative residential accommodation... within a reasonable distance from his place of employment''. On the facts the applicant did not occupy the accommodation provided by his employer by reason of the necessary unavailability of alternative residential accommodation and (c) can also be set aside. Matter (d) can be disregarded as well for apart from the stated difference in area, there was no evidence to establish factually that it was of a higher standard than required or was of a larger size than necessary to accommodate the applicant and his family. It was being occupied as a family home by two adults and two ``older'' children and the Tribunal is unable to make the necessary finding - in this regard it is illustrative (but in no way decisive) that the applicant's valuer did not make allowance for this aspect (nor for matter (c)) in arriving at his ``affected'' value. The final matter (e) is satisfied in principle and this really is the only matter that the applicant's valuer has made any allowance for in his valuation.

55. Accordingly the first step is to determine a figure for the value unaffected by matters (b) and (e) and then to consider what reduction in such figure should be made on account of matters (b) and (e).

56. The starting point obviously is the estimated fair market rental value ignoring smoke, etc., emissions, telephone and radio transmissions and in this regard the Commissioner's valuer has set a figure of $105 and the applicant's valuer one of $95. Neither valuer has had regard to the fact the applicant receives free electricity, heating, gardening (not in practice) and telephone (in practice) and some allowance should be made for these. Having regard to the whole of the evidence the Tribunal is satisfied that a starting point of $105 per week for each year is justified. As indicated previously the Commissioner's valuer's evidence was not discredited whilst the photos attached to his report assisted in fleshing out the descriptions shown in the schedule. Neither was the applicant's valuer's evidence discredited and, if it had not been for the items not taken into account, perhaps an average figure of $100 per week might have been the overall result.

57. Turning now to the smoke, etc., emissions, the applicant's valuer's estimate of $25 was a very subjective one based on his estimate of a reduction in value on account of a busy road of $5-$10. However, the estimate of the other valuer was admitted to be ``a pure subjective figure'' and in cross-examination he at one stage spoke of a figure of $20 to $25, although he finally firmed on $20. In the circumstances it is not unreasonable that the estimate of $25 p.w. should be adopted.

58. In relation to the telephone and radio transmissions aspect the only estimate before the Tribunal is that of the applicant's valuer, i.e. $20 p.w. The Commissioner's valuer regarded this aspect as covered by sec. 26AAAA - presumably matter (e) - whilst there was no evidence in respect of the basis of the discount applied by someone other than the valuer to his estimated value. Since matter (e) relates to ``any onerous conditions... attached to the lease or licence'' and there is nothing in the relevant documents that would seem applicable in this regard, it is thought it is something that more properly falls within ``all relevant matters'' other than those matters set out in (a) to (e) inclusive. Accordingly it will be dealt with here although the overall result will be the same as if it were something to be considered under matter (e). Despite being the only estimate placed before the Tribunal it still has to be looked at in the light of the other evidence, i.e. this was the first occasion the valuer had been called upon to make such an estimate and that his visit coincided with a current bad spoke of interference. In the circumstances it is considered that a figure of $15 p.w. should be substituted.

59. Overall this yields a figure that would otherwise be the value to the applicant of $65 p.w., i.e. $105-$25-$15 and consideration now has to be given to what reduction in that figure is appropriate in relation to matters (b) and (e) of sec. 26AAAA. Dealing with (e) first the Commissioner allowed a discount of $531 (say $10 p.w.) in the 1983 year (unknown for 1982) whilst the applicant's valuer's estimate is $20 p.w. In arriving at his figure the valuer had regard to a quite different situation which is not considered to be comparable to the present one. When houses are on the market agents can bring prospective clients for inspections many

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ATC 1091

times a day (hopefully) or per week and a lower rent is justified on account of such disturbances and inconvenience. However here although the right exists it has never been exercised (1968 to 1986) and a much lower reduction is in order. In all the circumstances the figure of $531 should be adopted.

60. The final matter (b) is one in respect of which the Commissioner allowed a discount of $309 (say $6 p.w.) in the 1983 year (unknown for 1982) whilst the applicant's valuer did not make any allowance therefore in his valuation. However it was argued (see para. 50) that for this matter ``a heavy discounting if not on NIL value'' was required. The nil value concept has been rejected but the degree of discounting required is probably the most difficult aspect of this application for the legislation leaves it to the discretion of the Commissioner and the Tribunal standing in his place upon an application to review. Particularly is this so when the basis of the Commissioner's figure and reasoning therefore has not been disclosed nor has any specific alternative amount (other than nil) been advanced.

61. Undoubtedly the degree of discounting was left open for there are a multitude of situations to be covered. However the position has been complicated by the fact that sec. 26AAAB was enacted later than sec. 26AAAA but to operate from the same date and in circumstances where, if it had operation, the provisions of sec. 26AAAA were to be inapplicable. Section 26AAAB, unlike 26AAAA, specifically refers to factors where the occupation of the of the employer provided accommodation was by reason that ``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'' and ``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''. In the present case it is apparent sec. 26AAAB would have applied (even though accommodation not in a remote area) except for the fact the employer did not provide ``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'' - only 3 others being covered. If the provisions had applied it seems the applicant would have been assessable only on 10% of the figure of $105 p.w., i.e. $546 for 1982 and a slightly increased figure for 1983 - roughly the same amount as returned by the applicant. Is this something that can legitimately be taken into account in determining what reduction is appropriate for sec. 26AAAA purposes?

62. In para. 47 no reliance was placed upon the introduction of later legislation proceeding on the basis of earlier legislation having a particular meaning. Here we have the situation of earlier legislation to be read in the context of the Act as a whole including the later legislation operating retrospectively from the same date and providing, if it applies, for the earlier provision to be inapplicable. Nevertheless it is not thought that the degree of reduction necessary having regard to the terms of sec. 26AAAA has, ipso facto, been altered without any change in its own provisions by the enactment of sec. 26AAAB. It has not been suggested that before matter (b) sec. 26AAAB came into being it would have been a factor in terms of sec. 26AAAA that someone else in an almost identical situation would be better off taxwise and logically the same position applies after its introduction without any change in the terms of sec. 26AAAA. Unfortunately the tax field is strewn with situations where, because one of the requirements of the Act has not been satisfied, persons in almost identical circumstances are either entitled or not entitled to a deduction or are either assessable or not assessable upon particular items. It is considered the same situation exists in the present instance. A contrary answer would have provided a simple solution, i.e. treat persons in almost identical situations in an almost identical manner but, regrettably, this is considered to be inappropriate having regard to the terms of the legislation. Such a solution would of course still have its own difficulties, e.g. degree of sameness, but at least there would have been a gauge against which a result could be determined.

63. This conclusion brings one back to the beginning (para. 60) and to the fact that the Commissioner allowed a discount of $309 (basis of and reasoning for unknown) whilst no specific alternative figure (other than nil) has been advanced. In
Stewart v. F.C. of T. 73 ATC 4007 which involved an appeal to the High Court from a Board of Review decision

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ATC 1092

upholding an opinion formed by the Commissioner in terms of sec. 65 Menzies J. said at p. 4009:

``Section 65 commits the decision as to the amount to be allowed as a deduction to the opinion of the Commissioner and it would, I think, be a special case in which either the Board of Review or the Court could be satisfied that the Commissioner's opinion was mistaken. This is not such a case''

(emphasis added).

His Honour would have been well aware that, unlike a court, a Board of Review could substitute its opinion for that of the Commissioner and undoubtedly he was making the point that this should not be done purely arbitrarily but only where the available material supports a conclusion that the Commissioner's figure was incorrect and allows a reasoned amount (rather than a pure guess) to be substituted. Does the material available here meet this requirement? It is doubtful if it does but, despite the clear proposition that each decision relies upon its own peculiar facts (all of which may not be known to a reader), it seems from a perusal of Case N14,
81 ATC 72, Case P46, 82 ATC 218, Case P80,
82 ATC 390 and Case Q13,
83 ATC 48 (the only reported decisions relevantly involving sec. 26AAAA) that some possible inconsistency emerges.

64. In Case N14 a figure of $11.30 per week was assessed to a minister of religion whereas the Commissioner's valuer determined a fair rental value of $80 per week. Again in Case P80 another minister of religion was assessed on only an amount of $585 as compared with the valuer's evidence of a commercial value of $50 to $55 per week. In Case P46 (a bank officer) the Commissioner's valuer after determining figures of $75 and $80 per week discounted these by $20 per week on account of ``the fact that the taxpayer had little choice in obtaining alternative accommodation because of the Bank's practice in making its own residences available'' and ``the fact that the house was probably too large for the taxpayer's requirements''. The final Case Q13 involved a prison officer where a valuer said the rent would have been at least $30 per week but ``he had developed a practice of reducing the commercial rents by 25%... because of the unsatisfactory environments mainly due to noise and air pollution'' and considered the ``disadvantages of a prison location warranted a 50% reduction'' to $15 per week (free electricity worth $4.90 per week not included).

65. The minister of religion cases can be put to one side for a lot of church activity takes place in a minister's home (meetings, etc.) and so can the prison officer's case for obvious reasons. The bank officer's case is however interesting in that a $20 p.w. reduction was made (from values of $75 and $80 p.w. this equals reduction of 26.66% and 25% respectively) for two factors. As the house was only ``probably too large'' it would seem the bulk of the reduction related to the effect of the bank's ``practice in making its own residences available'' and the allowance here of only just on $6 p.w. or 7% of $85 p.w. (less of $105 p.w.) for matter (b) would seem out of line. An allowance of 20% of $105, i.e. $21 p.w., would seem more in line.

66. Whilst still doubtful, whether the evidence placed before the Tribunal, would, standing on its own, support an adjustment to the Commissioner's figure it is considered that, when viewed in the light of the previous cases, the material is sufficient to do so. On balance the view is held that an additional $15 per week ($21-$6) allowance is not unreasonable thereby increasing the reduction on this account from $309 to $1,089.

67. The overall result in that the figure that would otherwise be the value, i.e. $65 per week (para. 59) $3,280 for each year should be reduced by $1,620 ($531 - para. 59 and $1,089 as above) to yield an assessable amount each year of $1,660 - such figure approximates or is not substantially different from the applicant's valuer's final amounts. Since the Commissioner has included $3,757 (1982) and $3,271 (1983) these require reduction by $2,097 and $1,611 respectively.

Conclusion

68. For the above reasons the Tribunal varies the decisions of the Commissioner upon the applicant's objections to his assessments for the years ended 30 June 1982 and 1983 by reducing the amounts included in the applicant's assessable incomes by virtue of sec. 26(e) and 26AAAA from $3,757 to $1,660 for 1982 from $3,271 to $1,660 for 1983.

Claims allowed in part