BRANDON And COMMISSIONER OF TAXATION
[2010] AATA 530
•15 July 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 530
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/0180
TAXATION APPEALS DIVISION ) Re JUSTIN WALLACE BRANDON Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Senior Member R W Dunne Date15 July 2010
PlaceAdelaide
Decision The Tribunal affirms the objection decision under review.
..............................................
R W DUNNE
(Senior Member)
CATCHWORDS
TAXATION – income tax – allowable deductions – motor vehicle travel expenses – Australian Army bombardier – transport of “deployment priority 1” equipment between home and work – whether equipment “bulky” – whether secure storage provided at work – effect of personal choice – effect of public binding ruling – whether expenses incurred in gaining or producing assessable income – whether loss or outgoing of a private or domestic nature – objection decision under review affirmed.
Income Tax Assessment Act 1997 s 8-1
Taxation Administration Act 1953 s 14ZZK(b)Income Tax Assessment Act 1936 s 51(1)
Re Crestani and Commissioner of Taxation [1998] AATA 612
Commissioner of Taxation v Vogt [1975] 1 NSWLR 194
Ronpibon Tin NL v FC of T (1949) 78 CLR 47
Lunney v FC of T and Hayley v FC of T (1958) 100 CLR 478
FC of T v Wiener 78 ATC 4006
FC of T v Collings 76 ATC 4254
FC of T v Ballesty 77 ATC 4181
Garrett v FC of T 82 ATC 4060
Case 43/94 94 ATC 387
Case U29, 87 ATC 229
Case U107, 87 ATC 650REASONS FOR DECISION
15 July 2010 Senior Member R W Dunne introduction
1. The applicant in this matter is Mr Justin Brandon. During the 2005/2006 tax year, which is in dispute, he was employed by the Australian Army, acting as a bombardier (corporal). From July 2005 to December 2005, he was based at the Woodside Army Barracks, 110th Air Defence Battery, in South Australia. In January 2006, he relocated to Steele Barracks – Training Command, Moorebank, New South Wales. He claimed a taxation deduction for motor vehicle travel expenses of $20,888 under s 8-1(1)(a) of the Income Tax Assessment Act 1997 (“ITAA 1997”). The claim was allowed but, following an audit by the respondent, it was disallowed and an amended assessment issued. The applicant objected against the amended assessment, the objection was disallowed in full and he applied to this Tribunal for review of the objection decision.
2. The applicant was represented by Mr F John Morgan (of counsel) and the respondent was represented by Mr Stuart Cole (of counsel). The Tribunal received into evidence the T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Exhibit R1), together with the following exhibits:
·applicant’s documents (420 pages) (Exhibit A1);
·letter dated 20 July 2005 from the respondent to Mr Nicholas Birdseye (Exhibit A2);
·Information Bulletin dated 6 August 2009 from the respondent to Australian Defence Force Personnel (Exhibit A3);
·witness statement of Mr Markus Scheidl dated 13 August 2009 (Exhibit A4);
·witness statement of Mr Paul Golding dated 10 March 2010 (Exhibit A5);
·witness statement of Mr Adam Valladares dated 15 September 2009 (Exhibit A6);
·View Leave History of applicant (Exhibit A7);
·Application to Live In, Live Out and Categorisation form (Exhibit A8);
·Car and travel expenses extract from “Taxpack 2009” (Exhibit A9);
·photographs of applicant’s residence numbered 1-7 (Exhibit R2);
·witness statement of Lieutenant Colonel John McLean dated 3 June 2009 (Exhibit R3);
·witness statement of Mr Nigel Sannholm dated 11 March 2010 (Exhibit R4);
·witness statement of Captain Selena Clancy dated 2 June 2009 (Exhibit R5);
·witness statement of Mr Inger Lawes dated 5 March 2010 (Exhibit R6); and
·vehicle ownership record of applicant (Exhibit R7).
issues for the tribunal
3. The following are the issues before me:
(a) Were the motor vehicle travel expenses of the applicant in the 2005/2006 tax year incurred in gaining or producing his assessable income, so that they are deductible under s 8-1(1)(a) of the ITAA 1997?
(b) Were the motor vehicle travel expenses of a private or domestic nature and, as such, precluded as a deduction under s 8-1(2)(b) of the ITAA 1997?
4. I note the following matters in connection with the issues in paragraph 3, which are accepted by the parties:
(a) Under s 14ZZK(b) of the Taxation Administration Act 1953 (“TAA”), the onus is on the applicant to establish that the relevant assessment (or amended assessment) is excessive.
(b) Having regard to my ruling made during the hearing, there is no issue of substantiation before me, so that if the objection decision is decided in favour of the applicant he is entitled to the taxation deduction claimed by him.
legislation
5. The provisions of the ITAA 1997 that are presently relevant are as follows:
“8-1 General deductions
(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.
Note: Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income.
(2)However, you cannot deduct a 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.
For a summary list of provisions about deductions, see section 12-5.
(3)A loss or outgoing that you can deduct under this section is called a general deduction.
For the effect of the GST in working out deductions, see Division 27.
Note If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20-A.”
background
6. Mr Brandon commenced employment with the Australian Army in January 2001. He was based at Kapooka and Puckapunyal during basic training and then at Woodside Army Barracks from May 2001. As a soldier, he was initially issued with his “deployment priority 1” (“DP1”) kit (or equipment), which included the following items (Exhibit A1 at pages 4-5):
(a) field pack, which includes:
(i) knife;
(ii) machete;
(iii) combination pick and spade;
(iv) 2 water bottles;
(v) sleeping bag;
(vi) bivvy bag;
(vii) eating equipment;
(viii) ground sheets and pegs;
(ix) Hexamine stove and tablets;
(x) field towels;
(b) combination webbing, which includes:
(i) straps;
(ii) 3 Minimi Ammunition pouches;
(iii) 2 Steyer Ammunition pouches;
(iv) compass pouch;
(v) belt and buckle;
(vi) large knife;
(vii) first aid kit;
(viii) survival kit;
(ix) water bottles;
(c) hydration gear, which includes a camel pack;
(d) wet weather gear;
(e) physical training gear;
(f) weapons, comprising “non-signed for” and “signed for” weapons;
(g) aeroplane models;
(h) laptop and training notes;
(i) toiletries;
(j) several different army uniforms, including:
(i) 4 Alpha - cams, GP boots and grade 1 slouch hat;
(ii) 4 Delta - cams, GP boots, bush hat, pack and webbing;
(iii) service dress - blazers, accoutrements, tie and belt and grade 2 slouch hat;
(iv) pollies - shirt, slacks, belt, parade boots and accoutrements;
(k) solid plastic trunk measuring 900 x 520 x 380 millimetres (178 litres);
(l) echelon bag;
(m) stretcher.
7. The Woodside Barracks (or Base) is known as 16AD (16 Air Defence). It provides air defence using missiles fired from a stand. In the 2005/2006 tax year a Rapier missile launcher was used. The Rapier was stored in a bay, which was contained in a shed situated in a restricted compound on the Base. There were four sheds in the compound and each shed contained four bays with a lockable roller door on the front of each bay (Exhibit A1, page 302).
8. The applicant’s claim for motor vehicle travel expenses of $20,888 related to travel to and from work at the Woodside Barracks and the Steele Barracks. Particulars of the claim are set out in the applicant’s witness statement (Exhibit A1, page 9). After further examination, the applicant adjusted his claim for travel expenses to $21,938.
9. In May 2007, the respondent completed an audit of the applicant’s travel expenses claim. In deciding to disallow the claim in full, the respondent’s reasons for decision included the following observations (Exhibit R1, T6, pages 27-29):
“Where the taxpayer keeps necessary equipment or instruments at his home which he needs for the purpose of performing his work and by reason of its bulk such equipment needs to be transported by vehicle from the home to his place of work, the expenses incurred in transporting the equipment will be an allowable deduction (FCT v Vogt 75 ATC 4073).
To satisfy this requirement, you must be transporting bulky equipment that is essential to your income earning activities. The equipment must be of such bulk that the trip is considered to have the character of transporting the equipment, with the secondary purpose of transporting you to your place or work.
In your case you stated that the equipment comprised of models of aeroplanes and personal equipment. Your tax agent also stated that your employer did not provide secure storage for you to leave your equipment at your work place.
…
Taxation Ruling TR95/17 specifically relates to work related deduction of employees of the Australian Defence Force and clearly states that a deduction is not allowable for the cost of travel between home and the normal work place as it is generally considered to be a private expense. A deduction is allowable if the transport expenses can be attributed to the transportation of bulky equipment rather than to private travel between home and work. A deduction is not allowable if the equipment is transported to and from work by the ADF member as a matter of convenience.
The question that needs to be asked is: were the tools and equipment bulky?
…
In your case, you stated that the items you carried to your work were:
·Model Planes
·Bulky equipment
Carrying of these items is not considered necessary in your capacity as a Trainer for the Australian Air Force [sic]. Carrying these items does not alter the private nature of travel between your home and place of work. You transported yourself to work by the use of your motor vehicle. Putting the above items in the motor vehicle did not alter either the nature of the trip or the character of the expenditure which is private.
…”
10. In deciding to disallow the applicant’s objection, the respondent’s reasons for decision included the following observation (Exhibit R1, T2, page 5):
“…
In your case, you carry a pack and webbing when you travel between home and work. By their very nature, these items are designed to be carried by you for considerable distances. It is not considered that you are carrying bulky equipment and the means of transporting this equipment is simply a consequence of the method you used to travel between home and work. Placing this equipment in your car does not alter the nature of this travel from being private in nature.
…”
11. In making his travel expenses claim, the applicant adopted the “log book method” of recording motor vehicle travel undertaken. Under this method, log book records are required to be kept for at least 12 weeks and travel expenses are apportioned between income-producing use and private use of the motor vehicle. The log book used by the applicant was initially prepared as a result of the audit and not contemporaneously with the travel undertaken by him during the 2005/2006 tax year. A non-contemporaneous revised log book for the 2005/2006 tax year was also prepared later by the applicant.
evidence
Evidence of Applicant
Woodside Base
12. The applicant’s evidence was provided in his witness statement (Exhibit A1, pages 1-30) and orally. In broad terms, his evidence was that he was required to transport his DP1 daily from his home to the Woodside Base (and to the Steele Barracks). Part of the readiness requirement for a soldier was that the DP1 would be available or accessible at all times. Due to the lack of secure storage facilities, the bay in the restricted compound allocated to the applicant’s detachment was designated as the storage area at the Woodside Base. There was physical space for trunks to be kept on the shelving down the sides of the bay. The remainder of the DP1, including the field packs etc, could hypothetically be stored in the padlocked caged area at the rear of the bay, and there was no restriction on placing DP1 equipment in that area. However, the caged area was the designated area for the storage of field equipment, field stores and vehicle equipment in priority to DP1 equipment.
13. The applicant found it more secure to keep his DP1 equipment in his motor vehicle. There was the risk of equipment being stolen if the trunk and the remaining DP1 were stored in the bay. Other members of his detachment, who were predominantly new soldiers living on the Woodside Base, secured the majority of the DP1 in their rooms. Any member of his detachment who did not live on the Base adopted a similar method to him as far as the storage of their DP1 was concerned. He did not order his detachment to do this, but left it open to them in the method they adopted. If they lived off the Base and chose to store their DP1 equipment in the bay, they would not be criticised.
14. In relation to access to the bay, if the roller door was closed and locked, key access was needed from the guard room adjacent to the compound. Any soldier could go to the guard room and sign out the key to a roller door, irrespective of which bay was involved. The key to the caged area at the rear of the bay was co-located with the roller door key. If there was no one in the bay, but all the roller doors were open, one person would remain to look after all the bays. Otherwise, the roller doors would be closed and locked. The bay doors would usually be open from 10:00am and would stay open, provided someone was present in the restricted compound. Gates to the compound were locked at times, but were often open from 6:00am to 7:00am in the morning until 8:00pm to 10:00pm at night. At the end of the day, the bay doors were closed and the keys were handed back, often by one soldier, to the guard room. It was up to the guard duty officer to secure the compound at night. If access to the applicant’s trunk was needed, to retrieve equipment and the roller door was closed, the access key would be obtained, the roller door would be opened and the trunk accessed. Afterwards, the roller door would be closed and locked and the key returned to the guard room.
15. Mr Morgan referred the applicant to his daily training program (Exhibit A1, page 294) which he first said was compiled by the “troop hierarchy”, apparently meaning his superiors at the Woodside Base. He then admitted that the schedule was not an official training document, but had been prepared by his tax agent based on details of equipment, activities and locations provided by the applicant. Such a program was prepared for every day of the week and included DP1 equipment movement to and from his motor vehicle. At Woodside, the program commenced in the morning with physical training in the gym. At this stage, the applicant’s vehicle contained all his DP1, “as well as whatever is in the trunk that I don’t need for that day”. The bulky items went into the boot of his vehicle and loose items would sit on the back seat. Clothes would hang on the side. Also in the vehicle were aircraft models, ranging in size from 10 cm upwards. Between one and two dozen models were involved and were used by the applicant when giving aircraft recognition training lessons to his detachment, which comprised up to seven soldiers. The laptop and reference notes were kept on the floor of the vehicle, behind one of the seats.
16. At Woodside, after physical training and then morning tea at the nearby mess hall, the applicant moved his motor vehicle from the gym car park to the Battery car park, a distance of approximately one kilometre. From there he took his laptop, aircraft models and reference notes to the Regimental Training Complex for lessons. After the lessons, the laptop and models were returned to the vehicle and he changed into his 4 Delta uniform along with other items for lunch at the mess. He would not drive his vehicle from the Battery car park as there was to be minimal vehicle use around the Woodside Base during the day. Following lunch, the afternoon activities would take place in the combined training area. The activities complete, the applicant would return to Battery headquarters and then the Battery car park where he would return his webbing and field pack and change his uniform for parade. After parade, he would return to his vehicle and change out of uniform. At this point, his full DP1 was in the vehicle and he would drive home. At home, all dirty and damaged DP1 items would be removed from the vehicle for cleaning, repair and preparation for work the next day. The rest of the applicant’s DP1 would remain in his motor vehicle in a locked garage, which he said was “safer than his house”.
Steele Barracks
17. The applicant said he would have driven to and from work “in any event, every day he attended for work”. The same applied at Steele Barracks. There was no practical public transport from home to Woodside and no fairly direct public transport from home to Moorebank.
18. The training program at Steele Barracks (Exhibit A1, page 319) was different to that at the Woodside Base. There were no bays there. Woodside was solely an air defence artillery base, whereas his position at Moorebank was an “all corps environment incorporating a common interest training module package”. At the Steele Barracks, the focus was on training and rehabilitation for injured soldiers and he did a lot less military recognition work there. His role was an instructing and mentoring one. There were field and weapons lessons in the morning and instruction and mentoring in the afternoon. In the 2005/2006 tax year, the applicant kept his DP1 (including the aircraft models, laptop and reference notes) at home and he brought the equipment to work daily in his motor vehicle. After arriving in the morning for physical training at the gym, the applicant would drive from the gym car park to the Training Command Army Rehabilitation Wing (“TRW”) car park. He would then move to the building in which his office was situated and change in the communal change room at the end of the building. When asked about the distance between the TRW car park and his office, the applicant said:
“Yes, that would be probably – yes, I would say maybe 100 metres between car park and, sort of, where my office was located. So I would take, depending on what the training program dictated for the day – we’re using Monday, so I would take, obviously, my echelon bag with a change of clothes, sir, and get changed into 4 alpha – I was going to say 1 alpha, but 4 alpha – and get changed for the day. I would also take a – well, having gotten changed, I would then return, once again, get rid of all the soil, towel, PT gear, all that sort of stuff, back to the car, collect what I needed for the day, in this example, models, reference notes, laptops – or laptop, sorry – and return back to the office. Once again, make sure there was no points from here that needed to be addressed prior to actually kicking off the days activities, and then I would move straight into the lessons and get going with what had to happen for the day.” [Transcript, page 87]
19. The applicant was located in a communal office of three section commanders and a clerk. Because of space constraints, he was not able to store his DP1 in the office. The door to the office was lockable, with three keys. The building in which the office was situated had two main doors that were lockable. They were opened early in the morning and closed and locked at night. After lodging his 2005/2006 taxation return, when his assessment had not arrived, he contacted his tax agent and was advised that the respondent was withholding his refund and he was going to be the subject of an audit. He rang the respondent’s office himself and was advised that he would not be able to claim motor vehicle expenses for transporting his equipment to and from work and that he should start storing the equipment at work. As a result, he transported all his DP1 to work and stored it in the communal change room, toilet and locker room adjacent to his office. This commenced in about August or September 2006.
20. After the change in the storage of his DP1 equipment from home to work, the applicant said his padlocked trunk was stolen. This occurred in October 2006. He made a loss and damage report in respect of the equipment stolen. The theft was investigated, found to be genuine and after about four to six weeks he was re-issued with the military equipment he had lost. In relation to his Q (quartermaster) report excerpt (Exhibit A1, page 285), which was the Army record of all the equipment that had been issued to him, he acknowledged that there was no entry for all the equipment that had been issued to him in November 2006. The excerpt was only one of many from the Q report, but he had been unable to obtain any further excerpts from the report.
21. When his trunk was re-issued, the applicant decided to no longer store his equipment at work, but would do so at home in his locked garage and in his house. He would then identify what equipment he needed each day and would take it on his motor bike to the Steele Barracks. He said that he would run the gauntlet and risk punishment for not having his complete DP1 at work. As to the transport of his DP1 thereafter, he said he would use his car half the time and his motor bike the remainder of the time.
Log Book
22. For the 12 week log book period adopted by the applicant, an opening odometer figure of 56,000 kilometres was used, with a closing odometer figure of 59,765 kilometres. Revised non-contemporaneous log book details were then prepared, based on the purchase and sale documents relating to the applicant’s motor vehicle, a Subaru Impreza WRX, used by him during the 2005/2006 tax year. With this information, an opening odometer figure of 58,807 kilometres at 4 August 2005 was used, with a closing odometer figure at 31 October 2005 of 62,625 kilometres. Based on the revised opening odometer figure provided by the applicant and the actual odometer figure of 75,875 kilometres as at 30 June 2006, 17,068 kilometres were travelled by him during the 2005/2006 tax year.
23. In cross-examination, the applicant could not recall what he used for the opening odometer reading of 56,000 kilometres. He said he did not make the figure up, but he could not remember what he used for the reading. Daily business travel was 70-80 kilometres to and from his home and the Woodside Base. The personal kilometres were, to the best of his recollection, the distance he would have travelled for his personal use. He was unsure of the date he prepared the initial log book figures, but agreed that they would have been prepared after 8 January 2007. He denied that what he did with the log book figures in the period after 8 January 2007 was a best guess at his personal use of his vehicle in the period August to October 2005. He confirmed that, for the revised log book, the opening odometer reading was the figure appearing on the purchase contract for his Subaru Impreza WRX. The closing reading was determined by adding what was travel for work use and personal use, rounded to the nearest kilometre, to the opening odometer reading. He did not take a reading of the vehicle’s odometer on 31 October 2005. The best he could say was that, if his sums were right, then the figure of 62,625 kilometres would have been the closing odometer reading on 31 October 2005. When further questioned, the applicant said there were no differences between the details in the two log books, apart from the opening and closing figures. When Mr Cole referred to a number of differences in the travel figures, the applicant said that “nobody is perfect” and “there may well still be discrepancies there”.
Motor Bikes
24. The applicant was asked about the use of motor bikes during the 2005/2006 tax year. He said he had two motor bikes. He bought a 400cc track bike in March 2006 and a 1,000cc road bike in around October/November 2006. He did not ride a motor bike at all in the period from July 2005 to March 2006 and he did not ride the track bike after 30 June 2006. He used the track bike at Steele Barracks a maximum of three or four times in the 2005/2006 tax year. On 30 June 2006, he sold the Subaru Impreza WRX and purchased a utility to transport an Alaskan malamute dog that he and his partner had acquired. Once he started storing his DP1 equipment at the Steele Barracks, there was much greater use of his road bike. He did carry equipment home on the bike for washing, laundry and repair, although he had a motor vehicle. Because of the Sydney traffic, he chose to use the bike daily.
25. In further cross-examination by Mr Cole, the applicant again confirmed that he transported all his DP1 in his motor vehicle on a daily basis. He did this during the 2005/2006 tax year and until August or September 2006. In relation to the Woodside Barracks, he was referred to paragraph 77 of his witness statement, which reads (in part):
“Approximately once per working day I would visit the bay to retrieve equipment that I stored in my trunk in the bay. …”
He said he retrieved the equipment for DP1 inspections and once the inspections were finished he would return the DP1 equipment to his vehicle. When he was not using the equipment, it would be secured in his locked vehicle. His trunk was stored in the bay every day that he was required to get equipment out of it. The time he would place the trunk in the bay depended on what time DP1 inspections were conducted. To explain more fully, he said:
“Depended [sic] on what time of the day that we needed to do DP1 inspections, be it morning, afternoon, you would go and - up to - you’d go to your vehicle, grab your trunk, you’d take it down to the bay. You would then go to a central location usually out in front of all the bays and whoever was running the actual inspection would identify righto, “You four blokes will be the” for want of a better term “inspectors”. I’ll yell out an item of equipment and you will verify that all the soldiers have got it.” [Transcript, pages 135-136]
26. When I asked the applicant to confirm the time of the DP1 inspections and whether he knew of the inspections in advance of that time, the applicant responded:
“You do. I mean, like I said, it was a given thing that it was going to happen every day and, more often than not, it would be first thing in the morning.” [Transcript, page 138]
When details of an inspection were known, the applicant reiterated that he would carry out his other work and then go to his vehicle, pick up all the DP1 (including the trunk) and take it down to the bay, where he would retrieve all the gear that he needed for the inspection. When asked whether anyone would see him take his trunk in and out of the bay on a regular basis, he said:
“There would have been plenty of people who would have seen me taking it in and out of the bay, sir, the same way that I saw plenty of people taking their trunk in and out of the bay.” [Transcript, page 137]
27. I pressed the applicant as to why he would “visit the bay to retrieve the equipment that he stored in his trunk in the bay”. He responded that the bay was where the DP1 inspections took place. He would visit the bay to actually conduct the inspections and for any other reason that he might have for obtaining gear from his trunk. He denied that paragraph 77 made reference to the trunk being stored in the bay for the purpose of DP1 inspections. He said he would carry the trunk and the DP1 from the Battery car park to the bay. If it was too heavy, he would “daisy chain” the trunk with those of other soldiers, or a trolley would be found to move the DP1 equipment to and from the bay. Alternatively, if a vehicle was available between the Battery car park and the bay, the trunk would be carried in the back of the vehicle.
28. In relation to storage of his DP1 at Steele Barracks, the applicant was referred to paragraph 100 of his witness statement, which reads:
“From the time I relocated to Steele Barracks in February 2006 to October 2006 I stored my trunk on the floor in the communal change room provided by the Base.”
When questioned about this paragraph, the applicant acknowledged that it was incorrect and had been an “oversight” on his part. He stated that he started storing his equipment at Steele Barracks “after September 2006, or after advice from the ATO”. Until then, he transported the trunk and the rest of his DP1 to and from work daily in his motor vehicle. The majority of his personal equipment, such as the larger aircraft models, personal items, thermals and sneakers were kept at home, due to space limitations at work.
29. Mr Cole referred the applicant to the schedule in his witness statement detailing the equipment used by him at the Woodside Base five days each week (Exhibit A1, pages 289-290). He acknowledged that the schedule did not include the weight of his trunk, which was described as being “at work”. He agreed that the weight should have been included and that the schedule wrongly described the location of the trunk. It should have been shown at work “in the car, as part of my personal security arrangements and transportation arrangements”. He acknowledged that the inclusion in the schedule of the trunk weight was important and that the oversight was due to his lack of attention to detail in his statement. The omissions in the schedule of the weight of his stretcher and his helmet were also oversights on his part. He admitted that there were a few “glaring inconsistencies” in his witness statement.
30. Further, to the issue again of daily DP1 inspections, Mr Cole raised the following questions and the applicant responded:
“MR COLE: Coming back to the issue of the daily inspections, as you would have it, when you were in attendance as part of the inspection, how many other soldiers were also in attendance?‑‑‑It was dependent on - it could be anything from, on a very broad range, it could be anything from five to a whole battery’s worth, so up to - yes, five up to a 100.
And how long did the inspection take?‑‑‑That depended on whether it was a thorough inspection or whether it was a spot inspection. A spot inspection could literally be over in five to 10 minutes, or a thorough inspection could take the better part of an hour and a half.
And you say this was a daily occurrence?‑‑‑Yes. Spot inspections were a daily occurrence. And I know that because I was there, obviously.” [Transcript, page 149]
31. Later, the applicant confirmed that he and his immediate subordinates and superiors ran the daily DP1 inspections. As far as his immediate working group was concerned, the inspections were conducted at any time throughout the day. Most of the time, the group was small, usually detachment size, comprising five to seven soldiers and the DP1 inspection was conducted in the bay. As to who determined that his detachment would do a daily DP1 inspection, the applicant said:
“The hierarchy did, and also as part of professional mastery and being ready, when I got to the command level that I’m still currently at, I determined that my guys would always maintain their individual readiness, or the AIRN and ensure that they have their DP1 ready to go at all times. And as part of that provision, obviously, me being the one who has put that into place, then I would have to have mine ready to go as well. And it was a - on a bigger picture, it is a requirement of the Army, as part of one of the policies, that if you are to be AIRN compliant, or ready to deploy, then this DP1 gear needs to be ready to go at the drop of a hat, hence the daily DP1 checks.” [Transcript, page 154]
32. The applicant was detachment commander of his bay at Woodside for the whole of the 2005/2006 tax year, but he was answerable to anyone who held a higher rank at the Base. As detachment commander, he would be told in advance of larger scale DP1 inspections and one or two days notice would be given. Spot DP1 inspections were generally directed to take place by the applicant as detachment commander. The soldiers in the other bays would know of the daily DP1 inspections conducted by the applicant, as would those of equal or higher rank in his troop. As far as spot checks were concerned, these were a regular occurrence. He said:
“However, the hierarchy wouldn’t traditionally do a spot check on one of the gunners. They might do a spot check on one of the corporals or one of the bombardiers, with the knowledge that we would be doing the same thing to our junior soldiers, or to our soldiers, …” [Transcript, pages 182-183]
And later, in relation to spot checks of the applicant’s DP1 equipment at Woodside without notice he said:
“My equipment was inspected on regular occasions without notice, or without written notice on the training program, as would happen for a comprehensive every item DP1 check, such as would happen prior to deploying.” [Transcript, page 183]
At Steele Barracks, spot checks also happened because the level of morale was low and the soldiers were continually monitored.
33. Mr Cole referred the applicant to paragraph 12 of his statement of facts, issues and contentions, which reads in part:
“The employer requires the applicant to store the majority of his Military equipment in his personal vehicle for security purposes and accessibility. …”
In relation to this paragraph, the applicant said he stored his equipment in the manner mentioned for accessibility and to fulfil his readiness obligations. However, he was not required by his employer to store his equipment in his personal vehicle. The unit in which he was situated at Steele Barracks was almost brand new and there was next to no storage facilities there. He admitted that paragraph 12 of the statement of facts, issues and contentions was poorly worded. He said:
“… At no stage were you required to utilise your vehicle as storage, but it was a case of making a personal choice, once again, by knowing exactly where your equipment is, what condition it’s in and how secure it is.” [Transcript, page 176]
34. Mr Cole again referred the applicant to paragraph 77 of his witness statement and asked why the issue of daily DP1 inspections did not appear anywhere in the paragraph. The applicant said he assumed that “every body knows the inner workings of how the regiment works”. As a result, he had not alluded to as many details of the day-to-day workings as he should have done. He acknowledged that he had written each paragraph of his witness statement, but it was “broken down” as his tax agent saw fit and was an accurate recollection of what he had given to his tax agent’s employee. When also directed again to the meaning of paragraph 100 of his witness statement, he said:
“Well, once again, paragraph 100 is exactly the same as paragraph 77, in the fact that my lack of attention to detail, or my assumption that people know the inner workings, yes, is lacking. Well, yes, my assumption that they would know the inner workings is a poor assumption.” [Transcript, page 198]
35. The applicant said that, for DP1 inspections for his detachment, soldiers on base would carry their DP1 equipment from their living quarters down to the bay, a distance of about one kilometre. The inspections could be comprehensive or “10 percent” only, which would take from 5 to 10 minutes. As to the time taken for the 10 percent inspections, he gave his soldiers a 20 minute window to have their equipment at the bay, inspected and back to their rooms. He acknowledged that the time taken for his DP1 inspections was not included in his daily training program, but the program allowed sufficient time between 1:30pm and 3:45pm for the inspections.
36. Mr Cole referred the applicant to the excerpt from his Q record relating to the loss and damage claim for his trunk in October 2006. The applicant agreed that the excerpt contained an entry for 18 April 2007 and that he was re-issued only with parade ankle boots. The rest of the Q record would show that he received the remainder of his equipment over time. He could obtain a copy of the whole of his Q record which would show the re-issue of all his DP1 equipment. In relation to the Q store, the applicant said he was unaware that there was an option to store his DP1 at the store at Steele Barracks. He also denied Captain Clancy had told him that, if he needed more storage space for his gear, she could make some available. When Mr Cole suggested that there were adequate facilities at both Woodside Base and Steele Barracks for him to store his DP1 equipment, the applicant said:
“There was adequate storage. However, it was inadequate security, hence the reasoning of mine to actually utilise my own residence and my own vehicle as storage for that equipment.” [Transcript, page 250]
evidence of mr markus scheidl
37. Mr Morgan referred Mr Scheidl to his witness statement dated 13 August 2009 (Exhibit A4). His evidence was that he had been at the Woodside Barracks from January 2009 to the current date and that, prior to that period, he had served at the Woodside Barracks from 1996 to the end of 2000. He was not present at the Woodside Barracks during the period from July 2005 to December 2005. He acknowledged that he could not have any personal observations about what the applicant did himself at Woodside during the 2005/2006 tax year. For himself, he would generally store various parts of his equipment in his motor vehicle. On occasion, he carried his trunk in the vehicle, but not very often. Due to his Army experience, he was able to be aware of when DP1 equipment was required at the Woodside Barracks. From his personal experience, he had seen live-out soldiers carrying webbing and field packs in their vehicles. On a rare occasion, he had seen a trunk being carried. When he was living on base, his kit was generally stored in his room and he would have to take it from there to wherever an inspection was held or where he was using the kit. He said, soldiers would not have a DP1 inspection every single day. This would severely diminish morale. The frequency of the inspections would depend on the particular circumstances involved. If there were overseas deployments, DP1 inspections may be more frequent.
38. In cross-examination by Mr Cole, Mr Scheidl said that, when he went to live off Base, he kept his trunk at home. For the most part, the trunk contained the portion of the DP1 that he would not need on a daily basis. He would know roughly what equipment was needed at the Base and he would bring the minimum that was required. However, if there was an ad hoc inspection, he could be caught out. He agreed that there was room to leave trunks in the bay and that it was not uncommon for soldiers to do so, where about half of them would be padlocked. In his time in the Army, he had never come across daily DP1 inspections. If DP1 inspections were required for any reason, two or three days notice would be given. The single men’s quarters were about 700-800 metres away from the bays, the closest being about 500 metres. The closest married quarters, in a direct line, would be about 900 metres to a kilometre away from the bays. With a complete DP1 inspection, it would be necessary for these soldiers to get all their equipment down to the bays. If inspections were done every day, there would be a loss of morale involved. From his time at the Woodside Barracks, it was permitted, if not required, that gear be stored in the bays. If a theft occurred, a loss and damage report would be completed. If the theft was genuine, the lost equipment would be replaced, if available.
39. In re-examination by Mr Morgan, Mr Scheidl said that theft was one of the big issues within the Army. It was treated very seriously. With a communal storage area, such as the bays, if theft occurred it would be easy to allege, but often difficult to prove. If a soldier alleged that their gear was stolen, but they could not prove it, there would be a loss and damage report and it would be up to the investigating officer to determine whether the loss would be reimbursed to the soldier at the Commonwealth’s expense.
evidence of mr paul golding
40. Mr Golding’s evidence was that he had never been stationed at Woodside Barracks, although he had run training courses there from time to time. He said he did not have an opportunity to observe the bays at the Woodside Base. He said he had spent about 20 years in the Army and the one thing that remained constant, was readiness. With a trunk, its storage would depend on the individual. For a private soldier, it could vary from an open field bay, a secured field bay and individual cages within those field bays to carrying the trunk in a vehicle or keeping it at home. He said his routine was to have his unpacked kit at home and he would pack it and take it to work when he needed to. As he had an office at work, most of the time he would store his trunk in his office. When he was more junior, his trunk was kept at home. He would transport the trunk to work, maybe once a month.
41. In cross-examination by Mr Cole, Mr Golding said that, in terms of deployment, the primary requirements were to have the DP1 available and in appropriate condition. A soldier was issued with the DP1 when he joined the Army, but it was not a full DP1. That was issued when the soldier joined a particular unit. The DP1 would not be needed daily, but it would need to be available or accessible. When further questioned, he said it would be unreasonable and unusual for a detachment commander to require his detachment every day to bring all of their DP1 down to a designated spot to determine how much of that equipment would be inspected.
evidence of mr adam valladares
42. Mr Valladares’ evidence was given by telephone. He said that he was posted to the Woodside Barracks in the 2005 and 2006 calendar years and was a vehicle fleet manager there. His job was to maintain the vehicle fleet serviceability and would run drivers courses around the barracks. As a transport member, he had a change room and all his DP1, being his trunk, pack and webbing, would be stored in the change room. As a transport member, he had a locked cage at Woodside. He did not know what storage existed in the missile areas. The majority of the transport members, including himself, kept their equipment at home and brought it in, as required. He was only a short distance from the barracks and, if he needed anything, he could go home and get it. There were occasions when part of his equipment was kept in his motor vehicle if he needed it at work. When asked by Mr Morgan about the bays in the applicant’s case, he said he had nothing to do with them, apart from driving a military vehicle to park there. In 2005, his webbing was constantly kept in his car or in his locked office. If he knew he was going field, he was given 30 minutes notice of what equipment was needed. He was able to arrange things because he used his initiative and knew what was going to take place. Although he was present at Woodside when the applicant was there, he did not have any experience of how he or his detachment transported their equipment to the Base.
43. In cross-examination by Mr Cole, Mr Valladares admitted that he did not know much about the workings of the missile regiment at Woodside in the 2005/2006 tax year. The evidence he had given was in relation to the transport regiment and for storage, including the lockable cages, applicable to that regiment or to him personally. As to full and part DP1 inspections, for the most part he would know in advance what equipment he needed to bring to work. This was why he was able to leave his trunk at home and remove items from it as needed.
evidence of lieutenant colonel john mclean
44. Lieutenant Colonel McLean’s evidence was that he arrived at Woodside Barracks in December 2008 and his command tenure started in January 2009. He said he used his staff at Woodside who collected knowledge of practices during the 2005/2006 tax year and which included knowledge of the general practices over the years.
45. When questioned by Mr Cole about the issue to a soldier of the DP1, Lieutenant Colonel McLean said that the equipment did not need to be with the soldier at all times. The soldier needed to be able to have access to it and take responsibility for it. As to how much of the DP1 was required on a daily basis for activities at Woodside, he said the requirement varied, according to the activities that were being conducted. An actual equipment inspection might happen two or three times a year, when a soldier would be required to have all his deployable kit there. If it was a normal training week in the Woodside Barracks, the soldier may not need to have his kit at all, other than his basic uniforms, or he may need some of his field kit on one or two occasions during that week. If he was deployed into the field for a period of time, he would need a large majority of his personal military equipment to actually take off the Base. As to the equipment a soldier needed for activities each day, training programs existed which indicated the activities, the timing, the dress and who was responsible. Sometimes there were short notice changes, but they were generally rare. In relation to any notice given for DP1 inspections, he said, generally speaking, it was very rare. He said with deployments, they are planned well in advance and there is a planned program and passage of information. Most times when a soldier is going off Base, where their field kit is needed, notice will be given.
46. In relation to the storage of equipment in the bays, he said he believed that, in the 2005/2006 tax year, each detachment had an area for personal equipment. This included weapons and equipment, as well as their personal DP1. As to the theft of soldiers’ equipment from the Base, Lieutenant Colonel McLean said he had no evidence of it occurring. However, he could not confirm that. His enquiries did not turn up any documentation that showed that theft was a particular problem at the time. He said there was no record of daily inspections being conducted by the applicant in the period July to December 2005. The activities would have been co-ordinated, most likely by word of mouth, and not part of any formal training program. Daily inspections of soldiers’ DP1 were not common, unless conducted for a short period as a remedial activity. Daily DP1 inspections would not be considered normal over a prolonged period of time.
47. In cross-examination by Mr Morgan, Lieutenant Colonel McLean admitted that he had no first hand knowledge of what took place at the Woodside Barracks in the 2005/2006 tax year. His knowledge was gathered from his staff. When asked about the items in paragraph 4 of his witness statement comprising items in the DP1, he said it was difficult to estimate the weight of the items, but he thought it would be about 20-odd kilograms. When added to the items listed in paragraph 5 of his statement, he thought the cumulative weight of the items was about 60 kilograms. When asked by Mr Morgan whether it was accepted that soldiers, including the applicant, could store equipment at home, Lieutenant Colonel McLean said:
“Yes. It’s accepted practice. People have some of their uniforms at home and items of equipment. They are the responsibility of the member. The member has signed for them and therefore they are to look after the security of those items and, yes, of the many of us have various bits of uniforms and so on at home.” [Transcript, page 347]
48. In re-examination, Lieutenant Colonel McLean said that his response regarding the weight of the items in the DP1, to which he referred in paragraph 4 of his witness statement, was an estimate only. He also said that, if the applicant stored all his equipment at his residence, he would have been required to transport it in his private motor vehicle to Woodside Barracks. Not all of it would have been required every day and it could be stored at Woodside Barracks. If the equipment was in one place and needed to get to another place, then it would have to be transported.
evidence of mr nigel sannholm
49. The evidence of Mr Sannholm, who was a tax agent advisor at the respondent’s office, was given by telephone. Mr Cole referred him to his witness statement dated 11 March 2010. In answer to a question by Mr Cole, he said that the work he did when he was asked to conduct a tax agent visit for the purposes of doing a client audit was the sort of work that he had been engaged in previously. Once a decision was made to audit a taxpayer, the process would commence the next day. Once the decision was made to conduct the audit, the auditor would put a note on the system at the time the audit letters were sent out to the tax agents. Until then, there would be nothing on the system to indicate that an audit was in process.
50. In cross-examination by Mr Morgan, he said that no decision had been taken to audit the applicant until, at the earliest, November 2006, which was when he was told he was to visit the applicant’s tax agent and when he would have started the audit profiling. He was in no position to deny that a letter had been sent to the tax agent in July 2005 listing 50 or 60 of his clients who were going to receive “educational letters”. He agreed that the applicant was a person of interest identified by the respondent nearly a year and a half before the decision was made to conduct an audit.
evidence of captain selena clancy
51. The evidence of Captain Clancy was given by telephone. She was the applicant’s supervisor while he was working at Steele Barracks from 17 January 2006 to 30 June 2006. Mr Cole referred her to paragraph 4 of her witness statement, which read in part:
“Bombardier Brandon was required to have his pack and webbing (containing Training Command-Army directed DP1) on a daily basis at work. …”
The contents of the applicant’s pack would depend on his daily activities and what lessons he would be giving or receiving with the students. In no circumstances was the pack simply used as a means of conveying what he needed for his daily activities. If he had use for certain items outside of the pack march, he would use his webbing or a personal day pack. There were some items that might be needed on a regular basis, otherwise it was as needed. She observed his lessons fortnightly and she could not recall him using his aeroplane models as part of his instruction to trainees. Computers were available at the workplace and there was no requirement for the applicant to use his laptop, nor was it encouraged.
52. Captain Clancy said that the quartermaster store was a store that held all of the DP1 equipment that personnel required for their training or operational duties. There were lockable cages in the store available for the applicant to store his issued equipment if there was not available or ample storage in the workplace. Also, ample storage was available in the section commanders’ office, which had a lockable door and window and in the wing sergeant major’s office and her own office. She said she observed the applicant’s trunk and personal equipment being stored in the section commanders’ office, which he shared with others. Between February 2006 and October 2006, she observed weekly the applicant coming to work on a motor bike. Between February 2006 and the end of June 2006, there was one DP1 inspection made that she initiated, which included herself and the applicant. At least two weeks notice was given of the inspection.
53. In cross-examination by Mr Morgan, Captain Clancy was referred to paragraph 8 of her witness statement. She agreed that a soldier’s responsibility to get to and from work was part of the Army’s readiness requirement and so would be a condition of service. Although not encouraged, the Army permitted soldiers to store items at home and, as part of the readiness requirement, they would need to be able to get their equipment back to the Barracks. When questioned further, she said the lockable cages in the quartermaster store were large enough to hold two military trunks fitted width-wise into the cage. Soldiers were able to store equipment individually in a cage if they were concerned about the security of their equipment. There were five cages in the store available to members of her team, including the applicant. These were sparsely used. If a member did not want to share a cage, there would be other arrangements made for them, including storage in Captain Clancy’s office. In response to Mr Morgan, she said she was unable to comment on the security of the male-only change room. However, the section commander’s office was a secure, lockable room.
54. As to the use of motor bikes, Captain Clancy said that the bike she saw the applicant riding was more of a road bike. Her recollection was that the applicant used the bike more than once a month. It was certainly at least fortnightly, but her recollection was that the applicant would ride his motor bike to work weekly. As to storage of equipment, she said that all of her DP1, including her trunk, her pack and her webbing were stored in her office, which she shared with a civilian personal assistant and the Commandant. As a junior soldier, her DP1 was always stored in the Q store. However, on occasion and on a case-by-case basis, she stored her trunk at home.
evidence of mr inger lawes
55. Mr Cole referred Mr Lawes to his witness statement dated 5 March 2010. He said he was Commanding Officer of Woodside Barracks from January 2005 until December 2006. As to DP1 inspections, these were held every three months only for soldiers moving from a low level of readiness to a high level of readiness. This movement was not applicable to the applicant and his detachment. Their DP1 inspections did occur, but they were less frequent. Notice was given of all these DP1 inspections. As to spot checks, he said there was only one spot check in the two years he was at Woodside. That was a general recall exercise of the entire unit. When asked by Mr Cole whether he had knowledge of the applicant conducting daily DP1 inspections of his detachment and that those soldiers were required to attend in the barracks each day with all of their DP1, Mr Lawes said:
“Yes, I would have expected to have learned of that eventually, it – those who were Brandon’s direct superiors would have known that that was the case, and what would have likely happened is that through the chain of command, someone would have told me, yes, there’s someone conducting a daily inspection. So I may have learned of it through the chain of command, or more than likely, I would have learned of it through other soldiers. Because I came from the shop floor, so to speak, I spent a lot of time just engaging the soldiers, talking about what was going on around the unit, and something like a daily DP1 inspection, you would appreciate, comes with a certain amount of impost, if I can use the word embuggerance; that’s a lot of equipment involved. The soldiers would complain fairly quickly if they were doing a daily inspection but others were not, and neither of those circumstances occurred, so I wasn’t aware that that may or may not have been occurring in Brandon’s case.” [Transcript, page 391]
56. In relation to storage of the DP1 equipment in the bay, Mr Lawes said that this could vary from detachment commander to detachment commander. Some detachments chose to store their equipment on the shelves in the bay. Others used the floor area available or they would hang the large pack and the web equipment on the cyclone mesh fencing. The monitoring of people going in and out of the bays and the compound was by the person in the guard room. To get into the bay, the bay keys would be signed for and registered in a book. At the completion of the day or when the bay was left unattended, the key was signed back into the guard room. He said it was possible that others would have access to someone’s bay and that would occur if one or two people were assigned to collect all the keys for the bay. However, this practice was not formally authorised. If a soldier went to the guard room and wanted the key to the bay of another detachment, there would be questions asked by the person in the guard room. When asked about theft at the Woodside Barracks, he said that there were no incidents of theft during the time he was there. He could not recall ever dealing with a theft issue.
57. In cross-examination by Mr Morgan about DP1 inspections, Mr Lawes said that, if the applicant wanted to conduct some kind of DP1 inspection for his detachment, there would be plenty of room in his bay and it would be sensible to have it there. When asked about the applicant holding 10 percent checks, Mr Lawes said that there was no such inspection. When asked whether these checks might even be good soldiering, Mr Lawes said:
“No, I wouldn’t agree that it’s good soldiering, because it is pointless soldiering, in my view, and the circumstance that you have just described, where soldiers are moving even 10 per cent of their DP1 in a circuitous route around the unit, is simply not good practice. Let’s assume that, on occasion, Sergeant Brandon – Bombardier Brandon as he was – conducted a 100 per cent DP1 check. The occupational health and welfare standards that apply to the general population apply to the military. It would be unreasonable to expect a soldier to move 10 per cent or 100 per cent of his equipment around the camp area for an inspection. I would also suggest that if Bombardier Brandon was conducting these inspections in his bay, the soldiers on either side would think this was a fairly curious activity and, as I mentioned before, that would certainly have come to my attention, so I don’t agree that it is good training. It is poor training.” [Transcript, page 399]
When asked further by Mr Morgan whether it would be a requirement for the applicant to have a motorised vehicle of some sort to get himself to the Base within a reasonable period of time, Mr Lawes said there was no policy document or directive at unit level, or indeed at AEF level, that required that a soldier must have a motor vehicle or means of getting to work. He said he would not disagree that it is a common sense thing to have a motor vehicle. However, during his tenure, there was no requirement, oral or written, to have a motor vehicle.
submissions for the applicant
58. The following submissions, in brief terms, were made by Mr Morgan:
(a)All or some of the applicant’s motor vehicle travel expenses were “incurred in gaining or producing assessable income” under s 8-1(1)(a) of the ITAA 1997.
(b)On the basis of the ruling made by the Tribunal during the hearing that there is no issue of substantiation before it, the applicant is not required to comply with the further requirements of Divisions 28 and 900 of the ITAA 1997.
(c)As the applicant’s home to work travel was incurred in gaining or producing assessable income, the percentage of his deductible travel expenses should be determined, on the balance of probabilities, by the proportion of the total kilometres travelled by applicant in the 2005/2006 tax year that were of an income producing character, namely 75.9 percent .
(d)Alternatively and based on the decision of Senior Member J Block in Re Crestani and Commissioner of Taxation [1998] AATA 612, the applicant’s motor vehicle travel expenses fall within and are deductible in accordance with clauses 229 and 230 of Taxation Ruling TR95/17.
(e)Based on relevant court decisions on home to work travel, such as Commissioner of Taxation v Vogt [1975] 1 NSWLR 194 and Re Crestani (supra), the applicant’s motor vehicle travel expenses were incurred in gaining or producing his assessable income and, as such, are deductible under 8-1(1)(a) of the ITAA 1997.
submissions for the respondent
59. The following submissions, in brief terms, were made by Mr Cole:
(a)The applicant has not discharged the burden of proving that his 2005/2006 amended assessment made by the respondent is excessive.
(b)To the extent to which the applicant transported his DP1 equipment in his motor vehicle during the 2005/2006 tax year, his motor vehicle travel expenses were not incurred in the course of gaining or producing his assessable income and did not have the essential character of a work expense.
(c)Although the applicant’s DP1 equipment may be bulky, there was no compelling employment-related reason for storing it at home.
(d)The applicant was not required by his employment to transport his DP1 equipment to and from work and home, but made a personal choice to do so.
(e)There was adequate storage (or adequate secure storage) available both at the Woodside Barracks and the Steele Barracks for the applicant’s DP1 equipment and, although soldiers were permitted to take their DP1 equipment home, that was a matter of personal choice.
consideration
Were the motor vehicle travel expenses of the applicant in the 2005/2006 tax year incurred in gaining or producing his assessable income?
60. The deductibility of motor vehicle expenses relating to home to work travel for a soldier falls to be considered under the first limb of s 8-1(1) of the ITAA 1997. The language of that provision (or, more particularly, its predecessor, s 51(1) of the Income Tax Assessment Act 1936 (“ITAA 1936”) has been the subject of careful analysis by Courts and Tribunals on many occasions. For expenses to be allowable as a deduction as outgoings incurred in gaining or producing the assessable income they must be incidental and relevant to that end. The words “incurred in gaining or producing the assessable income” mean in the course of gaining or producing such income (see Ronpibon Tin NL v FC of T (1949) 78 CLR 47 at pages 56-57). It is both sufficient and necessary that the occasion of the outgoing should be found either in whatever is productive of assessable income or, if none be produced, in whatever would be expected to produce assessable income (see Ronpibon Tin NL at page 57).
61. In Lunney v FC of T and Hayley v FC of T (1958) 100 CLR 478, the High Court had cause to further consider the incidental and relevant test. In doing so, the Court directed that attention should be focussed on the nature and character of the outgoing in question. The decisions in those cases gave rise to what is now commonly referred to as the essential character test. The joint judgment of Williams, Kitto and Taylor JJ (at page 499) makes it clear that in determining whether or not expenses are incurred in or in the course of gaining or producing assessable income depends upon considerations which are concerned with the essential character of the outgoings. Applying that test, the majority formed the view that expenditure incurred in travelling to and from work was “not by any process of reasoning a business expense”. On that basis, it was held that expenditure of that kind did not qualify for deduction under s 51(1) of the ITAA 1936. However, as Mr Cole submitted, the Courts have recognised that there are cases which are exceptions to the rule that expenditure on travel to and from work is never tax deductible. One of these relates to the transportation of a professional musician and his bulky instruments between his home and places of performance (Vogt (supra)). Another relates to the motor vehicle expenses of an aircraft engineer in travelling between home and work where he was required to transport his box of tools of trade (Re Crestani (supra)). Not surprisingly, the applicant placed substantial reliance on these cases and thus there is the need for me to consider them in some detail and to observe variances of any significance.
62. Mr Vogt was a professional musician who worked at a suburban RSL Club as a member of the Daley Wilson Big Band. He kept his musical instruments and their associated equipment (trumpet, fugal horn, acoustic base, electric base and amplifiers) at home because it was essential to practice on them and because it was the only practicable place to keep them. He used his motor vehicle to transport himself and his instruments and equipment between his home and the various places where he was engaged to perform. The instruments and equipment were very bulky and a station wagon was purchased to facilitate the constant moving of those items. At issue was the tax deductibility of the expenditure incurred in transporting Mr Vogt and his equipment to and from his home. In the Supreme Court of New South Wales, Waddell J dismissed the respondent’s appeal against a Board of Review decision that the outgoings in question were allowable deductions under s 51(1) of the ITAA 1936. The learned Judge found that Mr Vogt was entitled to a deduction for expenditure on car travel between his home and his places of work carrying his bulky instruments and equipment.
63. Mr Crestani was employed by Ansett as an aircraft engineer at Ansett’s Sydney terminal. He drove to and from work and his home and conveyed his box of tools with him. Senior Member Block (as he then was) found that the factual issues resolved themselves into three issues as follows:
(a)first, whether the applicant’s box of tools was aptly described as “bulky”;
(b)second, whether Ansett provided a secure area in which boxes of tools could safely be left overnight; and
(c)third, whether the applicant travelled to and from work in his car as a matter of personal choice.
Senior Member Block found, as a matter of fact:
(a)that the applicant’s box of tools was bulky within the meaning of that term contained in paragraph 138 of Taxation Ruling TR95/19;
(b)that Ansett did not provide a secure area for the storage of tool boxes; and
(c)that the applicant did not travel to and from work in his own car as a matter of personal choice, but did so when his box of tools had to be carried and when, in reality, he did not have any real choice about doing so.
64. In the present case, the applicant’s evidence was that he transported his DP1 daily in his motor vehicle to both Woodside Barracks and Steele Barracks. In his witness statement (Exhibit A1, paragraph 52), he said his chief reason for doing this at Woodside was because of the lack of secure storage, because of the lack of room within the bay allocated to his detachment for storage and because the bay could only be used if his equipment was stored on the floor of the bay. His equipment, to be kept at an appropriate standard, was required at work for the performance of his duties as an employee of the Army and included his duties as a soldier of the requirement for “equipment readiness”.
65. In his witness statement (Exhibit A1, paragraph 90), the applicant said his chief reason for transporting his DP1 daily at Steele Barracks was because of the lack of secure storage for personal equipment or fragile items. Again, his equipment, to be kept at an appropriate standard, was required at work for the performance of his duties as an employee of the Army and included his duties as a soldier of the requirement for “equipment readiness”.
66. The applicant argued that he could support his claim for deductibility of his motor vehicle travel expenses in two ways, and that he could pick whichever was the better. It was contended that the decision of Senior Member Block in Re Crestani (supra) disclosed two ways in which the applicant could establish that his 2005/2006 amended assessment was excessive. The first way was that he could rely on the contents of the respondent’s binding public Taxation Ruling TR95/17, which is similar to what the taxpayer did in Re Crestani in relying on the contents of the respondent’s Taxation Ruling TR95/19. The second way was to rely on the relevant expense deductibility provisions in the ITAA 1997, in particular, s 8-1(1)(a).
taxation ruling tr95/17
67. The relevant paragraphs of TR95/17 read as follows:
“24. The common work-related expenses incurred by ADF members and the extent to which they are allowable deductions are discussed below, in alphabetical order.
…
Travel between home and work – transporting bulky equipment
229. A deduction is allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work (see FC of T v. Vogt 75 ATC 4073; 5 ATR 274). If the equipment is transported to and from work by the ADF member as a matter of convenience, it is considered that the transport costs are private and no deduction is allowable.
230. A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) ATR 1232).”
Based on TR95/17, the applicant argued that there are three requirements for expenditure to be relevantly income producing for tax deductibility purposes. These requirements are:
(a) the applicant’s DP1 was “bulky”;
(b) there was no secure area for the storage of the applicant’s DP1; and
(c) the applicant’s motor vehicle travel expenses were attributed to the transportation of the bulky equipment, rather than to private transport between home and work.
68. I am satisfied that TR95/17 is a public ruling which is binding on the respondent and the Tribunal. However, TR95/17 is only presently relevant insofar as it deals with the type of travel between home and work by employees of the Australian Defence Force referred to in paragraphs 229 and 230 of the Ruling.
“Bulky”?
69. In adopting the approach taken by Senior Member Block in Re Crestani and in applying TR95/17, can the applicant’s DP1 equipment be described as “bulky”? As to this issue, in my view, having viewed it in its entirety at the hearing, the applicant’s DP1 was not easily portable and could not conveniently be carried for any distance. I find, as a matter of fact, that the applicant’s DP1 was bulky within the meaning of that term contained in paragraph 229 of Taxation Ruling TR95/17.
Secure Storage?
70. Next, applying TR95/17, was a secure area for the storage of the applicant’s DP1 provided at both Woodside Barracks and Steele Barracks? As to this issue, it was the applicant’s evidence that there was no secure place for storage of his DP1 at either Woodside Barracks or Steele Barracks. He invited the Tribunal to find, at a minimum, that the relevant level of security for storage of equipment was an individual cage available to an individual soldier made of steel mesh of reasonably small gauge and of reasonable strength which was lockable and with the key available only to the soldier concerned. Having considered all the relevant evidence, I am not prepared to make such a finding.
71. The applicant said that, at Steele Barracks, he was located in a communal office of three section commanders and a clerk. There were space constraints and he was unable to store his DP1 in the communal office. Captain Clancy said in her witness statement that, during the period 17 January 2006 to 30 June 2006, the applicant shared a lockable office with other section commanders. When he was not using his pack or webbing, he kept these items, for the majority of the time, within the shared lockable office environment. She also said that soldiers could store their equipment in the quartermaster store or at home, rather than transporting their items daily. In her oral evidence she said that, in addition to the quartermaster store which provided cages for equipment storage, the section commanders’ office had a lockable door and lockable window, and provided ample storage. There was also the wing sergeant major’s office and her own office. She said she observed the applicant’s trunk and personal equipment being stored in the section commanders’ office. Equipment of other soldiers, as well as the applicant, was situated in that office. Also, as a daily arrangement she had with section commanders, they could store their equipment in her office. They only needed to approach her to store their equipment in either her or the wing sergeant major’s office. Mr Morgan cross-examined Captain Clancy about the storage of equipment in the quartermaster store and the five cages she said were available for storage. It seemed Mr Morgan understood her evidence to be that the five cages were available to more than 300 people at the barracks. However, it became apparent that Captain Clancy was only concerned with the soldiers she was responsible for and the five cages that were available to them. Having considered all the evidence, particularly the evidence of Captain Clancy, I find that a secure area for the storage of the applicant’s DP1 was provided to him at Steele Barracks.
72. In relation to Woodside, the applicant said the bay allocated to his detachment in the restricted compound was designated as the storage area. He acknowledged there was physical space for trunks on the shelving down the side of the bay and the remainder of the DP1 could hypothetically be stored in the padlocked cage area at the rear of the bay. In his witness statement Mr Lawes said:
“There was not a requirement for any soldier to transport their DP1 to and from the barracks. There was ample storage space available in the bays to store trunk and kit, even before the missile system was being decommissioned in 2005. Detachments left their trunks there and hung their kits on the mesh. BDR Brandon and his detachment had the most amount of space to store their equipment, as the bays were being emptied out to take in a new missile. The entire bay was a Class A container with padlocks on the cages and on the roller door.”
Although he initially seemed to be of the view that the storage at the Woodside Barracks was inadequate, when challenged by Mr Cole, the applicant said:
“There was adequate storage. However, it was inadequate security, hence the reasoning of mine to actually utilise my own residence and my own vehicle as storage for that equipment.” [Transcript, page 250]
73. On the question of the provision of a secure area for storage at Woodside Barracks, I note from the evidence that the restricted compound was surrounded by a mesh fence with two lockable gates and each bay roller door was lockable. At the time of my site inspection of the Barracks, I noted that the guard room was situated immediately adjacent to the restricted compound. When asked about the guard room, the following exchange took place between Mr Cole and Mr Lawes:
“Was there any sort of monitoring role of the person in the guardroom as to who was going in and out of the bays and the compound?---Yes. The control of the keys to an individual bay is the responsibility of the guard commander or his deputy. The process to get into the bay was to go and sign for the bay keys. That was registered in a book. The bay key is issued out at a particular time into the bay, open everything up for daily work, and at the completion of the day or when the bay was being left unattended, the key is back – signed back in and secured in a safe or a class A container in the guardroom where the keys were kept.
Now, in terms of your evidence so far, obviously those members of a detachment who were responsible for a bay would have access to the bay?---Yes.
Would others have access to a detachment bay?---It’s possible that others would have access to someone else’s bay and that eventuality would occur if one or two people were assigned to collect all the keys for the bay. Having said that, that was a practice that was not formally authorised and it would be an unwise or unsafe practice to do that. The policy or procedure was that either the detachment commander or his 2IC, the second in command of the bay, would sign for a single set of keys and therefore retain the security and integrity of the bay.” [Transcript, pages 393-394]
74. The applicant’s evidence was that the security in the bay was not adequate. There was the risk of his equipment being stolen if the trunk and remaining DP1 was stored in the bay. He said he found it more secure to keep his DP1 equipment in his motor vehicle. It was clear on his evidence that, in relation to security in the bay, the applicant was concerned, not only about theft by civilians, but more so about theft by other soldiers or even soldiers in his own detachment. If theft was involved and could be proved through the lodgement of a lost and damage report which was accepted, any lost items would be re-issued. The applicant would be compensated. In his evidence, Lieutenant Colonel McLean said that he could not say there was any particular problem with theft in the 2005/2006 tax year at Woodside. He had no evidence of theft occurring at all. Mr Morgan accepted that there was room for both subjective and objective evidence as to security in the bay. He submitted the applicant exercised his judgement as a professional soldier in determining that secure storage was not provided in the bay. In my view, the issue of whether secure storage existed cannot be determined unilaterally and subjectively by the applicant. The objective evidence would seem to suggest that there were secure bays available, one was allocated to the applicant’s detachment, of which he was in charge, and he could have stored his DP1 there. In view of the findings I make later in these reasons, it is not necessary for me to reach a concluded view on the question of secure storage of the applicant’s DP1 at Woodside Barracks.
Were the travel expenses attributed to the transportation of bulky equipment?
75. In his witness statement the applicant said that he was required to transport his DP1 to and from Woodside Barracks and Steele Barracks and that this was done because there was not adequate and secure storage provided. However, on his oral evidence, he was not required by his employment to do this. When questioned about transporting his DP1, he said:
“I wasn’t ordered to carry my gear in the car or store my gear in the car, or anywhere else. I wasn’t ordered to store my gear anyway. It was purely that I – the only thing that you are ordered to do is to know and be able to produce equipment that you have been issued when and where you are required to do so. [Transcript, page 169]
….
At no stage were you required to utilise your vehicle as storage, but it was a case of making a personal choice, once again, by knowing exactly where your equipment is, what condition it’s in and how secure it is.” [Transcript, page 176]
76. The applicant made a personal choice to transport his DP1 to and from work. The evidence of Mr Lawes (Exhibit R6 and Transcript, pages 393-394) was that there was adequate secure storage provided to the applicant for his DP1 at Woodside Barracks. The evidence of Captain Clancy (Exhibit R5 and Transcript, page 373) was likewise. There was adequate secure storage provided for the applicant’s DP1 at Steele Barracks. On the evidence, it was not a requirement that the applicant or any soldier transport their DP1 to and from work at Woodside and Steele Barracks, and I so find.
77. As to the transport of his DP1 to Woodside for daily inspections, in paragraph 77 of his witness statement the applicant said (in part):
“Approximately once per working day I would visit the bay to retrieve equipment that I stored in my trunk in the bay. …”
When questioned about paragraph 77, he said that he did not store his DP1 in the bay. It was kept there for the time he needed it and he would then return the equipment to his motor vehicle. Paragraph 77 is confusing, when compared with the applicant’s oral evidence. It certainly reads as though he stored his DP1 equipment in the bay and then retrieved it when he needed it or when he returned the equipment to his motor vehicle. However, nothing is said in paragraph 77 about the holding of DP1 inspections. In fact, nothing was said by the applicant about DP1 inspections anywhere in his witness statement. His oral evidence and submissions proceeded on the assumption that there was transportation of the DP1 to and from his work and that this was done because of the need or requirement for daily DP1 inspections. In my view, the important evidence about daily DP1 inspections at Woodside should have been included in the applicant’s witness statement, particularly, in paragraph 77.
78. The applicant said that he had to carry his DP1 every day from the Battery car park to his bay for inspections and then return it to his motor vehicle. In looking at the map of Woodside Barracks that I was provided with, it seems to me that the distance between the Battery car park and his bay was not inconsiderable for travel, to and fro, on a daily basis. And at least some of his detachment brought their DP1 from their living quarters to the bay which, by reference again to the Barracks map, would appear to be more than twice the distance that the applicant was required to cover daily.
79. He said that the training program at Steele Barracks was different to that at Woodside. On my understanding of his evidence, daily DP1 inspections were not conducted there, but it was necessary for the applicant to have his DP1 accessible at both Barracks. In paragraph 100 of his witness statement, he said that, from February 2006 to October 2006, he stored his trunk in the communal change room at Steele Barracks. In his oral evidence when being questioned about his discussion with an officer of the respondent about his tax refund in July or August 2006, the applicant said that the statement in paragraph 100 was incorrect and had been an “oversight” on his part. He said he started storing his equipment at Steele Barracks “after September 2006, or after advice from the ATO”. Obviously, it would be difficult for him to say that he stored his trunk at Steele Barracks from February 2006, when his other evidence was that he stored his equipment at home until he was advised by the ATO, some time after July or August 2006, to start storing it at work.
80. On all the evidence, I am unable to accept that the applicant transported his DP1 daily to Woodside Barracks and to Steele Barracks. Apart from the applicant, no evidence about the holding of daily DP1 inspections was provided by anyone else and, as I have already mentioned, nothing appears about the daily DP1 inspections in the applicant’s witness statement. For the applicant’s witnesses, Mr Valladares’ evidence was the closest. He was at Woodside in 2005 and 2006, but he was in the transport division and had no personal experience of what took place in the applicant’s missile area. Mr Scheidl was not at Woodside in the 2005/2006 tax year but he said that, in his time in the Army, he had never come across daily DP1 inspections. If inspections were done every day, there would be a loss of morale. Mr Golding was never at Woodside at the same time as the applicant and only visited there occasionally. Mr Lawes said that, as commanding officer at Woodside Barracks in the 2005/2006 tax year, he had no knowledge that the applicant conducted daily DP1 inspections of his detachment and that they were required to attend each day with all their DP1. He said he would have expected to have learned of the inspections eventually, but he had not. The soldiers would have complained fairly quickly, but he was not aware that that may or may not have been occurring in the applicant’s case. And, from the evidence of Lieutenant Colonel McLean, there are still people at Woodside who were there in the 2005/2006 tax year, but nothing seems to have been said by them about the applicant’s daily DP1 inspections.
81. I queried with Mr Morgan why, apart from the applicant, there was no other evidence of the conduct of his daily DP1 inspections. Mr Morgan responded that the respondent had not called witnesses to test the actual evidence of the applicant about the holding of the inspections. However, as the applicant has the onus of proving that his amended assessment is excessive, it seems to me that there is no obligation on the respondent to call witnesses who might support the applicant’s evidence. On the question of corroborating evidence, the applicant has asserted that he transported all of his DP1 to and from work daily. As was submitted by Mr Cole (which submission I accept), if this assertion is correct, it is remarkable that he did not find anyone to come to the Tribunal to give corroborating evidence of the daily transportation. For my part, I would have thought that, had there been one person who could corroborate the applicant’s assertions in a material particular, it would have been his wife. She was his girlfriend when he was at Woodside and they subsequently married. She would have been able to corroborate the applicant’s evidence about daily transportation of his DP1 to work, to the storage of the equipment in his motor vehicle and to the security that was available when his vehicle was garaged at his residence. Corroborating evidence could also have been provided by any one or more of the soldiers who had been members of the applicant’s detachment at Woodside during the 2005/2006 tax year.
82. The applicant gave evidence-in-chief and was cross-examined by Mr Cole in relation to the use of his garage at his residence for the storage of his DP1. Mr Cole submitted that there were a number of deficiencies in the applicant’s evidence on this point. In his evidence-in-chief and in cross-examination by Mr Cole about the use of his log book records, other deficiencies were identified. In cross-examination, Captain Clancy gave evidence about the applicant’s use of motor bikes, which incidentally were not referred to in his witness statement. Captain Clancy appeared to find difficulty in discussing the intricacies of motor cycles and Mr Morgan suggested her knowledge of the subject was “exaggerated”. Given the conclusions that I have reached in relation to the applicant’s evidence about his daily use of the DP1 and its transportation from his home to work, I do not see it necessary to examine and comment upon any suggested deficiencies in the applicant’s evidence on the use of his garage and his log book records or upon Captain Clancy’s evidence about motor bikes.
83. On the balance of all the evidence, I am not satisfied that the applicant’s travel expenses were attributed to the transportation of his bulky DP1 equipment, rather than to private transport between home and work.
deductibilty under the income tax assessment act 1997
84. As mentioned earlier, the High Court found in Lunney (supra) and Hayley (supra) that travel between home and work that does no more than get a taxpayer to his work, and is not in any other way part of the income earning activities, is usually regarded as not incurred in or in the course of producing assessable income. However, as also mentioned earlier, the Courts have recognised that there are cases which are exceptions to the rule that expenditure on travel to and from work is never tax deductible. In his outline of submissions, Mr Cole referred to FC of T v Wiener 78 ATC 4006, where the taxpayer’s teaching job was itinerant in nature; to FC of T v Collings 76 ATC 4254, where the taxpayer had two places of work, one of which was home, and his travelling was part of his work; and to Vogt (supra). Mr Morgan also referred to FC of T v Ballesty 77 ATC 4181, where the taxpayer was a professional footballer and had to travel in a manner that allowed him to perform his best; and Garrett v FC of T 82 ATC 4060, where the taxpayer was a medical practitioner and grazier who practiced at various centres and used an aircraft to travel to various points of income production. Having considered these cases, it is clear that they were all decided on their own particular facts. The case that comes closest to the facts in the applicant’s case is obviously Vogt.
85. In analysing the decision in Vogt, it is clear that the size and bulk of the item being transported was a relevant consideration. Also relevant was the fact that the transport of Mr Vogt’s instruments and equipment did not arise because he made a personal choice to keep the instruments and equipment at home, but because there were compelling employment-related reasons for keeping the items with him. Those reasons were the lack of secure storage at his performance venues and the need to use the instruments at home for practice. Waddell J found that the motor vehicle expenses were incurred as part of the operations by which the taxpayer earned his income. The expenditure was essential to the carrying on of Mr Vogt’s income earning operations, there being no other practicable way of getting his instruments to the places where he was to perform. In a practical sense, the expenditure could be attributed to the carriage of Mr Vogt’s instruments, rather than to his travel to the places of performance. The mode of his travel was simply a consequence of the means that he employed to get his instruments to the places of performance, that is, by carrying them in the motor vehicle which he drove. In light of those matters, Waddell J found that the essential character of the expenditure was such that it could be regarded as having been “incurred in gaining or producing the assessable income”.
86. In his outline of argument, the applicant referred to the two step approach outlined by Waddell J in Vogt. The first step was to identify the income-earning operations of the applicant. For the applicant, this was stated to be a readiness “at short notice for deployment to war or other semi-military or civilian catastrophe engagements”. In my view and on the evidence, I am unable to accept that this was the heart of the applicant’s income-earning operations. Lieutenant Colonel McLean said that DP1 inspections, when the applicant would be required to have all his deployable kit present, might happen two or three times a year. Mr Lawes said that DP1 inspections were held every 3 months only for soldiers moving from a low level of readiness to a high level of readiness. This movement was not applicable to the applicant and his detachment. Their DP1 inspections did occur, but they were less frequent. Notice was given of all these DP1 inspections and, as to spot checks, there was only one check of this nature in the two years that Mr Lawes was at Woodside. I accept that the applicant was a professional soldier in his decision-making process. However, I do not accept that readiness at short notice for deployment was at the high level that he indicated it to be. Whatever the readiness requirement was for the applicant, on the evidence before me he would have fulfilled that requirement in the 2005/2006 tax year without having to transport his DP1 daily to and from Woodside Barracks and Steele Barracks.
87. Also in his outline of argument, the applicant contended that it was a “condition of service” that he have a car, so as to meet the readiness requirements relating to his position as a soldier. Although Lieutenant Colonel McLean and Captain Clancy gave evidence that suggested they agreed having a motor vehicle would be appropriate to enable a soldier to get to work to perform duties, Mr Lawes was quite clear in his evidence that there was no policy document or directive at any unit or AEF level that required a soldier to have a motor vehicle or means of getting to work. He did not disagree that it was a common sense thing to have a motor vehicle, but, during his tenure, there was no requirement, oral or written, for a soldier to have a motor vehicle.
88. In Case 43/94, 94 ATC 387, the Tribunal (comprising Deputy President BH Burns, Mr B C Lock (Member) and Mr D J Trowse (Member)) had cause to consider the case of a flight sergeant with the Royal Australian Air Force who claimed a deduction for carrying bulky equipment between home and work. The flight sergeant’s bag, when packed, weighed 20 kilograms. The contents were mainly uniforms, personal survival gear and flying clothing and included some equipment, such as a knife and a torch. Like other members of the air crew, the taxpayer was allotted a locker for the storage of his work gear. The locker was unsecured and was used to house no more than his full dress uniform. The reasons for this limited use ranged from insufficient locker space, lack of security and to the personal choice by the taxpayer to keep the gear in the boot of his car in which he travelled to and from work. It was contended that the carriage of the bag and work gear converted the private nature of home to work travel expenditure to expenditure incurred in deriving assessable income. Alternatively, it was argued that the home of the taxpayer was also a place of employment and that the travel from home to work and return was travel applicable to that employment. The Tribunal found that all of the taxpayer’s work gear was capable of satisfactory storage in his locker and that the decision to keep the gear in the boot of his car was driven by personal choice. The Tribunal referred to Lunney (supra) and Hayley (supra) and to the exception in Vogt that expenditure on travel to and from work was never deductible. In reaching its decision and in analysing Vogt, the Tribunal made the following observation (at paragraph 19):
“19. The major factual differences as between Vogt and the current reference are two-fold; first, the absence of suitable storage facilities in Vogt and, secondly and more significantly, the bulkiness of the items being transported. The Tribunal is of the view that the mode of transporting the duffle bag, the navigational bag, and occasionally the suit bag, was simply a consequence of the means adopted by the applicant in conveying himself to and from his place of employment. Merely putting those items in the boot of the car did not alter either the nature of the trip or the character of the expenditure. Against that background, the Tribunal concludes that the expenditure should be attributed to the applicant's travel to and from work rather than the carriage of the various items of flying gear, that is, a reversion to the Lunney/Hayley decisions that expenditure of this kind is not by any process of reasoning a business expense nor can it be said to be incurred in gaining or producing the applicant's assessable income. It is the view of the Tribunal that this conclusion obviates the need to further consider the questions pertaining to the provision of a locker at the base and the exercise by the applicant of a personal choice to carry the equipment in his car. It seems that those matters would be relevant where the primary finding is that the expenditure be attributed to the carriage of goods rather than to the person. In that circumstance, those factors would again precipitate a decision that the expenditure was of a private nature and thus not incurred in the gaining of assessable income.”
89. In the present case, given my finding that it was not a requirement that the applicant take his DP1 home each day, the present case is distinguishable from Vogt. In applying the ratio in Vogt, for the applicant’s motor vehicle travel expenses to be deductible, they must be incurred in transporting his bulky DP1, rather than in transporting himself, to and from work, and there must be a compelling employment-related reason for storing the DP1 at home. In the applicant’s case, there was no such employment-related reason. On the evidence, there was no connection between any transport by the applicant of his DP1 and the earning of his income. The applicant was not required by his employment to transport his DP1 and he acknowledged that he made a personal choice to do this. There was adequate secure storage available for the DP1 at both Woodside Barracks and Steele Barracks. As was found by the Tribunal in Case 43/94, the mode of transporting his DP1 was simply a consequence of the means adopted by him in conveying himself to and from his place of employment. Merely keeping and transporting his DP1 in his motor vehicle did not alter either the nature of the trip or the character of the expenditure. Unlike what the Tribunals found in Case U29, 87 ATC 229 and Case U107, 87 ATC 650, the applicant’s employment did not create the need, as a matter of practical necessity, for him to transport his DP1 from his home to his place of work.
90. In the circumstances, I find that the expenditure involved in transporting his DP1 did not have the essential character of a business expense, nor can it be said to be incurred in gaining or producing the applicant’s assessable income.
91. In his closing, Mr Morgan made reference to the imposition of short-fall penalties in the applicant’s 2006 amended assessment and that the level of penalty was 25 percent of the tax shortfall. Having perused the notice of amended assessment, I am unable to find any reference to administrative penalties. The only reference is to a “shortfall interest charge” of $80.78. In these circumstances, I do not find it necessary to make any comment about the level of shortfall penalties. If I am wrong in this and penalties are in fact imposed at the level of 25 percent, in my view and given the decision I have reached about the tax deductibility of the expenditure involved, no adjustment to shortfall penalties is warranted.
conclusions
92. It follows from the considerations in these reasons that the motor vehicle travel expenses of the applicant in the 2005/2006 tax year were not incurred in gaining or producing his assessable income, so that they are deductible under s 8-1(1)(a) of the ITAA 1997. The motor vehicle travel expenses were of a private or domestic nature and, as such, are precluded as a deduction under s 8-1(2)(b) of the ITAA 1997. The applicant has failed to discharge the onus, under s 14ZZK(b), of proving that his amended assessment for the 2005/2006 tax year was excessive.
decision
93. The objection decision under review is affirmed.
I certify that the 93 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne
Signed: ............J Coulthard............................................
AssociateDates of Hearing 14-15 December 2009, 9-12 March 2010 and 19 March 2010
Date of Decision 15 July 2010
Counsel for the Applicant Mr F John Morgan
Solicitor for the Applicant N Birdseye & Associates
Counsel for the Respondent Mr Stuart Cole
Solicitor for the Respondent ATO Legal Branch