Case G67
Judges: JL Burke ChRE O'Neill M
CF Fairleigh QC
Court:
No. 1 Board of Review
C.F. Fairleigh Q.C. (Member): The taxpayer is a professional musician. In his return of income for the years ended 30 June 1970 and 1971 he claimed deductions for 80% of depreciation and running expenses of his motor car. He used the car to transport his instrument and some associated equipment from his residence to the places where he took part in musical performances and practice sessions. In each of those years the claim was also in respect of use of the car in his engagements as an arranger of music.
ATC 501
2. The particulars of the claims are -
30 June 1970
Depreciation $552
Less 20% private 110 $442
----
Running expenses 758.57
Less 20% private 151.71 606.86
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Deduction claimed $1,048.86
---------
30 June 1971
Depreciation $428
Less 20% private 86 $342
----
Running expenses 797.41
Less 20% private 159.48 637.93
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Deduction claimed $979.93
--------
3. The Commissioner adjusted those claims to the following extent -
30 June 1970
Claim (based on 20% private use) $1,049
Less 60% private 525
-------
Deduction allowed $524
-------
30 June 1971 (after a subsequent amended assessment to correct
an error in calculation)
Claim (based on 20% private use) $980
Less 60% private 489
-----
Deduction allowed $491
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4. Upon reference of the decisions on the objections to the Board the Commissioner contended that no deduction should have been allowed as the total use of the vehicle was private but he did not seek a revision of the assessments.
5. The main contention is whether the matter comes within the principle of
F.C. of T.
v.
Vogt
75 ATC 4073
in which
Waddell
J. said
-
``... the first step in determining whether the expenditure in the present case is deductible under sec. 51(1) is to state what are the relevant aspects of the operations carried on by the taxpayer for the production of his income. These are that he earned his income by performing, at several places, on musical instruments and associated equipment upon terms that he brought the instruments and equipment to the place of performance; the instruments and equipment were of substantial value; they were of a bulk which meant they could be transported conveniently only by the use of a motor vehicle; the taxpayer kept the instruments and equipment at his residence for justifiable reasons of convenience and for the purpose of practising on them. This step must first be taken in order to take the next step which is to determine what was the essential character of the expenditure itself. These matters are, I think, relevant to this character. Firstly, the expenditure was incurred as part of the operations by which the taxpayer earnt his income. Secondly, it was essential to the carrying on of those operations: there was no other practicable way of getting his instruments to the places where he was to perform. Thirdly, in a practical sense, the expenditure should be attributed to the carriage of the taxpayer's instruments rather than to his travel to the places of performance. The mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance,
ATC 502
that is by carrying them in the motor vehicle which he drove. In the light of these matters it is my opinion that the essential character of the expenditure was such that it should be regarded as having been `incurred in gaining or producing the assessable income'.''
6. Whilst there were occasions when the taxpayer needed an additional instrument (an electric bass guitar) the instrument and associated equipment which in any event he had to transport for each musical performance and practice session were -
- (i) A trombone (either in a soft case or in a hard case which nonetheless was not reinforced throughout).
- (ii) A small metal stand on which to rest the trombone during parts of performances.
- (iii) A canvas ``airways'' type bag in which the mutes for the trombone were carried.
It would not be a physical impossibility for him to carry all three units at the same time but it is impracticable to suggest that he should carry equipment of this bulk by public transport even if it could be shown that public transport was within walking distance of his residence and of the place of performance and at the times reasonably convenient for him. The trombone is of substantial value (its cost was approximately $600). It is delicately constructed, easily damaged and virtually non-repairable. The practical means of taking that equipment back and forth between his residence and the places where he needs it for musical performances and practice sessions is by motor vehicle and the sensible course is for the taxpayer to accompany the equipment. These facts establish that the matter is within the principle of Vogt's case for all the occasions when the taxpayer drove his own car to transport the trombone, the stand and mutes whenever he was engaged to play the instrument, e.g., at clubs, at concerts, as a member of a band run by a proprietary company, at television and broadcasting studios, at recording sessions and at practice sessions.
7. The Commissioner placed before the Board a letter from a television corporation stating that on one occasion the taxpayer was engaged to play a trumpet. The taxpayer's evidence is accepted that this is an error and that he cannot play a trumpet. Thus no question arises whether a claim for a deduction would be sustainable if all that the taxpayer had to carry was a trumpet.
8. On many occasions, seemingly about once a fortnight, the taxpayer had to include an electric bass guitar in the equipment as mentioned in para. 6; on many occasions also he had to carry music sheets in a flat brief case; at most of the performances at a club (several every week) he was required to be in dress clothes and either had to travel so dressed or carry a change of clothing. All these matters make a fortiori the conclusion which is set out at the end of para. 6. So also with the letter which the Commissioner obtained from the club where the taxpayer was performing regularly that the club had no lock-up facilities for instruments.
9. The taxpayer included in his claim the expenditure resulting from the mileage he travelled to attend a musicians' club where he did not work and to visit on social occasions musicians with interests similar to his own and to attend concerts as a member of the audience. The evidence does not establish that these matters are ``in a correct sense incidental to his employment'' to adopt the expression from
F.C. of T.
v.
Finn
(1961) 106 C.L.R. 60
at p. 68
.
10. It can be accepted on such scant evidence as there is that the taxpayer stood in the relationship of employee to employer in respect of the club at which he as a member of a band played regularly - an overall average of five times a week and one rehearsal a week and various special occasions. So also with his relationship to a proprietary company whose business was to provide a band for concerts. Similarly when he was engaged as a member of a band on a cruise ship. On one occasion he played at another club and was subject to the direction of a band leader and he can be taken to be an employee; this seems likely also in respect of his participation in television shows and at recording sessions where presumably he was not a soloist and there was a leader with some responsibilities of an employer.
11. On the other hand the very nature of the work in composing musical arrangements indicates that the taxpayer was self-employed, an independent contractor, so far as that branch of his activities is concerned. The work of composition was done at his residence where he kept for that and other purposes a classical type guitar and organ, in addition to the trombone and electric bass guitar. This aspect of the matter is completely outside Vogt's case
ATC 503
and it can be related to the principle in such cases asF.C. of T. v. Green (1950) 81 C.L.R. 313 at p. 319; 9 A.T.D. 142 at p. 147 , viz., expenditure ``incurred in relation to the management of the income-producing enterprises of the taxpayer''. On these occasions the taxpayer had to carry at most, sheets of music in a brief case. He used his car on these occasions in travelling back and forth from his residence to the places where he received the commissions and delivered the compositions. His right to a deduction for the use of his car in respect thereof is the same as that of any other person in business on his own account who uses his car in the ordinary conduct of his business. See also the series of cases referred to by the Member Mr. O'Neill in para. 11 et seq. of his reasons in Case D5,
72 ATC 21 .
12. It is desirable to state why this aspect of the claim is available to the taxpayer. In each of the two years there is a statement in an annexure to the return that the ``taxpayer used his car to transport... and in connection with his profession of musical arranger''. That is ample to bring squarely before the Commissioner that the taxpayer is claiming for car use independent of transport of instruments. In each return there is a clear dissection of income and that from employment is entered under item l and income from arranging (1970) and musical arrangements (1971) is shown as fees and commission under item 8. That is sufficient indication that the taxpayer is returning income from the private practice of his profession as an arranger of music and claiming deductions for travelling expenses relevant thereto. The assessment was thus made and the allowances adjusted on material before the Commissioner that the taxpayer has the dual capacity of employee and independent contractor. The notice of objection includes a statement that motor car running expenses and depreciation have been incorrectly decreased and the balance incorrectly considered as private expenditure. (As to the construction of a notice of objection see
Caltex Ltd.
v.
F.C. of T.
(1960) 106 C.L.R. 205
per
Taylor
J. at p. 246 and per
Menzies
J. at p. 255;
A.L. Campbell
&
Co. Pty. Ltd.
v.
F.C. of T.
(1951) 82 C.L.R. 452
per
Dixon
J.
-
as he then was
-
at p. 461 and
F.C. of T.
v.
Western Suburbs Cinemas Ltd.
(1952) 86 C.L.R. 102
per
Kitto
J. at p. 106.)
13. The Commissioner's representative in accordance with her customary care in preparation and perception of issues cross-examined the taxpayer both on the issue of an independent business, e.g., a listing in the appropriate section of the telephone directory, and the issue of quantum, e.g., mileages in relation to the obtaining of commissions to do musical arrangements. These issues were clearly ``live'' ones on the hearing of the references.
14. On the basis of the evidence placed before the Board the following represent acceptable estimates of the mileages travelled by the taxpayer in deriving income from the several sources indicated in the table -
1970 1971
Social club -
Regular attendances 2,820 3,120
Special attendances 390 390
3,210 3,510
Proprietary company 1,320 1,580
Miscellaneous
engagements 152 106
Trips connected with
musical arrangements 64 176
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4,746 5,372
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15. The taxpayer's estimated total mileage for the above years was 7,900 and 7,712 respectively. Rounding the figures to 4,700, 5,400, 7,900 and 7,700 respectively produces percentages of 60% and 70% which should be used to apportion the deductions allowable for car running expenses and depreciation for the said years of income.
16. Thus the deductions allowable would be -
- (a) Year ended 30 June 1970 - $787 being 60% of $1,311 (running expenses $759 and depreciation $552).
- (b) Year ended 30 June 1971 - $857 being 70% of $1,225 (running expenses $797 and depreciation $428).
On these findings the respective assessments should be amended to allow a further deduction of $366 for the year ended 30 June 1971.
Claims allowed in part
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