Handley v. Federal Commissioner of Taxation.

Judges: Stephen J
Mason J
Murphy J
Aickin J

Wilson J

Court:
Full High Court

Judgment date: Judgment handed down 1 April 1981.

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Wilson J.

This case raises issues similar to those which the Court has dealt with in the recent case of
F.C. of T. v. Forsyth [ 81 ATC 4157 ] . The appellant is a barrister who in addition to his city chambers maintains a study in his residence. He uses the study for the purposes of his professional practice for something like 20 hours a week for about 45 weeks of the year. His total work commitment is 80 to 100 hours a week. There was no physical separation of the study from the remainder of the house, it being adjacent to the living room. Its use for other than professional purposes was infrequent and intermittent. The taxpayer claimed to deduct pursuant to sec. 51 of the Income Tax Assessment Act 1936 (``the Act'') a proportion of the interest paid under a mortgage upon his home, and of municipal and water rates and of insurance premiums in respect of the premises. A Board of Review upheld the respondent Commissioner's assessment, whereupon the taxpayer appealed to the Supreme Court of New South Wales. Yeldham J. felt obliged to follow and apply the principles enunciated by Walsh J. in
Thomas v. F.C. of T. 72 ATC 4094 ; (1972) 46 A.L.J.R. 397 , Mason J. in

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ATC 4176

F.C. of T. v. Faichney 72 ATC 4245 ; (1972) 129 C.L.R. 38 , and Helsham J. in
F.C. of T. v. McCloy 75 ATC 4079 ; (1975) 1 N.S.W.L.R. 202 , and dismiss the appeal. The taxpayer now appeals by special leave to this Court.

In my opinion, the appeal cannot succeed. The room used as a study does not cease to be part of the taxpayer's home merely because as a matter of convenience he uses it for professional purposes for 20 hours per week during 45 weeks of the year. It is true that in choosing for purchase in 1969 this particular residence as a home for himself and his family the taxpayer was influenced by the fact that there was in it a room which he considered to be suitable for use by him as a study. But it remained essentially part of his home. The payments for mortgage interests, rates and insurance premiums were of a kind which in the circumstances of this case cannot be apportioned between home and office expenses. They related to the building and/or land as a whole, and are not affected in any way at all by reason of the fact that the taxpayer performs professional work on the premises. They would remain the same whether or not he worked at home.

In view of the foregoing considerations, and for the reasons I have given in Forsyth , I conclude that no part of the outgoings possess the requisite character of outgoings incurred in gaining or producing assessable income, nor are they necessarily incurred in carrying on the taxpayer's profession. In any event, I believe that they must be regarded as outgoings of a capital, private or domestic nature, thus coming within the exception to sec. 51.

I would dismiss the appeal.

ORDER:

Appeal dismissed with costs.