CGWT and Commissioner of Taxation (Taxation)
[2020] AATA 6155
CGWT and Commissioner of Taxation (Taxation) [2020] AATA 6155 (23 December 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2016/4833
Re:CGWT
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:F D O'Loughlin QC, Deputy President
Date:23 December 2020
Place:Melbourne
The Tribunal sets aside the decision under review and in lieu thereof allows the Applicant’s objection to the extent conceded by the Respondent together with a deduction of $680 for mobile phone and internet costs and remits the underlying assessment back to the Respondent for amendment.
......................[sgd]..................................................
F D O'Loughlin QC, Deputy President
Catchwords
Taxation
·Deductions, whether the Applicant’s home was her place of work and whether expenditure for mobile phone, internet and electricity connections and services, travel, parking, hotel accommodation, stationary, copying, printing, postage, PO Box, attendance at and participation in events and admission to tourist attraction sites are deductible work-related expenses for sporting competitions manager and events lecturer.
·Medical expenses, whether expenditures were for therapeutic treatment administered by direction of a legally qualified medical practitioner
·Penalties
·Burden of proof, reliability of evidence
Legislation
Taxation Administration Act1953 (Cth), s 14ZZK
Income Tax Assessment Act 1936 (Cth), s 159P(4)(d)
Income Tax Assessment Act 1997 (Cth), ss 8-1, 900-195
Cases
Allard v F. C. of T. (1992) 24 ATR 493
F. C. of T. v Dalco (1990) 168 CLR 614
F. C. of T.v Finn (1961) 106 CLR 60
Galea v F. C. of T. 90 ATC 5060
Gauci v F. C. of T. (1975) 135 CLR 81
George v F.C. of T. (1952) 86 CLR 183
Guest v F. C. of T. [2007] FCA 193
Imperial Bottleshops Pty Ltd and William John King Egerton v F. C. of T. (1991) 22 ATR 148
Ma v F. C. of T. (1992) 37 FCR 225
McAndrew v F. C. of T. (1951) 98 CLR 263
Moreau v F. C. of T. (1926) 39 CLR 65
Tisdall v Webber [2011] FCAFC 76
Trautwein v F. C. of T. (1936) 56 CLR 63
Vu v F. C. of T. [2006] FCA 889
REASONS FOR DECISION
F D O'Loughlin QC, Deputy President
23 December 2020
THE DISPUTE
The present application is principally a burden of proof dispute that rests on whether the Applicant’s uncorroborated evidence can be accepted to found conclusions that a range of expenditures was incurred, or, for expenditures that can be accepted as having been incurred, had the requisite nexus with income-producing activities. The application concerns:
(a)whether a range of losses and outgoings which the Applicant asserts are connected with various income-producing activities are deductible pursuant to s 8-1 of the 1997 Assessment Act;[1]
(b)substantiation of some of the asserted expenditures;
(c)identifying the appropriate proportion of expenditure which can be accepted as having been incurred that has the requisite nexus with income-producing activities;
(d)whether in the Applicant’s circumstances other expenditures of $2,380 for gym and physiology, remedial massage and acupuncture were payments … for therapeutic treatment administered by direction of a legally qualified medical practitioner so as to constitute medical expenses for the purposes of s 159P(4)(d) of the 1936 Assessment Act,[2]
(e)whether a shortfall penalty is payable, and
(f)if shortfall penalty is payable, whether it ought be remitted in all the circumstances.
[1]The Income Tax Assessment Act 1997 (Cth).
[2]The Income Tax Assessment Act 1936 (Cth).
The Commissioner contends that for some of the deduction claims, the Applicant has not demonstrated that the relevant losses or outgoings were incurred, and for others where there is no challenge to the expenditure having been incurred or made, the relevant nexus with earning assessable income or proportionate nexus of multi-purpose expenditures with earning assessable income has not been demonstrated, that the expenditure in question does not comprise medical expenses and that penalty is payable and ought not be remitted.
Table 1 sets out the amounts the Applicant contends are properly deductible or properly recognised as medical expenses and the amounts that the Commissioner concedes ought be accepted as such.
[3]Pacific Island Holiday Destination Country.
Table 1 Item Applicant's continuing claim
$
Amount Respondent concedes
$
Disputed amount
$
D1 Work-related car expenses 3850.00 424.27 3425.73 D2 Work-related travel expenses PIHDC[3] Trip Flights 1393.00 0.00 1393.00 Accommodation Transport 63.20 0.00 63.20 Food 1723.18 0.00 1723.18 Airport Parking in Melbourne 151.98 0.00 151.98 Additional expenses in PIHDC (moved from D5) 573.24 0.00 573.24 Phone internet in PIHDC 252.19 252.19 0.00 4156.79 252.19 3904.60 Sport Australia Melbourne Accommodation 1138.25 0.00 1138.25 Melbourne Parking 216.41 0.00 216.41 Sydney Trip (baggage, transport, meals + reasonable expenses/top-up) 133.95 33.30 100.65 Perth trip (baggage, meals, airport cart + reasonable expenses/top-up) 1007.32 558.05 449.27 Brisbane trip (baggage, parking, meals + meal reasonable expenses/top-up) 374.80 235.50 139.30 2870.73 826.85 2043.88 7027.52 1079.04 5948.48 D4 Work-related self-education expenses Course Fees 2090.00 0.00 2090.00 Tasmanian Trip 5143.40 0.00 5143.40 Event Ed – Tickets – events 1982.33 161.00 1821.33 9215.73 161.00 9054.73 D5 Other work-related expenses PO Box 126.00 0.00 126.00 Choice Membership 69.00 0.00 69.00 Travel Insurance 917.00 337.00 580.00 Mobile phone 1215.00 0.00 1215.00 Internet 1079.00 0.00 1079.00 Qantas Membership 485.00 0.00 485.00 SA - Stationery/copying/postage 575.40 0.00 575.40 SA - Misc 263.43 263.43 0.00 Event Education - Reference Books 390.04 262.57 127.47 Inside Sports Subscription 160.00 160.00 0.00 ANZSLA Membership 50.00 50.00 0.00 SCRBD App 10.00 10.00 0.00 Library - VU Alumni 115.00 115.00 0.00 Home Office - electricity 551.00 0.00 551.00 Event Ed Postage 131.85 0.00 131.85 Event Ed Copying 241.69 0.00 241.69 Event Ed Stationery 770.80 0.00 770.80 Event Ed Stationery (1/3 of shared stationery) 23.33 23.33 7,173.54 1,198.00 5,975.54 Total work-related deductions claimed 27,266.79 2,862.31 24,404.48 Gifts and donations $610.00 $610.00 0.00 Net medical expenses $20,774.49 $18,394.00 $2,380.49
The work-related deductions part of Table 1 is part of a more comprehensive table reproduced at Annexure 1. The Annexure 1 table sets out the amounts of the deductions claimed or asserted at various points in time in various communications with or documents provided to the Respondent beginning with the Applicant’s tax return for the 2014 Year[4] through the dispute process with the ATO to the position adopted by the Applicant in submissions made on her behalf following the conclusion of the hearing. It can be seen that the deductions asserted are significant in the context of the gross assessable income earned by the taxpayer in the 2014 Year and from time to time have been significantly higher than the final position adopted by the taxpayer.
[4]The Year ended 30 June 2014.
Amended assessments will be needed to give effect to those matters fully conceded by the Respondent which are yet to be reflected in an amended assessment.
THE FACTUAL CONTEXT
The facts that provide the setting for determining the disputed issues are as follows.
2014 Year income from employment
During the 2014 Year, the Applicant had three employment-based sources of income: the Department of Human Services Victoria, Event Education, and Sport Australia and derived gross income of $75,677[5] from the two sources which are the reference points for her deduction claims, namely:
(a)Event Education[6] - $29,058; and
(b)Sport Australia[7] - $46,619.
[5]The Applicant also received gross income of $29,652 from the Department of Human Services and had an aggregate gross income of $105,329.
[6]Not its real name.
[7]See f/n 6.
Event Education was an online education provider and the Applicant was a part-time Flexible Online Learning Lecturer;
Sport Australia was the national co-ordinating body for an international and domestic team sport and the Applicant was employed as its Competitions Manager.
In each of these roles the Applicant undertook tasks from her home in WRT,[8] and used her own phone and internet facilities.
[8]See f/n 6. A western regional town approximately 75 Km from Melbourne.
2014 Year voluntary and other activities
Also during the 2014 Year, the Applicant was involved in at least five organisations or activities in an unpaid or voluntary capacity:
(a)the Sailing Foundation[9] of which she was a board member from approximately 2011 and, in that capacity, during the 2014 Year she was a, possibly the, lead member of the organising committee for the 2013 Sailing Festival[10] which was a significant demand on her time for the lead-up period for that event;
(b)Sport Central Victoria[11] of which she was a board member from approximately 2004 to 2017 except for a break in about 2010/2011 and during the 2014 Year was the chair of the Facilities Association of that entity which involved [l]iaising with council, ensuring operations [and servicing] of the facility and dealing with people in a Victorian western regional city;
(c)Sport Australia as Team Manager of its touring team which was competing in a two-country tournament in PIHDC in December 2013. This role was an unpaid, volunteer role, and team managers were to be funded independently of Sport Australia;
(d)Western Region Sport2[12] of which the Applicant was a board member with the board meeting approximately monthly in an inner-western suburb of Melbourne. This was a less onerous role than those noted above;
(e)EE[13] as an actual or potential investor. The Applicant did some unpaid research work for this organisation in relation to a small number of projects and the work involved during the 2014 Year was as significant as the work for the Sailing Foundation, Sport Central Victoria or Sport Australia as its touring team’s Team Manager; and
(f)in the first part of the 2014 Year, as a student studying Planning Theory as part of a Masters in Urban Planning course with Curtin University.
[9]See f/n 6.
[10]See f/n 6.
[11]See f/n 6.
[12]See f/n 6. The organising body for a mainstream team sport in the Western part of Victoria.
[13]See f/n 6. EE was an entity involved in property developments.
In each of these roles the Applicant also undertook tasks from her home, and used her own phone and internet facilities.
Event education matters
The Applicant’s claims concerning the Sailing Festival and Tasmanian trip, the event design course, attendances at events, and the cost of the urban planning textbook are solely or principally linked to her Events Education role.
in the 2014 Year, the Applicant taught three different subjects in courses offered by Event Education, two in two separate streams and one in four separate streams, and all were concerned with aspects of events - logistics, risk, commercial modelling, policy and strategy.
The Applicant’s Event Education Contract provided that:
Expenses: You will be reimbursed for all reasonable expenses incurred in the proper performance of your duties and responsibilities which have been authorised by the Company in advance. You are required to produce evidence to the Company’s satisfaction of payment for such expenses. From time to time, you may be required to travel on behalf of the Company for varying periods. You must maintain accurate records for all Work-Related Expenses as outlined in the Expense Guidelines (available from Human Resources)
For her events teaching activities, the Applicant contends:
(a)as the courses were taught online, she worked from home;
(b)she was required to use her home Telstra Internet and landline account for her Event Education work including doing research (as she says she worked at home seven days a week) and was required to attend meetings via Skype;
(c)she needed to keep abreast of the state of the art in event staging;
(d)she was required to drive to Victoria University, once a week for 16 weeks to access material (a round trip of 148km); and
(e)she incurred other work-related expenses for stationery, postage and copying.
Attendances at events
During the 2014 Year the Applicant attended various entertainment events in and around Melbourne which she contends constituted professional development obtaining industry currency, such that the expenses for tickets, entry fees, and associated accommodation and parking constitute other work-related deductions. The events were the Sailing Festival, a Bon Jovi concert, the White Night festival/event, the Australian Open tennis tournament for four sessions, the Heide Museum, the Abbotsford Convent, and an Adam Hills concert. Usually, two tickets were purchased for these events. The Applicant also bought two tickets to a Rolling Stones concert that was cancelled without a refund being paid to the Applicant.
There is corroborating evidence of teaching material based on observations at the Bon Jovi concert that was used in the Applicant’s teaching activities, and of teaching material that had its source in the Sailing Festival.
The Applicant contends that two tickets were purchased for these events for one of two reasons: to provide extra space to accommodate her knee and leg difficulties or to take a student or work colleague with her, but she is unable to say definitively which reason applied to which event. The Applicant believes she bought two tickets for the Bon Jovi concert and the Australian Open tennis events because of her knee difficulties.
Sailing foundation and Tasmanian trip
The Applicant was a member of a Sailing Foundation[14] organising committee for a Sailing Festival[15] event held in early September 2013. In the three month period leading up to this event, she worked extensively (including after-hours and on weekends) project planning for the event and did not receive any income in respect of her work. The Applicant was paid her out of pocket costs in relation to her Sailing Festival activities.
[14]See f/n 6.
[15]See f/n 6.
In late July the Applicant booked to sail to Tasmania on the Sail Boat[16] which was one of the boats that was part of the Sailing Festival, and in mid-August 2013 paid for two fares on a 27 September 2013 flight from Hobart to Melbourne and paid $30 for excess baggage with that booking.
[16]See f/n 6.
At the conclusion of the Sailing Festival in Melbourne, the ships involved in it moved to Hobart and a similar festival was held, or continued, there. Between about 14 September 2013 and 27 September 2013, the Applicant travelled as a member of the crew of the Sail Boat to Tasmania, arriving in Hobart on 22 September, engaged in various activities in Hobart before flying back to Melbourne on the 27 September flight she had booked.
On 22 September 2013 the Applicant’s car was left at the Melbourne Airport long-term car park and was there until 27 September 2013. The evidence did not disclose who left the Applicant’s car at the Melbourne airport car park. 22 September was also the start of a five-night booking made, and paid for, by the Applicant for two people in a 64 square meter two-level executive suite in a Hobart hotel.
While in Tasmania, the Applicant attended a number of tourist attractions: Mona Gallery, Port Arthur and the Maritime Museum. The Applicant bought two tickets for these attendances and the ferry trips to and from Mona Gallery. The Applicant also attended the Hobart premises of Sport Australia while there.
The Applicant contends she travelled to Tasmania alone.
Under the general banner of work-related self-education expenses, the Applicant has claimed a deduction for attending two events which were part of the Sailing Festival in Melbourne and for what she contends was a study tour to Tasmania. The study tour expenses include the ship costs, flight home and accommodation, airport parking, and venue visit charges. The Applicant also includes in her claims the Commissioner’s reasonable rate for food and incidentals for the five days she was in Hobart.
The Applicant contends that with the exception of one day’s activities in Hobart, the Tasmania trip was a study tour that consisted of activities which related to her income-producing roles, particularly that with Event Education.
Events design course
On 25 November 2013 the Applicant enrolled in a Certificate in Event Design course at the Australian Academy of Wedding and Event Planning, incurred course fees of $2,090 and, the Applicant contends, expenses of $167.48 for stationery/postage and copying in relation to this course. The Applicant did not complete this course.
The Applicant contends that the course content was relevant to her position at Event Education, in particular to a course that she taught in early 2015, and that it assisted in her obtaining that role.
Well after her involvement in this course terminated, the Applicant has been inconsistent in her description of her pursuit of this course in representations to the Respondent. In at least one representation, the Applicant said she had completed this course, and in at least one other representation said she had not completed the course as yet, and in at least one other representation indicated that she had stopped working on assignments.
These statements are not entirely accurate. By 3 December 2013 the Applicant had decided that the course was not suitable and began a process of attempting to obtain a refund of the fees paid. That process was interrupted by her trip to PIHDC and resumed shortly after her return in January 2014. On 24 January 2014 the Applicant made a complaint to Consumer Affairs about her inability to obtain a refund of the fees she had paid.
The Applicant contends she believed she had completed the course and later found out that she had not done so.
Textbook purchase
On 10 July 2013, the Applicant bought a textbook entitled Urban Planning Theory. The cost is advanced as deductible by reference to the Applicant’s Event Education role.
Sport Australia matters
The Applicant’s claims concerning the PIHDC trip, travel insurance, Qantas Cub membership, overnight accommodation in Melbourne, reasonable allowance top-up claims while travelling and the Applicant’s place of employment are solely or principally connected with her Sport Australia role.
PIHDC trip
In approximately July 2013, the Applicant was appointed by Sport Australia to the role of Team Manager of its touring team which was to compete in a December 2013, two-country tournament in PIHDC. This role was an unpaid volunteer role, and team managers were to be funded independently of Sport Australia.
The Applicant was required to wear a uniform in her role as Team Manager, which the Applicant bought for the December 2013 tournament.
On or about 28 August 2013, the Applicant booked and paid a deposit for flights and accommodation and transfers for a trip to PIHDC. The total payable for these booked arrangements and services was $8,360. When this booking was made, the Applicant was committed to be in PIHDC for the tournament and planned to have a nice relaxing location for her holiday after the tour ended and knew that the booking was for four people including herself. Her prospective travelling companions were a person who lived at the Applicant’s residence in WRT, another woman and her child who the Applicant also regarded as a grandchild.
Commencing from 1 October 2013, the Applicant was engaged as a Competitions Manager for Sport Australia under an offer of employment dated 29 August 2013. The offer of employment stated that:
(a)the Applicant’s place of work would be Sport Australia’s corporate office, which is located at [Melbourne address];
(b)the Applicant was required to attend work between 9.00 am and 5.00 pm on scheduled work days;
(c)the Applicant would be reimbursed for all reasonable business expenses incurred by the Applicant in carrying out the duties as required by the contract;
(d)Sport Australia would reimburse mobile phone and mobile internet charges to a maximum of $85 per month; and
(e)Sport Australia would provide the Applicant with a laptop computer.
Between about 12 December 2013 and 5 January 2014, the Applicant travelled to PIHDC with the touring team as its Team Manager, followed by her holiday. The Applicant was with the touring team until approximately 22 December, and on 23 December she was joined by her holidaying companions and then spent time at a number of locations returning to Australia on 5 January 2014.
The touring team component of the trip was not in her role as Competitions Manager of Sport Australia: - Competitions Managers would not ordinarily go on such trips in that role. The Applicant applied for leave from 11 December 2013 to 6 January 2014 (inclusive), for 8.5 working days, and the Applicant’s payslips for this period record that she was paid holiday pay for 68 hours (i.e. 8.5 days) during this period.
On 23 December the Applicant’s car was left at Melbourne Airport carpark and car parking charges were incurred from that day. Again, the evidence does not establish who left the car at the airport car park.
In the post-tournament period from 23 December to 6 January, the Applicant contends she worked for at least three-quarters of the time preparing for upcoming Sport Australia events which were to take place in Australia shortly following her return.
The Applicant has claimed deductions as outlined in Annexure 1 for work-related travel expenses for the PIHDC trip. The deduction claimed includes the cost of flights and accommodation, reasonable rates for food and incidentals, airport parking, additional expenses and phone and internet charges while working in PIHDC.
The amounts claimed to be deductible in respect of the PIHDC trip have varied over time as indicated with the ongoing disputed deductions as set out in Table 1. The flights and accommodation components are noteworthy. The original deduction claim of $1,864 for these components is not explained: - how it was determined, whether it forms part of a larger sum paid, and who, if anyone, paid this amount is not revealed by the evidence. The $8,360 subsequently claimed was an amount specified on a statement from a travel agent that did not specify what the amount was paid for. During the processes before the Tribunal, the Respondent sought and procured a summons for the production of documents by Flight Centre. The Applicant opposed the summons but her opposition was overruled by the Tribunal. Flight Centre produced an itemised invoice that showed the $8,360 was the amount paid for airfares for three people, not including the Applicant, for travel from Melbourne to PIHDC and return, and for accommodation and transfers in PIHDC for four people including the Applicant for the period from 23 December.
The Applicant contends that until the itemised invoice produced in response to the summons was available, she was unaware of the information it disclosed, and when she became so aware, she checked her banking records and realised she had been reimbursed part of the amount she paid by one of her travelling companions, and reduced the amount of the deduction claimed. The Applicant contends she did not remember she was joined in PIHDC by people with whom she had close connections, and holidayed with them until she saw the document produced in response to the summons. The Applicant does remember that she had one room in the accommodation in PIHDC and the other three travellers shared the other room in the facilities they had. The Applicant contends that her car was not left at Melbourne Airport by anyone who joined her in PIHDC.
Reasonable allowance top-up claims and substantiation rules
Following her return from PIHDC in January 2014, the Applicant travelled to Sydney, Brisbane and Perth for Sport Australia. In Brisbane the Applicant stayed with a friend. The Applicant has claimed work-related travel expenses associated with that domestic travel. The Applicant contends that Sport Australia paid for her flights on Virgin for this travel, but paid no other travel expenses in relation to this travel.
The Applicant has claimed deductions for expenses for which she has receipts/invoices records, and for a reasonable allowance top-up for expenses she asserts would have been incurred but for which she has no receipts or other documentary evidence. The Applicant went through a process of examination of bank records and receipts to identify what she had spent and concluded that that was not enough to sustain herself while travelling so must have spent more. Hence, the reasonable allowance styled top-up deduction claim.
Travel insurance
The travel insurance policy paid in March 2013 ($580) which remains disputed covered domestic and international travel between March 2013 and March 2014. The Applicant contends that this amount was not claimed in the Applicant's 2012/2013 return. The travel insurance policy paid in April 2014 ($337 which the Respondent has conceded is deductible) was a renewal.
Qantas Club membership
The Qantas Club payment for which a deduction has been claimed of $485 was in fact paid on 28 July 2014 after the close of the Year. The Applicant contends, and it might be accepted, that once paid, the membership was backdated to March 2014 which is consistent with a reminder sent to the Applicant on 17th March 2014 that her individual Qantas Club membership was due for renewal on or before 31 March 2014. The renewal was not effected when due and when renewed operated retrospectively to 31 March.
The earlier payment to Qantas Club for the preceding year was made in March 2013
The Applicant’s place of employment
For her Sport Australia role and her activities related thereto, the Applicant contends:
(a)although in theory the job was an office-based job, in reality, the majority of her time was spent offsite at events;
(b)she travelled to work at the head office everyday between 26 October until 11 December 2013; and
(c)from February 2014, she used her home as her working base, attending head office twice a week for team meetings on a Tuesday and one other day.
These assertions are somewhat contradicted by the only witness who was in a position to know what the Applicant’s formal terms of employment were.
Melbourne parking
The Applicant has demonstrated that parking fees in Melbourne locations were incurred. Various instances of claimed parking occurred in and around Sport Australia headquarters and were related to trips to that destination. Other instances of parking were at locations unrelated to the Applicant’s Sport Australia job and were incurred on days when she had taken leave and on one day when she had appointments of a personal nature.. Included in the amounts claimed were double claims (which have been abandoned), and for parking for two days at a car park near Sport Australia headquarters that the Applicant explained were called for because she needed to transport bulky goods that she had brought back to Melbourne from Perth.
Overnight accommodation in Melbourne
The Applicant stayed overnight 11 times at hotels in Melbourne, incurring accommodation and meal expenses. The cost, and that she paid it, is not disputed.
The Applicant contends that:
(a)these hotel stays and meals were likely to have coincided with the lead-up to Sport Australia tournaments when she had commitments briefing officials and attending meetings outside of normal business hours, and to facilitate attendances at Sport Australia board meetings; and
(b)the reasons for her hotel stays were recorded in her Sport Australia work diaries, which she no longer has a copy of; and
(c)she was not reimbursed for these amounts by Sport Australia.
This evidence is not corroborated and is somewhat contradicted.
Matters referrable to both Event Education and Sport Australia roles
The Applicant’s claims concerning the phone, home internet and home electricity charges, motor vehicle expenses, postage, printing, copying, PO Box, choice magazine subscriptions and miscellaneous purchases are supported or advanced by her in connection with both roles.
Home and personal utilities costs
In all of her income-producing roles, the Applicant needed telephone and internet facilities. The amounts of the deductions claimed by the Applicant for internet and mobile phone expenses comprise 90% of Internet/landline (Telstra) charges and 75% of Vodafone Mobile iPad 2 and iPhone charges and 50% of her one-third share of total electricity charges. The 90% proportion followed an initial assessment by the Applicant based on a review of usage for February 2014 that led to a 98% claim which has been reduced in final submissions to 90%. The Applicant has not provided any evidence of using her home landline for work calls before February 2014 and contends that her personal surfing was done via her iPhone or iPad data.
The Applicant contends that:
(a)from February 2014, in her position at Sport Australia she worked from home and used both her landline and iPhone for work calls;
(b)she incurred expenses for two mobile phone accounts, one for her iPhone and one for her iPad 2. She states that she used the iPhone mainly for data at external events for Sport Australia, but also for general work calls;
(c)when she was at Sport Australia events she was expected to provide a hotspot data supply during competitions and used her iPad mini using the data from the iPhone when out of the office (the iPad mini did not have a sim card); and
(d)based on a review of her mobile phone account, only a quarter of calls were for personal use so 75% of her mobile phone charges for both the iPhone and the iPad for work purposes are deductible.
The review of her phone account revealed error in arriving at the percentage employment-related use adopted.
Motor vehicle travel
The Applicant contends that during the 2014 Year, she was required to use her vehicle for the following purposes:
(a)travelling between her home in WRT and Sport Australia meetings, competitions and head office and return;
(b)travelling between her home and Melbourne airport and return for Sport Australia domestic and international travel (Perth, Sydney, Brisbane and PIHDC); and
(c)travelling between her home and the various professional development entertainment events referred to above; and
(d)travelling between her home and Victoria University.
In her objection, the Applicant contended that the total work-related car travel was 2,823km. For present purposes the Applicant contends that her work-related car travel exceeded 5,000km, and comfortably so, premised upon the proposition that return travel between her home and:
(a)the Sport Australia head office, places in and around Melbourne and Melbourne airport connected with her Sport Australia responsibilities; and
(b)locations of events that she attended that are claimed to be employment-related activities; and
(c)VU library facilities,
was employment-related travel.
Postage
The Applicant has demonstrated that postage and PO Box expenditures were incurred. The connections with income-producing activities asserted have altered over time.
The Applicant’s asserted need for private postage and PO box expenditures were required based on non-existent or inadequate facilities at Sport Australia is contradicted by evidence of other Sport Australia employees.
Any need to incur unreimbursed postage expenditure in connection with the Event Education role is inconsistent with the terms of the Applicant’s employment contract.
Copying and printing stationery and supplies
The Applicant has demonstrated that copying and printing stationery and supplies expenditures were incurred. Like postage expenditures, the connections with income-producing activities asserted have altered over time. Some of the outlays were directly in connection with the Sailing Festival, and because the Applicant contends she used the learnings from the Sailing Festival in her courses she taught, the expenditures were attributable to her Event Education income-producing activities.
Choice magazine
The Applicant paid for the Choice magazine subscription. She contends that the subscription provided access to research that the Applicant used to write courses for Event Education, and a pre-purchase resource for items she was required to source and provide for both Sport Australia and Event Education and her house when tenanted. No evidence of any instance of the use of the subscription for income-producing purposes was led. The Evidence does not disclose any example of a purchase made or research relied on as a consequence of the use of the subscription.
Health and personal matters
The evidence led concerning any direction of legally qualified medical practitioners and what are claimed to be medical expenses comprised two letters; one from the Applicant’s treating general practitioner dated 2 May 2017, and a second from the Applicant’s treating specialist medical practitioner dated 17 May 2017.
The Applicant’s general practitioner indicated that she required management of injuries to both her knees and subsequently her back and required care. The general practitioner indicated:
…
Primarily this involved care from:
-physiotherapists (various)
-exercise physiologist [name of physiologist]
-dietitian [the name of the physiologist]
-osteotherapist [name of osteotherapist]
-acupuncture
-hydrotherapy [self-managed, under consultation with Osteo and Physio]
-gym [self-managed exercise plan developed by physio and/or exercise physiologist]
-myotherapy/remedial massage [name of therapist]
as well as myself as GP and from an orthopaedic surgeon.
This care was intermittent, based on need, but enduring in the sense that she has degenerative legacies from her injuries which require ongoing attention.
The letter from the Applicant’s treating specialist practitioner was as follows:
“Acupuncture and natural therapies have been shown to have some therapeutic benefits when undergoing [nature of treatment] treatment.
CGWT accessed these therapies from July 2013 and June 2014 while undergoing [name of treatment] treatment under my care”.
The Applicant has suffered and continues to suffer conditions as noted by Mr Poyser below.
In and following the 2014 Year the Applicant has suffered physical and mental health conditions that on any view would be regarded as serious. Post the 2014 Year the Applicant has also suffered bereavement through the passing of family members.
The Applicant explains her lack of memory as to critical details associated with the activities for which she has claimed deductions in respect of their associated costs on the basis that there were more important things going on in her life during and following the year of income.
THE EVIDENCE
The evidence in support of the Applicant’s claims comprises an extensive range of documentary evidence, the Applicant’s written and oral testimony, written and oral testimony of three people from the Applicant’s workplace when she was working at Sport Australia (Mr X, Ms Y and Mr G), written and oral testimony of her manager (and fellow lecturer) at Event Education (Mr N), and written and oral testimony of her treating psychologist (Mr Poyser).
Except for reasonable expenses top-up claims, and kilometre based motor vehicle claims, it can be, and is, accepted that the expenditures asserted to have been incurred were incurred – money was spent. In those instances, the relevant question is nexus with earning income. Whilst a significant body of documentary evidence has been received, the evidence led in support of the critical questions concerning the appropriate apportionment of expenditures incurred that serve private and employment-related purposes, namely phone bills, internet charges and electricity charges, and the nexus of losses or outgoings with earning of assessable income is limited to the personal and uncorroborated, and at times either contradicted and or improbable testimony of the Applicant.
The evidence led to suggest that there has been a relevant direction of a legally qualified medical practitioner for the administration of therapeutic treatment comprising the gym and physiology, remedial massage and acupuncture is as set out above.
No evidence has been led as to the steps, if any, taken by the Applicant’s agent in preparing and filing a tax return that would throw light on whether the agent took reasonable care.
Mr N was the Applicant’s manager and a fellow lecturer at Event Education, lecturing in events related courses. His evidence was that events lecturers are expected to keep abreast of state of the art event staging and the like, and one way of keeping abreast is to attend such events and, if possible, get backstage with event organisers to view events and how they are staged and managed and the like from the perspective of both a customer and an event provider. Mr N acknowledged that it can be difficult to get backstage and personal contacts are required for this, and in the ordinary course most events instructors or lecturers simply attend as an audience paying member or customer.
Mr N did acknowledge that it would be expected that someone attending an event to stay abreast with state of the art technologies and the like would have notes and/or photographs of their observations that could be shared with students or form the basis of discussion with students. Relevantly he said:
If you’re attending an event and you’re intending to use what you’ve seen or observed or learnt from attending that event in one of the courses - you know, if you’re wanting to translate that into class content, as you refer to in paragraph 26 of your witness statement, you refer to using these experiences to translate into class content. Would you expect that typically you would take notes of what you observed and take photos, and then turn those into some kind of lecture notes or presentation or some other materials? What would you expect to do?‑‑‑A combination of all of those. For example, I tend - you know, personally I intend to take, you know, set-up photos. I try and sneak in a bit early if I can be let in. If I can, you know, use my charms to get through, you know, and take a few photos and then those I will, you know, get to students one way or another. Sometimes it’s as simple as just saying, “Hey, students, look at this.” You know, I’m flipping through the - you know, the photos on your phone. Or flipping them up onto, you know, a display screen or what-have-you. Bear in mind our classes are pretty small, so we’re not talking, you know, three or four hundred students in a lecture hall. We’re talking 35, 40 maybe. So you’ve got a pretty close relationship with those students just because of the class size. Using them in lectures, absolutely. Sometimes that will go into lecture slides, sometimes it will go into online content, depending on whether it’s an online modality. So CGWT was using - she would have been using either Moodle or Blackboard in her role as an online lecturer. I do actually know of situations where she was actually putting up photos of her experiences and using those as tutorial content.
Which experiences are you referring to there?‑‑‑She took a trip, I believe, to the London Olympics in 2012. I think it was around then or it was a sporting event of some variety around that kind of time.
Are you aware of any other events that she attended that she used for class content?‑‑‑Yes, the actual … stuff, I still use her content.
You’re talking about the [Sailing] Festival ….? ‑‑‑Yes, that content goes into my lectures.
Yes?‑‑‑Now.
So the presentation that she prepared are available to you, and you’re able to see them. Is that right?‑‑‑Well, they were back then because, you know, I was the manager, so, yes. Nowadays, no, because I’m in a completely different role in a different campus.
Yes, but back in 2013, 2014, during that period, you could observe what she had put into class content?‑‑‑Yes. Absolutely.
Mr N also confirmed that the course in which the Applicant was enrolled would have played little part in the Applicant securing roles as a teacher in particular subjects in later years and those decisions were made more based on resourcing and scheduling and availability and the like. Mr N said:
No, I’m not asking you, sorry, whether there’s any exact correlation, and maybe I should just rephrase the question. What I’m just driving at, as far as you know was there any connection between her doing that course, the event design course in the wedding academy and her subsequently being assigned to teach that course; now, there may be no relationship at all, I’m not trying to put words into your mouth, I’m just asking are you aware whether there was any connection?‑‑‑Honestly at the time I don’t know. We would’ve - the main driver between a lot of why classes were assigned would have been on things like availability of lecturers, staffing requirements need to provide a certain level of hours to staff, those sort of issues. The enrolments that we had we didn’t always have 100 per cent, you know. Each - each unit wouldn’t go every term, it would be based on the business realities, that’s what it comes down to; I Event Education is a full profit entity, so it would be based around a lot of numbers and a lot of those things - - -
A multitude of factors?‑‑‑Yes. So that would be the primary drivers of assigning staff. If we had other staff who are overloaded or what have you, we’d move them around, we’d provide other - you know, provide various different - you know, we want to try and mix it up a little bit as well, so we’re getting staff moving across different units so we can get them trained up in them. Yes, so there was a lot of different, you know, considerations going into, you know, staffing levels. Ultimately, yes, look, knowing - knowing that CGWT was engaged in that course allowed us to put her on other courses, such as the ones that engage with weddings, and wedding design. We were actually - at that time we were looking at engaging with a wedding unit. That ultimately didn’t come to fruition, but we were looking at designing a whole bunch of different units based around wedding specialties, venue design specialties, venue management specialities, and some of those units were created. So, yes, does that answer the question?
CGWT wasn’t connected with that though, teaching wedding courses though, was she?‑‑‑No, because we never actually ended up going ahead with it. That unit - we run to a reaccreditation process which runs for a five year cycle. As a business we’re looking to, of course generate as much profit as possible, and we’re looking to generate new units, you know, for want of a better term, sexy titles for those units to engage, you know, a bigger customer base. So at that time - - -
Ms Y was in a finance role with Sport Australia, but was not employed by Sport Australia when the Applicant was employed there. Ms Y provided records in connection with expense and leave claims. Ms Y also gave evidence of her knowledge of mailing facilities at the Melbourne headquarters of Sport Australia, presumably derived from observations from the time that she was there and what she understood or learned about past practices. The mail receipt and dispatch facilities at Sport Australia were not as dire as described by the Applicant.
Mr X was the Applicant’s manager and responsible for employing the Applicant at Sport Australia. Mr X was, of all witnesses, in the best position to give an employer’s perspective on the Applicant’s employment arrangements. His witness statement evidence was brief and relevantly comprised the following paragraphs:
6. Ms CGWT had been appointed by Sport Australia as Team Manager of the Under 21 Women's Sport team for a tournament in PIHDC before I employed her as Competitions Manager and I employed her on that basis. I refer to the letter from Michael Nelson, Australian Country Coordinator dated 26 April 2016 at T35, p394 and the Sport Australia Team manager Duty Statement at ST32. Although the Team Manager role was an unpaid role, it led to, and was absorbed into, CGWT's position as Competitions Manager.
7CGWT was travelling to Tasmania in the immediate period before she started at the Sport Australia Office and I directed her to visit the State Sport Centre whilst she was in Tasmania and to meet with staff there.
…
9CGWT was required to, and did, work throughout the period from December 2013 to early January 2014 on preparation for the Australian Open and the Under 21 s Indoor Championships, which took place from 2 to 10 January 2014, and the Under 15s and Under 18s Indoor Championships, which took place from 12 to 20 January 2014
Mr X’s evidence in cross-examination was very different from that in his witness statement. And it is apparent that it was prepared with either the Applicant’s or the Applicant’s advisers’ material input. In this regard:
(a)in her statement the Applicant said of her role as tour manager and Competitions manager:
Although it was initially an unpaid role, it led to, and was absorbed into, my appointment to the paid position of Competitions Manager of Sport Australia, which, in part, was to manage and resolve some team and athlete behavioural matters. Being a SA staff member meant I had a strong understanding of SA's expectations and requirements of representative teams.
and Mr X’s written statement is as set out above;
(b)in cross-examination Mr X said:
MS SHAND: … Mr X, who prepared your witness statement?‑‑‑I would presume that the lawyers for CGWT have done that.
Was it based on information you told them or did they provide it to you, or how did the drafting work?‑‑‑They provided the information to me and then I was able to check that with the statement.
You checked it - what did you check the statement against?‑‑‑Some of my diary entries from that period, but also some other evidence that they'd given me such as the employment contract.
…
Did you talk to anyone - when you prepared the statement did you talk to anyone about its content?‑‑‑No.
I mean I assume you talked to the solicitors for CGWT?‑‑‑Yes.
Have you talked to CGWT at any point about this proceeding?‑‑‑Yes, before she - before this was sent.
What was the content of that discussion?‑‑‑The content was related to the dispute and that would I appear and give the facts as I knew them.
Did you have any discussions with her that related to any of the content in this statement?‑‑‑Yes. Yes, I did.
Can you point to me which content you're referring to there?‑‑‑It would have been with regard to number 4 for example, number 6, number 5.
So for example in paragraph 6 what was your discussion with her in relation to that?‑‑‑It was, "Can you recall that occurring", and I said, "Yes, I can recall."
Recall which, which thing?‑‑‑The part where we - she was heading to PIHDC, so we'd employed her, she was heading to PIHDC. Before we employed her, or as I gave her the contract and said, yes, we'd like you to work she said, "This is coming up, what do you think", and I said, "Well, yes, that seems to be okay and that will fit in, but you'll need to do some work whilst you're there, or are you able to do some work whilst you're there", and she assured me she was able to.
There you're talking about the discussion you had with her at the time you employer her. Have you had any discussions with her about this content subsequently?‑‑‑Only when she rang me to ask, you know, if I was able to appear today.
What was that discussion?‑‑‑"Can you recall this occurring."
Which part?‑‑‑"Me going to PIHDC and being able to do some work there for Sport Australia." Yes.
In relation to the other paragraphs do you recall any discussions with her about - so moving on to paragraph 7 did you have any discussions with her about paragraph 7?‑‑‑Yes, that occurred. We had some discussions, "Can you recall" again, and given that it was six or seven years ago I said, "Yes, I can recall that." I can't recall the specific dates or times, but I can recall that occurring.
So did she ask you if you recall that you directed her to visit the State Sport Centre while she was in Tasmania, is that what she asked you?‑‑‑Yes, she was - she was heading to Tasmania and I said, "While you're there are you able to go to the offices of Sport Tasmania", and she said that she was able to, yes.
When do you say that discussion occurred?‑‑‑Before - well, before I received this, so, yes, whenever this was - you know, a couple of months ago now.
….
I'm being vague because I'm vague, but it was something - she was …. heading down to Tasmania and I said, "While you are down there can you go into the offices of Sport Australia, introduce yourself, say hello", and she agreed to do that, and to the best of my knowledge she did that:
Given the admissions as to the process of development of the witness statement and the evidence in cross-examination, Mr X’s written evidence is to be regarded with the same care that the Applicant’s personal evidence is to be received.
Mr X’s evidence in cross-examination presented a more credible picture of the Applicant’s circumstances and is to be preferred. Included in that evidence were explanations of what happened that are more consistent with what could be expected in the circumstances. For example:
(a)rather than directing a person who was not yet an employee to visit the Hobart offices of her prospective employer organisation, about which the Applicant said:
…
I was also directed by Sport Australia to visit the Tasmania State Sport Centre and meet with staff while I was in Tasmania. I did so on Monday 23 September 2013, meeting with staff, touring the venue and reviewing arrangements for the Women's Australian Sport League. …
You’ve said here at paragraph 25 that you were directed by Sport Australia to visit the Tasmanian State Sport Centre and meet with staff while you were in Tasmania. You did so on Monday 23 September 2013. Who do you say directed you to?‑‑‑My manager, Mr X.
So that was Mr X, and when do you say that direction took place?‑‑‑Prior to me leaving Victoria on 14 September.
…
and Mr X’s evidence was as noted above;
(b)rather than the tour manager role being absorbed into and being part of the competitions manager role as the Applicant would have it, and consistent with the Applicant applying for, taking and being paid for leave to make the trip to PIHDC to perform the tour manager role, Mr X’s evidence in cross-examination was:
But to your understanding is that correct that the tours are partially subsidised by managers and by the players and not by Sport Australia?‑‑‑That would be correct, yes.
Is that consistent with the fact that the team manager role is really a volunteer position?‑‑‑Yes, correct.
It’s not something that managers do in their capacity as employees of Sport Australia, is it?‑‑‑No, not normally.
….
All right, and as far as the team manager role, you say there at paragraph 6 of your statement, the last sentence you say, "Although the team manager role was an unpaid role it led to and was absorbed into CGWT's position as competitions manager"?---Yes, she would've had a hand - any competitions manager would have had something to do with that trip anyway, not necessarily going on the trip but they would've had something to do with it and I - if I recall, I also directed her while she was there to be doing some other work - apart from being the competitions manager, because we had tournaments coming up.
Right, so you - while she was in PIHDC you wanted her to also make sure she was doing her competitions manager role as well?---Yes, that's correct.
Is it true to say that these two roles ran in parallel, the team manager role remained a volunteer unpaid role?---That would be correct, yes.
And that as separate from her competitions manager role?---Correct.
So when you say it was absorbed into her role there, was that your wording? Did you choose that wording or did someone suggest that wording to you?‑‑‑No, that would've been chosen. It just depends on your definition of "absorbed" but that was part of the competition manager's job certainly was to be involved in that tournament but as I said, not to be the team manager of that tournament.
Yes, the team manager is a separate role?---A separate role.
So you certainly wouldn't be saying that she went to PIHDC as team manager of the under 21 team in her capacity as the competitions manager?---No.
So it certainly wasn't in her paid role that she went to PIHDC?---No.
But it was the case that you said to her "While you're in PIHDC I still want you to make sure you do your competitions manager work" is that correct?---Correct.
So is it fair to say it wasn't on Sport Australia's direction that she did work following that tournament and PIHDC, she could have done that work anywhere?‑‑‑Well - - -
You didn't require her to be in PIHDC to do the work?---No.
After the tournament finished?---No.
You would've been just as happy if she was in Australia doing the work?‑‑‑Correct.
So essentially it was her choice?---That's after the - yes, after the tournament ‑ ‑ ‑
After the tournament?---And after the team had left.
Yes, so after the tournament it was - it's fair to say it was CGWT's choice to stay on in PIHDC?---Correct.
….
(c)rather than being required to stay in Melbourne overnight for Board meetings, about which the Applicant said:
Were you directed by anyone at Sport Australia that you were required to stay in Melbourne overnight in a hotel or other accommodation for the purposes of your work at Sport Australia?‑‑‑In part for some specific meetings, so for the board meetings I was told to.
Who told you to do that?‑‑‑Potentially either Grant or Cam, whoever it was that was directing me with respect to my attendance at board meetings.
Are you saying that was a standing direction or this was done on a meeting by meeting basis, or how did that direction occur?‑‑‑Usually a meeting by meeting basis depending on the content of the meeting.
How often did the board meetings occur?‑‑‑Monthly I believe.
Where were those meetings held?‑‑‑Literally like - not even like a block from the Parkview.
So is this at the Sport Australia office or was it somewhere else?‑‑‑No, it was at a hotel conference room which was in between the office and where I was staying overnight.
Are you saying that some of this hotel accommodation was with respect to board meetings?‑‑‑My attendance at board meetings, yes.
It was either Cam or Grant you say who directed you to stay?‑‑‑Yes.
Where were those board meetings held, what time of day were they?‑‑‑Crack of dawn mostly.
Were you required to attend the whole day or some of the day?‑‑‑Mornings, the morning portion.
When you say crack of the day what do you mean, what time?‑‑‑One of them was I think about 7, 7.30, somewhere around there.
Why was it that you were required to stay in Melbourne as opposed to just driving in early for the meeting?‑‑‑I guess because it would have been a challenge to get there on time and they wanted me to be there on time.
But I assume if you had left at 5.30 you could arrived by 6.30 with traffic at that time, so why exactly would you be needing to stay in accommodation overnight?‑‑‑Sorry, leave at 5.30?
From your house to drive in. Why would you need to stay overnight?‑‑‑You'd have to ask them.
Was that an option that you canvassed with them that you could just drive in?‑‑‑To drive in early?
Yes, just drive in and get here early?‑‑‑I don't recall that discussion.
So they said you actually have to pay for accommodation overnight, is that what they said to you?‑‑‑They said to organise accommodation for overnight.
Did you have any discussion with them that since that was a requirement of Sport Australia that Sport Australia should therefore pay for that?‑‑‑I don't think we discussed the money.
Mr X said:
Are you aware whether or not CGWT was required to attend Sport Australia board meetings?‑‑‑She would’ve - not - not all board meetings, and there might’ve been the occasional board meeting where she would’ve had to give a report.
How often would that have been?‑‑‑No, I can’t recall that.
Did you have visibility of whether or not she needed to attend board meetings; is that something you would’ve known about?‑‑‑Yes, definitely.
So when you say “Yes, definitely” is that because you asked her to attend them or how why do you say - - -?‑‑‑I would’ve either asked - I would’ve had our CEO ask me for her to attend, or I would’ve - I would’ve gone over what she needed to present beforehand, being her manager at the time.
And how often would you estimate she was required to attend Sport Australia board meetings?‑‑‑No, I don’t know, I can’t recall.
Once a month, once every six months?‑‑‑I can’t recall.
Certainly not every one?‑‑‑Certainly not, no.
They were held monthly, I take it, were they?‑‑‑Yes, more or less.
So certainly not monthly?‑‑‑No.
To your knowledge - - -?‑‑‑Sorry, just on that, I would’ve asked her to do a board report monthly, but that’s different from her appearing - - -
Actually attending?‑‑‑Yes.
And if she did attend would that have been for the entire day or was that for part of the meeting?‑‑‑That would’ve been as a part of the meeting.
Just her component. And to your knowledge when were those board meetings held, what time of day?‑‑‑They were generally held all day.
All day?‑‑‑Yes.
So her component may have just been one part of that day?‑‑‑Certainly.
She wasn’t required to come very early in the morning to attend the whole day?‑‑‑No, not generally.
To your knowledge was she ever directed to stay overnight in Melbourne to attend any meetings?‑‑‑I can’t recall.
If she was given any such direction would that be from you or who would that be from?‑‑‑It would’ve been from either myself or the CEO of Sport Australia.
If she’d been directed to do that would that be something you’d be aware of as her direct manager?‑‑‑Not necessarily. If she’d been - sorry, if she’d been directed to I would have, yes. Yes.
And to your knowledge that didn’t happen, she wasn’t directed to - - -?‑‑‑No, I’m not saying that, I just can’t recall.
You don’t recall?‑‑‑No.
Can you think of any reason why she would be directed to stay overnight in Melbourne?---No, if it was - sometimes we had two day meetings where we had the CEOs in the states come in as part of a board meeting and we'd have a seminar type situation in we'd have a board meeting and a seminar with the states, especially once a year we would do that, so that would go over two days. There would be a dinner with the CEOs, that would be an example of an occasion that she may have been asked to stay overnight.
And why would it be necessary to stay overnight?---Well, there would have been a dinner on that night and then we would've got going early the next morning.
But why couldn't you just drive home and then drive back in? Why would you be directed to stay overnight - was anyone else directed to stay overnight?‑‑‑Well everyone else was only 15 or 20 minutes away from the office or half an hour from the office, not an hour and-a-half or whatever. So I'm not saying it happened or it didn't happen but that would be the reason.
Right, but you don’t recall that ever actually being directed to do it?---No I can't recall that happening but there's a possibility because we - you know, it wasn't - that would have been an example that I gave of a two day situation that encompassed the board meeting.
(d)rather than her home being a formal place of employment as the Applicant would have it, Mr X said:
Now, while CGWT reported - I take it she reported to you, is that correct?‑‑‑That’s correct.
And while she reported to you where was her place of employment?‑‑‑She worked at the office in [Melbourne Address], and she also did some work from home.
Do you recall that there was any change in those arrangements, or was it constant throughout the period?‑‑‑I think if I recall she wanted to do a little bit more work from home, I think the traffic was starting to - to get busier.
Do you recall when or about that she started doing more work from home?‑‑‑No.
To your knowledge was any arrangement that she formally changed her place of work to home or was it more that she just worked sometimes at home, sometimes at work, sorry, at [Melbourne Address]?‑‑‑I would’ve thought that that was an informal arrangement that we’d come to, that it wasn’t - that her office was still [Melbourne Address].
So to your understanding her formal arrangement was that her place of work was [Melbourne Address], but on a[n] [in]formal basis you were happy for her to work sometimes at home, is that correct?‑‑‑Correct.
Mr G knew the Applicant for the whole of the time that she worked with Sport Australia, but not from an employer’s perspective, for all but one month of the 2014 Year. Mr G was an employee of Sport Victoria which had a relationship with Sport Australia and through his role with Sport Victoria was able to make observations on the kind of activities that the Applicant engaged in but was not in a position to know the formalities of the Applicant’s employment contract and the basis upon which she worked from home. Mr G only became an employee of Sport Australia in June 2014.
Mr G gave his observations on the mailing systems at Sport Australia from when he arrived there. His description of the mailing facilities was not as dire as that given by the Applicant and is more in keeping with what would be expected of a national headquarters of a sporting body whose teams participate in domestic and international sporting competitions. Mr G did not expect that the Applicant would have needed to incur expenses on behalf of Sport Australia. His evidence was unequivocal:
… there was no expectation that staff would be expected to pay for a work-related postage of an item. That certainly should have been claimed as a work-related expense and submitted to our finance department for appropriate payment.
Mr Poyser provided counselling services to the Applicant approximately fortnightly between March 2012 and July 2014 and again, three times, between mid-October 2016 and the end of November 2016. His conclusions were that:
(a)the Applicant suffered five conditions which together meant that she suffered a severe psychiatric illness which impaired her ability to function;
(b)the dissociation condition that the Applicant suffered meant that she was not always present affecting her ability to function in most areas of her life some of the time;
(c)among the difficulties she suffered was a difficulty to stay present, to concentrate and maintain logical functional thinking;
(d)the degree of the problem was linked to the extent to which she was present at the relevant time;
(e)the Applicant’s conditions would not have caused her an inability to understand the difference between right and wrong; and
(f)the Applicant’s conditions are not irreconcilable with the fact that she held a demanding job, rather those conditions meant that the tasks she was required to perform always required a great deal of effort and sometimes mistakes were made. One of the effects of the conditions leads to an inability to recall things if she is dissociated.
ISSUES
The present dispute is very much a burden of proof case as noted at paragraph [1] above. The issues call for consideration of whether the Applicant has demonstrated:
(a)for some claims, that the expenditure in question was incurred;
(b)for other claims, that expenditure which had been incurred had the requisite nexus with income-producing activities to be deductible;
(c)for apportionable expenditure claims, the appropriate proportion of expenditure which had been incurred that had the requisite nexus with income-producing activities to be deductible;
(d)in the circumstances, failure to satisfy the substantiation rules can be dispensed with;
(e)that some health connected expenditures are medical expenses as defined; and
(f)that any shortfall penalty ought be remitted, and if so to what extent.
The Commissioner does not contend that the law does not allow deductions for expenditure for the cost of activities of the general type or character contended for by the Applicant if the requisite nexus, proportion and substantiation are established.
LEGAL PRINCIPLES
Burden of proof
The burden of proof imposed by s 14ZZK of the Administration Act[17] requires a taxpayer to establish that the disputed assessment is excessive. What these rules require has been the subject of repeated commentary of the Courts. By way of overview, and without listing every authority to like effect:
(a)excessive means the amount of the assessment exceeds what it should be;[18]
(b)a taxpayer must establish the claim he or she asserts;[19]
(c)it is not enough to show that the Commissioner made an error[20] or that an assessment may be wrong;[21]
(d)taxpayers must go further and show what the correct position should be,[22] or what correction should be made to make the assessment right or more nearly right,[23] or the amount that should be assessed for tax,[24] or show that he or she has been assessed to a liability which neither the 1936 Assessment Act nor the 1997 Assessment Act imposes;[25]
(e)there is no onus on the Commissioner under the Assessment Acts and there is no requirement that an assessment be supported by evidence;[26]
(f)the Commissioner doesn’t need to show that a taxpayer’s assessable income was at least a particular figure or that a particular amount is assessable; and
(g)if the Commissioner chooses to make such an assertion and fails to prove it, that failure does not bear upon whether the taxpayer has discharged the statutory burden of proving an assessment is excessive.[27]
[17]The Taxation Administration Act1953 (Cth)
[18]F. C. of T. v Dalco (1990) 168 CLR 614 at 621 per Brennan J with whom Mason CJ and Dawson, Gaudron and McHugh JJ agreed and 631 per Toohey J., McAndrew v F. C. of T. (1951) 98 CLR 263.
[19]Trautwein v F. C. of T. (1936) 56 CLR 63 at 87 per Latham CJ, Moreau v F. C. of T. (1926) 39 CLR 65 at 70 per Isaacs J.
[20]Trautwein above at 87 per Latham CJ, Dalco above at 621 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
[21]Trautwein above at 112 per Dixon and Evatt JJ, Dalco above at 625 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed and at 631 and 633 per Toohey J.
[22]Trautwein above at 87 per Latham CJ.
[23]Trautwein above at 88 per Latham CJ.
[24]Trautwein above at 103/4 per Starke J., Dalco above at 625 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
[25]Trautwein above at 111 per Dixon and Evatt JJ., Dalco above at 624 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed and 626 per Deane J and 631 per Toohey J, George v F.C. of T. (1952) 86 CLR 183 at 201 per Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ.
[26]Gauci v F. C. of T. (1975) 135 CLR 81 at 89 per Mason J (in the minority but not on this point, see Dalco above per Brennan J at 624).
[27]Vu v F. C. of T. [2006] FCA 889 at [9] per Finn J., Galea v F. C. of T. 90 ATC 5060 at 5067 per Hill J.
How a taxpayer’s burden might be discharged varies with the circumstances. If a dispute concerns deductibility of an identified amount, then a taxpayer may show that the assessment is excessive by demonstrating that that amount is deductible without any examination of the balance of the assessment.[28] This might be shown by demonstrating that the loss or outgoing was incurred, or the requisite nexus is established or that the appropriate proportion of an amount incurred for dual purposes has been established.
[28]Dalco above at 624 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
Estimating and speculating
There is limited support in the authorities for using estimates in satisfying the requisite burden of proof.[29]
[29]See Ma v F. C. of T. (1992) 37 FCR 225 per Burchett J and Allard v F. C. of T. (1992) 24 ATR 493 per Hill J, which pick up on some of the remarks of Brennan J in Dalco. .
Ma concerned assessments raised based on credits to bank accounts which the Applicant therein claimed were amounts of money withdrawn at earlier dates and redeposited. On the question of demonstrating that an assessment is excessive, Burchett J reflected on the reasoning in Dalco, to the effect that a taxpayer does not necessarily succeed by showing the Commissioner made an error; and that the manner in which the burden of proof may be discharged varies with the circumstances. His Honour observed that Dalco was a narrowly argued case where the fact of receipt was not contested, only the character of the receipts was. Implicit in what his Honour said is that the decisions in Dalco need to be read recognising the factual context in which they were written. His Honour continued:
If the taxpayer has shown by evidence that the only receipts which could possibly be income were the amounts paid into the bank account, and that many of those amounts represented the same capital re-invested after previous withdrawals, he has shown that an assessment based upon the counting of income of all the payments (save certain, which the arguments set on one side) must be excessive. The question, then, is whether he has proved sufficient to entitle him to the setting aside of the amended assessments and their replacement by assessments in the amounts of the original assessments, assuming assessments had earlier issued on his returns, or to entitle him only to the setting aside of the amended assessment and a referral back to the Commissioner, or to some other decision.
Furthermore, the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments. To refuse to consider the credit, not only the Applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support the accountant’s generalisations about double-counting rather than to hit upon a precise figure, was to fall into error of law.[30]
[30]At p.232-233.
In Allard v F. C. of T.[31], Hill J noted:
(a)the observations of Brennan J in Dalco to the effect that merely showing an error on the part of the Commissioner is not sufficient for a taxpayer to succeed;[32]
(b)that mathematical precision is not demanded;[33]
(c)that in Dalco, Brennan J continued to the effect that the manner in which the burden of proof can be discharged varied depending upon the circumstances;[34]
(d)that in Ma, Burchett J held that there could be circumstances where assessments could be based on estimates based upon inexact evidence that would justify finding that an assessment is excessive.[35]
[31](1992) 24 ATR 493.
[32](1992) 24 ATR 493 at p 498.
[33](1992) 24 ATR 493 at p 499.
[34](1992) 24 ATR 493 at p 499.
[35](1992) 24 ATR 493 at p 499.
His Honour did not draw a line up to which estimates will be permitted and beyond which they will not be. Accordingly, his Honour’s decision concerning the use of estimates should not be regarded as authority for use of estimates beyond circumstances broadly equivalent to those in which he indicated they were permissible. In Allard, there was documentary and independent witness evidence in addition to the Applicant’s evidence upon which Hill J could rely to calculate the taxable amounts. His Honour did not permit the burden of proof to be discharged by reference to unsupported estimates at large. His Honour permitted estimates where there was independent and unchallenged evidence that was consistent with the estimates.
A taxpayer’s personal evidence
Having received the Applicant’s evidence as to whether losses or outgoings were incurred and the contended for nexus with earning assessable income, whether it should be accepted for its content, or whether it should be afforded sufficient weight to reach the contended for factual conclusion for which it is advanced, become live considerations. Much of the evidence comprises the Applicant’s unsupported assertions in her personal testimony, at times assertions that are somewhat contradicted by evidence from other witnesses.
On the topic of personal assertions that might be self-serving, in Imperial Bottleshops[36] Hill J said:
A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be ‘tested more closely and received with the greatest of caution’… Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed
[36]. Imperial Bottleshops Pty Ltd and William John King Egerton & Commissioner of Taxation (1991) 22 ATR 148 at [31].
His Honour’s remarks have been followed frequently in Tribunal decisions. While not expressly followed in Court decisions, Courts have adopted a similar approach, for example the Full Court in SNF:[37]
[81]The Commissioner submitted that these findings involved error because the trial judge had failed to test closely M. Pich’s oral testimony and to assess its weight ‘particularly given its consequence, for the first time, as an outburst in cross-examination’. Reliance was placed upon the statement of Fullagar J in Pascoe v Commissioner of Taxation:
Where a person’s purpose or object or other state of mind in relation to a given transaction is in issue, the statements of that person in the witness box provide, in a sense, the ‘best’ evidence, but, for obvious reasons, they must, as Cussen J observed in Cox v Smail, ‘be tested most closely, and received with the greatest caution’.
[Citations omitted]
[37]Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 (Ryan, Jessup and Perram JJ), quoting Fullagar J in Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 at 403 who had endorsed what Cussen J had observed in Cox v Smail [1912] VLR 274, at p 283.
In a similar vein are the remarks in Trautwein[38] concerning the effect of being unable to produce records:
In the absence of some record in the mind or in the books of the taxpayer, it would often be quite impossible to make a correct assessment. The assessment would necessarily be a guess to some extent, and almost certainly inaccurate in fact. There is every reason to assume that the legislature did not intend to confer upon a potential taxpayer the valuable privilege of disqualifying himself in that capacity by the simple and relatively unskilled method of losing either his memory or his books.
[38]Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87 Latham CJ.
There are (at least) two reasons for the caution called for by the authorities:
(a)first, self-serving evidence may be false - some witnesses tell lies leading to rejection of that evidence as evidence of its content; and
(b)second, while a witness might be convinced of its truth, the evidence may be so affected by an unconscious bias or other condition that makes it unreliable which compels affording that evidence little or no weight. .
In a setting where the evidence in question is uncorroborated and/or improbable, should either of these circumstances exist rejection of the evidence, or affording little or no weight to the evidence, can lead to a conclusion that the propositions advanced in reliance on that evidence are not proven or established.
Weight and reliability of evidence
In a similar vein, weight and reliability of evidence, are close travelling companions: the more reliable, the greater weight. The connection between these concepts was also the subject of discussion in SNF:[39]
[27] Nor ought one to accept the burden of the Commissioner’s secondary argument that the trial judge should not, in any event, have accepted this evidence as going to the question of weight. Before this Court that argument was revealed to have two facets: the hearsay nature of the evidence degraded its probative value and an examination of the scope of the five companies revealed that they were not comparable even if they were distributors. But hearsay is not inherently unreliable; each case turns on the hearsay in question and the merits of the matter will be driven by an assessment of its reliability. In this case, those merits slant decidedly against the Commissioner for it is not to be forgotten who these witnesses were. Mr Schag was the corporate controller of the US supplier and Mr Schroeter, the managing director of the taxpayer. Located in such senior positions within the SNF Group, it cannot be correct to suggest that the information internally supplied to them about the nature of the customers to whom the SNF Group sold its product would be unreliable. Quite the opposite is the case: situated where they were within the institutional framework of the SNF Group the more natural inference is not that the information they received about such customers would be unreliable but, entirely to the contrary, that it would be cogent. [Emphasis added]
[39]Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 (Ryan, Jessup and Perram JJ).
Similar sentiment was at the core of the reasoning concerning business records in Guest:[40]
24 The Loan Account Statements on their face purport to be documents recording financial transactions, namely loans, involving Rural Finance. They are "records" in the sense that they are part of a repository of information in organised form which is accessible in the ordinary course of a business and for the purposes of that business. The Receivers found the documents amongst the business records of Rural Finance when they took control of those records. I find that they were part of Rural Finance’s records within the meaning of s 69(1)(a)(i).
25 The terms of s 69(2)(a) do not suggest that it is an essential precondition of admissibility that the "person" in question be identified. The ordinary meaning of the language is that it is sufficient that the person who made the representation, whoever he or she is, had or might reasonably be supposed to have had, personal knowledge of the asserted fact. The policy behind the provision is clear enough. Routine business records, made before any legal proceeding arises or is contemplated (cf the exception in s 69(3)), have an inherent likelihood of reliability which outweighs the common law’s aversion to hearsay evidence where the maker of a statement cannot be tested by cross-examination. The utility of s 69 would be greatly diminished if it were necessary to locate among large organisations, perhaps over a long period of time, persons who made representations, often in circumstances where the practical needs of the organisation did not require any identification at the time the representations were made.
…
36 All the handwritten entries in the Investors Ledger appear to have been made by the same person although probably a different person from the one who made the notations on the Loan Account Statements; in the latter, but not the former, the figure seven is written in the European style with a horizontal line through the vertical part of the figure. Again, the identity of the person who made the entries in the Investors Ledger is not known. As a whole, the Investors Ledger appears to be a document in which routine, and indeed meticulous, entries are made by a person who would have personal knowledge of the relevant facts. It is admissible under ss 69 and 1035. There is no basis made out for discretionary exclusion.
[40]Guest v Commissioner of Taxation[2007] FCA 193 (Heerey J) referring to Karmot Auto Spares Pty Limited v Dominelli Ford (Hurstville) Pty Ltd (1992) 35 FCR 560 at 565
Inferences
The circumstances in which inferences can be drawn are not unlimited. They can be drawn from observed facts. Mere assumptions, guesswork and speculation are not accommodated in the process of arriving at conclusions.[41] There must be a body of evidence that might reasonably sustain a relevant finding of fact or permit the Tribunal to draw an inference.[42]
[41]See Tisdall v Webber [2011] FCAFC 76 at [128] per Buchanan J, with whom Tracey J agreed.
[42]See Tisdall, above, at [127] per Buchanan J, with whom Tracey J agreed.
Effect of the context of the case
For the hotel accommodation costs, the discrepancies between the asserted need to stay in hotels in Melbourne, at times booked for two people, is contradicted at worst, and at best not corroborated by fellow employees of Sport Australia. And these costs are unexpected or unusual outgoings for an employee to bear, particularly if the use of the temporary accommodation was directed and involuntary as asserted by the Applicant.
The Applicant’s evidence concerning returning bulky goods was:
So could you explain to the tribunal how parking ticket for nine hours and 55 minutes at your - just near your place of work would be a parking in relation to some meeting you went to - or how would that be Sport Australia work?‑‑‑Because it would've been, by the date, pretty much directly after I got back from Perth and I had a number of items that I was required to bring over from Perth to Australia. I'm not carrying that on the train. I would have to have driven it in.
So you're saying that would be for carrying heavy, bulky items?---Yes.
And for two days later, on 30 October, on the same page, that's also for nine hours and 42 minutes, so how would you explain that one?---Something similar. Quite often I would have to either go pick stuff up or bring stuff in or transport stuff and I can't do that on foot.
So you're saying two days later you were still needing to bring equipment back from the Perth trip is that right?---That's likely.
So one car load wouldn't have been enough?---I don't think so.
How many bags of items were you bringing back from Perth?---Several - which is why I had the excess luggage. The tail end of that trip - the middle of the trip was for the International Super Series. The staff from that packed up and left me there on my own and left a bundle of stuff there for me to bring back.
And you've got a Ford Explorer, is that correct?---Yes.
And you're saying it require more than one car load to transport equipment back?---Potentially. I didn't bring the car in or I would not bring the car in unless it was needed.
Reliability of the Applicant’s testimony
Several of the activities engaged in by the Applicant for which she has claimed the deduction for the expenditure she has incurred or outlaid can be seen on one level as ordinary leisure, entertainment or recreational activities. While expending money on such activities is not necessarily denied deductibility because of these features of the activities, it is necessary to establish the purpose for which the activities were engaged in, and that that purpose had sufficient connection with earning assessable income.
Beyond the connection between the Bon Jovi concert and course material derived from the event, and Mr N’s indication that he had seen and used some of the Applicant’s materials produced following her participation in the Sailing Festival, the only evidence of connection between the expenditure for which the Applicant claims deductions and the Applicant’s income-producing activities is the coincidence of the activities engaged in (entertainment or recreational activities) and the subject matters of her teaching, namely events, and the Applicant’s assertions as to her motives.
There aren’t any reports, notes, copies of documents, photographs and other similar evidence as was apparent in Finn.[43] There are the Applicant’s assertions as to the purpose of the expenditure and the use to which the experience gained from attendance at the event or location was put in her teaching activities.
[43]Federal Commissioner of Taxation v Finn(1961) 106 CLR 60
The question for the Tribunal is whether the assertions can be accepted, in light of all of the evidence led. That evidence includes implausible and/or contradicted assertions or explanations about:
(a)the timing of and how her car was twice taken to a car park at Melbourne Airport;
(b)the bookings for two guests at hotels in Melbourne and Hobart;
(c)the return airfares from Hobart;
(d)tickets for two people to attend events in Hobart and in Melbourne;
(e)whether the Applicant was directed to do things in Hobart, as she contends, namely before her employment had started;
(f)whether her place of employment was her home;
(g)whether her use of telephone and internet facilities that she paid for was as she contends;
(h)whether the mail and reception facilities at her place of employment were as she contends calling for her to spend her own money on these facilities on behalf of her employer;
(i)whether any of the expenditure totalling $8,360 in respect of the trip to PIHDC was as she has contended over time; and
(j)whether two trips in a large vehicle were required to carry bulky goods that she had brought back from Perth in checked luggage from her home to Sport Australia headquarters as she contends.
Much of the Applicant’s evidence is improbable at best. The Respondent’s effective contention that it is false is not without foundation. It is possible that the Applicant genuinely believes what she has said is true. It is possible, for example, that she did forget she remained in PIHDC with the company of Z, A and T. Her conditions may have caused her memory failures.
In evaluating the evidence led, the Commissioner seeks a positive finding from the Tribunal that the Applicant gave untruthful evidence, and seeks findings, for example, that the Applicant was accompanied on her trip to Tasmania and that the Applicant’s car was driven to the airport for both the trip to Tasmania and the trip to PIHDC by somebody who left the Melbourne airport on the day the car was left at the airport and travelled to in the first instance Tasmania and in the second instance PIHDC to join the Applicant at those locations.
In and following the 2014 Year the Applicant has suffered physical and mental health conditions that on any view can be regarded as serious. Post the 2014 Year, the Applicant has also suffered bereavement through the passing of family members.
The Applicant explains her lack of memory as to critical details associated with the activities for which she has claimed deductions in respect of their associated costs, on the basis that there were more important things going on in her life during and following the year of income.
It is not necessary to conclude as to whether the Applicant was knowingly making false statements in her tax return and in her subsequent dealings with the Respondent following lodgement of her tax return, or whether as a result of her conditions she was unaware of realities and had memory failures that caused inaccurate things to be said and claims to be made for deductions that were not allowable. In either circumstance little or no weight ought be afforded to the Applicant’s evidence unless it is corroborated. If what the Applicant has said was knowingly false, the reason for no weight is obvious. If what she has said was the product of an affected memory as a consequence of her conditions, the improbability of the assertions that she makes calls for corroboration from some independent source before her evidence could be accepted as reliable. Here, significant expenditures are claimed to be deductible based on a nexus with earning assessable income that don’t have any independent corroboration, and given the nature of the assertions made appear highly improbable. Further, and far from being corroborated, some of the Applicant’s assertions are contradicted by evidence of other people. In those circumstances little weight can be attached to the Applicant’s uncorroborated assertions.
Event Education role matters
Of the deductions claimed that are solely or principally referable to the Event Education role, only part of the cost of the Bon Jovi concert tickets is properly allowable as a deduction as conceded by the Respondent.
Attendances at events
The Applicant’s attendances at events in Melbourne, particularly in circumstances where two tickets for attendance were purchased, the attendance was no more than that of an ordinary member of the public, there was no evidence of any attempt to get backstage, and (save for two exceptions) there was no evidence beyond the Applicant’s assertions that she used any knowledge gained though these attendances in any of her teaching, falls short of the proof required to demonstrate nexus of the expenditure incurred on these events with the earning of assessable income. As touched on above, mere participation in or attendance at an ordinary recreational or an entertainment event or facility by a person whose income-producing activities are connected with such things, potentially with a companion, or in circumstances where two tickets are bought at least does not demonstrate expenditures were incurred in income-producing activities as would be required for a deduction to be allowed. Ordinary recreational or an entertainment activities are inherently capable of being both closely connected with income-producing activities and completely unconnected. And when put to the test, it is incumbent on a taxpayer asserting the former to demonstrate the proposition contended for. Someone who uses observations from attendances at events or locations can be expected to be able to produce some tangible or independent evidence that that has happened. The leg and knee pain relief explanation for the extra expense of second tickets was also advanced at one point in discussions with the Commissioner to explain the magnitude of the expense incurred on the PIHDC trip (namely the extra cost of a business class ticket). When made in connection with the PIHDC trip, that explanation has proven to be inaccurate. The expenditure incurred there was significant for reasons wholly unconnected with income-producing activities: it was significant because it entailed international airline travel for three people not including the Applicant, and the Applicant’s Qantas Club records indicate that she travelled economy class rather than business class as asserted. Explanations as to extra facilities on account of leg and knee pain have been proven to be unreliable.
The Bon Jovi concert ticket cost can be seen as an exception. There is evidence to connect that event with income-producing activities.
The Sailing Festival and Tasmanian trip
For the Tasmania trip it is not necessary to go so far and make the findings urged by the Commissioner. In circumstances where:
(a)the Applicant clearly has a long-term interest in the activities of the Sailing Foundation which is not asserted to be for the pursuit of income-producing activities;
(b)the applicant participated in the Sailing Festival organised by the Sailing Foundation as an organiser and boat passenger;
(c)an improbable explanation was advanced as to how the Applicant’s car arrived at an airport parking facility on a date that the Applicant was to take up accommodation in Hobart that was booked for two people;
(d)the Applicant attended at least three entertainment or recreational or leisure facilities and locations in and around Hobart for which she purchased two entry tickets and paid two transportation fares;
(e)the Applicant returned to Melbourne using one of two airline fares purchased by her;
(f)the Applicant advanced an improbable explanation for the second return airfare; and
(g)beyond the Applicant’s assertions, there is no evidence before the Tribunal that any observations of any of the places visited in Tasmania formed part of her class material in the subjects that she taught,
it is difficult to find, as the Applicant would urge it, that the purposes of her participation in the festival activities, and the expenditures associated with them, and of the travel to Tasmania and activities engaged in there were a study tour in connection with pursuit of the Applicant’s teaching activities such that all of the expenditures sought to be deducted are properly deductible. Even if there was some nexus between the activities, it cannot be accepted that the expenses incurred were wholly so related to income-producing activities and the evidence does not disclose what an appropriate proportion would be.
In all of those circumstances, the relevant nexus with earning of assessable income has not been established to maintain deductions for all of this expenditure.
The Applicant’s participation in the Sailing Festival and her whole trip to Tasmania are equally explained by being private pursuit of private recreational activities. If the expenditures in pursuit of these activities and in part private recreational activities and part income-producing activities, the Applicant has not established the appropriate apportionment.
Event Design course
The asserted connection of the Event Design course for which the Applicant enrolled, but did not participate or pursue, with earning assessable income is contradicted by Mr N’s evidence. It is quite apparent that the Applicant communicated with the Commissioner in a way that could be taken to have inferred that the Applicant had a greater involvement in this course than she did. This misdescription of her participation in the course together with the contradiction of the Applicant’s evidence by Mr N’s evidence, suggests that the Applicant’s assertions concerning this course cannot be accepted as reliable in establishing the relevant nexus with the expenditure and earning of assessable income.
Urban Planning textbook
The connection this book had with the Applicant’s Event Education activities has not been demonstrated. The explanation that planning matters are factors in events planning might be accepted, but the more than a mere assertion is called for when there is an obvious, and somewhat compelling connection of a textbook with a private study activity and there has been no suggestion that the Urban Planning course is an employment-related endeavour.
Sport Australia role matters
Of the deductions claimed that are solely or principally referable to the Sport Australia role, only the cost of the internet facilities in PIHDC, the travel insurance costs as conceded by the Respondent, and substantiated domestic travel costs are properly allowable as deductions as conceded by the Respondent.
The PIHDC trip
The PIHDC trip suffers a problem in keeping with the Tasmanian trip.
The Commissioner contends that the Applicant positively misled him about expenditure on the PIHDC trip. The Commissioner contends that not until a copy of the relevant invoice was produced in response to a summons sought by the Commissioner did the Applicant disclose that the expenditure on the PIHDC trip was principally to meet the cost of others participating in the trip. The Applicant denies that the Commissioner was misled and asserts that until the document was produced in response to the summons, she did not recall what the expenditure was for. She maintains that she had forgotten that she travelled overseas with three others and that she had been reimbursed part of the expenditure that she had outlaid. When she did recall that others travelled overseas to meet her at the end of the tournament, whereupon they visited holiday locations together, the Applicant did recall that she had one room to herself in the accommodation facilities and the other three shared a different room in those facilities which supported the Applicant’s apportionment of the accommodation claims now contended for.
Again the explanation that the Applicant’s car was left at the Melbourne airport carpark by friends and was not taken to Melbourne airport by anyone who joined her in PIHDC notwithstanding that the car was left at the airport carpark on the same date that her three holiday companions left Melbourne airport for PIHDC, is, without corroboration, so unusual an explanation as to be improbable.
Also, as a matter of principle the costs met by the Applicant in respect of the fares and accommodation for the PIHDC trip cannot be deductible for the reason that the expenditure was for a private and domestic holiday. When the trip was booked it was intended to be for a relaxing holiday with people with whom the Applicant shared a sufficient relationship that an overseas holiday of that kind could be enjoyed in their company. After the trip was booked and paid for, the Applicant’s circumstances changed, her employment with Sport Australia began, and that employment entailed commitments that needed to be satisfied for tournaments scheduled to begin shortly after her return from the booked holiday in PIHDC. She continued to have her time in PIHDC but the change in circumstances led to a need to spend a degree of time working in preparation for the events scheduled to take place back in Australia shortly after her return. The purpose of the expenditure for PIHDC was, quite clearly, not the Applicant’s personal expenditure rather the majority of it was for people with whom she shared a sufficient relationship to found an overseas holiday and for her to participate in the overseas holiday with them. Many a person has paid for and begun a holiday only to find during their holiday time it is necessary to attend to work matters. That does not change the cost of the holiday and the transportation to a holiday location into a work-related expense.
Reasonable allowance top-up claims and the substantiation rules
The reasonable allowance claims made in respect of interstate travel which are beyond what the Applicant can demonstrate she spent money on by way of receipts or invoices do not satisfy the substantiation rules.
While the Commissioner urges that … the Tribunal should find that in relation to the Perth, Sydney and Brisbane trip, the Applicant did not in fact incur the amounts claimed as “top-up” amounts, totalling $1,277.79 which amounts have not been substantiated, the proper conclusion to reach is that against a backdrop where banking and receipt records were searched to identify expenditures incurred, the Applicant stayed with friends for one of her trips and that the s 900-195 power to dispense with these rules calls for satisfaction of incurrence of the relevant expenditure, the state of satisfaction should not be reached. Also, the Applicant’s personal evidence and memory of events is at best compromised and therefore unreliable. Based on that evidence, the Tribunal is not satisfied that the expenditures were incurred as contended for.
Travel insurance
The travel insurance conceded by the Respondent was the only travel insurance for which a loss or outgoing was incurred in the 2014 Year. No further deduction is allowable.
Qantas Club membership
The circumstances in which the Qantas Club membership was paid were such that the relevant loss or outgoing was not incurred during the year of income and is not deductible. The earlier payment to Qantas Club for the preceding year was made in March 2013 and before the relevant year of income so that too is not deductible in the 2014 Year.
The Applicant’s place of employment
The Applicant’s asserted place of employment being her home is contradicted by Mr X’s evidence. The conclusion to reach is that the Applicant’s place of work was in Melbourne. That conclusion makes the foundation for most Sport Australia connected travel, car parking and accommodation expenditures to and in Melbourne locations fall away.
Melbourne parking
The Applicant has not demonstrated that the costs incurred were related to her employment to the extent required. Various instances of claimed parking occurred in and around Sport Australia headquarters and were related to trips to that destination which was her place of work. Other instances of parking were at locations unrelated to the Applicant’s Sport Australia job and were incurred on days when she had taken leave and on one day when she had appointments of a personal nature. The cost of this parking is not deductible. Included in the amounts claimed were double claims (which have been abandoned). The bulky goods explanation for two days’ parking charges is implausible.
Overnight accommodation in Melbourne
The Applicant’s claims for deductions for the cost of overnight accommodation in Melbourne are based on her assertions that she was required as part of her employment with Sport Australia to attend board meetings which commenced early and she was required to stay overnight in Melbourne the night before and other meetings which were at odd hours. The Applicant’s evidence is not supported or corroborated by Mr X’s evidence. Many of the bookings for accommodation in Melbourne were for two people. While the Applicant contends that that is simply a feature of the booking system it is equally a feature or potentially a feature of a booking that the Applicant made indicative of two people using the room. In circumstances where the Applicant’s evidence is effectively contradicted by that of her manager and Sport Australia the Tribunal cannot accept that expenditures incurred had the requisite nexus with income-producing activities.
Matters concerning both roles
Of the deductions claimed that are referable to both the Event Education and Sport Australia roles, only the motor vehicle costs as conceded by the Respondent, the Mobile phone and internet costs to the extent noted below, $680, are properly allowable as deductions as conceded by the Respondent.
Phone internet and home electricity
Throughout the 2014 Year the Applicant also had voluntary roles with Sport Regional Victoria as its Facilities Manager and Football Regional Victoria as a committee/board member. The Applicant used telephone, computer and home office, internet and electricity facilities to attend to these activities. Further, at the start of the 2014 Year at least, the Applicant was enrolled in and completed a course, Urban Planning, through the University of Curtin. She participated in that course remotely using home-based facilities and, potentially, other facilities available to her in and around Melbourne.
The home-based electricity charges and internet and telephone charges are referable to the totality of the Applicant’s activities which include her voluntary community commitment and study activities and the proportionate split between her use of those facilities for non-income-producing purposes and income-producing purposes has not been established.
Some part of the expenditures on these matters would be deductible if the appropriate part can be established. The proportionate claims asserted by the Applicant are questionable. The proportions asserted are high and whether they have proper regard to the Applicant’s non-income-producing activities in which she was involved during the year of income is unknown. The Applicant’s asserted telephone use is based on an incorrect characterisation of some of the telephone calls.
Where there is limited scope for speculation, estimates or guesswork, there needs to be some foundation for a deduction claim. While employed by Sport Australia the Applicant was allowed $85 per month for phone and internet use. That is a reasonable and external basis for determining an allowable deduction. The proportionate use was probably more than that amount but the extent to which it was more is unknown and unproven. A deduction of $680 for the eight months the Applicant was employed by Sport Australia is allowable.
Motor vehicle expenses
The travelling expenses includes asserted travel between where the Applicant lived, which she asserts as her primary place of work, and the university campus on unspecified dates to do unspecified work and research the produce of which is unknown which necessarily makes the use of that produce also unknown. The Applicant had multiple potential reasons to attend the university library facility. In these circumstances, mere assertion cannot be taken to be proof of work-related travel.
Other travel between the Applicant’s home and Melbourne locations connected with Sport Australia is not work-related travel, rather it was travel from home to a work location and its cost is not deductible.
The Applicant has not demonstrated that a deduction beyond what the Respondent concedes is deductible.
Postage, copying and PO Box and miscellaneous expenditure
The rationale for deductions for postage and like expenditure has changed over the course of a discussion between the Applicant and the Commissioner. It is not clear to which activity the expenditure relates and to some extent, namely that the expenditure relates to the Applicant’s employment with Sport Australia, her explanation of the need for this expenditure is contradicted. In other respects, the need for incurring the expenditure is not consistent with entitlements to be reimbursed by the Sailing Foundation, Event Education. In those circumstances the Applicant’s contentions as to nexus of this expenditure with income-producing activities has not been established.
Choice magazine
Beyond an assertion from the Applicant that the subscription provided access to research that the Applicant that she used to write courses for Event Education, and a pre-purchase resource for items she was required to source and provide for both Sport Australia and Event Education and her house when tenanted, there is no evidence of any instance of the use of the subscription for income-producing purposes. The evidence does not disclose any example of a purchase made or research relied on as a consequence of use of the subscription.
This claim is another uncorroborated assertion that is not accepted as proven in the circumstances.
Medical expenses
The Applicant contends that payments of $989.00 for gym and physiology, $63.00 for remedial massage, and $1,328.00 for acupuncture were for therapeutic treatments administered by direction of legally qualified medical practitioners. While a wide variety of activities might be regarded in some senses as therapeutic, and other activities might be seen as therapeutic in the colloquial sense, the tax system draws a line at therapeutic treatments undertaken at the direction of a legally qualified medical practitioner. Recognised medical science needs to be involved in directing the treatment. That rules out many expenditures on a wide variety of treatments.
Here, the evidence led does not rise to the standard required to constitute therapeutic treatment administered by direction of a legally qualified medical practitioner so as to constitute medical expenses for the purposes of s 159P(4)(d) of the 1936 Assessment Act and in those circumstances, the expenditures do not qualify as medical expenses. The evidence is after the event and does not mention that the medical practitioners directed anything. Had they done so it could be expected that they would have said so.
Penalty
Penalty is payable if there is a tax shortfall and the shortfall is a product of the Applicant or the Applicant’s agent failing to take reasonable care and if so the rate is 25% or being reckless and if so the rate is 50% or intentionally disregarding the law and if so the rate is 75%. It is necessary to show that both the Applicant and the Applicant’s agent took reasonable care. There is no evidence as to what enquiries the Applicant’s agent made. In circumstances where the deductions claimed are a very significant proportion of the gross income earned the Applicant’s case is not the usual type of case for a salary and wage earner and that being so one could expect that an agent who takes reasonable care would ask some questions of the taxpayer. That may well have happened but there is no evidence of what care the agent did take and in circumstances where very significant deductions are claimed which have not been allowed it is necessary to lead evidence of what the agent did.
In the circumstances of this case where the deductions claimed are proportionately very high and where the Applicant took steps to resist the Commissioner finding out further facts than the Applicant had disclosed concerning her trip to PIHDC and the expenditure that she incurred associated with that trip, particularly expenditure incurred in respect of the cost of others associated with that trip it would have been reasonably open to conclude that the shortfall was a result of recklessness or complete indifference as to the correct position. The Applicant has led evidence of a mental health condition and other conditions that she suffered during the time that she prepared and lodged her tax return.
Given the low rate of penalty that has been applied, the absence of any evidence of care taken by the taxpayer’s accountant, the relative improbability associated with the taxpayer’s explanations for significant elements of the expenditure and the fact that notwithstanding her mental health conditions her treating psychologist’s evidence that sufferers of the Applicant’s conditions do not have any inability to differentiate between right and wrong, the appropriate conclusion to reach is that there ought not be any further remission of the penalty.
The Commissioner concedes, correctly, that some aspects of the Applicant’s claim have been established. The Tribunal accepts that and concludes that an adjustment is required to the assessment that underlies the objection decision under review and accordingly there is a lesser shortfall amount. Penalty should be reduced to reflect that reduction.
DECISION
The Tribunal sets aside the decision under review and in lieu thereof allows the Applicant’s objection to the extent conceded by the Respondent together with a deduction of $680 for mobile phone and internet costs and remits the underlying assessment back to the Respondent for amendment.
I certify that the preceding one hundred and sixty-two (162) paragraphs are a true copy of the reasons for the decision herein of F D O'Loughlin QC, Deputy President
.................................[sgd].......................................
Associate
Dated: 23 December 2020
Date of hearing: 25 to 27 March and 15 April 2019 Date final submissions received: 31 May 2019 Counsel for the Applicant: Mr S Linden Counsel for the Respondent: Ms F Shand Annexure 1
Summary of work-related deductions claimed by Applicant over time Item *1 *2 *3 *4 *5 *6 *7 *8 *9 D1 Work-related car expenses 1795.00 3850.00 4158.72 4158.72 3850.00 3850.00 3850.00 424.27 3425.73 D2 Work-related travel expenses PIHDC Trip Flights 1582.00 4065.00 8360.00 8360.00 8360.00 4180.00 1393.00 0.00 1393.00 Accommodation 282.00 4065.00 Transport 1051.00 968.68 0.00 0.00 0.00 63.20 63.20 0.00 63.20 Food 81.00 81.00 0.00 0.00 0.00 1723.18 1723.18 0.00 1723.18 Airport Parking in Melbourne 0.00 0.00 151.98 151.98 151.98 151.98 151.98 0.00 151.98 Additional expenses in PIHDC (moved from D5) 0.00 0.00 593.00 593.00 593.00 573.24 573.24 0.00 573.24 Phone internet in PIHDC 0.00 0.00 252.19 252.19 252.19 252.19 252.19 252.19 0.00 Reasonable rates/top-up 0.00 0.00 2875.00 2875.00 2875.00 386.82 0.00 0.00 0.00 2996.00 9179.68 12232.17 12232.17 12232.17 7330.61 4156.79 252.19 3904.60 Event Education Parking 21.00 0.00 0.00 0.00 0.00 0.00 0.00 Accommodation 147.00 0.00 0.00 0.00 0.00 0.00 0.00 Tasmania Trip (moved to D4) 5169.00 5090.04 5167.40 5167.40 0.00 0.00 0.00 5337.00 5090.04 5167.40 5167.40 0.00 0.00 0.00 Sport Australia Melbourne Accommodation 1852.00 2739.54 1992.45 1992.45 1992.45 1821.95 1138.25 0.00 1138.25 Transport 66.00 196.10 61.71 61.71 0.00 0.00 0.00 Flights 141.00 35.00 140.50 140.50 0.00 0.00 0.00 Airport parking 171.00 76.50 76.50 76.50 0.00 0.00 0.00 Bags 418.00 417.79 354.79 354.79 174.00 0.00 0.00 Melbourne Parking 387.00 433.36 361.00 361.00 361.00 377.76 216.41 0.00 216.41 Sydney Trip (baggage, transport, meals + reasonable expenses/top-up) 0.00 0.00 301.85 301.85 301.85 133.95 133.95 33.30 100.65 Perth trip (baggage, meals, airport cart + reasonable expenses/top-up) 0.00 0.00 1426.20 1426.20 1426.20 1456.59 1007.32 558.05 449.27 Brisbane trip (baggage, parking, meals + meal reasonable expenses/top-up) 0.00 0.00 475.40 475.40 475.40 514.10 374.80 235.50 139.30 3035.00 3898.29 5190.40 5190.40 4730.90 4304.35 2870.73 826.85 2043.88 11368.00 18168.01 22589.97 22589.97 16963.07 11634.96 7027.52 1079.04 5948.48 D3 Work-related clothing expenses 868.00 783.29 868.00 868.00 868.00 D4 Work-related self-education expenses Course Fees 2090.00 2090.00 2090.00 2090.00 2090.00 2090.00 2090.00 0.00 2090.00 Course - Stationery 1165.00 811.85 1103.70 214.72 110.23 57.32 0.00 Course - Postage 343.00 108.25 217.00 119.80 14.80 23.80 0.00 Course – Copying 115.00 297.00 280.19 40.40 13.80 10.00 0.00 MV Expenses 2005.00 0.00 0.00 0.00 0.00 0.00 0.00 Tasmanian Trip (moved from D2) 0.00 0.00 0.00 0.00 5201.48 5243.00 5143.40 0.00 5143.40 Think Ed – Tickets – events (moved from D5) 0.00 0.00 0.00 0.00 0.00 3454.85 1982.33 161.00 1821.33 5718.00 3307.10 3690.89 2464.92 7430.31 10878.97 9215.73 161.00 9054.73 D5 Other work-related expenses PO Box 168.00 168.00 168.00 168.00 168.00 168.00 126.00 0.00 126.00 Choice Membership 92.00 92.00 92.00 92.00 92.00 92.00 69.00 0.00 69.00 Travel Insurance 473.00 473.00 493.00 493.00 493.00 917.00 917.00 337.00 580.00 Mobile phone 1620.00 1620.00 1620.00 1620.00 1215.00 1215.00 1215.00 0.00 1215.00 Internet 1199.00 1199.00 1199.00 1199.00 1176.00 1176.00 1079.00 0.00 1079.00 Qantas Membership 485.00 485.00 485.00 485.00 485.00 485.00 485.00 0.00 485.00 SA - Phone and Internet 296.00 252.19 252.00 252.00 0.00 0.00 0.00 0.00 SA PIHDC Trip - Misc (moved to D2) 593.00 593.00 739.05 739.05 0.00 0.00 0.00 0.00 SA - Stationery/copying/postage 516.00 514.37 516.00 516.00 769.30 575.40 575.40 575.40 SA - Misc 512.00 541.00 575.00 575.00 463.38 263.38 263.43 263.43 0.00 Event Education - Tickets (moved to D4) 3205.00 3196.72 3205.00 3205.00 3512.15 0.00 0.00 0.00 Event Education - Reference Books 556.00 451.36 574.84 574.84 574.84 529.49 390.04 262.57 127.47 Inside Sports Subscription 160.00 160.00 160.00 160.00 160.00 160.00 160.00 160.00 0.00 ANZSLA Membership 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 0.00 SCRBD App 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 0.00 Library - VU Alumni 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 0.00 Home Office - electricity 371.00 0.00 574.00 574.00 0.00 574.00 551.00 0.00 551.00 Think Ed Postage 0.00 0.00 0.00 97.20 131.85 131.85 131.85 0.00 131.85 Think Ed Copying 0.00 0.00 0.00 239.79 239.79 241.69 241.69 0.00 241.69 Think Ed Stationery 0.00 0.00 0.00 888.98 770.80 770.80 770.80 0.00 770.80 Think Ed Stationery (1/3 of shared stationery) 0.00 0.00 0.00 0.00 28.65 23.33 23.33 23.33 10421.00 9920.64 10827.89 12053.86 10454.76 7497.94 7173.54 1198.00 5975.54 Total work-related deductions claimed 30170.00 36029.04 42135.47 42135.47 39566.14 33861.87 27266.79 2862.31 24404.48
*1 Original amount claimed *2
Original claimed at objection
*3
10 Jan 2017 Response to ATO
*4
Revised stationery – 14 Feb 2017
*5
Applicant's Summary – 14 Jan 2018
*6 Amended SFIC – 25 March 2019 *7 Applicant's closing submissions *8 Amount conceded by Respondent *9 Disputed amount
0
11
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