94 ATC 501
BA Barbour SM
Administrative Appeals Tribunal
Judgment date: 28 October 1994
BA Barbour (Senior Member): This is an application to review an objection decision of the respondent Commissioner of Taxation of 21 March 1994, disallowing a deduction in respect of motor vehicle expenses incurred by the applicant in driving to and from work during the tax year ended 30 June 1993. The application was heard before me on 10 October 1994.
2. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (T documents), and supplementary T documents lodged by the respondent on 29 September 1994. The applicant, represented by Mr Pearson, a chartered accountant, tendered photographs of the applicant's locker, the locker area generally, and the ``kit'' of equipment that was provided by his employer to perform his employment duties as an airline services operator and coordinator. The respondent was represented by Mr Beaver, a tax officer. The applicant, and two fellow employees, gave evidence before me.
3. The issue to be determined is whether motor vehicle expenses incurred by the
94 ATC 502
applicant in driving from his home to his workplace are deductible from his assessable income pursuant to the first limb of subsection 51(1) of the Income Tax Assessment Act 1936, which relevantly provides:
``All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of a capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.''
4. In the event that I find in favour of the applicant, the parties have agreed that the deduction allowable will be $1,070, pursuant to subsection 82KW(2) of the Income Tax Assessment Act 1936.
5. In his opening address, the applicant's accountant noted that while travel expenses are not usually deductible expenses as against assessable income, where there is a requirement to carry heavy or bulky equipment, those expenses may be deductible. In his notice of objection (T5), the applicant stated that the uniforms required to be worn by him are bulky, that they cannot be left at work because of insufficient security, and that it would be impossible and impracticable to carry them on public transport. Therefore, it was necessary in the year of income for the applicant to transport and store his uniform in his motor vehicle. It is on this basis that the applicant argues that the expense is deductible.
6. There is not a great deal in dispute as regards the facts of this matter. The applicant gave evidence that he has been employed by an airline company for the past seven years as both an Airline Services Operator and Airline Services Coordinator. His duties include the loading and unloading of aircraft, the coordinator supervising this process; the equipment required for each of these functions is almost identical, the coordinator also carrying a red folder and a radio.
7. In order to perform his duties, the applicant was provided by the airline company with a substantial kit of clothing, that included a warm coat and wet weather gear, this kit being produced before me at the hearing, photographs of it being tendered, and a list of items appearing in the T documents at page 10. The applicant estimated that the kit weighed 12 or 13 kilograms. The applicant had made available to him by the airline company a half locker in which to store this kit. The applicant stated in evidence in chief that he could not fit his entire uniform in the locker. He agreed that both the wet weather gear and the warm coat could fit in the locker provided to him.
8. The applicant stated that his locker had been broken into on two previous occasions (about five years ago), and the contents stolen. It took him over a month to have the wet weather gear, which was removed on the first occasion, replaced. He also stated that the employer had provided a drying room for the wet weather gear, but that this room had no lock, and that it did not function effectively as a drying room, although he himself had not used it.
9. Because of these problems, the applicant stated that he stored the parts of his uniform that were not in use in his car, and that he did not store anything in his locker. He placed the uniform in the wheel well of his car (leaving the spare wheel at home), and on the occasions that he did not drive he would transfer the uniform to the car of the person who was driving him. He stated that he parks his car at the staff car park, and that he carries into work a blue cylindrical bag, approximately one metre long (which was produced before me), and containing all of his kit except his wet weather gear; he carries his warm coat over his arm. He stated that he leaves this bag in the staff lunch room. If he requires his wet weather gear he stated that he would return to the car park to fetch it.
10. The applicant stated that he lives approximately 60 kilometres from the airport, and was required by his employer to work irregular hours. He gave evidence that there is no public transport available for him to travel to and from his work. Occasionally he has obtained a lift with other workers, but otherwise drives his car to and from work. The applicant stated that he wore part of the uniform to work, although he did not wear his safety shoes as he found it difficult to drive with these on, and instead wore sneakers.
11. The applicant agreed that on no occasion had he been unable to attend work because of a lack of uniform, although he stated that he had
94 ATC 503
once been sick because he had become wet while performing his duties without wet weather gear that was stolen. He also agreed that his clothing had been supplied by his employer, and when it was stolen he was not subjected to sanctions, and that the employer had replaced the stolen items.
12. The applicant stated that he would use public transport if that option were open, and that he found it convenient to drive to work, but that he required his kit with him, and he could not afford time off work.
13. A full time Airline Services Coordinator also gave evidence on behalf of the applicant, and stated that his locker had also been broken into, and that he kept that part of his kit that he was not using in the back of his car. He agreed in cross-examination that he had also driven to work prior to the break-in to his locker.
14. The manager of ramp services for the airline gave evidence that he knew the applicant, and described the applicant's duties as loading cargo and baggage onto and off planes. He stated that the applicant was required to wear his uniform, that the uniform was provided by the employer, and he agreed that the regulation kit was that as reproduced on page 10 of the T documents, excluding the calculator and towel.
15. He stated that if part of a uniform was stolen, then the employee could obtain a replacement for that at no cost, and that he considered security to the locker areas adequate. He agreed that anyone with access to the ``airside'' of the airport could have access to the locker rooms; access to ``airside'', was through a turnstile that was operated by a swipe card. He also stated that he believed that the car park area was secure, although he was aware of thefts from the car park.
16. He stated that airline services operators did have to work in the wet, and that if they did not have their regulation wet weather gear, this could be obtained from uniform stores during regular hours, and that it was policy that some wet weather gear was kept on the premises, including boots. He conceded under cross- examination that he was not sure if that equipment was available as required.
17. He stated that airline services operators have an entitlement to a full size locker, this being sufficient for storing the uniforms. He doubted whether the equipment of an airline services operator could fit into a half locker. He also stated that most airline services operators wore their uniforms to work.
18. In answering questions from the Tribunal, he agreed that the employer accepts responsibility for the security in the locker room; that items stolen would be replaced; that until items were replaced there would be no sanctions against the employee; that although an employee without safety shoes (part of the kit) would be sent home, he was unaware of any employee losing income because of goods being stolen from the locker. He also agreed that an employee could perform duties without a warm coat or wet weather gear. In response to a ``question arising'', he agreed with Mr Pearson that an employee may not be paid penalty rates for shift work if the employee was not working.
19. In closing submissions, Mr Pearson argued that the loss of assessable income if the applicant's uniform was stolen, for example by the loss of penalties and shift allowances if the applicant's safety shoes were stolen and he was unable to attend work, enabled the motor vehicle expenses to be claimed under subsection 51(1) Income Tax Assessment Act 1936. Because of the poor security in the locker rooms, and hence the potential loss of income, it was necessary for the applicant to drive to and from work.
20. Mr Beaver for the respondent argued that the motor vehicle expenses were private or domestic in character, and as such were not deductible under section 51(1) Income Tax Assessment Act 1936. He stated that the security problems at the airport were the employer's problem, and that there was no evidence on which the Tribunal could be satisfied that the applicant's locker could not be secured, and additional locks fitted. He also stated that it was the applicant's choice to carry his uniform to and from work.
21. I was referred to caselaw by both parties, and have had regard to this and all the other oral and documentary material before me. I find the applicant, and the other witnesses, to be truthful and honest, and would make the following findings with respect to the evidence before me:
- · The applicant works as an airline services operator or coordinator, both positions requiring him to have available a ``kit'' as produced before me and listed in the T documents (excluding the calculator and
94 ATC 504
towel), and as represented in the photographs tendered by the applicant. This ``kit'' weighs approximately 12 kilograms. The ``kit'' includes wet weather gear and a warm coat that the applicant requires at times (although not at all times) in order to comfortably carry out his duties, although he can satisfactorily perform his employment without these articles;
- · If the applicant does not require his wet weather gear and warm coat, he is able to store these in the locker provided by his employer;
- · the applicant either wears or is able to transport the remainder of his kit in a blue cylindrical carry bag, that is approximately one metre long, and which he is able to comfortably carry;
- · The security for employee lockers is somewhat less than ideal, and all persons ``airside'' of the airport have access to the area where the applicant's locker is located. The applicant, and other employees, have had goods stolen from their lockers. On one occasion the applicant had his wet weather gear stolen, and he stated that he became sick because this gear was not available. I am not satisfied that the applicant became sick because he did not have his stolen wet weather gear, and on this question of cause and effect I do not accept the applicant's evidence on its own, and there is no proper evidence (for example, medical evidence or sick leave records) to link his sickness with that episode. The drying room provided to employees is also less than secure;
- · Because of the applicant's concerns about the security in the locker rooms, he stores that part of his ``kit'' that is not required in the wheel well of his car, it being located in the staff car park. Thefts have also occurred from the staff car park;
- · The applicant's work clothes are the property of his employer, and if they are stolen from his locker, his employer replaces them without cost or sanction to the applicant. The applicant's employer also has a policy of having on hand wet weather gear to make available to employees who have arrived at work without it or for some other reason do not have it with them, although I am not satisfied that this equipment is at all times available for that purpose;
- · If the applicant was unable to work because part of his ``kit'' was stolen (for example, his safety shoes), he would not lose his wage entitlements, except perhaps an entitlement to shift penalties. The evidence on this point, however, was speculative, and not sufficient to make a finding other than that I am satisfied that the applicant would be recompensed his normal wages should he not be able to work because items were stolen from his locker.
- · The applicant travels to work in his motor vehicle because it is convenient to do so, and I would find that it would be very difficult for him to use public transport to travel to work, given the distance he must travel and the hours he must work. I do not find that the only reason that he travels to work in his car, or even the main reason, is so that he can store the remainder of his ``kit'' that he does not require in the wheel well, so as to protect it from being stolen. This finding is based on the applicant's evidence as to the lack of availability of public transport, and his concession that driving to work is the most convenient form of transport for him.
Lunney v FC of T (1958) 11 ATD 404; (1957-1958) 100 CLR 478, Williams, Kitto and Taylor JJ., in rejecting the proposition that fares paid by an employee or self employed person in travelling from that person's home to the work are deductible under section 51(1), stated:
``(at ATD 412-413; CLR 498)... The question whether the fares which were paid by the appellants are deductible under s. 51 should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as `incidental and relevant' to the derivation of such income. No doubt both of the propositions involved in this contention may, in a limited sense, be conceded but it by no means follows that, in the words of the section, such expenditure is `incurred in gaining or producing the assessable income' or `necessarily incurred in carrying on a business for the purpose of gaining or producing such income'. It is, of course, beyond question that unless an employee
94 ATC 505
attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income. Whether or not it should be so characterised depends upon considerations which are concerned more with the essential character of the expenditure itself than with the fact that unless it is incurred an employee or a person pursuing a professional practice will not even begin to engage in those activities from which their respective incomes are derived.''
``(at ATD 414; CLR 501) No doubt the legislative provisions which required consideration in these cases were not identical with s. 51, but the process of reasoning by which they were decided consistently rejects the notion that expenditure incurred by a taxpayer in order to travel from his home to his place of business is, in any sense, a business expenditure or an expenditure incurred in, or, in the course of, earning assessable income. Indeed they go further and refuse assent to the proposition that such expenditure is, in any relevant sense, incurred for the purpose of earning assessable income and unanimously accept the view that it is properly characterised as a personal or living expense. This view agrees with that which we, ourselves, entertain. Expenditure of this character is not by any process of reasoning a business expense; indeed, it possesses no attribute whatever capable of giving it the colour of a business expense. Nor can it be said to be incurred in gaining or producing a taxpayer's assessable income or incurred in carrying on a business for the purpose of gaining or producing his income; at the most, it may be said to be a necessary consequence of living in one place and working in another.''
FC of T v Vogt 75 ATC 4073, Waddell J., after reviewing Lunney and other relevant authorities, stated that the first step in determining whether expenditure is deductible under subsection 51(1) Income Tax Assessment Act 1936 is to state what are the relevant aspects of the operations carried on by the applicant for the production of his income. The next step is to determine the essential character of the expenditure itself.
24. In this matter, I have found that the applicant is an airline services operator and coordinator, and that he earns his income from loading and unloading baggage and cargo from planes. He is required to work in all weather conditions, and to that end his employer provides him with wet weather gear and a warm coat. Although these garments are not necessary for him to carry out his functions, his safety shoes are required if he is to work, and he would be sent home without these. As a matter of convenience, he chooses not to wear his safety shoes when driving his car to work.
25. He is provided with a locker by his employer in which to store his uniform, and this locker is sufficiently big to store both his wet weather gear and his warm coat. The applicant is able to carry, in a blue bag that is easily managed, or he wears, that part of his uniform that is not his wet weather gear and warm coat. If items are stolen from the locker provided to him, his employer will replace the items, and if the applicant was unable to attend work because items had been stolen, then he would not lose his wage entitlements.
26. As regards the character of the motor vehicle expenses: firstly, the driving to work was not necessary in order for the applicant to have his kit available to him; secondly, driving to work was the only practical and the most convenient way for the applicant to arrive at the airport; thirdly, in no sense did the motor vehicle expenses contribute to the activities of employment (that is, the loading and unloading of baggage and cargo from planes) from which the applicant derived his assessable income.
27. The expenditure is properly characterised as a private expense, being incurred in order for the applicant to arrive at his workplace, and in no way ``incidental and relevant'' to the earning of income, but rather being a necessary consequence of the applicant living 60 kilometres from the airport and working irregular hours.
28. The motor vehicle expenses, being properly characterised as a private expense, and not being incurred in gaining and producing assessable income, are not allowable as a deduction under subsection 51(1) of the Income
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Tax Assessment Act 1936. I would therefore affirm the objection decision under review.
29. For the sake of completeness, there are several matters I should like to address. Firstly, there was much oral evidence in relation to a ``drizabone'', coat that had been issued by the applicant's employer at one time. This evidence I would consider in no way relevant to the issue before me, and I am unsure as to why this evidence was led by either party, except to the extent that it was part of the applicant's ``kit''.
30. The other matter is the caselaw to which I was referred. I would note that the question before me is a factual one. While I do not find great value, when approaching a question of deductibility of expenses under subsection 51(1) Income Tax Assessment Act 1936, in seeking to compare the facts before me with those that were at some time before courts or other tribunals, I find nothing in the approach I have adopted that is inconsistent with the decisions in those cases cited to me in argument, and in particular Case L49,
79 ATC 339, Case U29,
87 ATC 229, Case U107,
87 ATC 650, Case Z22,
92 ATC 230 and Case 43/94,
94 ATC 387.