Jennings and Commissioner of Taxation

[2003] AATA 280

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 280

ADMINISTRATIVE APPEALS TRIBUNAL        Nº NT2001/622

TAXATION APPEALS DIVISION

Re:         Leonie Grace Jennings

Applicant

And:       Commissioner of Taxation

Respondent

DECISION

Tribunal:       P.J. Lindsay, Senior Member

Date:              26 March 2003

Place:            Sydney

Decision:The Tribunal affirms the decision under review.

(sgd) P. J. Lindsay

Senior Member

©        Commonwealth of Australia          (2003)

CATCHWORDS

Income tax – deductions claimed for work related expenses – audit of tax return – amended assessment disallowing most work related expenses – taxpayer’s loss of records - decision affirmed

Income Tax Assessment Act 1997, ss.8-1, 900-15, 900-30, 900-205

Taxation Administration Act 1953, s.14ZZK

Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478

Commissioner of Taxation v Studdert (1991) 33 FCR 75

Federal Commissioner of Taxation v Maddalena (1971) 2 ATR 541

Handley v Federal Commissioner of Taxation 81 ATC 4165

Federal Commissioner of Taxation v Forsyth 81 ATC 4157

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1. Ms Leonie Jennings (the applicant) objected to an amended assessment issued by the Commissioner of Taxation (the respondent) in respect of the year of income ended 30 June 1999. In her return for that year Ms Jennings claimed deductions for the following work related expenses: car; travel; clothing, laundry and dry cleaning; self-education; and home office expenses related to her work as an employee. At the hearing, Ms Jennings gave evidence and was represented by Mr C. Brumby, registered tax agent. Ms A. Lai, an officer employed by the Australian Taxation Office, represented the respondent. The Tribunal had before it the documents lodged pursuant to s.37 Administrative Appeals Tribunal Act 1975 (T documents) and the exhibits tendered at the hearing.

2.      Ms Jennings, who is aged 36, has a graduate diploma qualifying her as an archivist and records consultant.  During the 1998-99 income year, Ms Jennings worked for the Archives Authority of New South Wales, until she resigned on 6 November 1998, and then commenced at the Office of State Revenue (OSR).  She was employed by the Archives Authority for approximately nine years, and from 1 July 1996 until her resignation, she had been employed as the Senior Archivist Disposal (Archivist, Grade 3).  Her position was based in Sydney at The Rocks.   The Archives Authority is responsible for appraising time-expired government records and, if it authorises disposal, will administer the disposal process.  Government agencies pay the Archives Authority for storage of semi-active records held at the Government Records Repository located at Kingswood, a suburb located about 50 kms from the city.  The Repository has 120 kms of storage shelf-space.  Her statement of duties noted that Ms Jennings assisted in the co-ordination of all matters concerning appraisal and disposal of NSW public records (Exhibit R2).  Her special responsibilities were for the appraisal and disposal of time-expired records from the Repository, and the development and co-ordination of client based training courses in records disposal procedures and issues.  At the OSR Ms Jennings was an Information Policy and Standards Officer who developed policies for information management.

3.      On 25 October 1999 Ms Jennings lodged her income tax return for the 1998-99 income year.  Mr Brumby prepared the return. The following amounts were claimed as work related expenses (T3):

Work related car expenses  $1,859

Work related travel expenses  $  248

Work related uniforms / protective clothing / laundry expenses         $  518

Work related self education expenses (amounts over $250)              $1,368

Other work related expenses        $5,108

4.      By notice dated 9 August 2000 (T4) Ms Jennings was informed that her return was to be audited in relation to the claims for work related expenses.  She was asked to complete a questionnaire and to provide records and evidence supporting her claims.  During the audit, Ms Jennings, through her agent, revised her claim as follows (T5-53):

Work related car expenses  $2,390

Work related travel expenses  $  263

Work related uniforms / protective clothing / laundry expenses                  $  540

Work related self education expenses (amounts over $250)  $1,412

Other work related expenses  $5,108

The completed questionnaire was sent to the Commissioner together with Mr Brumby’s letter of 14 September 2000 (T5-52) which explained that his client’s receipts and records had been lost as a result of her moving house at the end of June 1999.

5.      On 29 November 2000, the notice of decision on income tax audit issued. The Notice of Amended Assessment for the 1998-99 income year issued on 10 January 2001.  Of the total amount of $9,101 claimed for work related expenses, only $330 for union fees was allowed (T9-88).  Her taxable income was increased by $8,771. Ms Jennings objected to the assessment by a notice of objection (T11) dated 15 January 2001, to which was attached her statutory declaration made on 13 February 2001.  She referred to moving house after 30 June 1999 and the consequent loss of many records, documents and receipts. She stated in her statutory declaration (T1-8) that, while working for the Archives Authority from July 1998 to October 1998, she had to visit the Repository at least forty times, causing her to incur toll fees and parking costs amounting to $248.  The objection was disallowed on 27 March 2001. 

6.      The following table sets out the items of expenditure claimed in Ms Jenning’s 1998-99 income tax return (in total $9,101), as well as details of the amount notified  in her audit questionnaire ($9,713):

Item of Expense	1998-99 Income Tax Return $	Audit Questionnaire $
Work related car expenses	1,859 (3,582 kms x $0.519/km)	2,390 (5,000 kms x $0.47/km)
Work related travel expenses	·     Parking Stations = 38 ·     Parking Meters = 34 ·     Taxis = 42 ·     Buses = 32 ·     Trains = 38 ·     Bridge and Road Tolls = 34 ·     Drivers Licence = 15 ·     NRMA = 15 248	·     Tollway (47 trips @ $3.00 return) = 141 ·     Parking Stations = 22 ·     Parking Meters = 10 ·     Buses and Trains = 50 ·     Drivers Licence = 20 ·     NRMA = 20 263
Work related uniforms, protective clothing, laundry	·     White dust coats ($38 x 2) = 76 ·     Work Mandatory Smocks ($36 x 3) = 108 ·     Safety Shoes ($86 x 2) = 172 ·     Other clothing accessories = 42 ·     Dry Cleaning Costs = 64 ·     Laundry Expenses = 34 ·     Maintenance of Clothing = 22 518	·     Jeans ($42 x 2) = $84 ·     Work Smocks ($30 x 3) = $108 ·     Safety Shoes ($92 x 2) = $184 ·     Repairs to Safety Shoes = $48 ·     Accessories = $46 ·     Dry Cleaning (48 weeks x $2) = $96 ·     Laundry = $34 600 ·     Less personal usage (10%) = 60 540
Work related self-education expenses	·     Enrolment Fees = 1,280 ·     Travel to and from University to Home (316km x $0.515c) = 162.74 ·     Student Fees = 75 ·     Folders, Binders, Stationery = 54 ·     Photocopying = 46 1,617.74 ·     Less Statutory Amount = 250 1,367.74	·     Enrolment Fees = 1,280 ·     Student Fees = 75 ·     Travel to and from University (332km @ $0.478c) = 158.70 ·     Folders, Binders, Stationery = 54 ·     Photocopying = 46 ·     Publications & Relevant Text Books = 48 1,661.70 ·     Less Statutory Amount = 250 1,411.70
Other work related expenses	·     Rental of Premises ($280 x 52 weeks x 15%) = 2184 ·     Electricity, Light and Power = 156 ·     Gas for Heating = 52 ·     Computer Parts and Service = 89 ·     Union Fees = 330 ·     Computer Stationery = 260 ·     Work Diary = 22 ·     Telephones, Business only = 48 ·     Postage, Business only = 29 ·     Printing, Stationery, Folders, etc - 36 ·     Writing Requisites = 24 ·     Photocopying = 36 ·     Depreciation = 1,842 5,108	·     Rent ($280 x 52 weeks x 15%) = 2184 ·     Electricity (estimate $3 per week) = 156 ·     Gas (estimate $1 per week) = 52 ·     Computer Parts and Service = 89 ·     Union Fees = 330 ·     Computer Stationery = 260 ·     Work Diary = 22 ·     Telephones, Business only (on call) = 48 ·     Postage, Business only = 29 ·     Printing, Stationery, Folders, etc = 36 ·     Writing Requisites =  24 ·     Photocopying = 36 ·     Depreciation (computer and furniture) = 1,842 5,108

7.      Ms Jennings’ evidence regarding the loss of her logbook, receipts and other records was quite vague.  She said that, since she moved house in June 1999, she has been unable to find the boxes containing the records.  She said she had the documents at the time the tax return was prepared around October 1999, having given them to her tax agent for that purpose, but could not find them when completing the audit questionnaire in September 2000.  Ms Jennings explained that she was extremely ill during 1999.  She became ill just before she moved house and was taking prescription pain-killers.  Her illness caused her to resign.  For about two years after the move she was in such pain that she could not unpack her documents.  Ms Jennings is still unable to say what happened to her boxes of documents. In cross-examination she agreed that the answers to the questionnaire were based on estimates.  She also agreed that copies of some of her records, such as telephone and utility bills, could have been obtained from the supplier but she chose not to pursue that course.  

Car expenses

8.      In her evidence Ms Jennings said that during major projects, she had to visit the Repository to appraise records and make disposal recommendations.  She also had to supervise Repository staff involved in appraisal.  Although she had access to an office car, Ms Jennings said that she usually drove her own car to the Repository at Kingswood.  Most of the travel in her car was from her home at Concord to the Repository and back home.  This trip took her along the M4 motorway, a toll way.  Occasionally she drove to the Repository from her office in the Rocks and would then drive the office car.

9.      The claim for car expenses was calculated on the cents per kilometre basis.  On the advice of her tax agent, Ms Jennings said she began to keep a logbook, probably from 1997.  Unfortunately, the log book was lost following her change of  residence in June 1999. 

10.     Ms Jennings claimed $1,859 for work related car expenses in her 1998-99 income tax return.   By letter dated 16 August 2001 (T1-10) her tax agent explained the calculation of that amount as follows: 3,582 kms x $0.519 cents per kilometre (the car had 1,800cc engine capacity). Ms Jennings’ statutory declaration of 13 February 2001 (T1-8) stated that the car travel occurred from July to October 1998.

11.     The figure of $1,859 conflicted with the amount of $2,390 advised in the audit questionnaire dated 14 September 2000 (T5-56), also completed on the cents per kilometre basis as follows: 5,000 kms x $0.478 cents per kilometre (assumed engine capacity 1,400cc).  As required by the questionnaire form, Ms Jennings made a declaration that the information she provided in the questionnaire was true and correct.  Actual business travel was stated to be 5,356 kms based on a weekly trip to the Repository.  The rate employed would appear to be in error.  The correct rate should be 45.7 cents per kilometre.  The tax agent repeated the claim for $2,390 in a letter to the respondent dated 4 December 2000 (T1-17).  The amount claimed was based on a round trip of 108 kms from home at Concord to the Repository (47 trips). In clarification of the discrepancy between the different engine sizes, Mr Brumby submitted that the correct engine capacity was 1,400cc.

12.     When it was put to Ms Jennings that she did not know how many kilometres she travelled on business in the 1998-99 income year, she said she knew at the time of lodging her income tax return because she still had her logbook.  Asked why the figure for business kilometres increased from the tax return’s 3,582 to the audit questionnaire’s 5,356 kilometres, Ms Jennings explained that she was very ill at the time she completed the questionnaire and her powers of concentration were not great.  She did not compare the two figures before making the declaration for the answers to the questionnaire.  In evidence she allowed that she would not have travelled to the Repository every two days, as would have to be the case if she made 47 trips during her eighteen weeks employment with the Archives Authority in the 1998-99 income year.  She also allowed that her statutory declaration to the effect that her claim was based on 47 trips during that period was inaccurate.

13.     Ms Jennings told the Tribunal that the Archives Authority reimbursed some of her expenses for train and bus travel and for toll charges when inspecting records held by other government agencies.  Her employer would not reimburse tolls, however, when she was travelling to the Repository or to the city office from home. She said these trips were considered by her employer to be travel to her place of work. I am unable to accept that Ms Jennings’ claim for expenses incurred for travelling from home to the Repository and return was other than a claim for private expenditure.  She regularly attended at the Repository to carry out her usual duties and I find that, during the 1998-99 income year, she went there from home about once week.  The travel took her to an alternative but usual work location.  The cost was not incurred in the course of gaining her assessable income and therefore is not deductible under s.8-1 of the Income Tax Assessment Act 1997 (the Act): Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478.

Work related travel expenses

14.     Ms Jennings told the Tribunal that she should have instructed her agent to omit the claims for bus, train and taxi expenses because they were reimbursed.  In addition Ms Jennings said that she should not have claimed the expenses for parking stations, parking meters and bridge and road tolls, as they were claimed in error.  It is noted that the information provided in response to the audit, includes a claim for $141 on tollways being 47 trips at $3 return.  For the same reason that the car expenses are not deductible, I find that this cost was private in nature. 

15.     As for the claim for part of the cost of her driver’s licence and NRMA membership, I accept the Commissioner’s submission that both costs are private in nature for Ms Jennings and not deductible under s.8-1 of the Act.

Work related uniforms, protective clothing, laundry

16.     This item related only to her work at the Repository, which Ms Jennings said required her to climb ladders to retrieve boxes of records for appraisal.  It was dirty and dusty work.  She said she needed protective clothing.  Although the Archives Authority did provide staff with dust coats, she bought her own because the others did not fit.  The Archives Authority also supplied gloves and face masks.

17.     Ms Jennings said that, throughout her nine years with the Archives Authority, she worked at the Repository as required.  Ms Lai asked her why it was necessary in the 1998-99 year to purchase three smocks and two dust coats.  Ms Jennings answered that she was not able to be certain when she bought those items.  She said that $34 claimed for laundry related to both her dust coats and business clothing.  The $64 dry cleaning expenditure was for cleaning her business clothes if they became soiled from handling old records.  As for the safety shoes, Ms Jennings said they were leather court shoes.  She did not deny they were conventional shoes, though she added they were not the kind of shoes she normally would wear. She was unable to say when they were purchased.  Ms Jennings could not explain the claim for $42 on clothing accessories.

18.     Her evidence regarding the discrepancies between the income tax return and the audit questionnaire was unsatisfactory.  She said she would not use the word ‘smock’..  She assumed the claim for the cost of three smocks must be for dust coats.  This would mean she bought five dust coats from 1 July 1998 to 6 November 1998.  She said that in this period she also bought two pairs of court shoes at a cost of $86 and, according to the audit questionnaire, paid $46 for shoe repairs.  She was unable to recall a claim for $42 on clothing accessories or give a reason why the claim was for $46 in the questionnaire.  Ms Jennings assumed the $22 claimed for maintenance of clothing was to repair tears to a dust coat.  Ms Lai put it to her that the entire claim for work related clothing expenditure in the income tax return was simply an estimate.  Ms Jennings said she could not respond to that without her records, which she is unable to find. 

19. I have some doubt as to whether any of the expenses claimed under this head have been incurred. The applicant was not a convincing witness and her credit was not helped by the discrepancies between the return and the answers to the audit questionnaire. Under s.14ZZK of the Taxation Administration Act 1953 (the Administration Act) Ms Jennings has the burden of proving that the amended assessment is excessive. What has been presented in the T documents in explanation of her claim is contradictory. She has made a declaration that her answers to the audit questionnaire were correct. However, in relation to the claim for dust coats, clothing accessories, dry cleaning and repairs to shoes and clothing, it conflicts with her statutory declaration of 13 February 2001. I do not accept her evidence in relation to purchases of dust coats or smocks, shoes or repairs. Further, I cannot be satisfied on the state of the evidence, that she either purchased the other items claimed or spent the amounts asserted on cleaning. I find that Ms Jennings has not discharged the onus of proof in relation to establishing that this part of the amended assessment was excessive.

Work related self-education expenses

20.     In 1999 Ms Jennings enrolled in a course ‘Corporate Investigations’ conducted by the Australian Centre for Security Research at the University of Western Sydney.  Mr Dean McDonald, a senior lecturer at the University, wrote to the applicant’s tax agent on 14 March 2002 (Exhibit R2) and stated that Ms Jennings attended five workshop / lecture days in the course during March and April 1999. There was no documentary evidence about the subject matter of the course. Ms Jennings said the primary lecturer was a former police officer.  OSR did not reimburse her for the cost of attending, because the course was not specifically related to information management.  She was not given study leave.  Ms Jennings, however, thought the course would develop her interviewing skills and help with her functional analysis.  In evidence Ms Jennings said that her role at the OSR was to develop policies for all aspects of information management in response to the information management blueprint published by the Office of Information Technology.  This task required her to identify OSR business functions and processes, and then classify the information and other records based on the identified functions rather than subjects.  Ms Jennings said the course dealt with interviewing skills, and research and investigation techniques. 

21.     She told the Tribunal that she was interested in widening her skill base in relation to doing investigations on a broader level. The course was at a much broader level than the interviewing she had undertaken in her job.  When asked if she was looking at other jobs, Ms Jennings told the Tribunal that she was looking at furthering her career and she saw the extra skills from the course as a way of giving herself an edge over others when applying for a job in information management.  It was not a course designed for archivists and there were not many archivists in attendance.  The point of her attending this course was to widen her skill base to do investigations on a broader level. 

22.     Unfortunately the receipts and other records relating to the cost of her attending the course, including a $75 student fee and photocopying and stationery expenditure, cannot be found.  Again there are discrepancies between the amount claimed in the tax return and the information provided in the audit questionnaire. The cost of travelling from her home at Concord to the university’s campus at Bankstown differed due to a change in the estimated distance and to the factor used in the cents per kilometre calculation.  As the questionnaire was completed without access to her records, Ms Jennings conceded the information therein would have been an estimate. Ms Jennings agreed that the $54 claimed for stationery appeared to be excessive.

23.     Ms Lai submitted that the expenditure on the course lacked the necessary nexus with her employment as an archivist.  Further it was submitted that the applicant had failed to provide written evidence of the cost of attending the course or that the expenditure was incurred in the 1998-99 income year.  Ms Jennings‘ evidence was that the course was about the development of investigation techniques.  While she said her job at OSR involved interviewing lots of people to obtain information about the use they made of documents, she was interested in the course to broaden her skill base.  In Commissioner of Taxation v Studdert (1991) 33 FCR 75 Hill J held that “ … the motivation of the taxpayer in a case such as the present is not an irrelevant matter in the question of characterisation” (at 81).  Ms Jennings’ purpose in taking the course was to give herself an advantage over others when applying for a position.  I find that there was little if any evidence demonstrating that the course would make her more proficient in her role at the OSR.  I am satisfied that the course was a means of obtaining new skills that would allow Ms Jennings to earn income from new sources.  On the authority of FederalCommissioner of Taxation v Maddalena (1971) 2 ATR 541, therefore, the expenditure under this head is not deductible.

Other work related expenses

24.     This item of expenditure relates mainly to Ms Jennings’ home office.  Both at her Concord and Lawson residences, Ms Jennings set aside a spare room for use as an office where she did work for her employer. While at the Archives Authority she prepared a number of specialised reports. For example she was asked by the Attorney-General’s Department to assist in its implementation of a records disposal schedule for the large number of documents it held. Ms Jennings said that from July to November 1998 she was very busy at the Archives Authority as an acting manager and still responsible for her normal job.  Her evidence was that, in common with other officers of similar responsibility, she used her office to complete important or urgent projects. In her statutory declaration dated 13 February 2001 Ms Jennings stated that “The office was open to the public at all times particularly during the evenings and weekends. Work on behalf of my employer was normally carried out during weekends and evenings and for which I received no reimbursement.”  In evidence she said she occasionally met work and other professional colleagues there for an hour or two and they would discuss their work.   These meetings would usually occur in the early evening, after work.  They were primarily work-related meetings, though they would at times have a meal afterwards.  This practice continued in her new position at the OSR.  In both positions, she had an office or work space at her employer’s premises.

25.     Ms Jennings claimed a deduction for a proportion of the rent for her home.  The proportion (15 per cent) was based on the floor area of the room used as an office.  She was not reimbursed for the cost of computer paper ($260), other stationery used in her office ($36) or photocopying ($36).   She explained that she did not keep her receipts meticulously and thus did not request reimbursement for expenses such as photocopying.  Apart from a computer, the depreciation schedule shows that all the furniture and equipment in the home office was bought on 1 July 1998.  Ms Jennings said that, although she had a home office at the Ashfield premises that she occupied prior to Concord, she set up the office again and bought furniture and equipment when she moved into the Concord residence.  Her evidence that she replaced her computer when she acquired a new one in 1998, conflicts with the depreciation schedule which refers to the computer being bought in 1996.  The schedule shows the computer was fully depreciated in 1998-99 with a deduction for $1,232 claimed as the final instalment under the prime cost method.

26.     Ms Lai cited Handley v Federal Commissioner of Taxation 81 ATC 4165 and Commissioner of Taxation v Forsyth 81 ATC 4157 in support of her submission that the applicant’s use of her spare room to complete work and discuss work matters with colleagues was merely a matter of convenience. There was no evidence to suggest that the spare room was set apart from the rest of the house or had a separate entrance. In no sense was Ms Jennings using the office as a place for meeting clients or doing business. During the hearing she said that the room was used as a work space and ought not be considered as an office ”open to the public” as stated in her statutory declaration. Thus it was submitted by Ms Lai that the essential character of the rent was private or domestic expenditure and excluded from deductibility by s.8-2 of the Act. I accept the respondent’s submission. The work done at home was work that Ms Jennings had not completed at her office. She wanted to finish her reports on time and chose to do so at home. Notwithstanding that the meetings arranged at home with fellow employees may have been mainly about work, I find that the meetings, held after work hours, were part of her working pattern and for her convenience.

27.     When asked about the $260 outlaid on computer stationery, a substantial number of reams of paper, Ms Jennings told the Tribunal that perhaps that item had not come to her notice before she lodged her return. She could not recall any details about the $46 for photocopying or offer a reason why she did not do the photocopying at work. Based on her evidence, I am not satisfied that she incurred the claimed expenditure at all, let alone for the amount claimed. Ms Jennings has failed to discharge the burden of proof under s.14ZZK of the Administration Act in respect of this part of her claim.

28.     As for the expenditure on the computer parts, stationery, diary, writing requisites, work related telephone calls, heating and power, there were no receipts or other documents available to the Tribunal. Similarly, there was no evidence to support allowing part of the claim for depreciation for some of the furniture.  Again, having regard to the vague, incomplete and contradictory nature of Ms Jennings’ evidence, I am not satisfied that Ms Jennings has discharged the burden of proof in relation to these items.  Further, I add that in relation to those items of “work expense” as defined in s.900-30 of the Act, Ms Jennings failed to comply with the requirements of Subdivision 900B – Substantiating work expenses.  She has not kept written evidence from the relevant suppliers containing details of the item or service acquired, the date of supply or the cost.  As an individual trained in procedures for retaining documents and records, I am not disposed to accept that Ms Jennings has taken reasonable precautions to prevent the loss of her records (s.900-205).  Consequently, the work expenses under this head could not be deductible (s.900-15). 

29.     For these reasons the objection decision under review is affirmed.

I certify that the preceding 29 paragraphs are a true copy of the reasons for decision herein of P.J. Lindsay, Senior Member:

Signed:         
          ....................................................................................……………………………….

Associate

Date of Hearing  19 August 2002

Date of Decision  26 March 2003

Applicant’s Representative            Mr C. Brumby, tax agent

Respondent’s Representative       Australian Taxation Office