91 ATC 166
Administrative Appeals Tribunal
Judgment date: 9 January 1991
Dr P Gerber (Deputy President): The applicant, a police officer, is well versed in court procedure and, although legally unassisted, had thoroughly researched the law relevant to his application. I gratefully acknowledge the considerable assistance I received from his submissions.
2. In the tax year now under review - 1987 - the applicant was frequently engaged in what was referred to as ``Special Services''. This involves additional police duties, voluntarily undertaken, for which special provision is made in the award. Typically, such services include crowd control at football stadia, security and protection at shopping centres, directing traffic at demolition sites, etc. These duties (which can involve Saturdays and Sundays) are undertaken in the taxpayer's own time and are often ``tagged on'' at the end of his normal duties, so that on such occasions he
91 ATC 167
may be away from home for anything up to 18 hours and is thus prevented from having his breakfast/lunch/dinner at home. Whenever it is impractical for the taxpayer to have his meals at home, he was in the habit of buying the relevant meal on location. In the belief that the expenditure on a meal away from home is deductible, the taxpayer claimed an amount of $2532 in the year under review for ``meals''. This amount was arrived at by multiplying the number of such special duties involving eating away from home (211) by $12. He was not cross-examined to what extent - if any - such meals are provided free of charge by the owners of restaurants in areas which are the subject of police protection.
3. According to the taxpayer, the claim of $12 per meal was arrived at in the following circumstances:
``Prior to completing my tax return I telephoned the Inquiry Section of the Tax Office in Brisbane and I enquired as to what was an acceptable amount for meals claims. A female at that office advised me that $12.00 per meal was an acceptable amount. At this time I was not advised as to any requirements for records to be made and kept to comply with the substantiation provisions of the income tax legislation. I explained to this female person that I was a Police Officer, that in the course of performing special duty I was required to have meals away from home and the Police Station to which I was attached, and she stated that $12.00 per meal would be an acceptable expense.''
4. Although the taxpayer was unable to identify ``this female person'' at the ATO Inquiry Section, I have little doubt that the conversation deposed to took place exactly as described. Similar complaints have been voiced to the Tribunal before. If Shakespeare was said to have little Latin and less Greek, the Commissioner of Taxation has gone one better by staffing his Inquiry desks with wallies unable even to converse in tax. Worse is to come.
5. After receiving his assessment, the taxpayer became the subject of an audit and, after being requested to supply substantiation for various claimed deductions, including the expenditure on his meals away from home, and, having failed to provide what was considered to constitute adequate documentary evidence of the impugned expenses, the respondent issued an amended assessment disallowing, inter alia, the amount of $2532 claimed for meals and in due course the matter came before this Tribunal. The applicant was advised until the very last moment that the sole issue to be determined was the lack of substantiation. Thus, in his ``section 37 statement'', the respondent identified the dispute as ``whether estimated expenditure of $2532 in respect of meals is an allowable deduction under section 82KZ of the (Income Tax) Act... the taxpayer did not provide any receipts or other documentation in respect of this expenditure''. My own notes, made at the Preliminary Conference, confirm that the only issue before the Tribunal related to an alleged failure to substantiate the various impugned expenditures. It was not until two days before the hearing the Commissioner advised the applicant by telephone and special courier that he intended to rely, in addition, on sec 51(1). At the hearing, the applicant submitted that the Commissioner should not be allowed now to rely on sec 51; in any event, he had not been given sufficient time to research the law on that aspect. After much argument and reference to
FC of T v Wade (1951) 84 CLR 105, I held that in the circumstances a ``kind of'' estoppel had arisen, and that if the applicant wanted an adjournment on terms, I would have no hesitation in granting it.
6. As I understand the law, the Commissioner, having undertaken to limit the legal dispute to the issue of ``substantiation'', and the applicant having relied on that undertaking to his detriment, the Commissioner must accept the limitation that he himself has introduced and is not allowed thereafter to extend his grounds except on reasonable notice. When I indicated that I would refuse to ``split'' the hearing (ie deal with the other matters and adjourn the ``meal'' argument to some other date), the applicant, after a short adjournment, advised the Tribunal that he was now ready to proceed with any argument based on sec 51.
7. The reason that I mention this is to record my acute irritation at the sloppy preparation in what was said to be a ``test case'', and to confess that I was sorely tempted, albeit only momentarily, to reject the Commissioner's amended ``defence''.
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8. Turning to the claim, I am satisfied that the deduction for meals cannot succeed. Turning to sec 51(1), the law - at least as I understand it - is clear: to constitute an allowable deduction, it must be incurred in gaining or producing the assessable income, ie the expenditure must be part of the process of gaining assessable income. In other words, one looks to the scope of the activity and the relevance of the expenditure thereto (
Amalgamated Zinc (De Bavay's Ltd) v. FC of T (1935) 54 CLR 295, 309). In any event, other than going to the bathroom, I can think of no activity which is more private or domestic than taking a meal.
9. The taxpayer relied on several Tribunal decisions in which the cost of meals has been held to be an allowable deduction. Not to be outdone, Mr Bickford, of learned counsel for the respondent was able to refer to a host of Board of Review decisions in which such deduction was denied. I agree with the taxpayer, who remained me that each case is only as good as its facts (the taxpayer is a police prosecutor). I therefore propose to deal with only two of the numerous cases to which I was referred.
10. In Case U148,
87 ATC 868, the facts, taken from the headnote, state:
``The taxpayer was employed as a truck driver. On some days he was required to travel out of his home city for periods of from 12 to 18 hours. On such occasions he would buy breakfast and lunch `on the road'. He would also buy an evening meal if he was away from his home city for about 18 hours. The taxpayer normally bought lunch, even on those days when he was working within his home city. He was not reimbursed for meal costs and received no meal allowance. Meal costs did not contribute to the determination of his wages or overtime allowances.
The taxpayer claimed deductions for meals bought on those days when he was required to be away from his home city for 12 to 18 hours. The Commissioner considered the meal costs to be private expenditure and disallowed the deductions. The taxpayer objected.''
At paragraph 7 Senior Member Roach had this to say:
``7. I also take into account the circumstance that breakfast is ordinarily considered as a meal to be taken before the working day commences, and that it is a meal which the circumstances of employment did not preclude him from having at home. On the other hand, I take into account the abnormal hour at which he would have had to prepare (or have prepared for him) that meal (or snack). As to lunch, his circumstances really do not differ from those of a vast number of persons who are unable to return to their home in the course of the working day. In that regard his circumstances are like to those of the taxi driver in Case H22,
76 ATC 166 who bought meals because he could not go home for them and, by law, was not allowed to eat meals in his cab. On the other hand I take into account that when the working day was to be no less than 12 hours long, it is not unreasonable to delay the first meal of the day for two hours or so, or to have two meals `on the road'. Nor is it unreasonable that, when the working day was to stretch out to 18 consecutive hours, a third meal, more substantial than the others, should be had `on the road'.''
11. Coincidentally, Case H22, to which the learned Senior Member referred, was a case I decided some 15 years ago, holding that the cost of meals in similar circumstances to those before Mr Roach was not an allowable deduction. To the extent that Senior Member Roach allowed the expenditure on meals taken ``on the road'' on the basis that they were ``not unreasonable'', I must regretfully part company with him. ``Reasonableness'' has not yet, as far as I am aware, been used as a litmus test to determine ``the extent to which (expenditures) are incurred in gaining or producing the assessable income'' or were of a private or domestic nature. Catching a bus to work is not ``unreasonable'', but it does not make the busfare an allowable deduction (
Lunney v FC of T (1957-1958) 100 CLR 478). It is also ``reasonable'' for working mothers to engage babysitters. However the sitter's fees thus incurred are not deductible (
Lodge v FC of T 72 ATC 4174).
12. A more formidable argument was raised by Deputy President Todd in Case U212,
87 ATC 1195. The relevant facts, again taken from the headnote, were:
91 ATC 169
``The taxpayer was a sales tax investigator employed by the Tax Office...
During the 1984 year, the taxpayer was engaged in a university course to facilitate his promotion within the Tax Office and on those nights he had to attend university he purchased his evening meal there. He claimed a deduction for the difference between the cost of eating at home and the cost of eating at the university.''
Deputy President Todd concluded that the claim for meals was allowable under sec 51(1) because (i) it would have been impractical for the applicant to eat at home; (ii) the claim was only for the excess over and above what it would have cost the taxpayer to eat at home; (iii) ``the expense was incurred in pursuing a course of study, other expenses of which were conceded to be in the course of the production of assessable income''. While I have the utmost hesitation to dissent from any view expressed by Deputy President Todd, whose knowledge of tax law is legendary, I have some conceptual difficulties in apportioning a meal to the extent it is claimed to be consumed in earning assessable income and to the extent it is said to be ``private or domestic''. Thus, while one can readily undertake such arithmetic with motor vehicles or lawnmowers, such a task strikes me as insuperable when applied to meals. I suspect the expenditure is either deductible in full or not at all. If the Act does not recognise deductions for notional ceilings under sec 53, cf
FC of T v Western Suburbs Cinemas Ltd (1952) 86 CLR 102. I suspect that the cost of a notional meal at home cannot be used as a credit against the deduction of the cost of a chicken leg consumed while guarding the premises of an honorary colonel in the Kentucky army. Again, the mere fact that the meals in Case U212 were consumed ``in'' the course of pursuing a course of study does not, ipso facto, make the cost an allowable deduction. ``In'' in the sense of ``during'' may be sufficient for purposes of workers'compensation legislation, something more than a mere temporary connection is required for purposes of the Income Tax Act. Assuming that the cost of pursuing a course of study, undertaken ``to facilitate his promotion within the Taxation Office'', to be an allowable deduction, I find the cost of consuming a lobster mayonnaise in a student cafeteria, washed down with a good bottle of Mouton Rothschild, not only too remote, but difficult to characterise as an outgoing incurred in deriving the scholar's assessable income.
13. For the sake of completeness, I should add that after the Tax Office requested substantiation of the meal expenditure, the taxpayer set about to reconstruct such outgoings by going through his diary and attaching to each of the days he was engaged on special duties an amount which he believed was roughly what he would have spent. This was then recorded as the actual cost. This amount was then reduced by - depending on the time of day - $1.50 for breakfast, $2 for lunch and/or $2.50 for dinner - amounts he arrived at by calculating what the equivalent meal or meals would have cost him if consumed at home. Thus the taxpayer frankly conceded that where he stated in the record he supplied to the Tax Office - taking two entries at random as typical examples - ``20 July 1986 Queen St - $12'', ``22 July 1986 Elizabeth St - $6'', these are pure guesses. He knew from his diary where he was on that date, but not where he ate, let alone how much he paid for his meal or even whether it was breakfast, lunch or dinner. The Act requires that taxpayers who want to claim deductions must keep records which substantiate the claims. In no conceivable circumstances can this taxpayer's ``records'' be said to support his claim. This alone is sufficient to dispose of the meals.
14. There were some ``bits and pieces'', such as laundry expenses, which were conceded by the respondent at the hearing. In addition, the taxpayer claimed some $9 for ``refills'' which he indicated he no longer wished to pursue. That left some $17 for a calculator which had been purchased for work purposes, the receipt for which the taxpayer retained but was unable to find; he was sure that it was still at home. He was able to say where he bought the calculator and when, and how much it cost and threatened to produce it. The respondent, whilst not conceding the claim, none the less did not press it. I am satisfied on the evidence that this taxpayer took all reasonable precautions to prevent the loss of the receipt, which was either lost or destroyed in circumstances beyond his control and that it is not reasonable to obtain a substitute receipt; cf
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sec 82KZA(6). I am also satisfied that in what purports to be a ``test case'', this claim was properly not pressed.
15. For the reasons given above, the objection decision is varied by allowing a further deduction of $466 ($17 for a calculator and $449 for ``laundry''). The objection decision is otherwise affirmed.