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                                                    By Stephen Barkoczy*
    This article examines several of the leading cases dealing with claims for deductions for expenditure on travel between a
taxpayer’s home and his or her work or business. In particular, the article evaluates the Full Federal Court case of FC of T v Payne
99 ATC 4391 which the Commissioner has sought special leave to appeal to the High Court.

                                                                      ("ITAA97") from the commencement of the
                                                                      1997/98 income year. The new provision
    There is no doubt that the general deduction
                                                                      essentially retains most of the wording of its
provision, formerly contained in s 51(1) of the
                                                                      predecessor and is only stylistically different. The
Income Tax Assessment Act 1936 (Cth)                                  Explanatory Memorandum accompanying the Bill
("ITAA36"), has spawned much litigation. A
                                                                      that introduced the rewritten provision expressly
prominent Queen's Counsel has lamented that "[i]t
                                                                      indicated that the introduction of the new
is amazing that a provision couched in such simple
                                                                      provision would not operate to effect any change
terms...has     given     rise    to    so     much
                                                                      in the law.5 As a result, the vast body of existing
jurisprudence."1 One of the issues frequently in                      common law dealing with s 51(1) will be equally
dispute between taxpayers and the Commissioner                        relevant to the interpretation of s 8-1.
concerns the deductibility of travel expenditure.2
This article examines the way in which the general
deduction provision treats a specific category of                         The general deduction provision provides a
travel expenditure, namely expenditure on travel                      taxpayer deductions for losses or outgoings to the
between a taxpayer's home and his or her work.                        extent that they are:
The article focuses on the leading judicial
pronouncements on this issue3 culminating most                        1. "incurred in gaining or producing" the
recently in the Full Federal Court decision in FC of                     taxpayer's assessable income (s 8-1(1),
T v Payne.4                                                              corresponding to the "first positive limb" of
                                                                         former s 51(1)); or
PROVISION                                                              2. "necessarily incurred in carrying on a business
                                                                          for the purpose of gaining or producing" the
    As part of the Tax Law Improvement Project's                          taxpayer's assessable income (s 8-1(2),
rewrite of the tax laws, s 51(1) has been replaced                        corresponding to the "second positive limb" of
with s 8-1 of the Income Tax Assessment Act 1997                          former s 51(1)).

  The writer thanks Vince Morabito and Primrose Mroczkowski for their helpful comments on earlier drafts of this article. The
views expressed in this article are the personal views of the author and not those of any organisation with which the author is
  IV Gzell, "Allowable Deductions: The Coles Myer and Fletcher Decisions" (1993) 28 Taxation in Australia (Blue Edition) 275.
  The relative importance of this category of deduction is highlighted by the fact that work related travel and car deductions are
dealt with specifically as separate items in income tax returns. The reason for this is principally for Australian Taxation Office
audit purposes.
  The Commissioner's views on this topic are peppered throughout a number of his rulings and determinations, including: Income
Taxation Rulings IT 112, IT 117, IT 2199 and IT 2543; Taxation Rulings TR 94/16, TR 95/15 and TR 95/34; and Taxation
Determinations TD 93/113 and TD 94/17. This article does not intend to specifically examine any of these rulings or
determinations. Instead, its aim is essentially to focus upon the body of case law that has evolved in this field.
  99 ATC 4391 ("Payne").
  "The Bill rewrites subsection 51(1) with a clearer structure but does not disturb its language and is not intended to effect
previous interpretations" Explanatory Memorandum to the Income Tax Assessment Bill 1996, 44.

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    The general deduction provision denies                             must be calculated under one of four methods15
deductions where the relevant losses or outgoings                      prescribed under Div 28 of the ITAA97.16
are of a capital, or private or domestic nature, or
are incurred in gaining exempt income (s 8-1(2)(a)
                                                                       3. GUIDING PRINCIPLES
to (c), corresponding to the "negative limbs" of s
51(1)). The new provision also expressly denies
deductions where a provision of "this Act"6                                Before proceeding to examine the way in
prevents the claiming of a deduction (s 8-1(2)(d)).7                   which the courts have dealt specifically with
This exclusion has particular relevance in the                         expenditure on travel between a taxpayer's home
context of travel expenditure generally as the                         and work, it is useful to establish the guiding
provisions contained in Div 900 of the ITAA97                          principles adopted by the courts in analysing key
specifically deny deductions for certain categories                    aspects of the general deduction provision.17 In
of expenditure unless substantiation requirements                      particular, it is instructive to focus on the way in
have been complied with. Whilst this article does                      which the judiciary has ascertained whether or not
not intend to deal specifically with the intricacies                   a requisite nexus or connection exists between an
of the substantiation provisions, it is important to                   outgoing18 and the taxpayer's income producing
bear in mind that these provisions8 deny                               or business activities. The courts have
deductions for a "work expense",9 a "car                               demonstrated that in undertaking this process, they
expense"10 and a "business travel expense"11                           have focused on "the object which the person
unless specific documentary evidence12 and, in                         making the expenditure has in view."19 The courts
certain circumstances, travel records13 have been                      have granted deductions where expenditure is
kept.14 Moreover, it is also worthwhile bearing in                     incurred "in the course of"20 gaining or producing
mind that in relation to car expenses, deductions                      assessable income or where it is "appropriate" or

  Defined to include the ITAA36 and Pt IVC of the Tax Administration Act 1953 (Cth) insofar as it relates to the provisions of
either the ITAA97 or ITAA36.
  Whilst s 51(1) did not contain similar express wording, it was widely accepted that the provision operated in an identical fashion.
  Subject to certain limited exceptions.
  A "work expense" is defined in s 900-30(1) as a loss or outgoing incurred in producing "salary or wages". By virtue of s 900-12,
the relevant provisions also apply to a "PAYE earner" (that is, an employee defined in s 221A of the ITAA36). A work expense
includes a "travel allowance expense" (as defined in s 900-30(3): s 900-30(2)) but does not include "motor vehicle" expenditure,
unless it relates to travel outside Australia, or is a taxi fare or similar outgoing (s 900-30(6)).
   Broadly, a "car expense" is a loss or outgoing to do with a car, operating a car, or depreciation of a car (other than a loss or
outgoing for travel outside Australia or on a taxi fare): s 28-13. A "car" is defined in s 995-1 as a "motor vehicle" (except a motor
cycle or similar vehicle) designed to carry a load of less than one tonne or fewer than nine passengers.
   Defined as a "travel expense" (that is, an expense for travel involving the taxpayer being away from his or her ordinary
residence for at least one night) in so far as it is incurred in producing assessable income other than salary or wages: s 900-95(1).
Motor vehicle expenses (other than for travel outside Australia or on a taxi fare) are excluded: s 900-95(5).
   See ITAA97, Subdiv 900-E.
   See ITAA97, Subdiv 900-F.
   For a general discussion of the substantiation rules, see R Woellner, T Vella, L Burns, S Barkoczy and R Krever, 1999
Australian Taxation Law (9th ed), 798-803.
   The "cents per kilometre", "12% or original value", "1/3 of actual expense" or "log book" methods.
   Again, for a general discussion of these provisions, see Woellner et al, above n 14, 795-796.
   Much has been written on the judicial tests used to interpret the provision. See further: Gzell, above n 1; I Wallschutzky andG
Richardson, '"The Extent to Which Expenditure is Deductible" (1994) 6(2) CCH Journal of Australian Taxation 47; G
Richardson, "Section 51(1): Unlegislated Tests of Deductibility" (1995) 24 Australian Tax Review 153; JV Durack, "Deductions
for Personal Expenditure - Having your Cake and Eating it Too" (1994) 23 Australian Tax Review 205; S Barkoczy, "Section
51(1): Characterising Deductible Outgoings" (1995) 3 Taxation in Australia (Red Edition) 206; and AH Slater, "The Character of
the Advantage Sought" (1997) 26 Australian Tax Review 131.
   Throughout this article the term "outgoing" has been substituted with the more commonly used expression "expenditure".
   W Nevill & Co Ltd v FC of T (1937) 56 CLR 290, 301; (1937) 4 ATD 187, 193 (per Latham CJ) ("Nevill"). Whilst this case
actually concerned the predecessor of s 51(1) (s 23(e) of the Income Tax Assessment Act 1922 (Cth)), the relevant words have been
adopted by the High Court in the context of s 51(1), see Ronpibon Tin NL v FC of T (1949) 78 CLR 47, 57; (1949) 8 ATD 431, 435
(per Latham CJ, Rich, Dixon, Mc Tiernan and Webb JJ) ("Ronpibon").
   Amalgamated Zinc (De Bavay's) Ltd v FC of T (1935) 54 CLR 295, 303; (1935) 3 ATD 288, 293 (per Latham CJ); W Nevill
(1937) 56 CLR 290, 305; (1937) 4 ATD 187, 193 (per Latham CJ) and Ronpibon (1949) 78 CLR 47, 57; (1949) 8 ATD 431, 435
(per Latham CJ, Rich, Dixon, McTiernan and Webb JJ).

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"plainly adapted for" a business activity.21 It has                          A distinction must be drawn between living
been observed that whether or not this is the case                           expenses and business expenses. In order to
depends upon whether or not the expenditure is                               decide into which category to put the cost of
viewed as "incidental and relevant to the                                    travelling, you must look to see what is the
operations or activities regularly carried on for the                        base from which the trade, profession, or
production of income."22 This in turn has                                    occupation is carried on... In the case of a
prompted an analysis of the "nature or character"                            barrister, it is his chambers. Once he gets to
of the expenditure.23 In the context of home to                              his chambers, the cost of travelling to the
work travel expenditure specifically, the courts                             various courts is incurred wholly and
have been especially concerned with issues of                                exclusively for the purposes of his
characterisation as is illustrated by the leading case                       profession. But it is different with the cost
on the subject, Lunney v FC of T &; Hayley v FC of                           of travelling from his home to his chambers
T.24                                                                         and back. That is incurred because he lives
                                                                             at a distance from his base. It is incurred for
4. THE GENERAL RULE                                                          the purposes of his living there and not for
                                                                             the purposes of his profession, or at any rate
                                                                             not wholly or exclusively, and this is so
     In Lunney & Hayley, Dixon CJ observed that                              whether he has a choice in the matter or not.
"the view has always prevailed that expenses of                              It is a living expense as distinct from a
travelling from home to work or business and back                            business expense.29
again are not deductible."25 This view finds its
roots in various United Kingdom authorities26                               The Newsom decision was expressly followed
including the Court of Appeal decision in Newsom v                      by a majority of the High Court30 in Lunney &
Robertson (Inspector of Taxes)27 in which a                             Hayley to deny an employee ship joiner and a self-
barrister was denied deductions for expenditure                         employed dentist deductions for their respective
incurred in travelling between his home and his                         expenditure incurred in travelling between their
chambers. The Court of Appeal focused on the                            homes and places of work. The High Court found
object of the taxpayer's journeys and found that                        that the relevant outgoings did not have the
they had not been undertaken for the purpose of                         "essential character" of income-producing or
his profession but, rather, because the taxpayer                        business expenditure. In reaching this conclusion,
lived away from his chambers.28 The Court                               the High Court declined to adopt a "but for" line of
distinguished between "living expenses" and                             reasoning and rejected the argument that just
"business expenses". In the words of Lord                               because a taxpayer needed to get to work to earn
Denning:                                                                income, the expenditure in getting to work should

   FC of T v Snowden & Willson Pty Ltd (1958) 99 CLR 431, 436-437; (1958) 11 ATD 463, 464 (per Dixon CJ); followed in Kidston
Goldmines Ltd v FC of T 91 ATC 4538, 4546 (per Hill J). See also, FC of T v Foxwood (Tolga) Pty Ltd 81 ATC 4261, 4263 (per
Gibbs CJ).
   Nevill (1937) 56 CLR 290, 305; (1937) 4 ATD 187, 196 (per Dixon J); followed in Ronpibon (1949) 78 CLR 47, 56-57; (1949)
8 ATD 431, 435 (per Latham CJ, Rich, Dixon, McTiernan and Webb JJ) and reiterated in Lunney v FC of T & Hayley v FC of T
(1958) 100 CLR 478, 497; (1958) 11 ATD 404, 412 (per Williams, Kitto and Taylor JJ) ("Lunney & Hayley").
   Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344, 351; (1956) 11 ATD 147, 149 (per Dixon CJ, Williams, Webb,
Fullagar and Kitto JJ). Whilst this case, related to a "loss" as opposed to an "outgoing", the principle has nonethelessbeen applied to
outgoings, see eg, Lunney & Hayley (1958) 100 CLR 478, 498-499; (1958) 11 ATD 404, 413 (per Williams, Kitto and Taylor JJ) and
Fletcher & Ors v FC of T (1991) 173 CLR 1, 18 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ)
   (1958) 100 CLR 478; (1958) 11 ATD 404.
   Ibid CLR 485; ATD 405.
   See eg, Andrews v Astley (1924) 8 TC 589 and Nolder v Walters (1930) 15 TC 380.
   (1952) 2 All ER 728 ("Newsom").
   "[T]he object of the journeys, both morning and evening, is not to enable the man to do his work but to live away from it." Ibid
732 (per Lord Romer).
   Ibid 731.
   Dixon CJ, Williams, Kitto and Taylor JJ; McTiernan J dissenting.

368                                                                    JOURNAL OF AUSTRALIAN TAXATION

be treated as deductible.31 In a joint judgment,                           Expenditure of this character is not by any
Williams, Kitto and Taylor JJ reasoned as follows:                         process of reasoning a business expense;
                                                                           indeed, it possesses no attribute whatever
     The question whether the fares which were
                                                                           capable of giving it the colour of a business
     paid by the appellants are deductible under
                                                                           expense. Nor can it be said to be incurred in
     s 51 should not and, indeed, cannot be
                                                                           gaining or producing a taxpayer's
     solved simply by a process of reasoning
                                                                           assessable income or incurred in carrying on
     which asserts that because expenditure on
                                                                           a business for the purpose of gaining or
     fares from a taxpayer's residence to his
                                                                           producing his income; at the most, it may be
     place of employment or place of business is
                                                                           said to be a necessary consequence of living
     necessary if assessable income is to be
                                                                           in one place and working in another. And
     derived, such expenditure must be regarded
                                                                           even if it were possible - and we think it is
     as "incidental and relevant" to the
                                                                           not - to say that its essential purpose is to
     derivation of such income ... It is, of course,
                                                                           enable a taxpayer to derive his assessable
     beyond question that unless an employee
                                                                           income there would still be no warrant for
     attends at his place of employment he will
                                                                           saying, in the language of s 51, that it was
     not derive assessable income and, in one
                                                                           "incurred in gaining or producing the
     sense, he makes the journey to his place of
                                                                           assessable income" or "necessarily incurred
     employment in order that he may earn his
                                                                           in carrying on a business for the purpose of
     income. But to say that expenditure on fares
                                                                           gaining or producing such income".33
     is a prerequisite to the earning of a
     taxpayer's income is not to say that such                            The outcome in Lunney & Hayley arose
     expenditure is incurred in or in the course of                   because the majority adopted a narrow approach to
     gaining or producing his income. Whether                         characterisation of the relevant expenditure.
     or not it should be so characterised depends                     Essentially, the Court viewed the expenditure as
     upon considerations which are concerned                          being of a kind which was "too preliminary"34 to
     more with the essential character of the                         be treated as a working or business expense.
     expenditure itself than with the fact that                       Expressed in another way, the Court treated the
     unless it is incurred an employee or a person                    expenditure as a "cost of getting to work or
     pursuing a professional practice will not                        business" rather than a "working or business
     even begin to engage in those activities                         expense". Whilst the restricted approach to
     from which their respective incomes are                          characterisation adopted by the Court clearly
     derived.32                                                       prevents the opening of "floodgates" for travel
                                                                      related claims and, in this respect, the conclusion
   Their Honours concluded with the following                         might be justified on policy grounds, one has
remarks:                                                              sympathy for the taxpayer's simple "but for"
                                                                      reasoning. After all, the reason why one travels to

   Incidentally, a "but for" argument was also rejected by the High Court some years earlier in a different context involving a
former general deduction provision (s 23(1)(a) of the Income Tax Assessment Act 1922 (Cth)). In FC of T v Munro (1926) 38 CLR
153 the High Court declined to allow a deduction for interest incurred on a loan secured over the taxpayer's income producing
property in spite of the taxpayer arguing that if the interest was not paid, the lender would foreclose on his property and he would
therefore not receive rental income (that is, the taxpayer had argued that "but for" the payment of interest, his income producing
asset would be lost). Contrast, however, Begg v FC of T (1937) 4 ATD 257 and Yeung & Anor v FC of T 88 ATC 4193. See, further,
the discussion relating to Munro (below).
   Lunney &; Hayley (1958) 100 CLR 478, 498-499; (1958) 11 ATD 404, 412-413.
   Ibid CLR, 501; ATD, 414.
   Contrast, in a different context, the observations about preliminary kinds of expenditure made in Softwood Pulp and Paper Ltd
v FC of T 76 ATC 4439, 4450-4451 (Menhennitt J) and FC of T v Maddalena 71 ATC 4161, 4163 (Menzies J; Barwick CJ,
Windeyer, Owen and Walsh JJ concurring).

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one's work or business is to earn income and the                           Forsyth46 where a barrister was denied deductions
purpose underlying the expenditure is therefore                            for rent paid for the use of a study in his home
clear.35 However, as Lunney &; Hayley and                                  which was owned through his family trust. Yet
subsequent cases demonstrate,36 "purpose" is not                           another illustration is found in FC of T v Cooper47
the test for deductibility, rather the issue is one of                     where a professional footballer who was instructed
"characterisation".37                                                      by his coach to increase his food and drink intake
                                                                           so that he could play football at his ideal weight
    The restricted approach to characterisation of
                                                                           was denied deductions for his extra food and drink
work related expenditure has transcended to other
                                                                           costs. A majority of the Full Federal Court48 held
related areas.38 For instance, in Lodge v FC of T39
                                                                           that the relevant expenditure was not "related to
Martin v FC of T40 and Jayatilake v FC of T41 the
                                                                           the income-producing activities of playing football
relevant courts denied deductions for child-
                                                                           or training"49 – that is the taxpayer was employed
minding expenditure, the incurring of which
                                                                           to "play football, not to consume food and
enabled the respective taxpayers to engage in
work.42 Likewise, in Handley v FC of T,43
expenditure relating to a barrister's home study44                             When one reads the above quoted passages
was held not to be deductible on the basis that it                         from the joint judgment in Lunney & Hayley, it is
was seen as being "referable to the home".45 A                             evident that in determining the "essential
similar conclusion was reached in FC of T v                                character" of expenditure the Court was actually
                                                                           focusing on its "relevance" to the taxpayer's

    McTiernan J's dissenting judgment in Lunney & Hayley (1958) 100 CLR 478, 490; (1958) 11 ATD 404, 407 encapsulates the
dilemma: "In my opinion it is an unduly narrow construction of the initial part of s 51(1), in the case of an employment, to confine
its operation to expenditure made by the taxpayer within the bare physical or temporal limits within which he performs his work or
labour and to disregard any expenditure made outside those limits even though it has a necessary relation to the purpose of earning
income for which the taxpayer carries on employment. It is shown by the stated case that the taxpayer could not in the
circumstances under which he was situated earn any assessable income by his employment without incurring the cost of travelling
which he claims to be an allowable deduction. I cannot see the difference in principle between an expense incurred in gaining
income and one incurred necessarily for the purpose of earning it." (emphasis added)
    See eg, Fletcher (1991) 173 CLR 1, 18 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ): "The
question whether an outgoing was, for the purposes of s 51(1), wholly or partly 'incurred in gaining or producing the assessable
income' is a question of characterisation."
   Purpose may nevertheless play a part in the process of characterisation in "colourable" cases: Fletcher (1991) 173 CLR 1. Note
particularly the observations made in Magna Alloys Research Pty Ltd v FC of T 80 ATC 4542, 4547 (per Brennan J): "Though
purpose is not the test of deductibility nor even a conception relevant to a loss involuntarily incurred, in cases where a connection
between an outgoing and the taxpayer's undertaking or business is affected by the voluntary act of the taxpayer, the purpose of
incurring that expenditure may constitute an element of its essential character, stamping it as expenditure of a business or income-
earning kind." See further FC of T v Ilbery 81 ATC 4661, 4667 (per Toohey J) and also Ure v FC of T 81 ATC 4100.
    Contrast, however, FC of T v Edwards 94 ATC 4255 and Mansfield v FC of T 96 ATC 4001 in which broad approaches to
characterisation were adopted by the courts.
   72 ATC 4174.
   84 ATC 4513.
   91 ATC 4516.
   The position is aptly described in Martin v FC of T 84 ATC 4513, 4515 where Bowen CJ, Toohey and Lockhart JJ remarked: "It
may be accepted that the placing of her child in a kindergarten (and the incurring of expenses thereby) was a prerequisite to the
taxpayer's employment. It was not suggested that any other course was open to her if she was to take on any of the three jobs in
question. But it is clear, at least since Lunney, that such a consideration is not of itself sufficient to attract the operation of s 51(1).
And it was for that reason that in Lodge Mason J rejected the taxpayer's claim. The character of the expenditure in that case was
found by his Honour to be neither relevant nor incidental to the particular work upon which Miss Lodge was engaged."
   81 ATC 4165.
   The relevant expenditure consisted of a relevant portion of the interest paid on the barrister's home loan and rates and insurance
relating to the property.
   81 ATC 4165, 4171.
   (1981) 148 CLR 203.
   91 ATC 4396.
   Lockhart and Hill JJ; Wilcox J dissenting.
   91 ATC 4396, 4414 (per Hill J).
   Ibid 4403 (per Lockhart J).

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income producing activities rather than whether or                   or domestic in nature. In any event, the issue
not it was private or domestic in nature.51                          would appear to be a moot point given Menzies J's
Nevertheless, in a number of the cases mentioned                     observations in FC of T v Hatchett,54 where his
in the preceding paragraph, the courts relied on                     Honour stated:
Lunney & Hayley to characterise the relevant
expenditure as being of a private or domestic                             It must be a rare case where an outgoing
expenditure. For example, in Handley, Mason J (as                         incurred in gaining assessable income is
he then was) stated:                                                      also an outgoing of a private or domestic
                                                                          nature. In most cases the categories would
     Expenditure related to the study is therefore                        seem to be exclusive.55
     referable to the home. The "essential
     character of the expenditure", to take up the
                                                                     5. ITINERANT TRAVEL
     expression used in Lunney v FC of T ... is
     therefore that of a "capital, private or                            The rigours of the Lunney & Hayley principle
     domestic nature".52                                             have been curtailed to some extent by a number of
                                                                     decisions that have distinguished the case and
    Professor Parsons has observed that on this                      relaxed the rigidity of what might appear, at first
analysis:                                                            glance, to be a "blanket rule" enunciated by the
                                                                     High Court. For instance, the courts have been
                                                                     prepared to grant deductions for "itinerant
     The     determination      of      "essential                   travel"56 between home and work where the home
     character"... goes not to determination of                      is regarded as a "base" from which work-related
     relevance but to the question whether an                        activities take place. Examples of this category of
     expense that may be relevant is to be denied                    exception are found in a trilogy of well-known
     deduction because of the private or                             cases handed down in the 1970's, namely FC of T
     domestic exception.53                                           v Collings;57 FC of T v Ballesty58 and FC of T v
     It is evident that whilst the essential character               Wiener.59 Before examining these cases in detail,
test formulated in Lunney & Hayley was actually                      however, it is worthwhile to first examine a
concerned with the nexus requirement under the                       selection of leading United Kingdom authorities
positive limbs of the general deduction provision,                   upon the subject which coincidentally were also
it has been transposed to apply to the negative                      handed down in the 1970's.
limbs of the provision. Whichever way the test is
used, its result will be consistent. Expenditure                     5.1 The United Kingdom Authorities
which is characterised as not relevant or too                            The relevant Australian authorities rely (in
preliminary to the taxpayer's income producing or                    part) on the celebrated House of Lords decision of
business activities will be just as much non-                        Owen v Pook60 involving a claim for travel
deductible as expenditure which satisfies the                        expenses incurred by a doctor in travelling
positive limbs but which is characterised as private

    See further, R Parsons, Income Taxation in Australia, 471 where the author observed: "The determination of essential character
involves the adoption of a description of the expense which affords an answer to the question of relevance. The description in
effect asserts the relevance or want of relevance of the expense. The analysis tends to cloak rather than to reveal the process of
decision. No analysis can deny the evaluation that must be made in concluding that an expense is relevant or irrelevant."
    81 ATC 4165, 4171.
    Parsons, above n 51, 471.
    71 ATC 4184.
    Ibid 4186.
    Taxation Ruling TR 95/34 contains the Commissioner's views on what constitutes "itinerant travel".
    76 ATC 4254 ("Collings").
    77 ATC 4181 ("Ballesty").
   78 ATC 4006 ("Wiener").
    (1970) AC 244.

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                                                                                        S BARKOCZY

between his home and the hospital where he             taxpayer had several places of work rather than a
worked. The doctor was on stand-by duty to deal        fixed base and that the travelling expenditure was
with emergencies and usually gave telephone            therefore deductible. In a well-known passage
instructions to hospital staff regarding the           Lord Wilberforce stated:63
treatment to be provided to patients before setting
out for the hospital. A majority of the House of          It is only if the job requires a man to travel
Lords held that the taxpayer performed the duties         that his expenses of that travel can be
of his office in two places, namely the hospital and      deducted, i.e. if he is travelling on his work,
the place where he received telephone calls. The          as distinct from travelling to his work. The
majority found that the taxpayer commenced his            most obvious category of jobs of this kind is
duties at the time of receiving the telephone calls       that of itinerant jobs, such as a commercial
and therefore his expenditure in subsequently             traveller. It is as a variant upon this that the
travelling to hospital was deductible. The                concept of two places of work has been
following passage from Lord Guest's judgment              introduced: if a man has to travel from one
encapsulates the essence of the majority's                place of work to another place of work, he
reasoning:                                                may deduct the travelling expenses of this
                                                          travel, because he is travelling on his work,
     In the present case there is a finding of fact       but not those of travelling from either place
     that Dr. Owen's duties commenced at the              of work to his home or vice versa. But for
     moment he was first contacted by the                 this doctrine to apply, he must be required
     hospital authorities. This is further                by the nature of the job itself to do the work
     emphasized by the finding that his                   of the job in two places: the mere fact that
     responsibility for a patient began as soon as        he may choose to do part of it in a place
     he received a telephone call and that he             separate from that where the job is
     sometimes advised treatment by telephone             objectively located is not enough.
     ... There were thus two places where his
     duty is performed, the hospital and his                The above passages sit comfortably alongside
     telephone in his consulting room. If he was       observations made by Brightman J in another
     performing his duties at both places, then it     United Kingdom case, Horton v Young,64 where
     is difficult to see why, on the journey           his Honour specifically referred to the concept of
     between the two places, he was not equally        itinerant travel:
     performing his duties ... It follows that he
     had to get from his consulting room to the           ... where a person has no fixed place or
     hospital by car to treat the emergency. The          places at which he carries on his trade or
     travelling expenses were, in my view,                profession but moves continually from one
     necessarily incurred in performance of the           place to another, at each of which he
     duties of his office.61                              consecutively exercises his trade or
                                                          profession on a purely temporary basis and
   Owen v Pook was examined in another well-              then departs, his trade or profession being in
known House of Lords decision, Taylor v                   that sense of an itinerant nature, the
Provan.62 This case concerned a Canadian                  travelling expenses of that person between
brewery takeover and merger specialist who                his home and the places where from time to
worked in various countries, including the United         time he happens to be exercising his trade or
Kingdom. The House of Lords held that the                 profession will normally be ... wholly and

   Ibid 256-257.
   [1975] AC 194.
   Ibid 215.
   (1972) 1 Ch 157.

372                                                    JOURNAL OF AUSTRALIAN TAXATION

exclusively laid out or expended for the                                  employment and of the taxpayer's duties.
purposes of that trade or profession. I have                              The taxpayer here, as much as in Taylor v
used the adverb "normally" because every                                  Provan, had a "very special" employment
case must to some extent depend on its own                                ... She was not really in a position similar
facts. 65                                                                 to those "thousands of employees" that Lord
                                                                          Donovan referred to (in Owen v. Pook
5.2 Collings                                                              [(1970) AC 244] p. 261) who have to be on
                                                                          stand-by duty at their homes and are
    The House of Lords decisions in Taylor v                              required to obey a summons to cope with
Provan and Owen v Pook were followed by the                               some emergency. It may or may not be that
Supreme Court of New South Wales in the first of                          those "thousands of employees" cannot
the three Australian cases mentioned above. In                            deduct the expenses of emergency travel;
Collings, a computer consultant who was on "24                            but the case of the present taxpayer is
hours call" and a "trouble-shooter" on a major                            clearly different, for she was engaged upon
project, was allowed deductions for expenditure                           a special assignment, and was continuously
incurred in travelling between her home and her                           on duty, wherever she was. The taxpayer is
employer's office outside normal working hours.                           not in this case choosing to do part of the
Rath J found that the facts of the case gave rise to                      work of her job in two separate places (cp.
special circumstances which permitted the                                 Lord Wilberforce in Taylor v Provan, at p.
deductions. His Honour noted that the taxpayer                            215). Unless she were to spend all her time
often received work related telephone calls and                           in the office with the computer, she must
gave advice over the telephone at any time of the                         have more than one place of work. Hers is
day or night; and that where she could not resolve                        not the freedom of choice of a barrister who
a problem over the telephone, or by use other                             does some of his work at home (Newsom v
portable terminal, she would return to the office                         Robertson (1953) 1 Ch 7). Her double
from wherever she might have been. These                                  work-location is not only not merely
circumstances led Rath J to conclude that the                             colourable, but the two places of work are a
taxpayer had, in fact, two places of work, being                          necessary obligation arising from the nature
her employer's office as well as her home.66 The                          of her special duties ..."68
Court was able clearly to distinguish Newsom v
Robertson which involved a taxpayer working                               The outcome in Collings is not surprising given
from home based on "freeedom of choice" from                         the close resemblance of the facts with those
the facts of the case where the nature of the                        considered in Owen v Pook. In this respect, Rath
taxpayer's employment mandated travel between                        J's conclusion of treating the case as an exception
home and work. Rath J took a pragmatic approach                      to the Lunney & Hayley principle would seem to
and noted that "it would, in a practical sense, be                   be warranted. It is a little more difficult, however,
necessary for any person on duty 24 hours a day                      to be so convinced by the circumstances involved
seven days a week to incur travelling expenses."67                   in Ballesty.
His Honour continued with the key segment of his
judgment as follows:                                                 5.3 Ballesty

     ... the journeys to and from home were                             In Ballesty, the Supreme Court of New South
     made necessary by the very nature of the                        Wales took a broad view of the "base of

   Ibid 164.
   It should be noted at this point that whilst the taxpayer had two places of work, the two places related to the same employment
The case does not deal with travel between two different places of unrelated work such as where a taxpayer travels between
different jobs or businesses (this separate issue is discussed further below).
   Collings 76 ATC 4254, 4268.

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operations" doctrine to conclude that a part-time                   5.4 Wiener
professional footballer was entitled to deductions
for expenditure incurred in travelling by car                           The concept of itinerant travel is perhaps most
between his home and training grounds and his                       aptly illustrated in Wiener involving a teacher
home and matches played on his home ground.69                       engaged in a pilot scheme that required her to
Waddell J held that the taxpayer's home was his                     teach at five different schools during the day and
base of operations from which he travelled as                       use her home as a base for preparing lessons and
required under the terms of his contract. His                       keeping materials. The relevant issue in the case
Honour found that it was necessary for the                          was whether she was entitled to deductions for
taxpayer to travel by car between his home and his                  travel from her home to the first school of each day
training grounds and away matches as public                         and between the last school of each day and her
transport was not suitable since he needed to carry                 home.74 In holding that she was, the Western
heavy and cumbersome football gear (weighing                        Australian Supreme Court found that the
between 12 to 20 pounds) with him and this would                    taxpayer's job required her to travel (indeed, it was
detract from his effective service to the club. His                 an implied term of her employment that she
Honour stated:                                                      provide her own means of transport) and that her
                                                                    duties were therefore inherently of an itinerant
     The occasion of the expenditure was,                           nature. According to Smith J, the taxpayer was
     therefore, the necessity to comply with the                    involved in the performance of her duties from the
     terms of his contract and to fit himself to                    moment she left home to the moment she returned.
     make the best contribution he could to the                     The practical approach to resolving the issue in the
     winning of the match or to the success of the                  case is reflected in the following passage from his
     training sessions to or from which he was                      Honour's judgment:
                                                                        Viewed objectively, it does not seem to me
    It is submitted that Waddell J's conclusion                         to be open to question that the taxpayer
represents a widening of the earlier view expressed                     would not have been able to perform her
by the same Court in Collings case.71 Certainly, it                     duties without the use of her motor vehicle.
is submitted that the facts in Ballesty are clearly                     On four of the five working days the
distinguishable from those in Collings72 where the                      taxpayer's contract of employment required
taxpayer actually worked from home in that she                          her to teach at not less than four different
answered telephone calls there. One wonders what                        schools and to comply with an exacting
(if any) actual duties of employment Ballesty                           timetable which kept her on the move
performed at home. In this respect, in order to                         throughout each of those days. The nature
rationalise the case with Collings, one must place                      of the job itself made travel in the
special weight on the finding that the use of the car                   performance of its duties essential, and it
for travelling between home and the relevant                            was a necessary element of the employment
grounds was seen as necessary to ensure that                            that on those working days transport be
Ballesty could perform at his best for the club.73                      available at whichever school the taxpayer
                                                                        commenced her teaching duties and that

   The Commissioner accepted the taxpayer's claim that he was entitled to deductions for expenditure incurred in travelling
between the team's social club (following a day's work) and training grounds and between his home and matches played away
from his team's home ground.
   Ballesty 77 ATC 4181, 4184.
   This widening has been criticised by Northrop J in FC of T v Genys 87 ATC 4875, 4881 (discussed below) where his Honour
remarked: "The decision in Ballesty seems unduly wide and difficult to reconcile with the clear principles stated in Collings."
   On a similar basis, the circumstances of the case are also distinguishable from those in Owen v Pook.
   See further the discussion of this case in the context of the "bulky goods" principle (discussed below). The Commissioner's
views on Ballesty's case are expressed in Taxation Ruling IT 112.
   The Commissioner did not dispute that she was entitled to claim deductions for travel between the different schools.

374                                                                JOURNAL OF AUSTRALIAN TAXATION

   transport remained at her disposal                                     Smith J concluded that the taxpayer's trips to
   throughout each of those days. It was not                          outlying courts were too infrequent to justify his
   said by the taxpayer in evidence that it was                       job being treated as inherently itinerant. His
   an express term of her employment that she                         Honour noted that it was not an express or implied
   provide her own means of transport, but it                         term of the Magistrate's employment that he have
   appears to have been tacitly understood that                       his car available for use in the performance of his
   she would do so, as she was paid an                                duties at his principal place of work each day.
   allowance by her employer for the use of                           Accordingly, his Honour held that the use of the
   her motor vehicle in travelling between                            car for travel between home and work was
   schools.75                                                         therefore a matter of personal choice. 77

5.5 Other Cases                                                            Another unsuccessful attempt made by a
                                                                      taxpayer to fall within the itinerant travel category
    Many taxpayers have sought to rely on the                         is found in FC of T v Genys78 involving a nurse
principles developed in the above cases to argue                      engaged by an employment agency to undertake
that their travel between home and work is                            relief shifts on a sub-contract basis, often at short
itinerant. They have experienced various degrees of                   notice. Northrop J pointed out that "[w]hether a
success. For example, in Burton v FC of T,76 a                        home constitutes a taxpayer's place of work
Magistrate failed to convince the Western                             necessarily depends on the nature and extent of the
Australian Supreme Court that he was entitled to                      activities undertaken by the taxpayer in the
claim deductions for expenditure on car travel                        home."79 His Honour held that the mere fact that
between his home and the main court at which he                       the taxpayer received telephone calls from the
worked. This was so despite the fact that the                         agency requesting her to work a particular shift
Magistrate had argued that:                                           was not sufficient to render her home a place of
                                                                      work. She was under no obligation to accept the
   he required to have his car at work as he was                      offer of work and therefore accessibility at home
   occasionally required, at short notice, to travel                  was not something that could be viewed as being
   to various outlying courts (although this                          required of her. His Honour found that the
   actually occurred on no more than nine                             taxpayer's duties commenced, not on receipt of the
   occasions during the year);                                        telephone call, but on her arrival at the relevant
    due to the nature of his office, it was advisable                 hospital. The facts in Genys are easily
    for him to avoid public places, including public                  distinguishable from those in Collings where the
    transport; and                                                    taxpayer was on 24 hour call and gave instructions
                                                                      from home.80 Unlike in Collings,81 the taxpayer's
    on occasions, he was required to prepare                          home was not a place where work was
    decisions at home in the evenings and he                          performed.82 It was only when she got to the
    therefore used his car to carry materials                         hospital that she commenced to perform work and
    between home and work.                                            for this reason, when travelling from home, she
                                                                      was not travelling on work but merely travelling to

       78 ATC 4006, 4010.
       79 ATC 4318.
       For further discussion of this case, see G Lehman and C Coleman, Taxation Law in Australia (4th ed), 462. The authors have
    observed that the "condition of employment test" applied in Burton has since been "firmly rejected": FC of T v Wilkinson 83 ATC
    4295, 4303 (per Williams J).
       87 ATC 4875 ("Genys").
       Ibid 4881.
       For the Commissioner's views on travel expenditure incurred between home and work by taxpayers on stand-by duty, see
    Taxation Ruling IT 112, para 21.
       And also unlike in Owen v Pook.
       This point was recently recognised in Pitcher v DFC of T 98 ATC 2190 (per Mr Block (SM)). On this basis, it is submitted that
    different outcomes in Collings and Genys are easily reconcilable.

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     The result in Genys might be contrasted with                     equipment.87 Likewise, the Administrative
that in Kerry v FC of T83 involving a casual on-                      Appeals Tribunal has allowed deductions for
course totalisator operator who was required to                       expenditure relating to travel between home and
attend more than one racetrack during a day. The                      work in the case of a carpenter who was required
Administrative Appeals Tribunal distinguished                         to transport heavy tools (Case U29)88 and in the
Genys and granted the taxpayer a deduction for her                    case of an aircraft engineer in similar
home to work travel on the basis that she had                         circumstances (Crestani v FC of T).89 In a sense,
"shifting places of work" notwithstanding that she                    the decision in Ballesty, sits more comfortably
did not use her home as a "workbase". An identical                    alongside these cases than the itinerant travel cases
conclusion to that reached in Kerry was arrived at                    mentioned above.
by the Administrative Appeals Tribunal in Case
T10684 where Mr Roach held that an "off-sider" in                         It would appear that the concept of "necessity"
the building industry who was continuously                            as opposed to "convenience" underpins the results
dispatched to sites at various locations was an                       achieved in the above cases. It also explains the
itinerant worker and therefore allowed to claim                       result in Case N7890 where an aircraft engineer
home to work travel expenditure. Both these                           (who transported a heavy tool box between his
Administrative Appeals Tribunal cases have                            home and work) was denied deductions for his car
strong parallels with the facts in Weiner and are                     expenditure. The Board of Review found that the
clearly supported by it.85                                            engineer could have stored his tools at work and
                                                                      that he transported the goods home with him
6. THE BULKY GOODS CASES                                              largely for his own convenience.91

    Over the years, a distinct line of authority has                  7. TRAVELLING BETWEEN TWO
also emerged allowing taxpayers to claim                              PLACES OF WORK WHERE ONE OF
deductions for the cost of travel expenditure                         THOSE PLACES IS HOME
between home and work where they are required
to transport heavy, bulky or cumbersome goods                             Collings demonstrates that the courts are quite
between these places. Rather than being based on                      prepared to allow deductions for expenditure on
the itinerant travel concept, these cases appear to                   travel where the taxpayer works from home and
be founded on an independent pragmatic approach                       travels to work in respect of the same job. The
which takes into account the special nature of a                      problems associated with the characterisation of
particular taxpayer's income producing activities.                    expenditure on travel between home and work
For instance, deductions for travel expenditure                       becomes more acute where the taxpayer's home is
between home and work were allowed by the New                         a distinct place of work separate from his or her
South Wales Supreme Court in FC of T v Vogt86 to                      other (unrelated) place of work conducted away
a professional musician who worked at various                         from home.
clubs and needed to transport heavy musical

   98 ATC 2295 ("Kerry").
   86 ATC 1192.
   The cases also have parallels with Taylor v Provan [1975] AC 194.
   75 ATC 4073.
   The Commissioner indicates that, based on Vogt's case, he will allow deductions for travel where a taxpayer performs his duties
at several places "by using his own equipment which he brings to the place of performance; the equipment is of substantial value and
of such bulk that it can only be conveniently transported by the use of a motor vehicle; and, there are justifiable reasons for the
taxpayer to keep the equipment at home": Taxation Ruling IT 112, para 21.
   87 ATC 229.
   98 ATC 2219. See also Case U107 87 ATC 229 for a similar result.
   81 ATC 403.
   Mr Harrowell explained his conclusions as follows: "On the taxpayer's evidence the need to carry the chest of tools in his car
was to enable him to engage in his hobby of repairing and servicing outboard motors and vehicles where any resulting income
apparently formed no part of his assessable income. The other reason put forward that the place provided for his tools by his
employer at his place of work was not secure I can understand and accept but to me that is an exercise of a personal preferencenot
a requirement under his terms of employment." Ibid 404.

376                                                                  JOURNAL OF AUSTRALIAN TAXATION

    The Supreme Court of New South Wales                                    taxpayer, or        the    home      can     be    so
decision in Garrett v FC of T92 and the Full                                construed."96
Federal Court decision in FC of T v Payne93 are
authority for the principle that, as the law currently                       His Honour relied, inter alia, on the early
stands, travel between two distinct places of work                     Victorian decision of In re The Income Tax Acts97
can be deductible, even though one of those places                     to come to this conclusion. This case concerned a
might be the taxpayer's home.94 The issue is,                          taxpayer that carried on a grazing business on the
however, far from settled as the Commissioner has                      property upon which he lived. The taxpayer was
sought special leave from the High Court to appeal                     allowed deductions for expenditure incurred in
the decision in Payne.                                                 travelling between his property and Melbourne to
                                                                       attend meetings of companies in which he was a
7.1 Garrett                                                            director. The deductions were allowed under s 9(2)
                                                                       of the Income Tax Act 1865 (Vic) which provided
    Garrett's case concerned a doctor who operated                     deductions for expenses that were "wholly and
a farming and grazing business from his country                        exclusively laid out or expended for the purpose of
home. The doctor was allowed deductions for                            ... trade". The Supreme Court of Victoria granted
expenditure incurred in using a plane to fly himself                   the deductions on the basis that the travel was
between his home and Sydney and various country                        "necessary" and "requisite"98 for the production of
centres being the places where he conducted his                        the taxpayer's income, in the sense that the
medical practice. The Supreme Court of New                             derivation of such income was impossible without
South Wales accepted that, if he had to rely on                        the travelling. In a passage that will be analysed
other transport, the doctor would not have been                        further below, Holroyd J stated:
able to meet the demands of both his farming
business and his medical practice. On this basis,                           [The director's fees], like the profits of his
Lusher J characterised the expenditure as essential                         business are part of his income, and the
to the taxpayer's income-earning operations which                           money which he employs in travelling up to
he considered involved travelling between his                               Melbourne in order to earn them is
different places of business.95 In the course of his                        expended for the purpose of enabling him to
judgment, Lusher J held that:                                               earn his income, and without paying those
                                                                            expenses, apparently, he could not earn it. I
     ... where the travelling expenditure is                                may say I do not understand the difference
     incurred on journeys between different                                 between the going and returning in such
     places of business or employment, the                                  cases. If he goes to Melbourne, he comes
     expenditure can be regarded as being a                                 back to where he lives; and in my opinion
     deduction within the subsection and this can                           the expense of going and returning are both
     be so even though one of the places of                                 necessary for the purpose of earning the
     business may also be the home of the                                   money.99

   82 ATC 4060.
   99 ATC 4391.
   See further In re The Income Tax Acts (1903) 29 VLR 299; FC of T v Green (1950) 81 CLR 313 and Owen v Pook (1970) AC
   Some time after the decision in Garrett was handed down, the Commmissioner issued Taxation Ruling IT 2199 in which he
indicated that he would allow deductions for the cost of travelling "directly between two places of employment, two places of
business or a place of employment and a place of business ... where the taxpayer does not live at either of the places and the travel
has been undertaken for the purpose of enabling the taxpayer to engage in income producing activities". However, the ruling goes
on to indicate that (subject to limited exceptions) the Commissioner will generally disallow a deduction for the cost of travel
between home and work where a taxpayer has full-time employment or carries on a business away from home and also conducts a
part-time income producing activity from home; or where the taxpayer carries on business from home and also has part-time
employment or business activities away from home.
   82 ATC 4060, 4063. Note that this passage was specifically relied on by the majority Justices in Payne 99 ATC 4391, 4399. See
further the discussion of this point below.
   (1903) 29 VLR 299.
   Ibid 306 (per a 'Beckett J).
   Ibid 304.

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    Lusher J was also persuaded by FC of T v                               practice in suburb B, the expenses of travel
Green100 in which the Full High Court101 had                               are ordinarily deductible under the first limb
allowed a company director who lived and worked                            of s 51(1) of the Assessment Act. Yet,
in Brisbane deductions for travelling between                              according to the Commissioner, if the
Brisbane and Northern Queensland to supervise                              taxpayer has qualifications and practises as
and inspect his rental properties.                                         both a solicitor and (say) an engineer, the
                                                                           expenses of travel between his or her two
7.2 Payne                                                                  separate income producing locations are
    The decision in Garrett was relied on by the                           not, without more, allowable deductions.
Full Federal Court majority in Payne. This most                            Similarly, we understand the Commissioner
recent case concerned expenditure incurred by a                            to accept that, where an employee is
Qantas pilot in travelling between his home, where                         required by his or her employer to travel
he operated a deer farm, and Mascot airport from                           between two separate places of
where he departed on flights. In their majority joint                      employment, the expenses of travel are
judgment, Sackville and Hely JJ concluded that                             normally deductible. According to the
travel from one place of business to another place                         Commissioner, however, if a taxpayer
of employment is capable of being deductible.102                           finishes work for employer A at 2pm each
In coming to this conclusion, their Honours placed                         day and then travels directly to the premises
weight on Lusher J's above quoted comments in                              of employer B to commence a different job,
Garrett. In other words, the majority found that                           the expenses of travel between the two
such expenditure can be treated as travel on work                          places are not ordinarily deductible.
rather than travel to work. This conclusion is based
on the view that an outgoing is deductible where it                        We find it difficult to accept that the
is incurred in gaining the taxpayer's assessable                           "essential character" of the expenditure
income generally and need not be confined to a                             incurred by the taxpayer changes in each
particular job. Their Honours pointed out that "the                        case simply because he or she is travelling
expression 'the assessable income' in s 51(1) has                          between two places at which unrelated
been authoritatively interpreted as meaning                                income earning activities take place. In our
assessable income which the relevant outgoing                              view, a taxpayer travelling from one place
would be expected to produce. It is not confined to                        of business or employment, at which he or
income from a particular job or a particular                               she derives assessable income, to another
business."103 In rejecting the Commissioner's                              such place, in order to conduct activities
contentions, the majority Justices stated:                                 from which he or she will derive assessable
                                                                           income, ordinarily is (to adopt the language
      The Commissioner accepted that travel by a                           of Lord Wilberforce in Taylor v Provan)
      taxpayer from one place of business to                               "travelling on his [or her] work, as distinct
      another is ordinarily a business or working                          from travelling to his [or her] work". The
      expense, if the activities at each place are                         taxpayer's work requires his or her
      part of a single income earning operation.                           attendance at each place. It does not matter
      On this reasoning, if a solicitor in sole                            that "the work" is for different employers,
      practice travels between his or her office in                        or involves one or more businesses, or spans
      suburb A to another office of the same                               different occupations.

    (1950) 81 CLR 313; (1950) 9 ATD 142.
    Latham CJ, McTiernan, Webb, Fullagar and Kitto JJ.
    In the outcome, the majority Justices did not, however, decide whether or not the relevant expenditure incurred by the
taxpayer in the case was deductible. They preferred instead to remit the matter back to the Administrative Appeals Tribunal so that
it could make specific findings of fact such as whether or not the farm constituted a place of business or a home.
    99 ATC 4399.

378                                                                  JOURNAL OF AUSTRALIAN TAXATION

       ... If the purpose of the travel is exclusively   adopted, that is one should "ask whether the travel
       to go from one income producing activity to       is on work (ie a working expense) or to work (ie a
       another, it is difficult to see how the           preworking expense)."
       essential character of the expenditure is
       other than a business or working expense.
                                                         8. EVALUATION              OF      THE      PAYNE
       104                                               JUDGMENTS

    Hill J delivered a strong dissenting judgment            It is submitted that the differences in opinions
diametrically opposed to that of the majority.           between the majority and minority judgments in
Whilst all judges accepted that expenditure on           Payne simply stems from their Honours'
travel from one place of employment to another in        approaches to characterisation. Sackville and Hely
respect of the same employment would be                  JJ adopted a broad view of the nature of a working
deductible and that a similar rule would apply           or business expense, whereas Hill J adopted a
where the travel occurs between one place of             narrow view. With respect to the majority, it is
business and another in respect of the same              submitted that Hill J's approach is less problematic
business, Hill J disagreed with the majority that        and technically more consistent with the restricted
this necessarily means that travel between               view to characterising travel expenditure
unrelated places of employment or business are           expressed in Lunney & Hayley. Hill J's judgment
therefore deductible. In simple terms, Hill J held       is also indirectly supported by cases like Lodge,
that travel between distinct places of employment        Martin, Jayatilake, Handley, Forsyth and Cooper
or business could not be regarded as connected           (discussed above) which demonstrate the judicial
with either income-producing activity and should         leaning towards a narrow approach to
therefore be treated as non-deductible expenditure       characterisation.
involved in travelling to (between) work rather
than on work. Hill J, it is submitted, correctly             Hill J's reasoning, it is submitted, is highly
recognised that the majority view produces various       compelling. If Lunney & Hayley is taken to
practical dilemmas as are illustrated in the             establish a general principle, in cases where a
following questions that his Honour raised:              taxpayer's work only commences when he arrives
                                                         there, it is not logical to allow the taxpayer a
       Does it change the situation if between two       deduction for travelling to work simply because
       separate employments and before travelling        the taxpayer departs for work from an earlier place
       from the first to the second the taxpayer         of work. It is submitted that it makes little sense in
       engages in some private activity such as          disallowing expenditure on travel between home
       visiting a library or lunching? Would it          and work and allowing expenditure on travel
       matter if there was a large (or small) gap of     between two places of unrelated work. As Hill J's
       time between the one employment                   judgment reflects, in neither case would the
       commencing and the other ceasing? What if         taxpayer be travelling on work, but simply
       one commences at 7.00 am in the morning           travelling to work - albeit from different locations.
       and the continues until 1.00 pm and the
       other starts at 7.00 pm and goes to                   In the light of the above analysis, the
       midnight? Why indeed, it may be asked, do         apparently well accepted notion that travel
       divisions of time into days matter?105            between two places of work is deductible may well
                                                         be a myth founded on questionable authority. It
     His Honour went on to conclude that in the          will be recalled that the majority in Payne relied
light of the above considerations a straightforward      on Lusher J's comments in Garrett for the
test which causes the least anomalies should be          conclusion that expenditure on travel between

      Ibid 4400.
      Ibid 4393-4394.

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                                                                                        S BARKOCZY

different places of business or employment is              expenses for the purpose of coming to
deductible. It will also be recalled that Lusher J         Melbourne to attend a meeting of directors
had relied on, inter alia, the 1903 Victorian              has a residence unconnected with any
Supreme Court decision In re The Income Tax Acts           income earned at that residence, and
for this conclusion. It is submitted that this             selected without any reference to the
decision may now be of questionable weight given           desirability of that being a place of
the trenchant criticism levied in the High Court           residence with a view to making an income.
joint judgment in Lunney & Hayley of the above             It is clearly stated by the case that the
quoted passage from Holyrod J's Judgment:                  taxpayer's presence at 'X' is necessary for
                                                           the conduct of the business there. That is
      The question in that case was whether                the place - as the case states - where the
      expenditure so incurred by the taxpayer was          business is carried on under his personal
      "wholly and exclusively expended for the             supervision. Therefore, in this case, when
      purposes of his trade" and may, perhaps, be          he leaves that place in which he is carrying
      said to differ substantially from that which         on business - 'X' - for the purpose of
      arises in the present case. Possibly, if the         coming up to Melbourne to attend a meeting
      learned judge had been required to apply the         of directors, he has to return to that which is
      provisions of a section similar in terms to s        another place at which he carries on
      51 he would have found great difficulty in           business producing income, and that place
      saying that the expenditure had been                 is the place at which he resides; and it seems
      "incurred in gaining or producing" the               to me to be a distinction which may be or
      taxpayer's assessable income." The                   may not be important. I am not saying what
      ground's for his Honour's decision on the            the difference would be if he were a mere
      point did not, however commend                       suburban resident coming and going from
      themselves entirely to the other two                 the place where he resided, and which he
      members of the Court in that case and do             occupied without any reference to his
      not appear to have found acceptance on any           carrying on business there. But here we
      other occasion on which not dissimilar               have a taxpayer who comes and goes from
      problems have arisen for consideration.106           the place at which he is carrying on
                                                           business, over which his personal
    This criticism was addressed by the majority in        supervision is necessary, and at which it is
Payne who adopted a narrow view of what the                necessary for him to be for the purpose of
High Court had said. According to Sackville and            carrying on that business. When he goes
Hely JJ, the criticism by the High Court Justices          from there - 'X' - to 'A' and 'B' it is
specifically focused on Holyrod J's Judgment and           necessary for him to return to 'X' to carry
did not address the reasoning advanced by the              on the business at 'X'. So it is necessary for
other judges in the case. The Full Federal Court           his business at 'A' and 'B' that when he
majority cited the following passage from                  goes from there to 'X' he shall return to 'A'
a' Beckett J's judgment107 (with which Hodges J            and 'B'. We are dealing, therefore, with a
concurred) and stated that the joint judgment in           case in which travelling is necessary to three
Lunney & Hayley "had nothing critical to say               places, at each of which his presence is
about the reasoning":108                                   requisite for the purpose of his carrying on
                                                           the businesses from which his taxable
      With reference to the second question, I             income is produced.
      think it is material to observe that this is not
      a case in which the person who pays his

    (1958) 100 CLR 478, 498; (1958) 11 ATD 404, 412.
    (1903) 29 VLR 298, 305-306.
    99 ATC 4391, 4402.

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     With respect to Sackville and Hely JJ, the High                  work is generally deductible. The conceptual
Court in Lunney & Hayley whilst only specifically                     problem with this approach is that the High Court
mentioning Holyrod J's judgment were actually                         would be adopting inconsistent approaches to
addressing the general issue of whether the                           characterisation (that is, a restricted approach in
expenditure was "incidental and relevant" to the                      the first situation and a broad approach in the
taxpayers' income-earning activities. It is                           second). However, another way of looking at the
submitted that the more appropriate construction                      matter is that it would simply be creating another
of the High Court analysis is that their Honours                      judicial exception to the general rule that travel
disagreed with the decision in In re The Income                       between home and work is not deductible. Such an
Tax Acts in so far as it could potentially apply to s                 exception would be similar to the exceptions
51.109 In other words, it can be inferred that their                  identified in the itinerant travel and bulky goods
Honours would not have regarded the relevant                          cases which are all based on the existence of
expenditure incurred in the early Victorian case as                   "special facts".
having been "incurred in gaining or producing"
the taxpayer's assessable income for the purposes of s                    The problem of characterising expenditure on
51.                                                                   travel between home and work or business
                                                                      becomes most acute where the home also
    It should also be recalled that Lusher J in                       represents a place of work or business. In such a
Garrett had relied on the High Court decision in                      case, the taxpayer is both living at home and
Green for the conclusion that expenditure on travel                   working there. The home serves two distinct roles.
between different places of business or                               If a broad approach to characterisation is to be
employment is deductible. It is submitted that the                    preferred and Lunney & Hayley is to be
weight of this authority is also questionable given                   distinguished, the better approach is to distinguish
that Lunney & Hayley was handed down after                            the following two kinds of cases:
Green. Moreover, the lack of any analysis of
principles in the High Court judgment in Green is                     1. The first kind of case arises where either:
also of concern. When one reads the judgment it is
apparent that the High Court did not cite any                            (a) immediately prior to travel to a place of
authorities for its conclusion. Indeed, the judgment                         work away from home, the home is used as
is conspicuously brief.                                                      a place of work; or
    On the other hand, it is apparent that Lunney &                      (b) immediately after the taxpayer returns home
Hayley did not concern travel between two places                             from a place of work away from home, the
of work and the decision can therefore be                                    home is used as a place of work.
distinguished on its facts from those cases
involving travel between two distinct places of                       2. The second kind of case arises where either:
work. Therefore, if special leave is granted in
Payne, the High Court will, strictly speaking, not                       (a) immediately prior to travel to a place of
need to feel directly constrained by its earlier                             work away from home, the home is used for
decision in Lunney & Hayley. Instead, it will be                             private purposes; or
free to focus on the special facts involved in the
case without being curtailed by the impediment of                        (b) immediately after the taxpayer returns home
the views expressed in the earlier decision. The                             from a place of work away from home, the
High Court could conceivably endorse both the                                home is used for private purposes.
Lunney & Hayley principle as well as a separate                           It is submitted that in the first kind of case, the
principle that travel between different places of                     taxpayer should be entitled to claim a deduction

   Interestingly, this was the interpretation adopted by the Administrative Appeals Tribunal at first instance in Payne (Case 26/97
97 ATC 296).

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                                                                                                             S BARKOCZY

for travel expenditure, whereas in the second kind                          be a place of business does not make it a
of case, the taxpayer should not. For instance, it is                       place of business on those occasions when
submitted that if a taxpayer who works from home                            no work is in fact carried on at home.114
simply wakes up one morning and travels to
another unrelated workplace, the taxpayer should                           Subsequently, in dealing specifically with the
be in no different position to an "ordinary                            issue of travel between unrelated places of work or
taxpayer"110 that does the same thing. In both                         business, Professor Parsons observes:
cases, the taxpayer is travelling from a place which                        Deductibility must ... be dependant on
at the relevant time was being used as his or her                           actual work in each place of business on the
home. No doubt this approach would raise                                    occasion of travel. A taxpayer who has a
questions as to whether or not a sufficient degree                          place of business at home in relation to one
of work activities are undertaken at home at the                            business or employment and a place of
relevant time in order to warrant a deduction.                              business in relation to another business or
Furthermore, the issue of whether a relevant                                employment elsewhere, will not be entitled
activity takes place "immediately" prior to or after                        to a deduction of the cost of travel on an
travel may, in certain cases, create some                                   occasion unless the travel follows
application problems.111 Notwithstanding these                              immediately on the performing of work in
matters, it is submitted that the above approach is                         his business at home, and there is worked
at least based on a sound principle and should                              performed on arrival at the place of the
provide equitable results between taxpayers.                                other business.115
    The law has applied a test not dissimilar to the
one proposed to the characterisation of the                            9. CONCLUSION
deductibility of interest. The "use test", as it has
become known, treats interest on borrowed funds                            The above discussion demonstrates that the
as deductible where the borrowings are used for                        courts have been prepared to circumvent the
income producing or business purposes.112                              rigours of the Lunney & Hayley principle in those
Likewise, it is submitted that travel to and from a                    cases where they have felt justified that special
home should be deductible where, at the relevant                       circumstances have warranted this. Clear
time,113 the home is used as a base of work or                         examples of this are found in the itinerant travel
business, but not where, at such time, it is used for                  and bulky goods cases. Ultimately, whether or not
private or domestic purposes. This view would                          a taxpayer will fall within these categories of
seem to find support in two distinct passages from                     exception will depend on the particular facts
Professor Parsons' work. In the first passage, he                      involved and each case will need to be considered
states:                                                                on the basis of its special circumstances.

      No authority would be necessary to deny a                            The unresolved issue at present clearly
      deduction of travel expenses on those                            concerns Payne's case. If the High Court grants the
      occasions when work is not taken home.                           taxpayer special leave to appeal the Full Federal
      The fact that home may on some occasions                         Court decision, it will be interesting to see whether it
                                                                       takes a broad or narrow approach to the

    That is, a taxpayer that does not have a base of operations at home.
    One of the anonymous referees of this article has asked to what extent would the fact that a taxpayer stops on the way home,
or after having arrived home, to have a cup of coffee, or lunch, breach the immediacy requirement. It is submitted that the answer
to this question will, to use classic legal terminology, depend on the facts of the case and is perhaps best left to the commonlaw to
    The "use test" was formulated by the High Court in Munro (1926) 38 CLR 153 and has since been widely applied: see eg, FC
of T v Roberts and FC of T v Smith 92 ATC 4380, 4388 (per Hill J).
    That is, immediately before or after travel.
    Parsons, above n 51, 475.
    Parsons, above n 51, 477.

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characterisation of the expenditure concerned. In                                narrow approach to characterisation along the lines
recent times, it has been difficult to predict the                               of Hill J's dissenting judgment in Payne would be
outcome of many High Court tax disputes.116 The                                  more conservative. On balance, such an approach
High Court could conceivably adopt a broad                                       would be more consistent with Lunney & Hayley
approach and distinguish Lunney & Hayley. Such                                   and the many cases handed down since that
a "progressive" approach would be welcomed by                                    decision which have also adopted narrow
the many taxpayers who have more than one                                        approaches to characterisation.
employment or business. On the other hand, a

    Indeed, in the author's opinion, the High Court has delivered a number of controversial and arguably surprising tax judgments
in the last decade. See, for example, Hepples v FC of T (1992) 173 CLR 492, Coles Myer Finance Ltd v FC of T (1993) 176 CLR
640, FC of T v Orica Ltd 98 ATC 4494 and FC of T v Montgomery 99 ATC 4749.

Stephen Barkoczy is an Associate Professor at Monash University and a Consultant at Blake Dawson Waldron. He has consulted to the Australian
Taxation Office and was formerly National Tax Director at Pannell Kerr Forster. Stephen has published many articles on taxation law and is a contributor
to three books. He is also a member of various Advisory Boards and Law Institute of Victoria Committees.

SEPTEMBER/OCTOBER 1999                                                                                                                383

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