Banks and Commissioner of Taxation (Taxation)

Banks and Commissioner of Taxation (Taxation) [2017] AATA 468 (11 April 2017)
DivisionTAXATION AND COMMERCIAL DIVISION
File Numbers 2015/1934, 2015/1935
RePaul Michael Banks
APPLICANT

Commissioner of TaxationAnd
RESPONDENT

DECISION
TribunalEgon Fice, Senior Member
Date11 April 2017
PlaceMelbourne

The Tribunal affirms the Objection Decision made by the Commissioner on 6 June 2014.
....................................[sgd]....................................
Egon Fice, Senior Member
TAXATION - appeal against objection decision - income tax assessment - claimed deductions disallowed on audit - whether assessment excessive or otherwise incorrect - claimed deduction for work-related travel allowance - application of exception from substantiation for travel and overtime meal allowances - applicant unable to rely on exception from substantiation due to amount claimed - applicant unable to prove deductions - applicant unable to prove assessment excessive or otherwise incorrect
TAXATION - penalties - administrative penalties - where applicant’s taxation shortfall arose due to failure of applicant and applicant’s tax agent to take reasonable care - where applicant incorrectly advised as to taxation obligations - where applicant failed to provide tax agent with all relevant information - penalties correctly imposed - no basis for remission of penalties for any other reason contended
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss. 19D, 25, 37
Income Tax Assessment Act 1997 (Cth) ss. 8-1, 900-15, 900-30, 900-50, 900-65, 900-115, 900-125 900-165, 900-170, 900-175 900-195, 900-200, 900-205
Taxation Administration Act 1953 (Cth) ss. 14ZZ, 14ZZK; sch. 1 ss. 284-75, 284-80, 284-90, 298-20
Cases
Imperial Bottleshops Pty Ltd and Anor v Commissioner of Taxation (1991) 22 ATR 148
Secondary Materials
Miscellaneous Taxation Ruling MT2008/1, Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
Taxation Ruling TR2004/6, Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses
Taxation Determination TD2010/19, Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2010-11 income year?
Taxation Determination TD2011/17, Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2011-12 income year?
Taxation Ruling TR 2004/6, Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses
REASONS FOR DECISION
Egon Fice, Senior Member
11 April 2017
Background and Reconstitution

This application was heard by the Tribunal, differently constituted, on 8 February 2016, 9 February 2016 and 20 June 2016. Further submissions were received in relation to the application on 25 July 2016 and 31 August 2016. The Tribunal’s decision was reserved as of 7 September 2016.
On 7 March 2017, after being formally requested to do so by Deputy President S A Forgie and after consultation with the Tribunal as previously constituted, the President of the Tribunal exercising his power under s. 19D(2)(b) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) reconstituted the Tribunal appointing me to continue this proceeding. Section 19D(4) of the AAT Act provides:
The reconstituted Tribunal must continue the proceeding. For this purpose, it may have regard to any record of the proceeding before the Tribunal as previously constituted (including a record of any evidence taken in the proceeding).
In writing these reasons for decision, I have had regard to all documents, including the

documents produced by the Respondent under s. 37 of the AAT Act; documents admitted into evidence in the course of the hearing; and the Transcript of Proceedings in this matter on 8 and 9 February 2016, and 20 June 2016.
The Reviewable Decision
The decision under review in this matter is an Objection Decision made on 5 June 2014, which concerned the Applicant’s claimed deductions for the 2011 and 2012 income years. During the 2011 and 2012 income years the Applicant, Mr Paul Banks, was employed as a truck driver by Dunn’s Transport Pty Ltd. In the course of his employment, Mr Banks was required to stay overnight away from his home. Dunn’s Transport paid Mr Banks a bona fide travel allowance to assist him with the cost of accommodation (where applicable), and food and drink expenses incidental to the travel. The allowance was said to be paid on the basis of $50 per night that Mr Banks slept away from home. Dunn’s Transport also stated that Mr Banks was required to take on each trip sleeping gear and tools for performing repairs on the truck when necessary.
In the income tax returns Mr Banks lodged for the relevant income years, he claimed work related travel expenses in the amount of $24,888 in the 2011 income year and $21,636 in the 2012 income year. His assessable income for those years was $74,624 and $78,311 respectively. In the relevant income years, Mr Banks also claimed deductions for work-related car expenses; work-related clothing expenses; other work-related expenses; interest deductions; gifts or donations; and expenses in managing his tax affairs.
In a letter dated 2 May 2013 the Australian Taxation Office (ATO) informed Mr Banks that his income tax returns for the 2011 and 2012 income years had been selected for audit in relation to those claimed deductions. In a letter dated 16 July 2013 the ATO informed Mr Banks that it had completed its audit for both income years. The ATO amended the assessments disallowing a number of Mr Banks’ claimed deductions, resulting in a shortfall amount of $19,342.74 which Mr Banks was then required to pay. That sum was calculated by making the following adjustments in each income year:
2011 Claimed and Allowed Deductions

Item Claimed amount Allowed amount

Work-related car expenses $3,750 $1,680

Work-related travel expenses $24,888 $162

Work-related clothing expenses $799 $460

Other work-related expenses $1,642 $521

Interest deduction $66 $0

Gifts or donations $100 $0

Costs of managing tax affairs $1,023 $0
2012 Claimed and Allowed Deductions

Item Claimed amount Allowed amount

Work-related car expenses $3,750 $1,680

Work-related travel expenses $21,636 $0

Work-related clothing expenses $600 $620

Other work-related expenses $1,410 $1,508

Interest deduction $48 $0

Gifts or donations $50 $0

Costs of managing tax affairs $1,282 $308

The auditors also informed Mr Banks that he was liable to an administrative penalty on the shortfall amount for failure to take reasonable care when he prepared his income tax returns in each income year. That amounted to $2,683.80 for the 2011 income year and $2,151.85 for the 2012 income year.
On 18 December 2013 Mr John Fumberger, a registered tax agent, lodged an objection to the assessments for the relevant income years. In a letter dated 5 June 2014 the ATO allowed the following claims in the two income years in question (the Objection Decision):
2011

Item Allowed Amount

Work-related car expenses $1,680

Work-related travel expenses $11,990

Other work-related expenses $521

Interest deduction $0

Gifts or donations $0

Costs of managing tax affairs $283
2012

Item Allowed Amount

Work-related car expenses $2,559

Work-related travel expenses $12,980

Other work-related expenses $1,666

Interest deduction $0

Gifts or donations $0

Costs of managing tax affairs $434

The ATO also informed Mr Banks that while he remained liable to pay an administrative penalty and a shortfall interest charge, they would be reduced for the amounts allowed as a result of the Objection Decision. The Commissioner issued notices of amended assessment for the 2011 and 2012 income years on 13 June 2014.
After the Commissioner had made his Objection Decision, on 22 September 2014 Mr Banks, through his tax agent Mr Fumberger, sought full remission of the shortfall interest charges and administrative penalties which had been determined by the Commissioner in his decision. On 23 January 2015 the Commissioner issued a Notice of Review Decision confirming that:
(a)the safe harbour exception (found in s. 284-75(6) of the Taxation Administration Act 1953 (Cth) (the Administration Act)) would be applied to the penalties previously imposed on the total shortfalls arising from overstated expenses claims; and
(b)a partial remission of the overall shortfall interest charge would be applied.
I should point out that the Tribunal’s jurisdiction to review certain decisions is found in

s. 25 of the AAT Act. Relevantly, it provides:
(1) An enactment may provide that applications may be made to the Tribunal:
(a)for review of decisions made in the exercise of powers conferred by that enactment; or
(b)for the review of decisions made in the exercise of powers conferred, or that may be conferred, by another enactment having effect under that enactment.
The enactment which provides that applications may be made to the Tribunal regarding taxation matters is found in the Administration Act at s. 14ZZ which provides:
(1) If the person is dissatisfied with the Commissioner’s objection decision (including a decision under paragraph 14ZY(1A)(b) to make a different private ruling), the person may:
(a)if the decision is a reviewable objection decision – either:
(i) apply to the Tribunal for review of the decision; or
(ii) appeal to the Federal Court against the decision; or
(b)otherwise – appeal to the Federal Court against the decision.
Clearly, in this case, the Tribunal is limited to reviewing only the Commissioner’s Objection Decision. It cannot review the decision made by the Commissioner on 23 January 2015 as it is not an Objection Decision. However, if, following the findings I make on the Objection Decision I am of the view that Mr Banks is entitled to a remission of penalties imposed on him, I shall of course be mindful of the decision made by the Commissioner in his Notice of Review Decision.
The Objection Decision made by the Commissioner dealt with the number of claims other than work-related travel expenses claimed by Mr Banks. Except for the claim for other work-related expenses claimed in the 2012 income year, the claims were reduced in the Objection Decision. No issue was taken with those reduced claims as determined in the Objection Decision. The only issues which it appears I am required to determine are:
(a)whether the work-related travel expenses claimed by Mr Banks satisfied the requirements in s. 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 97);
(b)whether s. 900-50 of the ITAA 97 operates to exempt Mr Banks from the obligation to establish that work-related travel expenses were incurred as claimed;
(c)whether Mr Banks or his tax agent failed to take reasonable care in claiming the work-related travel expenses resulting in Mr Banks being liable to an administrative penalty calculated at 25% of the shortfall amount for the claimed work-related travel expenses for each of the relevant income years pursuant to s. 284-75 (1) of Schedule 1 of the Administration Act; and
(d)if I find Mr Banks is liable to the administrative penalties levied by the Commissioner, whether there is any basis for remission either in part or in full of those penalties pursuant to s. 298-20 of Schedule 1 of the Administration Act.
GROUNDS OF OBJECTION AND BURDEN OF PROOF
Section 14ZZK of the Administration Act provides:
On an application for review of reviewable objection decision:
(a)the applicant is, unless the Tribunal orders otherwise, limited to the ground stated in the taxation objection to which the decision relates; and
(b)the applicant has the burden of proving:
(i) if the taxation decision concerned is an assessment – the assessment is excessive or otherwise incorrect and what the assessment should have been; or
(ii) in any other case – that the taxation decision concerned should not have been made or should have been made differently.
The Commissioner’s disallowance of the claimed deductions for work-related travel expenses made by Mr Banks has resulted in in a significant increase in Mr Banks’ taxable income. Mr Banks included a travel allowance of $10,900 for the 2011 income year and $11,800 for the 2012 income year in his income tax returns for those years. The amount paid to Mr Banks was not in dispute.
Mr Banks bears the burden of proving that the claimed expenses were in fact incurred or that he has met the substantiation requirements, if they apply, for the claimed deductions.
As for the administrative penalties, Mr Banks bears the burden of proving that the decisions to impose penalties should not have been made or that they should have been made differently.
WORK-RELATED DEDUCTIONS
Section 8-1 of ITAA 97 is the general deductions provision. It provides:
(1)You can deduct from your assessable income any loss or outgoing to the extent that:
(a)it is incurred in gaining or producing your assessable income; or
(b)it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
(2)However, you cannot deduct the loss or outgoing under this section to the extent that:
(a)it is a loss or outgoing of capital, or of a capital nature; or
(b)it is a loss or outgoing of a private or domestic nature; or
(c)it is incurred in relation to gaining or producing your *exempt income or your *non-assessable non-exempt income; or
(d)a provision of this Act prevents you from deducting it.
Section 900-30 explains the meaning of the expression work expense. Travel allowance expenses are included in that meaning. Relevantly, it provides:
(1)   A work expense is a loss or outgoing you incur in producing your salary or wages.
(2)   Travel allowance expenses count as *work expenses. A travel allowance expense is a loss or outgoing you incur for travel that is covered by a *travel allowance. The loss or outgoing must:
(a)be for accommodation or for food or drink; or
(b)be incidental to the travel.
(3)   A travel allowances is an allowance your employer pays or is to pay to you to cover losses or outgoings:
(a)that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and
(b)that our losses or outgoings for accommodation or for food or drink, or are incidental to the travel.
The travel may be within or outside Australia.
…
(4)   Meal allowance expenses count as *work expenses. A meal allowance expense is a loss or outgoing that you incur for food or drink that is covered by a *meal allowance.
(5)   A meal allowance is allowance at your employer pays or is to pay to you as an employee to enable you to buy food or drink. However, an allowance is not a meal allowance if it is a *travel allowance or part of one.
…
SUBSTANTIATION RULES
Ordinarily, a taxpayer is required to substantiate any claims made in relation to his or her income tax returns should the Commissioner seek substantiation (s. 900-175 of ITAA 97). Because the taxation system currently operating in Australia is described as a system of self-assessment, documents substantiating claims for deductions are not ordinarily required to be produced to the ATO upon lodgement of an income tax return. However, if the Commissioner decides to audit an income tax return of the taxpayer, he would ordinarily seek substantiation of the claims as part of that audit. Records substantiating work expenses must be retained by the taxpayer for 5 years or, where an objection is lodged, an extended period (ss. 900-165 and 900-170).
Section 900-10 provides that to deduct certain types of loss or outcomes, the taxpayer needs to substantiate them under Division 900 of ITAA 97. Subdivision 900-B deals with substantiating work expenses. Section 900-15 relevantly provides:
(1) To deduct a *work expense:
(a)it must qualify as a deduction under some provision of this Act outside this Division; and
(b)you need to substantiate it by getting written evidence.
Subdivision 900-E deals with written evidence. Section 900-115, which deals with written evidence from a supplier, is relevant in Mr Banks’ case. It provides:
(1) You may use this set of rules for any type of expense except the decline in value of a *depreciating asset.
(2) You must get a document from the supplier of the goods or services the expense is for. The document must set out:
(a)the name or business name of supplier; and
(b)the amount of the expense, expressed in the currency in which it was incurred; and
(c)the nature of the goods or services; and
(d)the day the expense was incurred; and
(e)the day it is made out.
(3) There are 2 exceptions to these requirements:
(a)if the document does not show the day the expense was incurred, you may use a bank statement or other reasonable, independent evidence that shows when it was paid;
(b)if the document the supplier gave you does not specify the nature of the goods or services, you may write in the missing details yourself before you lodge your *income tax return for the income year.
An alternative means of substantiation is provided in respect of a small total of small expenses. Section 900-125 provides:
(1) If your expense is small, and you have a small total of small expenses, you can make a record of the expenses instead of getting a document from the supplier.
(2) Each expense must be $10 or less, and the total of all your expenses that:
(a)are each $10 or less; and
(b)you incurred the income year and wish to deduct; and
(c)you must get written evidence for under this division;
must be $200 or less. These limits can be increased from time to time by regulations made under section 909-1.
There are, however, some exceptions to the general substantiation rule. Section 900-50 deals with the exception for domestic travel allowance expenses. It provides:
(1) You can deduct a *travel allowance expense for travel within Australia without getting written evidence or keeping travel records if the Commissioner considers reasonable the total of the losses or outgoings you claim for travel covered by the allowance.
(2) In deciding whether the total of the losses or outgoings you claim is reasonable, the Commissioner must take into account the total of the losses or outgoings of the following kinds that it would be reasonable for you to incur for the travel:
(a)accommodation;
(b)food or drink;
(c)losses or outgoings incidental to the travel.
What the Commissioner considers are reasonable amounts for the substantiation exception in Subdivision 900-B of ITAA 97 is set out in Taxation Determinations for each year. A Taxation Determination is a public ruling for the purposes of the Administration Act. If a taxpayer relies on the ruling, the Commissioner must apply the law in the way set out in the ruling unless the Commissioner is satisfied that the ruling is incorrect and disadvantages the taxpayer, in which case the law may be applied to the taxpayer in a way that is more favourable. For the 2011 income year, the relevant determination is TD 2010/19. For the 2012 income year, TD 2011/17 applies.
Table 6 of TD 2010/19 applies to employee truck drivers for the 2011 income year. The reasonable amount is divided into two blocks, dependent upon the truck driver’s salary range. If the driver’s salary is $97,100 and below, the maximum total reasonable allowance for food and drink is $84.90 per day. If the truck driver’s salary is $97,101 and above, the maximum total reasonable allowance for food and drink is $92.65 per day.

Table 6 of TD 2011/17 applies to employee truck drivers for the 2012 income year. If the driver’s salary is $100,840 and below, the Food & Drink allowance is $87 per day. If the driver’s salary is $100,841 and above, the amount rises to $94.95 per day.
Despite the exception to substantiation set out in s. 900-50 of ITAA 97, that exception does not mean that a taxpayer may not be required to substantiate that an expense was actually incurred and that it was for work related purposes. To begin with, s. 900-15(1)(a) provides that to deduct the work expense, it must qualify as a deduction under some other provision of ITAA 97. Generally, that is a reference to s. 8-1 of ITAA 97 dealing with work-related deductions.
Taxation Ruling TR 2004/6 is binding on the Commissioner. It came into effect on 23 June 2004 and was consolidated in June 2006. It remained in force until withdrawn on 27 April 2016, but was reinstated on 28 April 2016 and is relevant in this case. Paragraphs 13 – 15 of TR 2004/6 explain the substantiation exception in the following way:
13. The objective of the substantiation exception for travel and overtime meal allowance expenses provided for in Subdivision 900-B of the ITAA 1997 is to relieve taxpayers covered by the exception from the requirement to substantiate claims for deductible expenses by using detailed calculations, records or receipts. If a claim for expenses that are covered by a travel allowance or overtime meal allowance qualifies for exception from substantiation, it is not necessary to keep written evidence as would otherwise be required under Subdivision 900-B of the ITAA 1997.
14. A taxpayer can choose not to use the exception from substantiation. Each taxpayer can decide between maintaining fewer records and limiting a claim to the reasonable amount, which in some circumstances may be lower than the amount actually incurred, or keeping written evidence and claiming the full amount of deductible expenses incurred, which may be higher than the reasonable amount.
15. If a taxpayer relies on the exception from substantiation, they may still be required to show the basis for determining the amount of their claim, that the expense was actually incurred, and that it was for work-related purposes. What counts as evidence for a claim subject to the substantiation exception will vary according to individual circumstances and the nature of the expense.
TR 2004/6 at paragraph 16 sets out some common situations which may arise. The following are relevant:
16. Where a taxpayer receives a bona fide travel allowance or a bona fide overtime meal allowance and incurs deductible expenses in relation to it:
·     Where the deduction claimed is more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the excess over the reasonable amount.
·     Where the allowance received is not shown on the employee’s payment summary and is not greater than the reasonable amount and it is fully expended on deductible expenses, the allowance received is not required to be shown as assessable income in the employee’s tax return. Where it is not shown, a deduction for the expense cannot be claimed in the tax return – refer to paragraph 12.
·     Where the allowance paid by the employer is greater than the reasonable amount the taxpayer may still use the exception from substantiation if the claim for deduction is not greater than the reasonable amount. In that case the allowance must be shown as assessable income and written evidence is not required to support the claim.
·     Where the deductible expense is less than the allowance received, the taxpayer must show the allowance as assessable income in the tax return, and claim only the amount of the deductible expenses incurred.
Taxation Determination TD 2011/17 refers to Taxation Ruling TR 2004/6 and sets out the key points as follows:
3Key points from the TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:
·Claim must be allowable – A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.
·Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.
·For travel allowance expenses – The employee must sleep away from home.
·Substantiation exception – Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.
·Claims in excess of reasonable amounts – If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.
·Verification of reasonable claims – In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:
– how they worked out their claim;
– an entitlement to a deduction (for example that work-related travel was undertaken);
– a bona fide travel allowance was paid; and
– if accommodation is claimed, that commercial accommodation was used.
The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.
…
MR BANKS’ WORK-RELATED TRAVEL EXPENSE CLAIM
There was no dispute that Mr Banks received a travel allowance of $10,900 in the 2011 income year and $11,800 in the 2012 income year. Those amounts were returned as income in his income tax returns. Also, there can be no dispute that Mr Banks claimed work-related travel expenses in the amount of $24,888 in 2011 income year and $21,636 in the 2012 income year. Plainly, the expense deduction claimed in each year exceeded the bona fide travel allowance provided to Mr Banks by his employer.
It is important to note that the reasonable travel allowance claim is based on food and drink components only associated with reasonable domestic daily travel allowance amounts. The amounts determined by the Commissioner are reasonable for meal expenses of employee truck drivers who have received a travel allowance and who are required to sleep away from home. There was no dispute about the fact that Mr Banks was paid $50 per day by way of travel allowance for each night he was required to sleep away from home. Mr Banks confirmed as much in his oral evidence-in-chief.
Mr Banks’ employment as a driver typically required him to drive from Ballarat to Adelaide and return. He agreed that was the typical routine for each trip. While there were occasional changes to the routine, including stops along the way for rest or meal breaks, typically he would leave Ballarat in the afternoon of the first day, arriving in Adelaide late that evening or in the early hours of the following day. Typically, he would stop at Ararat and Tintinara, purchasing food and drink. He would also have an evening meal following arrival in Adelaide. On the following day, he would have breakfast at Adelaide and return to Ballarat, stopping at Price, Port Wakefield, and Tintinara. He usually arrived back at Ballarat late in the evening on the second day.
In his Objection Decision, the Commissioner determined that the travel allowance provided by Mr Banks’ employer of $100 per overnight trip was considered to be a reasonable amount in his circumstances. Accordingly, the Commissioner found that the allowance paid to Mr Banks met the criteria of a bona fide travel allowance and qualified for the substantiation exception.
Using the reasonable travel and overtime meal allowance expense tables set out in TD 2010/19, the Commissioner determined that the reasonable amount for Mr Banks for the 2011 income year, undertaking his usual pattern of travel, was $125.55 per overnight trip; comprising $20.65 for breakfast, $23.60 for lunch and $40.65 per dinner for two dinners. In the 2012 year, using the figures from TD 2011/17, the Commissioner determined that the reasonable amount for Mr Banks’ usual pattern of travel was $128.65; comprising $21.15 for breakfast, $24.20 for lunch and $41.65 per dinner for two dinners.
However, the serious problem which Mr Banks faced was that he was unable to produce receipts for the relevant income years which substantiated his claim for meals and drinks and incidental expenses incurred on overnight trips. When requested by the ATO on
22 May 2014 to do so, Mr Fumberger provided a total of nine receipts, dating between July 2013 and April 2014 on Mr Banks’ behalf.
Obviously, not one of those receipts related to the relevant income years. Nevertheless, Mr Fumberger submitted that these were typical of the expenses incurred by Mr Banks on his round trip. The maximum expenditure recorded on those receipts is $40 and the minimum $20. Plainly, those receipts cannot be said to substantiate the expenditure Mr Banks claims to have incurred in the relevant income years.
Although Mr Banks, in cross-examination, provided a number of estimated costs incurred in purchasing various meals, drinks and incidentals, that evidence must, necessarily, carry little weight. In fact, it is clear from the evidence given by Mr Banks that his memory of the nature of the food and drinks he in fact consumed and their cost were anything but clear. That is not meant as a criticism of Mr Banks but rather, that one could hardly be expected to remember with any degree of accuracy that information after the passage of four or five years.
Further, Mr Banks said he was aware that he needed to keep some receipts. He admitted he rarely kept such receipts. When asked whether Mr Fumberger told him he needed to keep receipts to support his taxation claims from a number of years, Mr Banks referred to the Seven year rule. He said he had the impression he had to keep them for that period of time rather than being told by Mr Fumberger. In fact s. 900-65 refers to the retention period as being five years.
In his Objection Decision the Commissioner determined Mr Banks’ claim by examining the 9 receipts provided by Mr Banks and broadly assessing those which may have been provided in respect of breakfast, lunch and dinner. The Commissioner concluded that a reasonable estimate of Mr Banks’ food, drink and incidental expenses per overnight trip was $110 per trip. Relying on the evidence given by Mr Banks, Ms Cameron arrived at a total expenditure per trip to be $140.50. This is to be contrasted with the calculation made by Mr Fumberger in his Objection which estimated Mr Banks’ expenditure over the two days to be $175. Mr Fumberger then calculated the travel allowance claim in the 2011 income year by claiming 218 “nights” at $93.80 totalling a claim of $20,448. For the 2012 income year, Mr Fumberger used the figures of 236 “nights” at $84.90 totalling a claim of $20,036.
Mr Fumberger justified the claimed figures by stating that each trip covered a period of at least 28.5 hours, which was the equivalent of two overnight claims. Plainly, that is a misconception by Mr Fumberger. The reasonable allowance figures are based on maximum amounts allowed for breakfast, lunch and dinner per day. Claims for those amounts are only reasonable if they involve an overnight stay by the truck driver. Effectively, Mr Fumberger has doubled the number of trips which Mr Banks in fact made in each income year. Furthermore, he has used incorrect figures in each income year for the daily rate. The maximum total, based on Mr Banks’ salary, for the 2011 income year was $84.90 per day (TD 2010/19) and the 2012 income year $87 per day (TD 2011/17).
The Commissioner, correctly in my opinion, by referring to the payslips provided by Mr Banks, calculated that he had 109 overnight trips in the 2011 income year and 118 overnight trips in the 2012 income year. The Commissioner then arrived at a reasonable estimate using $110 per overnight trip which, on the receipt evidence provided, was reasonably generous, allowing for dinner on the first day, and breakfast, lunch and dinner on the second day, resulting in a reasonable deduction claim of $11,990 in the 2011 income year and $12,980 in the 2012 income year. These figures are contrasted against the deduction claims by Mr Banks on his income tax returns for the corresponding years of $24,888 and $21,636.
As is explained at paragraph 13 of TR 2004/6, if the claim for expenses covered by travel allowance or overtime meal allowance qualifies for an exception from substantiation, as is the case in this matter, it is not necessary to keep written evidence as would otherwise be required under Subdivision 900-B of ITAA 97. However, in this case, Mr Banks clearly claimed a deduction significantly in excess of the reasonable amount. As is explained in paragraph 16 of TR 2004/6, the whole of the claim must be substantiated with written evidence, not simply the excess over the reasonable amount.
A taxpayer of course is not prevented from claiming a travel related expense in excess of the reasonable amount determined by the Commissioner. However, should he or she do so, they are required to provide written evidence to substantiate their claimed deduction. Despite this, the Commissioner has allowed Mr Banks work-related travel expenses in the amounts of $11,990 and $12,980 respectively.
Mr Fumberger, who not only assisted Mr Banks in preparing his income tax returns for the years in question, also appeared on his behalf at the hearing of this matter. In addition, he gave evidence, or what purported to be evidence, on behalf of Mr Banks in the form of an affidavit and he was cross-examined by Ms Cameron. Had objections been raised at the time of tendering that affidavit, much of it would have been struck out. It is either self-serving, and by that I mean statements made in his own interest as Mr Banks’ tax agent rather than that of Mr Banks, and much is also simply hearsay. A substantial portion of it is argumentative, taking issue with the way in which the Commissioner has calculated a reasonable amount for a work-related travel expense. It points clearly to the fact that Mr Fumberger had a conflict of interest in appearing before the Tribunal on behalf of Mr Banks. Nevertheless, I should mention some aspects of his evidence because they stand in stark contrast to that given by Mr Banks in his oral evidence.
In cross-examination Mr Fumberger was asked where he obtained the figures of $93.80 and $84.90 for the 2011 and 2012 income years respectively. His response was they came from tax determinations but was unable to identify which determinations. When Mr Fumberger was shown TD 2010/19 which deals with reasonable travel or overtime meal allowance expense amounts for the 2011 income year, Mr Fumberger referred to Table 1 which is found at paragraph 11.
That table refers to an employee’s annual salary of $97,100 or below. It is divided into a bracket of capital city allowances, high cost country centres, Tier 2 country centres which are described at Table 5 and other country centres. The figure of $93.50 per day applies only to capital cities. Lesser amounts are allowed for country centres. However, that table plainly does not apply to employee truck drivers whose allowances are specifically referred to in Table 6. Clearly, from the answers given by Mr Fumberger, he had not previously looked at table 6.
When asked why he didn’t use Table 6 for the 2011 income year, he suggested that he did use Table 6 plus the incidentals on Table 1. That response was also incorrect. If he had used Table 6 plus the incidentals shown on Table 1, that would have resulted in the claimed sum of $84.90 plus $16.85, which is $101.75. Plainly, Mr Fumberger was simply making it up as he went along. For the 2012 income year, Mr Fumberger used the amount $84.90 which is in fact the Table 6 daily allowance for the 2011 income year. When asked why that was the case, he simply said: I thought that was more relevant. When asked why he thought that figure was more relevant, Mr Fumberger said: Just because. In fact the 2012 income year figure is $87 per day.
Mr Fumberger was also asked whether he had produced any notes or copies of receipts for food and drink other than the nine receipts he produced in May 2014 which related to years other than those income years in question. Mr Fumberger responded that they were submitted at the time of the audit. When it was put to him that they did not relate to the income years in question, he responded: Yes, they do, ‘11 and ‘12. When asked which receipts he was referring to, Mr Fumberger said all the receipts that Mr Banks brought with him and produced at the interview were photocopied and sent to the auditor.
The audit report which is dated 16 July 2013 had attached to it copies of the documents provided to the auditor by Mr Fumberger. There were no receipts for food or drinks connected with Mr Banks’ travel expense claim with those documents. While the auditor concluded from the information provided by Mr Fumberger, that the travel allowance paid to Mr Banks was not a bona fide travel allowance, she concluded:
Even if your allowance was correctly classified as a bona fide travel allowance, you have not provided sufficient information to show that you incurred the expenses. It is not sufficient to multiply the number of nights that you sleep away from home by the Commissioner’s reasonable rate without showing that you actually incurred expenses. You did provide receipts showing that you spent $161.80 on meals in the year ended 30 June 2011. On this basis an amount of $162 has been allowed in your 2010-11 income tax return.
As no receipts were produced for the 2012 income year, the auditor disallowed the entire claim for work-related travel expenses for that year.
As I have noted above in relation to the auditor’s report, it appears that a very limited number of receipts were produced by Mr Banks and only for the 2011 income year. That accords with the evidence given by Mr Banks in the course of his cross-examination when the following questions were put and answers given:
No, and you haven’t got any receipts here today to show that that is what you do?---You did not ask for them, so I did not bring them.
Leaving aside what’s has been asked for, you didn’t think it was important to bring anything extra like that today?---Not for the years that are not covered by the tribunal.
What about for years that are covered?---Well, I don’t---
You don’t have anything?---No
Although Mr Banks gave vague evidence about having done some research himself via the internet about the allowances a truck driver was entitled to claim, that evidence was not convincing. He was unable to explain how he located Tax Rulings or Taxation Determinations on the ATO website. Even for those who are relatively familiar with the website, that can itself be a daunting task. Assuming he had looked at and found the appropriate Rulings and Determinations, the Tribunal suggested that having looked at those documents, he would have discussed them with Mr Fumberger. Mr Banks had previously referred to Mr Fumberger as a truck driver specialist when it came to completing income tax returns. The following exchange then occurred:
You didn’t check with your specialist to make sure that the way you were reading it was the right way?---I thought we were on the same page, yes.
I’m sorry?---I thought we were on the same page. I think we were on the same page.
How did you think that if you hadn’t discussed it with him?---Well, I figure if he’s claiming it, it must be right.
With respect to Mr Banks, that final answer probably explains why the income tax returns in 2011 and 2012 claimed the deductions recorded on those returns. It was plainly Mr Fumberger’s idea and understanding of the taxation law and Mr Banks, understandably, simply accepted it was correct. As I have already indicated above, Mr Fumberger provided Mr Banks with the wrong advice and then attempted to justify his decision in the course of the hearing of Mr Banks’ application for review of the Commissioner’s Objection Decision. That is undoubtedly why the following statement appears in Mr Fumberger’s so-called statement of evidence:
1. …
Typically, like all tax returns prepared by myself [sic], Mr Banks [sic] return was compiled with a great deal of professional care and skill, and with consultation with Mr Banks.
Mr Banks was familiar with the tax laws that were fundamental to the preparation of his return, and in particular the application of the ‘exception from substantiation’ principle that had been adopted in this case.
Mr Banks had undertaken his own research on this matter, and this was discussed at times, between ourselves [sic].

According to Mr Fumberger’s so-called statement of evidence, he estimated Mr Banks’ work related travel expenditure over two days to be $175. That is, an amount of $87.50 per day. While Mr Fumberger said that involved at least six meals, his claim was in fact calculated on the basis of seven meals: breakfast, lunch and dinner for two days as well as what is referred to as supper on the second day in the amount of $15.
If Mr Fumberger had examined Table 6 of TD 2010/19 dealing with 2011 income year, it would have been obvious to him that the food and drink allowance does not include an allowance for supper. While Table 1 provides an allowance of $16.85 for incidentals, the food and drink allowance, which applies to other country centres on that table is identical to that found on Table 6. The maximum reasonable claim per day is $84.90 and not $87.50 per day. That should have been obvious to Mr Fumberger, given that he was a registered tax agent at that time.
Furthermore, in the 2011 income year, Mr Fumberger in fact the doubled the nights Mr Banks slept away from home for that income year. His justification for doing so was said to be:
… That is, the reasonable amount determined by the Commissioner for overnight travel applies for each trip undertaken by the taxpayer. But because each trip covers a period of at least 28.5 hours, the equivalent to 2 “overnight” claims are made, and is on this basis that the bona fide travel allowances paid.
It should have been obvious to Mr Fumberger, and I have no doubt that it was, that the statement I have quoted above is patently incorrect. The reasonable allowance is calculated on a per day basis, provided the employee truck driver was required to sleep away from home and that the expenses were incurred in the course of Mr Banks’ travel for his employer. Furthermore, it is divided into reasonable allowances for breakfast, lunch and dinner. As TR 2004/6 states, at paragraph 46:
The reasonable amounts reflect accommodation expenses incurred in commercial establishments for short-term daily accommodation and the relevant food and drink expenses incurred during the period of that travel [emphasis added]. The reasonable amount for incidentals applies to deductible incidental travel expenses incurred for each day the employee travels if those expenses are covered by the travel allowance.
Therefore, where an employee truck driver leaves his home on the first day and travels to Adelaide where he sleeps overnight, the actual expenses he incurred on that first day for food and drink are claimable. In addition, if the employee truck driver then drives to his home town on the second day, he is entitled to claim for actual expenses incurred on that day. If the truck driver leaves his place of residence after breakfast on the first day and returns before dinner on the second day, his reasonable amount for that trip is calculated by reference to the reasonable amounts for lunch and dinner on the first day and breakfast and lunch on the second day. It is not simply the total maximum daily reasonable amount based on three meals for each day.
It should have been patently obvious to Mr Fumberger that making a claim for two such trips when only one trip was undertaken, even though it covered two days with one overnight sleep away from home, was incorrect. To do so would be making a claim for four days at the daily rate. It should have been obvious to Mr Fumberger that the reasonable claim for each trip which required Mr Banks to sleep away from home, given he was driving over two days, could only have been the actual food and drinks expenses he incurred on those two days. Therefore the maximum reasonable claim for each trip could only have been $169.80.
If Mr Banks had, in fact, incurred expenses to that amount on each of his 109 overnight trips, the maximum claim Mr Banks could have made amounted to $18,508.20. Mr Banks’ claim was for $24,888 in the 2011 income year, which plainly exceeded the maximum reasonable amount determined by the Commissioner. Therefore, if he had in fact incurred that level of expenditure on each trip, his claim could only be allowed if he met the substantiation rules. In the 2012 income year, assuming maximum expenditure on each overnight trip comprising two days of driving at the maximum rate of $87 per day, the maximum claim amount based on 118 overnight trips is $20,532. The claim in the 2012 income year was $21,636, also exceeding the reasonable amount determined by the Commissioner.
As is explained in TR 2004/6, there are two grounds upon which the substantiation exception for travel and overtime meal allowances can be invoked. The first is that the taxpayer receives a bona fide travel allowance and the second is that he or she in fact incurs deductible expenses in the course of the work-related travel. If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated by written evidence. Where the deductible expense claimed is less than the allowance received, the taxpayer can claim only the amount of the deductible expense incurred. In Mr Banks’s case, his claimed deductions for the 2011 and 2012 income years for work-related travel expenses exceeded the reasonable amount determined by the Commissioner in each case. Accordingly, it should have been obvious to Mr Fumberger that Mr Banks was required to fully substantiate the claimed expenditure. Mr Banks was not entitled to rely on the exception from substantiation provided for in s. 900-50 of

ITAA 97.
In any event, as is stated in TR 2004/6, a taxpayer relying on the exception from substantiation may nevertheless be required to show the basis for determining the amount of their claim; that the expense was actually incurred; and that it was for work-related purposes. This in fact simply picks up the requirements set out in s. 8-1 of ITAA 97, that is, that the expenses were incurred in gaining or producing assessable income.
Substantiation of claimed deductions requires the taxpayer to prove, by written evidence, that the expenditure claimed was in fact incurred and that it satisfied the general requirements set out in s. 8-1 of ITAA 97, that is, that it was necessarily incurred in the course of gaining assessable income. The oral evidence of Mr Banks given about his expenditures does not satisfy the legislative requirement for substantiation. However, Subdivision 900-H provides for relief from the effects of failing to substantiate claims. Section 900-195 provides:
Not doing something necessary to follow the rules in this Division does not affect your right to a deduction if the nature and quality of the evidence you have to substantiate your claim satisfies the Commissioner:
(a)you incurred the expense; and
(b)that you are entitled to deduct the amount you claim.
In this case, the evidence relied on by Mr Banks was his oral evidence, based solely on imperfect recollections of the amount and nature of expenditure for food and drinks. While some example receipts appear to have been provided by Mr Banks at audit, those receipts were not in evidence before the Tribunal and they by no means covered the entirety of his claimed expenditure on food and drink. The Federal Court of Australia (Hill J) in Imperial Bottleshops Pty Ltd and Anor v Commissioner of Taxation (1991)

22 ATR 148 said this about a taxpayer that did not keep records of his deductible outgoings, at 155:
A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If it goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be “tested most closely, and received with the greatest caution”: Pascoe v Federal Commissioner of Taxation (1956) 6 AIRT 315; 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as “prima facie unacceptable”, cf McCormack v Federal Commissioner of Taxation (1979) 143 CLR 248 at 302 per Gibbs J; 9 ATR 610; 23 ALR 583.
Mr Banks’ evidence was, as I have already indicated, unsatisfactory. He frequently referred to what he would have done rather than what he recalled doing. He plainly had difficulty in remembering what he had purchased on any particular occasion and the associated expense. That is hardly surprising, given the number of years which have passed since that expenditure was incurred. Furthermore, as Ms Cameron said in her closing submissions, the expenditures claimed by Mr Banks to have been incurred on a two day trip amounted to some $140.50 while the claim submitted by Mr Fumberger on objection amounted to $175. The evidence of both Mr Fumberger and Mr Banks on the expenses incurred in purchasing food and drinks on any single trip to Adelaide cannot be reconciled nor relied on for the purposes of the claimed deductions.
Relief from the effects of failing to substantiate expenditure may also be relied on where there was a reasonable expectation that the substantiation would not be required. That is explained in s. 900-200 of ITAA 97 as follows:
Not doing something necessary to follow the rules in this Division does not affect your right to deduct an amount if the only reason was that you had a reasonable expectation that you would not need to do it in order to be able to deduct that amount.
The difficulty for Mr Banks in seeking to rely on this provision is that he used a registered tax agent to complete his income tax returns. The evidence discloses, clearly enough, that Mr Fumberger was aware of the substantiation rules in the ITAA 97. Furthermore, it is sufficiently clear that he advised Mr Banks that he would not be required to keep receipts evidencing his expenditure provided his claimed deductions were within what the Commissioner considered reasonable for the travel covered by the allowance he received.
The problem is that the claimed amounts, attributable to Mr Fumberger’s advice to Mr Banks, were in excess of what the Commissioner considered to be a reasonable amount. In any event, Mr Fumberger should have advised Mr Banks that in the event that he was required to submit his claim to audit, he would require written evidence of the claimed expenditure. In those circumstances, it cannot be said that Mr Banks had a reasonable expectation that he would not need to follow the substantiation rules in

ITAA 97.
Section 900-205 of ITAA 97 also makes provision for documents which are lost or destroyed. It essentially deals with a situation where a taxpayer’s original documents are lost or destroyed, and where reasonable precautions were made to prevent loss and destruction. Where this occurs and the document in question is written evidence of an expense under Subdivision 900-E of the ITAA 97, the taxpayer must try and get a substitute document that meets all the original requirements. In this case, those provisions are inapplicable. The written evidence which Mr Banks needed in order to substantiate his claim was in the form of receipts for purchases. There is nothing to suggest that

Mr Banks made reasonable attempts to prevent loss or destruction of those receipts.
I find Mr Banks does not satisfy the exception for substantiating domestic travel allowance expenses, on the basis that in each of the relevant years the amount he claimed was above the reasonable amount determined by the Commissioner. Given the paucity of sound evidence of the expenditures Mr Banks claimed by way of work-related travel expenses for food and drink, I find that he has not satisfied the ITAA 97 dealing with substantiating work expenses. He does not satisfy any of the provisions dealing with relief from the effects of failing to substantiate expenses.
Accordingly, I find that the Commissioner’s Objection decision to allow Mr Banks’ deduction for work-related travel expenses in the 2011 income year at $11,990, and $12,980 in the 2012 income year was the correct decision. Those amounts are based on a figure which is slightly less than the maximum reasonable amount applying Table 6 of TD 2010/19 and TD 2011/17. There being no documentary evidence before the Tribunal to substantiate the claims made by Mr Banks in each income year, the Commissioner’s reasonable estimate of $110 per overnight trip should be applied.
ADMINISTRATIVE PENALTIES
The basis for liability to an administrative penalty is established by s. 284-75 of the Administration Act. Relevantly, it provides:
(1) You are liable to an administrative penalty if:
(a)you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation Law (other than the *Excise Acts); and
(b)the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
…
(5) You are not liable to an administrative penalty under subsection (1) or (4) for a statement that is false or misleading in a material particular if you, and your *agent (if relevant), took reasonable care in connection with the making of the state.
(6) You are not liable to an administrative penalty under subsection (1) or (4) if:
(a)you engage a *registered tax agent or BAS agent; and
(b)you give the registered tax agent or BAS agent all relevant taxation information;
(c)the registered tax agent or BAS agent makes the statement; and
(d)the false or misleading nature of the statement did not result from:
(i) intentional disregard by the registered tax agent or BAS agent of a *taxation law (other than the *Excise Acts); or
(ii) recklessness by the agent as to the operation of the taxation law (other than the Excise Acts).
The mechanism by which a base penalty is calculated is set in s. 284-90 of the Administration Act. Relevantly in this case, Item 3 of s. 284-90 provides:

Item

In this situation:

The base penalty amount is:

3

You have a * shortfall amount as a result of a statement described in subsection 284-75(1) or (4) and the amount, or part of the amount, resulted from a failure by you or your agent to take reasonable care to comply with a * taxation law (other than the * Excise Acts)

25% of your * shortfall amount or part

The Commissioner contended that the penalty was applicable in Mr Banks’ case because a statement in the returns lodged on his behalf in each of the relevant years was false or misleading in a material particular. Therefore, the correct base penalty rate was 25% of the shortfall amount because Mr Banks and/or Mr Fumberger failed to take reasonable care to ensure that the claimed deductions complied with the taxation law.
The expression, shortfall amount, is defined in s. 284-80 of the Administration Act. It provides:
(1) You have a shortfall amount if an item in this table applies to you. That amount is the amount by which the relevant liability, or payment or credit, is less than or more than it would have otherwise been.
Items 1 and 2 on the Table under s. 284-80 provide:
1A *tax-related liability of yours for an accounting period, or for a *taxable importation, or under the Superannuation (Unclaimed Money and Lost Members) Act 1999, worked out on the basis of the statement is less than it would be if the statement were not false or misleading.
2An amount that the Commissioner must pay or credit to you under a *taxation law (other than the *Excise Acts) for an accounting period, or under a tourist refund scheme under Division 168 of the *GST Act or Division 25 of the A New Tax System (Wine Equalisation Tax) Act 1999, worked out on the basis of the statement is more than it would be if the statement were not false or misleading.
As a consequence of the statements made by Mr Fumberger on behalf of Mr Banks in his income tax returns for the 2011 and 2012 income years, the notices of assessment issued by the Commissioner, both of which indicated significant refunds payable to Mr Banks, must be amended by a reduction in those credits. That may result in an increased tax liability. Clearly, Mr Banks has a shortfall amount as result of the misleading statements made by Mr Fumberger and accordingly his liability to an administrative penalty is enlivened.
For the sake of clarity, I should mention that Ms Cameron, in her written closing submissions, referred to a portion of the work-related travel expenses in the amount of $4,400 for what Mr Fumberger described as local trips in the 2011 income year in the course of providing the auditor with additional information. In fact, the table provided by Mr Fumberger discloses the amount of $4,440 by way of local trips for the 2011 income year and $1,600 described as Murray Bridge trip for the 2012 income year.
On the first day of the hearing, Ms Cameron noted those claims and raised the question regarding whether they involved overnight travel. She noted that Mr Fumberger did not refer to those entries in his notice of objection. The transcript of the first hearing day records that the Tribunal raised this with Mr Fumberger and allowed him overnight to consider whether those claims continued to be pressed. Ms Cameron noted in her submissions that Mr Banks adduced no evidence and Mr Fumberger made no arguments about those amounts.
As best I can determine, whatever the basis was for separating out those amounts from other work-related travel expenses, the deductions claimed on the income tax returns for the relevant years incorporated those amounts. There appears to have been an error in the 2011 income tax return, because the $4,440 amount was reduced to $4,400. Those amounts were taken into account when the work-related travel expenses were amended by the Commissioner in his Objection Decision.
Miscellaneous Taxation Ruling MT 2008/1 is a public ruling for the purposes of the Administration Act. It is an expression of the Commissioner’s opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or class of schemes. It provides an interpretation of the concept of recklessness as used in Subdivision 284-B of Schedule 1 of the Administration Act. The legally binding Ruling provides the following meaning of the expression reasonable care:
27. The expression ‘reasonable care’ is not a defined term and accordingly takes its ordinary meaning. The Australian Oxford Dictionary, 1999, Oxford University Press Melbourne, defines ‘care’ as ‘… 3 serious attention; heed, caution, pains’ and ‘reasonable’ as ‘3a within the limits of reason; not greatly less or more than might be expected’. Taking ‘reasonable care’ in the context of making a statement to the Commissioner or to an entity within the meaning of subsection 284-75(4) means giving appropriately serious attention to complying with the obligations imposed under a taxation law.
28. The reasonable care test requires an entity to take the same care in fulfilling their tax obligations that could be expected of a reasonable ordinary person in their position. This means that even though the standard of care is measured objectively, it takes into account the circumstances of the taxpayer. This aspect of the test is addressed in the Revised Explanatory Memorandum to the A New Tax System (Tax Administration) Bill (No. 2) 2000 where it states at paragraph 1.69:
Reasonable care requires a taxpayer to make a reasonable attempt to comply with the provisions of the ITAA and regulations. The effort required is one commensurate with all the taxpayer’s circumstances including the taxpayer’s knowledge, education, experience and skill.
29. Judging whether there has been a failure to take reasonable care turns on an evaluation of all the circumstances surrounding the making of the false or misleading statement to determine whether a reasonable person of ordinary prudence in the same circumstances would have exercised greater care.

To fall within the exceptions set out in s. 284-75 (5) of the Administration Act, both Mr Banks and Mr Fumberger were required to demonstrate by evidence that they took reasonable care.
Mr Fumberger’s evidence was that in preparing Mr Banks’ income tax returns, they would meet and go through the details relating to his work, the trips taken, the time and length of the trips, the places listed, convert the meals and drinks consumed and discussed whether there was anything out of the ordinary. Mr Fumberger also said they reviewed work diaries and log books which Mr Banks would always bring with him. Mr Fumberger then said they would refer to a representative batch of receipts for food and drink. That statement makes it plain that Mr Fumberger did not have before him all the relevant receipts required to substantiate the claim expenditure for work-related travel. However, he justified that by stating that Mr Banks chose to use the exception from substantiation and therefore fewer records were required.
Mr Banks’ evidence was that he had learned of the exemption to substantiation provisions from other truck drivers, from his own research of the ATO website and reference to what he described as a tax ruling book. However, as I have already indicated above, Mr Banks’ claim to have researched the ATO website and obtained relevant information regarding the exemption from substantiation was extraordinarily vague and general. It gave rise to serious doubts about its accuracy.
Nevertheless Mr Banks, having told Mr Fumberger that he intended to rely on the exception from substantiation of his work-related travel expenses, plainly relied on Mr Fumberger to ensure that his claimed expenditures fell within what the Commissioner determined was a reasonable amount. As a registered tax agent, it would be reasonable to expect Mr Fumberger to have referred to TD 2010/19 to determine what those reasonable amounts were for the 2011 income year, and to TD 2011/17 for the allowable amounts in the 2012 income year. Furthermore, it would be reasonable to expect a competent registered tax agent assisting Mr Banks to complete his income tax returns, knowing that he did not have the receipts required to substantiate the claimed expenditure, to ensure that the deductions claimed did not exceed the bona fide travel allowance which was paid to Mr Banks.
A reasonable registered tax agent would have taken significant care to ensure that the claimed number of nights Mr Banks was away from home was accurate. The evidence discloses that Mr Fumberger did not do so. The daily allowance for meals and drinks claimed by Mr Fumberger exceeded what the Commissioner determined was a reasonable amount. Furthermore, he deliberately doubled the number of nights Mr Banks was required to sleep away from home on the strangely reasoned notion that, because each sleepover involved two days of travel, Mr Banks became entitled to twice the claim for each trip even though the reasonable amount determined by the Commissioner is plainly a daily rate, with the sleepover simply being a requirement to establish the claim. Mr Fumberger’s explanation is devoid of logic.
In light of the above evidence given by Mr Fumberger and Mr Banks, I find that neither of them took reasonable care to ensure that the claimed work-related travel allowances were within the taxation law. Therefore, Mr Banks cannot take advantage of the exception provided for in s. 284 – 75(5) of the Administration Act.
As for the exception found in s. 284-75(6), I also find that this exception cannot be applied to Mr Banks. He did not give to Mr Fumberger all the relevant tax information required to accurately record the travel claim deductions to which he may have been entitled as he did not provide all the receipts in each income year. Without that information, there was no basis for Mr Fumberger lodging a claim for work-related travel expenses which exceeded the reasonable amount determined by the Commissioner in each year. I accept Ms Cameron’s submissions that the evidence demonstrated Mr Fumberger acted recklessly or with intentional disregard of the taxation law. As a registered tax agent at that time, he must have been aware of the limitations imposed by the taxation law on work-related travel expenses. Despite that, he made claims which were well outside the reasonable amount determined by the Commissioner in the absence of documentary evidence to substantiate those claims.
Section 298-20 of the Administration Act provides the Commissioner with discretion to remit all or part of a penalty. While that discretion is unfettered, it must nevertheless be exercised in accordance with the law. Standing in the shoes of Commissioner for the purposes of reviewing the Commissioner’s Objection Decision, the Tribunal may exercise the power of remission granted to the Commissioner. However, there must be a sound basis for exercising that discretion.
The problem for Mr Banks is that no evidence or submissions were provided to the Tribunal regarding remission. There being no basis before the Tribunal upon which to exercise the discretion to remit the penalties, I decline to do so.
CONCLUSION
Although Mr Banks submitted that he was entitled to rely on the exception to the general substantiation rule regarding his work-related travel expenses, I have found that the exception does not apply to him. That is because his claimed work-related travel expenses exceeded what the Commissioner considered to be a reasonable amount of the total losses or outgoings Mr Banks claimed for travel covered by the bona fide travel allowance given to him by his employer. Therefore, Mr Banks was required to substantiate his work-related travel expenses.
Because Mr Banks did not keep receipts for work-related travel expenses, he attempted to substantiate those expenses by giving oral evidence based solely on his memory. I found that evidence to be unsatisfactory. It was insufficient to substantiate the claimed expenses. In his Objection Decision the Commissioner determined that a reasonable amount per overnight trip in Mr Banks’ case was $110. I have found that was reasonable. That is because, even relying on self-serving statements from Mr Banks, that figure more closely approximates what might be reasonable expenditure in his circumstances.
I have also found that Mr Banks’ 2011 and 2012 income tax returns contained statements about his claimed deductions which were false or misleading in a material particular. Mr Banks had a shortfall amount, which resulted from Mr Banks’ and Mr Fumberger’s failure to take reasonable care to comply with the taxation law. Therefore, he was liable to an administrative penalty.
The exceptions to administrative penalty liability did not apply to Mr Banks because both he and Mr Fumberger did not take reasonable care in making statements in his income tax returns. Further, Mr Banks did not give Mr Fumberger all of the relevant taxation information. The decision not to do so, according to the evidence, appears to have been made by Mr Banks.
It follows that I find the Objection Decision made by the Commissioner on 6 June 2014 was the correct decision in respect of Mr Banks’ income tax liabilities for the 2011 and 2012 income years. His administrative penalty and shortfall interest charge have been adjusted accordingly. I affirm the Objection Decision.

I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member

.....................................[sgd].................................
Associate
Dated 11 April 2017

Dates of hearing 8-9 February 2016, 20 June 2016

Advocate for the Applicant Mr J Fumberger

Counsel for the Respondent Ms F Cameron

Solicitors for the Respondent Australian Taxation Office Dispute Resolution

[2017] AATA 468

11 April 2017

Key Legal Topics

Areas of Law

Tax Law

Administrative Law

Legal Concepts

Statutory Construction

Penalty

Remedies

Appeal

Judicial Review

Item	Claimed amount	Allowed amount
Work-related car expenses	$3,750	$1,680
Work-related travel expenses	$24,888	$162
Work-related clothing expenses	$799	$460
Other work-related expenses	$1,642	$521
Interest deduction	$66	$0
Gifts or donations	$100	$0
Costs of managing tax affairs	$1,023	$0

Item	In this situation:	The base penalty amount is:
3	You have a * shortfall amount as a result of a statement described in subsection 284-75(1) or (4) and the amount, or part of the amount, resulted from a failure by you or your agent to take reasonable care to comply with a * taxation law (other than the * Excise Acts)	25% of your shortfall amount or part*

Dates of hearing	8-9 February 2016, 20 June 2016
Advocate for the Applicant	Mr J Fumberger
Counsel for the Respondent	Ms F Cameron
Solicitors for the Respondent	Australian Taxation Office Dispute Resolution