81 ATC 383
KP Brady Ch
LC Voumard M
JE Stewart M
No. 2 Board of Review
Judgment date: 8 September 1981.
K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)
This reference concerned the year of income ended 30th June, 1977, and raised the issue of whether expenses, amounting to $360, which were incurred by the taxpayer, a commercial airline pilot, in undertaking a fitness course, were an allowable deduction pursuant to the provisions of sec. 51(1) of the Income Tax Assessment Act 1936.
2. At the hearing, the taxpayer appeared in person and gave evidence on oath. He was not represented. The Commissioner was represented by one of his officers.
3. At the time of the hearing the taxpayer had held a commercial pilot's licence for some 11 years and had been employed as a pilot by his then employer since 1975. To continue in employment as a pilot, it was necessary for him to hold a current pilot's licence and for that purpose he was required each six months to pass a medical examination which was carried out by a government appointed medical officer. It appears that each examination involved a thorough physical check-up of the applicant with particular attention being given to the condition of his reflexes, his eyes, his heart and blood pressure and to such associated matters as weight. It appears also that certain minimum physical standards were required to be met by the applicant and that certain weight limits could not be exceeded. Failure to pass such an examination would result in the loss of the pilot's licence held and, in the
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taxpayer's case, the loss of his immediate livelihood.
4. In one such examination just prior to the period in issue, which the taxpayer successfully underwent, the examining medical officer was said to have advised him that he was overweight and, without being specific, that he should do something about it. While the medical officer apparently did indicate in a general way that a fitness course should be undertaken, he did not specify any particular course. In the circumstances the taxpayer, in responding to the advice given, undertook a commercially operated general gymnasium course of weight-lifting and also followed a special diet which was prescribed by the same enterprise. As a result the taxpayer succeeded in reducing his weight to a satisfactory level, and up to the time of the hearing, he had retained his licence as a pilot.
5. To succeed in his claim before us the taxpayer must show that the expenses in issue fall for deduction under the provisions of the first limb of sec. 51(1) and that they do not fall within the exclusion provisions of the subsection as expenses of a private or domestic nature. The relevant words for present purposes of the first limb of sec. 51(1), ``... outgoings... incurred in gaining or producing the assessable income'', mean outgoings incurred ``in the course of gaining or producing'' such income (per Dixon J. (as he then was) at p. 309 in the High Court case of
Amalgamated Zinc (de Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295) in the sense that they are ``incidental and relevant to that end'' (per the joint judgment of the Full Court of the High Court at p. 56 in the case of
Ronpibon Tin N.L. & Tongkah Compound N.L. v. F.C. of T. (1949) 78 C.L.R. 47). However, as pointed out by the High Court in disallowing the claim arising in the case of
Lunney v. F.C. of T. (1958) 100 C.L.R. 478, which concerned expenses of travelling between home and work, the question of deductibility under sec. 51(1) cannot be determined simply by a process of reasoning which asserts that because expenditure on fares to work is necessary, in that unless one gets to work one cannot derive assessable income, it follows automatically that such expenditure must be regarded as ``incidental and relevant'' to the derivation of the income. Therefore, although expenditure of the kind in issue in the Lunney case (supra) is an essential prerequisite of the earning of assessable income, it is not expenditure which is, of necessity, incurred in gaining or producing the assessable income.
6. In commenting upon the decision in the Lunney case (supra), Mason J. at pp. 4175-4176 in the High Court case of
Lodge v. F.C. of T., 72 ATC 4174, which concerned a claim for a deduction in respect of child minding fees, stated that:
``The rejection in Lunney's case (supra) of the claim that the expenses of travelling between home and work was an allowable deduction was based on the proposition that it is not enough to show that the expenditure was an essential prerequisite to the derivation of assessable income. The decision denied the notion that an expense was incidental and relevant to the derivation of income merely because it was necessary in that sense. The decision turned rather upon a view of the character of the expenditure incurred.''
7. In rejecting the taxpayer's claim in the Lodge case (supra), Mason J., at p. 4176, stated that:
``... The expenditure was incurred for the purpose of earning assessable income and it was an essential prerequisite of the derivation of that income. Nevertheless its character as nursery fees for the appellant's child was neither relevant nor incidental to the preparation of bills of cost, the activities or operations by which the appellant gained or produced assessable income. The expenditure was not incurred in, or in the course of, preparing bills of cost.''
8. Likewise, in the instant case, we are of the opinion that we have no alternative but to arrive at the conclusion that the character of the expenditure in issue made it neither relevant nor incidental to the taxpayer's duties as an airline pilot, the activities by which he gained his assessable income, even though on the evidence the holding of the pilot's licence and the particular expenditure in issue appear as essential prerequisites of the derivation of that income. Therefore, in our opinion, the expenditure does not fall for deduction under the first limb of sec. 51(1).
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9. Because of the conclusion which we have reached, it is not necessary for us to consider whether the expenditure in question was of a ``private or domestic'' nature. However, having regard to the statements made by Mason J. at p. 4176 in the Lodge case (supra), concerning the nature of the expenditure there in issue, it would appear that, having concluded that the expenditure here in issue also falls outside the general provisions of sec. 51(1), there is no relevant reason for us not holding the expenditure to be other than private or domestic expenditure which was incurred by the taxpayer in relation to his personal health and welfare. Therefore, in our opinion, the expenditure was also excluded as a deduction under sec. 51(1) by the words of limitation contained in that subsection.
10. For the above reasons, we would uphold the Commissioner's decision on the taxpayer's objection and confirm the assessment in issue before us.