Case N64

KP Brady Ch

LC Voumard M
JE Stewart M

No. 2 Board of Review

Judgment date: 21 August 1981.

K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)

This reference comes about because of the Commissioner's disallowance of a claim by the taxpayer, made in his return of income for the year ended 30 June 1978, to deduct an amount of $386 paid to a hypnotherapist for speech therapy treatment he underwent during that year. This was caused by his desire to overcome a speech impediment. He had voluntarily undertaken speech therapy in an earlier year when employed as a sales representative by employer A, and when, in December 1977, he was negotiating for employment as a sales representative with employer B, he was advised that it would be advantageous to him in his career to continue the treatment. The treatment, at least after he became an employee of B, could thus be described as a requirement of his employer. The taxpayer was not referred to the hypnotherapist by a medical practitioner, and received no reimbursement for the fees from any source.

2. In his return of income the claim was described as ``self education required for employment position'', but clearly this description was incorrect. However, nothing

ATC 335

turns on that, for the taxpayer's objection against the Commissioner's refusal to allow the claim was based, as was his argument before the Board, upon sec. 51(1) of the Income Tax Assessment Act. As far as relevant that provision reads:

``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 a... private or domestic nature.''

Conformably with the requirements of this provision, the taxpayer, who presented his own case, had the task of showing (a) that the expenditure was incurred in gaining his income as a sales representative, and (b) that it was not of a private nature.

3. We do not need to consider whether the expenditure came within the phrase ``incurred in gaining or producing the assessable income'' for we are clearly of the opinion that it was in any event expenditure of a private nature, and as such excluded from deductibility. Expenditure of a private nature has been described to mean ``losses or outgoings relating solely to the person incurring them as an individual member of society where that society is the society of human beings'' (refer Case F37,
(1955) 6 T.B.R.D. 214 at pp. 216-217). The fees paid to the hypnotherapist fall within this description, and so represent expenditure of a private nature, which is expressly excluded from deduction by sec. 51(1).

4. Too much should not be made of our omission to discuss whether the outgoings concerned fall within the first positive limb of the section or not. We would simply repeat that because of the conclusion expressed in para. 3 above, the question cannot arise. But we might add a statement from the judgment of Menzies J. in
F.C. of T. v. Hatchett 71 ATC 4184 at p. 4186 which seems apposite. His Honour said that:

  • ``It must be a rare case where an outgoing incurred in gaining assessable income is also an outgoing of a private nature. In most cases the categories would seem to be exclusive. So, for instance, the payment of medical expenses'' [or, one might interpolate, of quasi-medical expenses such as are concerned in the present case] ``is of a private nature and is not incurred in gaining assessable income, notwithstanding that sickness would prevent the earning of income.''

5. For the reasons briefly outlined, we would therefore uphold the Commissioner's decision on the objection and confirm the assessment before us.

Claim disallowed

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