David Ford and Commissioner of Taxation
[2014] AATA 361
•27 May 2014
[2014] AATA 361
Division SMALL TAXATION CLAIMS TRIBUNAL File Number
2013/2680
Re
David Ford
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President S E Frost
Date 27 May 2014 Date of written reasons 6 June 2014 Place Sydney The objection decision is affirmed.
......................[SGD]..................................................
Deputy President S E Frost
CATCHWORDS
TAXATION – Income tax – allowable deductions – travel expenses – train guard – transport of materials between home and work – whether materials bulky and essential to income generating activity- whether secure environment provided – whether personal choice involved – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1997; s 8-1
CASES
Lunney v Commissioner of Taxation (1958) 100 CLR 478
Commissioner of Taxation v Vogt [1975] 1 NSWLR 194; 75 ATC 4073
Re Crestani and Commissioner of Taxation [1998] AATA 612; (1998) 40 ATR 1037; 98 ATC 2219
REASONS FOR DECISION
Deputy President S E Frost
6 June 2014
On 27 May 2014, at the conclusion of the hearing, I delivered an oral decision in this matter, affirming the decision under review. The respondent Commissioner of Taxation has asked for a statement in writing of the reasons for my decision. Those reasons follow.
BACKGROUND
The application relates to a claim for a tax deduction in relation to work-related car expenses for the 2010 income year.
The basis of the claim is that, during the relevant income year, Mr Ford was required by his work circumstances to carry bulky equipment between his workplace and home. He says that the bulky equipment was unable to be stored securely at his workplace. In those circumstances he was forced to carry the equipment every day to and from home. The only way he could do that is by car.
The simple question before the Tribunal is whether Mr Ford is entitled, under s 8-1 of the Income Tax Assessment Act 1997, to the deduction claimed.
BACKGROUND
Mr Ford has worked as a City Rail Intercity Train Guard for Rail Corporation New South Wales for about 28 years. I will refer to his employer as “RailCorp” although its name now appears to have been changed to Transport NSW Sydney Trains.
When he lodged his 2010 income tax return, Mr Ford did not claim a deduction for work-related car expenses. In fact, it seems that he had never claimed this type of deduction over the many years he had worked as a train guard.
However, he gathered from discussions that he had with his workmates in late 2012 or early 2013 that some of them were claiming deductions of this kind. Mr Ford asked his tax agent if it was possible to claim a deduction for 2010, but when the agent asked for Mr Ford’s return to be amended, the Commissioner said the amendment period had already expired. So the tax agent, on Mr Ford’s behalf, lodged an objection against Mr Ford’s assessment for the 2010 year. The objection was also out of time, but the Commissioner granted an extension of time, effectively accepting the objection as if it had been lodged within time.
The objection sought a deduction of $3,700, calculated on the “cents per kilometre” basis, at $0.74 per kilometre for the maximum 5,000 km allowed. No basis other than the cents per kilometre basis was available to Mr Ford, since he had not kept a log book during the relevant income year.
The objection was disallowed, which is why the matter is now before the Tribunal.
THE DEDUCTION CLAIM
Mr Ford’s case is this:
·His base of operation is Moss Vale railway station – this is where he starts and finishes all his shifts;
·He lives in the Camden area, about 85 kilometres away from Moss Vale station;
·RailCorp has issued him with a lot of materials and equipment that are essential to the carrying out of his functions as a train guard;
·He has a locker available to him at Moss Vale station;
·Not all of the materials and equipment issued to him by RailCorp fit into the locker;
·He is liable to RailCorp for the loss of any of the equipment issued to him;
·Anything that does not fit into the locker cannot be stored securely at Moss Vale station;
·He has to take any excess materials and equipment home with him every day;
·The materials he has to transport are bulky;
·The only reasonable way he can transport the materials is by car;
·The cost of travelling by car between his workplace and home should be deductible as a loss or outgoing incurred “in gaining or producing [his] assessable income”, in the words of s 8-1.
DEDUCTIBILITY
The starting point in a case such as this is the well-established principle that travel between home and a place of employment is not deductible: Lunney v Commissioner of Taxation (1958) 100 CLR 478.
But there are exceptions to that general principle. One category of exception, which is relevant in Mr Ford’s case, is the circumstance in which a worker carries, between work and home, equipment which is both bulky and essential to the income-generating activity. In some circumstances that transport can be characterised as something other than simply “travel between work and home”.
For example, in Commissioner of Taxation v Vogt [1975] 1 NSWLR 194; 75 ATC 4073, Waddell J considered the case of a professional musician who performed at various locations. He played acoustic bass, electric bass, trumpet and flugel horn. He had to transport his instruments and related equipment, which his Honour described as “very bulky”, between the various work locations and home, and sometimes from one work location to another. The taxpayer generally stored his equipment at home, “for justifiable reasons of convenience and for the purpose of practising on them”. His Honour concluded as follows:
… in a practical sense, the expenditure should be attributed to the carriage of the taxpayer’s instruments rather than to his travel to the place of performance. The mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance, that is by carrying them in the motor vehicle which he drove. In the light of these matters it is my opinion that the essential character of the expenditure was such that it should be regarded as having been “incurred in gaining or producing the assessable income”.
The same sort of reasoning has been applied in other cases. In Re Crestani and Commissioner of Taxation [1998] AATA 612; (1998) 40 ATR 1037; 98 ATC 2219, Senior Member Block (as he then was) allowed deductions to an aircraft engineer who transported “bulky” tools from work to home, in circumstances where the taxpayer’s employer provided no secure location for the tools to be stored at work. The travel expense was accepted as reasonably attributable to the tools, which formed an essential part of the taxpayer’s work.
Cases in which taxpayers’ claims have been unsuccessful are generally those where the travel expense has retained its character as “travel between work and home”, and has not taken on the flavour of a work-related activity.
The attributes that tend to shift the expense (generally a car expense) from the category of non-deductible private transport to that of a deductible work-related activity are that:
·the equipment being carried is necessary for the income-generating activity;
·the equipment is “bulky”;
·there is no secure storage at the workplace; and
·the only practicable way to transport the equipment is by car.
THE TAXPAYER’S CIRCUMSTANCES
A document issued by RailCorp and identified as “TWP 100”[1] lists the various items that a guard like Mr Ford must carry on the train. I find that any items so listed are essential to Mr Ford’s employment.
[1] TWP stands for Train Working Procedures
The version of TWP 100 that issued in November 2004 is the version that was relevant throughout the 2010 income year. It required a guard to carry a watch showing the correct time, a working multi-coloured torch, a notebook, a working timetable, a diagram book, a red and a green flag, a rail safety worker certificate (identification card), a working hand-held radio, a key kit, a train status book or equivalent, a departmental issue mobile phone, a pager, a whistle, a safety vest, and a pad of “delay slips”, which have to be completed if the train has been delayed.
TWP 100 also required guards to carry certain documents, in the nature of railway instructions, to cover situations that may arise during the operation of a train on the rail network. These documents are labelled Operator Specific Procedures (“OSPs”) or Network Rules and Network Procedures (“NRNPs”). During the relevant income year, guards were required to carry a total of six specified OSPs and seven specified NRNPs.
Mr Ford explained that both the OSPs and the NRNPs are issued by RailCorp as entire sets of documents (somewhere between A4 and A5 size), shrink-wrapped and hole-punched, and each of them with an accompanying folder to hold them. His practice has been to take the set of documents out of the shrink-wrapping and put them in their entirety into the folder. He then carries each folder with him on the train. That means that when he is on the train he is carrying the whole set of OSPs and the whole set of NRNPs, plus updates as they are issued, not just the ones he is required to carry. If he carried only those that are required, he would be carrying 94 pages of instructions – in other words, 47 sheets of material, printed on both sides. Mr Ford’s approach means that he is carrying, and storing, folders that are almost full, rather than folders that are almost empty. That makes little difference to the amount of space taken up either in his bag or in his locker, but in the circumstances, and as a matter of practicality, the full folders should be regarded as components of his “essential equipment”.
RailCorp had also provided him with several sets of uniforms, a pullover, an overcoat, a raincoat and wet weather boots, plus a bag. Mr Ford uses the bag as a convenient way of carrying onto the train everything that he needs to perform his role as a train guard.
The bag itself became a point of focus during the hearing. Mr Ford said that RailCorp had provided its staff with a few different styles of bags over the years. Originally staff had received an overnight-style bag, with handles for carrying, but when the amount of equipment being carried became heavier and heavier, a “trolley bag” with wheels was issued. Apparently these trolley bags did not have the usual telescopic handle; instead the handle was in a fixed raised position, a fact that assumes some importance when considering the size of the lockers and how much they can accommodate.
Unfortunately Mr Ford did not have a bag available to show the Tribunal. He said the one he is using at the moment is a different size to the one he was using during the 2010 income year. He gave me two sets of dimensions for the earlier bag: 45cm wide x 60cm high x 35cm deep was the first set of dimensions; the second set was 45cm wide x 55cm high x 34cm deep. RailCorp on the other hand said the dimensions of the bag currently on issue (which it said is the same size as the one issued for the 2010 income year) are 33cm wide x 48cm high x 25cm deep. RailCorp said the locker is 37cm wide x 86cm high x 44cm deep, and Mr Ford accepted that. RailCorp also provided a photo of an apparently full bag, inside a locker, and the bag fitted comfortably inside, with plenty of room to spare.
Mr Ford said that he could not fit all his gear – the bag with all the essential guard’s equipment in it, plus the overcoat, raincoat, wet weather boots, etc – into the locker, but he conceded that if he took the gear out of the bag then everything would fit. One of the points he made was that the bag had quite a rigid frame, and could not be squashed to take the interior shape of the locker. But on the basis of the dimensions that RailCorp provided (which, in the absence of an actual bag to examine and measure, I accept), no squashing or forcing the bag into the locker would be necessary.
APPLICATION OF THE PRINCIPLES TO THE TAXPAYER’S CASE
Once it is accepted that all the equipment that is essential to Mr Ford’s employment activity (including the full folders of railway instructions) would fit into the secure locker provided for him at Moss Vale station, his deduction claim must fail.
Not only do I find that all the essential equipment would fit inside the locker; I also find that the bag would fit in the locker if it contained all the essential equipment, and that there would still be room in the locker for the “non-essential” equipment such as the wet weather gear, boots and overcoat.
Given those findings, then to the extent that Mr Ford carries essential equipment between work and home, he does so as a matter of personal choice. His circumstances do not support a re-characterisation of his transport expenses out of the category of non-deductible private transport into that of a deductible work-related activity.
Even if it were the case that his locker did not accommodate all the equipment issued to him by RailCorp, and he chose to store the non-essential equipment (such as his wet weather gear) in the locker and transport his essential equipment, his claim would similarly fail. That would also be a matter of personal choice, and personal choice of that kind is not enough to displace the principle established in Lunney’s case that transport between work and home is not deductible.
CONCLUSION
For these reasons the objection decision is affirmed.
I certify that the preceding 29 (twenty -nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost .......................[SGD].................................................
Associate
Dated 6 June 2014
Date of hearing 27 May 2014 Advocate for the Applicant Josef Usnik, of Wilson Usnik & Associates Solicitors for the Respondent Vicki Hammond, of ATO Review and Dispute Resolution Group
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