Case R70

Judges: HP Stevens Ch
TJ McCarthy M

PM Roach M

Court:
No. 1 Board of Review

Judgment date: 25 July 1984.

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P.M. Roach (Member)

In this reference the taxpayer claims to be entitled to a deduction of the sum of $376 in the year of income ended 30 June 1982 in respect of the cost of purchasing daily and weekly newspapers and monthly journals. Details of the claim will be set forth later.

2. The taxpayer is a member of the Australian Society of Accountants; a registered tax agent; and in the year in question was a member of the Australian Public Service acting as a senior auditor in the office of the Auditor-General for the Commonwealth.

3. In the latter capacity the taxpayer discharged substantial responsibilities which she described in evidence (inter alia) in the following terms:

``The financial statements (of semi-government authorities) that we do involve a lot of investments... We have to comment on those and say whether they are making a wise investment or not. We are supposed to recommend to the Auditor-General what we think of the management and in doing that, we have to be very widely read to do that.''

Departmental records produced in evidence by the taxpayer confirmed the high expectations of the Auditor-General's Department of its staff and spoke highly of the quality of performance of the taxpayer as an officer of the Auditor-General.

4. It was a matter of disappointment that despite the qualifications of the taxpayer she did not present, either clearly or with precision, her income tax returns; her objection to the Commissioner's assessment, or her case before this Board. Further, even though a registered tax agent, she declined to cite any authorities of either Courts or Boards in support of her claim, preferring to rest her claim to a deduction on the basis that, in her own words:

``External auditors are the ones required, as far as I know... by statute to use their professional skill and knowledge, and judgment and I (would) like to know where I am supposed to get professional skill, knowledge and judgment if I do not keep reading or keep myself up professionally - by attending courses, reading books, reading journals.''

and -

``If auditors who are required by statute to use a professional skill, knowledge and judgment, and the only way to get that professional skill, knowledge and judgment - one of the best ways to get it is to keep reading - (to) keep abreast of what is going on. If they are not allowed that, I do not think there is anyone in the world that should be allowed any reading at all. As I said, auditors are the only ones I know of that are required by statute and can be prosecuted for not using professional knowledge, skill and judgment.''

I find nothing in the Audit Act supporting the allegation that accountants employed as auditors on the staff of the Auditor-General are so bound

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by statute, or that they are liable to ``prosecution'' under that Act for ``not using professional knowledge skill and judgment''. However, nothing turns on that point.

5. In the body of her income tax return the taxpayer claimed deductions (inter alia) under Item 30 `` Trade Union, etc., subscriptions paid to... SUBS $125''; and under Item 32 `` Deductions relating to allowances included in Items 6(d), 6(e) and 6(g)... newspapers/legal bks $378''. No allowances had been included in Items 6(d), 6(e) or 6(g).

6. Schedules annexed to the formal return show that the former amount was made up of sums of $105 paid to Rydges and $20 paid to Business Review (total $125); and the latter amount comprised brief case $96.50; National Times $1.40; (local newspaper) $125; Financial Review $4; The Land $3.50; Master Tax Guide $20; ``Rydge publication'' (sic) $32.50; Butterworths $33.45; CCH $62 ($378.35).

7. The Commissioner initially disallowed those two claims in their entirety but later, by amended assessment, allowed the latter claim in part only by allowing depreciation of $14 in relation to the brief case and allowing $131 in relation to other items. In the adjustment sheet accompanying the notice of amended assessment the Commissioner described the other items he was then allowing in the following terms:

      Journals and periodicals allowed       $131

      (CCH, Master Tax Guide,

        Butterworths, The Land)



      (Note: Newspapers and Rydges

        publications maintained to be

        private expenditure)
          

At the hearing the Commissioner's representative conceded that there may have been an arithmetical error whereby some greater allowance had been made to the taxpayer than was intended.

8. It is clear on the evidence that of the $151 now in dispute under Item 32, $125 certainly relates to the local daily newspaper; from which it follows that the balance of $26 relates to the items described as National Times $1.40; Financial Review $4; and ``Rydge publication'' (sic) $32.50.

9. In the course of evidence the taxpayer acknowledged the Rydge publication $32.50 to be an unidentified book and thereby to be distinguished from the sum of $105 claimed as an annual subscription to Rydges journal which is published monthly. I am not persuaded that the sum of $32.50 paid to Rydges for a book was not in respect of expenditure to purchase a capital item and, further, as no objection was raised to the failure of the Commissioner to allow depreciation thereon I would disallow the objection so far as it relates to that item.

10. As to the local daily newspaper the taxpayer gave evidence ``if it were not for my position as a professional auditor I would not buy (it). I had not been buying it before''. It is a matter of concern that the taxpayer was ambivalent in explaining why in her notice of objection and in later correspondence with the Commissioner she had claimed that she purchased the daily newspaper because of her interest in investment properties, when in her evidence before the Board her claim to a deduction was wholly based upon her responsibilities as an auditor. In support of the taxpayer I accept that there was an expectation on the part of the Auditor-General that persons such as the taxpayer should maintain and develop their professional standards; that the taxpayer was expected to do so principally out of hours; and that promotion and advancement were dependent (inter alia) upon the maintenance and development of professional standards.

11. The first question in my view is whether expenditure incurred in the purchase of a daily newspaper, providing a topical, non-specialised reporting of many aspects of community life as experienced recently, being a publication widely used throughout the community to enable individuals to inform themselves in a general way about those aspects of the life of the local, national and international community which interest them, can in the case of this particular taxpayer be removed from the classification of ``private expenditure'' which it would ordinarily bear, and be brought within the category of expenditure ``incurred in gaining or producing the assessable income'' of the taxpayer.

12. In the discharge of its responsibilities, the Board conducts its proceedings so as to make little attempt to prevent an unrepresented taxpayer from presenting such ``evidence'' and in such manner as the taxpayer thinks most appropriate. The taxpayer was heard at length and allowed to express her claim and give her

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``evidence'' as she wished. One consequence of permitting her to do so was that the taxpayer was allowed to repeatedly express her opinions, being conclusions as to the inferences to be correctly drawn from the limited testimony she offered as to matters of primary fact.

13. The question for the Board in a case such as this is whether the facts (as distinct from the opinions and beliefs of the taxpayer) established upon the evidence qualify the taxpayer for a deduction in relation to the expenses incurred by her. The question for the Board is not whether a belief or opinion of the taxpayer is truly held, with the consequence that an affirmative answer to that question binds the Board to hold that the taxpayer has qualified for the deduction claimed.

14. Despite her strong assertions as to the value of the daily newspaper in the planning and implementation of her audit work, I am not persuaded that the expenditure on that newspaper goes beyond being of a private nature, notwithstanding the forcefulness of the taxpayer's opinion to the contrary.

15. Just as no particular evidence of primary facts was given by the taxpayer or adduced on her behalf as to the relevance of the local daily newspaper; so too no such evidence was given in relation to the Rydges monthly journal.

16. One must ask therefore whether the primary facts established by evidence do justify the Board in adopting the conclusions of the taxpayer as developed from those primary facts. We have no evidence as to how any particular article in any of the publications related to the employment and duties of the taxpayer, nor do we have any clear evidence as to what portions or percentage (if any) of each publication related in any way to her employment and duties. Accordingly, I remain unpersuaded that the conclusions drawn by the taxpayer are sound. The ``subscription'' of $105 for Rydges upon the evidence also included the cost of unspecified books. As the taxpayer was not able to dissect what was capital expenditure from what was not, this claim also must fail.

17. I do not wish to be understood as saying that there are no circumstances in which an employee-accountant, including the taxpayer, could qualify for a sec. 51 deduction in relation to moneys expended upon publications such as Rydges Journal. Whether any taxpayer, or this particular taxpayer, is eligible to a deduction in respect of such expenditure depends upon the facts established in each case.

18. It is worthy of mention that in a recent unpublished decision of this Board delivered at the hearing a taxpayer did succeed with a similar claim. Although unrepresented, that taxpayer had the foresight to produce many copies of the publications in question, collated in groups to indicate how the copies in each group related to his income-earning activities as an employee. It is also worthy of mention that the Commissioner's representative did not cross-examine the taxpayer in relation to any of the relevant evidence-in-chief.

19. Although the evidence was scanty, like my colleague Mr. McCarthy I am satisfied that the amounts of $1.40 paid for the National Times and $4 paid for the Financial Review were incurred by the taxpayer to obtain particular issues of those publications which were relevant to particular aspects of her work. Accordingly I would allow that there is an entitlement to a deduction for each of those amounts under sec. 51(1) as an income-producing expense and a relevant incident of her employment. For the reasons advanced by my colleague Mr. McCarthy I would not allow a deduction for the subscription of $20 for the Business Review .

20. As to all other matters, on the evidence before us I cannot say of the facts established that ``they do seem to form a firm foundation for the conclusion that the expenditure was in truth incurred in gaining or producing assessable income'' (
F.C. of T. v. Finn (1961) 106 C.L.R. 60 ).

21. As to whether in the circumstances the assessment should be increased, confirmed or reduced, I agree with my colleague Mr. McCarthy. Accordingly, I would uphold the Commissioner's decision on the objection before us and confirm the amended assessment.

Claim allowed in part