87 ATC 575
RA Layton DP
DJ Trowse M
DB Williams M
Administrative Appeals Tribunal
Judgment date: 25 March 1987.
R.A. Layton (Deputy President), D.J. Trowse and D.B. Williams (Members): This is an application for review of a decision of the Commissioner who disallowed the taxpayer's claim for $206 in the year of income ended 30 June 1984, in respect of clothing, dry cleaning and laundering expenses pursuant to the provisions of subsec. 51(1) of the Income Tax Assessment Act 1936 ("the Act").
2. The facts giving rise to the application are that the taxpayer was employed for a period of six months as a part-time shop assistant in John Martin's department store. A statement of agreed facts was tendered by the parties in the following terms:
"1. From 1 December 1977 to 26 January 1984, the applicant was employed by John Martin Retailers Limited (`the employer'), a company which carried on the business of a retail merchant at various locations in South Australia.
2. The applicant was employed on a part-time basis in the capacity known as shop assistant. Her duties exclusively involved the sale of the employer's product to the general public. The applicant's duties were performed at the employer's premises at Marion.
3. During the period of the applicant's employment, the employer required its employees to dress whilst on duty according to the standard set out at pages 27 to 30 of the staff information booklet, attached as Appendix A.
4. In particular, page 28 of Appendix A sets out the standard of dress required by the employer of its female selling staff (`the
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required standard'). That standard was the appropriate standard to be observed by the applicant for the period 1 July 1983 to 26 January 1984 (`the relevant period').
5. During the relevant period the applicant purchased certain clothing conforming to the required standard at a total cost of $136.13. A detailed description of the purchases is set out at Appendix B.
6. The clothing listed in Appendix B was purchased by the applicant from the employer. It was of the same type as that offered for sale to the general public.
7. The clothing was neither monogrammed nor identifiable in any other way as clothing peculiarly worn by the employees of the employer. However all employees were required to wear removable identification badges carrying the company's name and the employees' names whilst on duty.
8. The employer placed no restriction on the wearing of the clothing outside the employee's hours of duty. However, apart from those periods spent travelling to and from work, the applicant did not wear the clothing outside those hours.
9. The applicant would not as a matter of choice have worn clothing in the colour combination required by the employer.
10. No clothing was provided to the applicant by the employer during the relevant period, no reimbursement of clothing expenses was made and no allowance in respect of clothing expenses was paid or payable.
11. During the relevant period, the applicant incurred expenses of $70.00 in respect of dry cleaning and laundering of the clothing referred to in Appendix B.
12. In the return of income year ended 30 June 1984, the applicant claimed as deductions amounts of $136.13 in respect of the purchase of the clothing and $70.00 in respect of dry cleaning and laundering expenses. The deductions were disallowed by the Commissioner and objection was taken by the applicant as set out in the documents forwarded to the Tribunal by the Deputy Commissioner of Taxation on 23 June 1986."
3. The relevant details as to dress are set out in pp. 27-28 of annexures which form part of a staff information booklet, as follows:
"STANDARDS OF DRESS AND PERSONAL PRESENTATION
We place great emphasis on the personal appearance of our staff at all times and we do not accept unsatisfactory standards in this matter. We expect our staff to reflect the clean contemporary appearance of our stores and therefore staff must be well presented and take pride in their appearance. For these reasons and also those of employee safety the following standards must always be strictly adhered to.
Whilst dress and grooming are very personal matters, we ask that all staff use commonsense and good taste in deciding on style, accessories and overall appearance. However as a guideline, dress and personal presentation must reflect a business-like appearance. Due to the varying interpretations of just what does represent good taste, the final decision on this will be at the discretion of your Store Manager for selling staff and Divisional Manager for non-selling staff.
We also require our staff to maintain the highest standards of personal hygiene as they need to work closely with customers and other staff members.
To wear a plain black tailored dress, suit or skirt, plain black or white blouse, either long or short sleeved. No cap sleeved, or sleeveless dresses or blouses are to be worn.
Multi coloured garments, or contrast piped garments are not permitted. Casual T-shirts are not permitted. Good quality plain black knitwear may be worn.
Shoes must be black business style. There is no regulation as to heel heights, other than that which is consistent with commonsense and safety. Flesh colour, black or dark grey fine denier hosiery only is acceptable. Hair should always be clean, tidy and well styled and not obscure vision.
Make-up should be moderate and of a tasteful application. Appropriate accessories and jewellery are encouraged but in all
87 ATC 578
cases, must complement the outfit and should be moderate in style and quantity. We ask that personal adornment be kept to a minimum, and suitable to our business environment. The final decision will be at the discretion of your Store Manager.
Staff in certain areas of the store are permitted to dress in a manner appropriate to that department. The Sales Manager will inform you of dress standards and regulations for these areas."
4. It was argued by Mr Allen, agent for the taxpayer, that it was a requirement of the taxpayer's employment for her to wear a black and white combination uniform, shoes and stockings whilst serving members of the public as a shop assistant. The clothing purchased by the taxpayer consisted of a black skirt, 2 white blouses, a black jumper, black shoes and black stockings. Mr Allen submitted that expenditure in relation to the purchase, dry cleaning and laundering of that clothing was expenditure incurred by the taxpayer in gaining assessable income and did not constitute expenditure of a private or domestic nature. The quantum of the claim is not disputed by the respondent.
5. The respondent, by his counsel, Mrs McHugh, submitted that the expenditure did not come within the first limb of subsec. 51(1) of the Act and, in addition, it was encompassed in the exception to that subsection, being expenditure of a private or domestic nature. The clothing was not a "uniform" and did not possess distinctive or unique features referable to the taxpayer's employment.
6. The question of expenditure in relation to uniforms has been the subject of many decisions of the previous Taxation Boards of Review. Initially, two separate tests emerged. In Case H61,
(1958) 8 T.B.R.D. (N.S.) 287, the test was whether the clothing was "necessary and peculiar to (his) occupation". In Case A45,
69 ATC 270, the test propounded was whether or not there was "abnormal expenditure on conventional clothing".
7. These two tests were accepted as the appropriate tests in subsequent cases. In Case 2,
(1967) 14 C.T.B.R. (N.S.) 7 the decision concerned a saleswoman required to wear a black dress. The taxpayer used the black dress exclusively for her employment, she did not wear the dress on other occasions and even preferred to wear street clothing to and from her work, changing into her black dress when at work. It was held by the majority of the Board that the claim should be disallowed as the expenditure was of a private nature and, although it may have been necessary for her to wear that dress in order to obtain assessable income, it was not peculiar to her occupation. As was stated by a member, Mr Thompson at p. 14:
"The frocks were not adapted in any way to meet the particular exigencies of her employment and were indistinguishable in every respect, except colour, from frocks worn by persons of her sex and station in life."
8. A similar point of view was expressed in Case G81,
75 ATC 572, in which clothing purchase and maintenance expenses were claimed by a fashion designer of a department store. The employer had rules as to the colour and length of dresses and the taxpayer was required to wear black. It was held that the claim should be disallowed as the clothing did not satisfy either the "necessary and peculiar" test or the "abnormal expenditure on conventional clothing" test.
9. Similarly, in Case H2,
76 ATC 7, an employee in a chain store was required to wear clothing consisting of black skirt and white blouse. That was its sole use, and the taxpayer changed before leaving the store. Again, it was held that the claim should be disallowed and the above previous decisions were followed.
10. However, the "necessary and peculiar" test and the "abnormal expenditure on conventional clothing" test have since fallen into disfavour on the basis that such tests are inappropriate and should not be used as a substitute for the wording used in subsec. 51(1) of the Act (see in particular Cases H32,
76 ATC 280;
N76 81 ATC 394). Whilst the application of such tests may no longer be appropriate, the final decision reached by those Boards has not been questioned.
11. A recent case, Case R55,
84 ATC 411, was concerned with clothing in the nature of a uniform, in which the Board considered the particular wording of subsec. 51(1). A female bank officer claimed the purchase and maintenance expenses of a vest, blouse and jumper, being clothing required by her employer bank to be worn at work. Evidence was given that it was a requirement of the bank
87 ATC 579
that female employees wear a skirt, blouse and jumper of a particular style and material, other clothing items being optional. The uniform replaced a previous uniform. The uniform requirements were specified in some detail by the employer. The employer also supplied each female employee with a jumper and skirt at its own expense. Arrangements for the supply of the skirt, vest, jumper, cardigan and blazer were made through particular manufacturers, and supply was not available to ordinary members of the public, although skirts may be purchased from the manufacturer by other interstate organisations. The employees were also required to wear a name-tag with a logo. The Board allowed the taxpayer's claim, and in doing so, expressed the view that the clothing did not fit either the "necessary and peculiar" test, nor the "abnormal expenditure on conventional clothing" test. However, the Board did not indicate that those tests were to be disregarded, rather they preferred to consider the facts having regard to the particular provisions of subsec. 51(1).
12. In reaching its conclusion that the claim should be allowed, the Board referred to the ordinary use of the word "uniform" which was described as clothing "... of the same pattern, colour and material against a number or body of persons". It was noted that the clothing required by the employer was distinctive and was not available to the general public; that the bank employees could be identified by the uniform; that there were elaborate specifications for the obtaining of the uniform; that the uniform was of durable material and part of a five-year uniform plan. The Board concluded that, having regard to the provisions of subsec. 51(1), the expenses of purchase of the clothing and its cleaning were expenses of a business kind and arose from a condition of the taxpayer's employment which required her to wear a particular uniform when on duty. Therefore, the outgoings in respect of the uniform were incurred in gaining assessable income. Further, they were not outgoings of a capital nature, being replacements of an obsolete uniform, nor were they outgoings of a domestic nature.
13. In considering clothing in relation to employment, Mr Donovan in Case 2, (1967) 14 C.T.B.R. (N.S.) 7 (supra) remarked at pp. 8-9:
"It may be taken as ordinarily understood that, in general, the cost of accommodation, food and clothing for a taxpayer are expenses of a private nature... it is not possible to describe with any precision the circumstances in which expenditure on clothing ceases to be of a private character and assumes the nature of an income-producing expense... A nexus which permits one to say that the expenditure falls upon the taxpayer not as an individual member of society, but unmistakably in his capacity as earner of income, and the occasions when this nexus exists will probably be found to be comparatively few."
14. Most people "dress" for work in some way which differentiates their work clothing from their leisure, social or clothing worn for other activities. Some may "dress up" for work by being more formal, others may "dress down" because, for example, of the physical requirements of their work. However, some form of dressing is used by us all and such clothing may depend on the weather, our economic or social position, personality, mood and the occasion. The purchase and wearing of clothing as well as its cleaning and maintenance is therefore a necessary and personal expense which would normally be classified as being an expense of a private and domestic nature.
15. There are occasions, however, when because of the relationship between expenditure on clothing and the gaining and producing of income, the private and domestic character of that expenditure is converted instead to an employment or business character. Unless that incidental and relevant relationship exists, expenditure on clothing remains private and/or domestic in nature.
16. Merely because a taxpayer dresses for work in a particular way which differentiates work clothes from other clothing worn, does not, in itself, mean that the relationship between the expenditure on clothing and the gaining and producing of income, exists. There must be something more. The express or implied requirement by an employer either for a distinctive and unique "uniform" as used in ordinary parlance and expenditure on the maintenance of that uniform, would usually be sufficient to provide the necessary nexus to convert what would otherwise be private or domestic expenditure on clothing to an allowable deduction. This does not mean that there may not be other variations or degrees of
87 ATC 580
work clothing which may also satisfy subsec. 51(1) requirements. The starting point must be that in the absence of a relevant income connection between the expenditure in relation to clothing and the gaining or producing of income, expenses in relation to clothing will not normally be deductible pursuant to subsec. 51(1) of the Act.
17. There is no one test which will satisfy all facts, but clearly on the decided cases, relevant considerations include:
- (1) Express or implied requirements of the employer or business concerning clothing;
- (2) The extent to which the clothing is distinctive or unique to the nature of the employment or business having regard to particular, special or accepted work clothing requirements, including its availability to be worn by members of the general public;
- (3) The extent to which the clothing is used solely for work;
- (4) The extent to which the clothing is unsuitable for any activity other than work;
and no doubt other factors may become relevant depending on particular facts or circumstances of a given case.
18. On the facts in this case, a female shop assistant in John Martin's had a multiple choice of clothing:
- black dress with or without black knitwear or black suit
- or black suit with black blouse or white blouse or black knitwear
- or black skirt with black blouse or white blouse or black knitwear.
There was no stipulation as to the style, length or material of the clothing. The common factor was merely the black and white colour combination which is not in itself a distinctive colour association. There were some minor limitations excluding multi-colour garments, sleeveless clothing, contrast piping and casual T-shirts. The employer requirements did not, therefore, come within the description of "uniform" as used in common parlance as discussed in Case R55, 84 ATC 411 (supra) instead being clothing united only in regard to colour.
19. There is nothing distinctive or unique about the combination of clothing which would identify the wearer as a John Martin's shop assistant or even a shop assistant from another department store. The colour combination of the clothing would be included in the range of acceptable street dress unassociated with business or employment, as well as a combination of colours sometimes worn by female drink or food waiting staff. Further the clothing could be purchased and worn by members of the general public unassociated with the taxpayer's employment.
20. Whilst the taxpayer only wore the clothing at work or whilst travelling to and from work, there was no impediment placed on her by her employer to restrict the wearing of the clothing outside her work hours. The clothing was not unsuitable for any use other than employment; to restrict its use was a choice made by the taxpayer.
21. For these reasons, therefore, we consider that the essential character of the expenditure of the taxpayer on clothing does not satisfy the requirement of subsec. 51(1), nor was it incidental and relevant to the performance of her duties. Further, even if it were so relevant and incidental, such expenditure did not have the necessary nexus to convert what would normally be a private or domestic expenditure into an employment-related expenditure. It is a question of the extent and degree of connection, and it must be close in order to qualify as a deduction under subsec. 51(1).
22. In the above passages, we have concentrated on the clothing of the taxpayer but, in our view, the purchase of shoes and stockings have even less connection with the gaining or production of assessable income and also remains a private or domestic expenditure.
23. For these reasons, we consider the decision of the Commissioner should be affirmed.