82 ATC 139
KP Brady Ch
LC Voumard M
JE Stewart M
No. 2 Board of Review
Judgment date: 16 April 1982.
K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members): The taxpayer is a real estate salesman employed by a public company in its real estate division. In the
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year of income in issue, that ended 30th June, 1980, he claimed a deduction under sec. 51(1) of the Assessment Act of amounts totalling $73 for the purchase of newspapers which he contended were of vital use to him in the earning of his assessable income. The Commissioner disallowed the claim on the basis that the expenditure was essentially private in nature and that decision is now before us for review.
2. The taxpayer derived his remuneration solely by way of commission which was directly related to the sales that he made. In the case of
F.C. of T. v. Barrett and ors. 73 ATC 4147, the High Court had cause to examine whether land salesmen receiving remuneration by way of commission instead of salary were independent contractors, or employees. The matter has relevance in the instant case following upon enunciation by the Courts in relatively recent cases of guidelines for deductibility of claims by employees under sec. 51 - refer
F.C. of T. v. Hatchett 71 ATC 4184;
F.C. of T. v. White 75 ATC 4018, and
Burton v. F.C. of T. 79 ATC 4318. The High Court, in Barrett's case, held that the salesmen in the situation which faced it were employees mainly because of the settled and permanent relationship which existed between the salesmen and the employer partnership, and (at p. 4152) considered that:
``The fact that remuneration takes the form of commission on sales or is paid on a piece work system or in some other form not strictly related to hours worked casts little light upon the relationship between the parties...''
3. As the various factors which led the Court in that case to view the salesmen as employees appertain also to the situation before us, we consider that the taxpayer was at all times in the year of income an employee, and not a contractor.
4. The Commissioner's representative argued not unexpectedly that the taxpayer was not able to demonstrate that his income was affected by expenditure on, or his regular early morning examination of, the real estate columns of those newspapers which he purchased. Within that context he pointed to the professional journals to which the taxpayer had access in his employer's office, also to the use he made of a multi-listing service. His conclusion, with which we agree, was that all those aids contributed to the derivation of the taxpayer's income and it was impossible for the taxpayer to specify, without adducing direct evidence, the separate contribution that the newspapers' purchase made to earning the sum total of his income.
5. We would consider that a heavy onus is placed on a taxpayer in seeking to obtain under the first limb of sec. 51 a deduction for an outlay (such as on newspapers) normally regarded as of a private nature. In
F.C. of T. v. Forsyth 81 ATC 4157, Wilson J., at p. 4163, in giving the principal majority judgment, approved the dictum enunciated in the Canadian case of
Brooks v. The Queen 78 DTC 6505, that there is a heavy onus placed on a professional man who seeks to claim expenses in using a room in his home as an office study, when that use is additional to occupying an office in a business environment. Similarly in the instant case, we consider that a substantial burden was placed on the taxpayer to demonstrate that at the very least some of the sales which he made resulted directly from his use of the newspapers. He was not able to discharge that onus.
6. Also the taxpayer was not able to provide satisfactory evidence of the expenditure claimed. It seems that one of the newspapers for which a full year's deduction was claimed did not commence publication until almost half-way through the year of income and it would appear that his claim represented a rough estimate only. We can only repeat what was said by this same Board as then constituted in Case C55,
3 T.B.R.D. 293 at p. 294 that:
``A taxpayer may thus, within the wide scope of the above remarks, be granted a deduction by the Commissioner without detailed proof of actual expenditure. But if he is denied such a deduction or is dissatisfied with its quantum and seeks to establish, on a review, that his assessment is excessive, proof becomes a statutory necessity.''
7. The Commissioner's representative also drew forth from the taxpayer the concession that it was not a condition of his employment that he buy newspapers, and he relied on the decisions in Hatchett's case and Burton's
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case (supra) to have deductibility precluded on that ground.
8. As an alternative submission, it was contended for the Commissioner that the character of the newspaper purchases was essentially of a private nature and therefore came within the exclusionary words of sec. 51(1). The purchase of newspapers is not inevitably of a private or domestic nature: for example, a dentist buying newspapers for his waiting room, but it seems to us in the particular circumstances of the instant case that the expense was essentially related to the taxpayer personally. Two of the newspapers which he purchased were delivered to his home each morning and the other two were purchased by him at the local delicatessen. Additionally, whilst he strenuously resisted the suggestion that there were occasions when he read parts of the newspapers other than the real estate columns, it would seem to us that there were times when he did, for he tended to prevaricate on that issue. Furthermore, his wife and eldest child then aged 11 had daily access to the newspapers, although it was again contended by the taxpayer that they did not in fact read them. It is worth noting that neither member of his family was called by him as a witness.
9. In our deliberations on the issue, we canvassed whether the newspapers took on the character of a trade journal so as to establish the necessary nexus between the expenditure and his income, but the sorts of personal considerations outlined above appear to preclude acceptance of that suggestion.
10. For the reasons outlined above, we are of the view that the outlay on the newspapers was essentially private expenditure. We would therefore uphold the Commissioner's decision and confirm the assessment.