87 ATC 1214
DJ Trowse M
Administrative Appeals Tribunal
Judgment date: 30 November 1987.
D.J. Trowse (Member): The question for decision in this reference is whether the applicant, a food and drink waitress, is entitled to claim as a deduction amounts expended on cosmetics during the 1985 year of income. The claim is to be determined in accordance with the provisions contained in the first limb of sec. 51(1) of the Income Tax Assessment Act 1936 ("the Act"). The amount in issue is $240.
2. Throughout the whole of the 1985 financial year, the applicant was employed by a leading restaurant and tourist complex as a waitress. The basis of that employment was described as permanent casual. In that capacity she was engaged to wait upon customers of the restaurant both at lunchtime and of an evening, and it seems that this double shift format resulted in a level of expenditure on cosmetics over and above her normal requirements.
3. An examination of the applicant's 1985 tax return reveals a claim for cosmetics to the extent of $240 which represented 50% of the amounts expended on items of that description during the year. A note attached to the return and relevant to the matter under review contained the following information:
"Her employers insist that their waitresses maintain the highest standards of dress, grooming and appearance at all times. In
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order to achieve and maintain these high standards the taxpayer finds it necessary to spend far more on cosmetics than she normally would."
4. The contents of a memorandum, issued by the employer to all new staff, and which was included in the file of documents presented to the Tribunal, attests to the requirements of management. Those parts relevant to this issue are as follows:
"Welcome to the staff of...
The following information is of great importance to you.
In order to maintain the... Restaurant as a professional restaurant with high quality food, excellent service and a unique casual seafaring atmosphere, the following procedures must be maintained.
We ask you, in the interests of achieving these goals, to be familiar with, and conform with them.
- Females: Hair should be sufficiently restrained in order to prevent its contamination of food and beverages. Make-up and lipstick required at all times."
Bearing in mind the criteria that has been applied in other references having common features with those in the present matter (see for example Case N34,
81 ATC 178), it was not surprising to find that the Commissioner's representative placed emphasis on the fact that the prescription made no mention as to either style, colour tone or brand name.
5. As between the parties, there was no dispute as to the quantum of the claim.
6. The provisions of sec. 51(1) of the Act, as they relate to this matter, are as follows:
"All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income... shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature..."
7. The application of this limb was considered by the Full High Court in
F.C. of T. v. D.P. Smith 81 ATC 4114, and in my opinion the views expressed at p. 4117 are of assistance:
"The section does not require that the purpose of the expenditure shall be the gaining of the income of that year, so long as it was made in the given year and is incidental and relevant to the operations or activities regularly carried on for the production of income. What is incidental and relevant in the sense mentioned falls to be determined not by reference to the certainty or likelihood of the outgoing resulting in the generation of income but to its nature and character and generally to its connection with the operations which more directly gain or produce the assessable income."
8. In my view the only perceivable connection between the outgoing and the gaining of the assessable income is the condition of employment imposed upon the applicant to wear makeup at all times. Thus the fundamental question is whether that relationship is sufficient to convert an outgoing generally regarded as private to one possessing a businesslike nature. The primary submission made on behalf of the applicant relies on the premise that the derivation of her assessable income was made possible only by compliance with the condition imposed by the employer. Whilst I am prepared to acknowledge that the expenditure may have been incurred for the purpose of earning the assessable income and that it constituted an essential prerequisite to such derivation, those aspects are not, in my opinion, sufficient to satisfy the requirements of the subsection. Rather it is the essential character of the particular expenditure that must be considered in order to determine whether it is income producing or not - see
Lunney and Hayley v. F.C. of T. (1957-1958) 100 C.L.R. 478 and
Lodge v. F.C. of T. 72 ATC 4174.
9. After a consideration of all pertinent facts, my view is that the nature and character of the amounts expended on cosmetics were neither relevant nor incidental to the very acts or operations directly engaged in by the applicant in the gaining of her assessable income as a waitress. My conclusion is that the amount of $240 was not incurred "in" gaining or producing the assessable income. That view remains unaltered by the fact that there were occasions when the applicant spent additional
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amounts on cosmetics because of the necessity to work two shifts per day.
10. In any event, I regard the purchase of cosmetics by the applicant as a classic example of private expenditure incurred as part of her day to day living expenses. As such they come within the exception clause of sec. 51(1) of the Act and no deduction is permitted.
11. For the reasons stated above, the Tribunal affirms the determination of the Commissioner upon the objection.
12. In conclusion, it is appropriate to comment on an additional submission made by the applicant's tax agent which was based on an alleged agreement between the Commissioner and employees of another well-known and substantial entertainment centre that, inter alia, provides meals and bar facilities to its patrons. In terms of that arrangement it was asserted that an agreement had been reached whereby female employees of that organisation be granted a tax deduction of $9 per week to cover the costs of cosmetics, hairdressing, etc., and that the employees, when making such a claim, should quote a particular reference number in compiling that part of their returns. Although the applicant's tax agent was able to speak with familiarity on the contents of a purported letter written by the Commissioner to a representative of the employee group concerned, which detailed particulars of the concession, he was not in a position to produce a copy of that correspondence. The Commissioner's representative was not able to advise whether such an arrangement existed, and, in any event, he correctly referred the Tribunal's attention to that portion of the decision in
F.C. of T. v. Wade (1951) 84 C.L.R. 105 which states that no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act.
13. Irrespective of that explanation and the possibility that the factual situations may be at variance, one can readily imagine the sense of frustration experienced by the applicant. If such an arrangement does exist, then hopefully the Commissioner will take the trouble to identify those factual differences to the applicant.