Federal Commissioner of Taxation v. Cooper

David Hunt J

Supreme Court of New South Wales

Judgment date: Judgment handed down 6 July 1990.

David Hunt J.

This is an appeal by the Commissioner of Taxation against a decision of Taxation Board of Review No. 3 which allowed the objections of the taxpayer (Robert John Cooper) against the Commissioner's assessments for the years ended 30 June 1980, 1981 and 1982 disallowing deductions claimed by the taxpayer under the first limb of sec. 51(1) of the Income Tax Assessment Act 1936. The taxpayer, a professional footballer, had claimed the cost of additional food which he had consumed, on the advice of his coach, in order to maintain his weight and thus his playing ability (he played as a forward) during

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the football season. The Board's decision is reported as Case T31, 86 ATC 290.

Both parties agreed that the appeal lay to this Court rather than to the Federal Court by reason of a gap in the legislation transferring income tax appeals from Supreme Courts to the Federal Court: cf.
F.C. of T. v. Malouf 87 ATC 4851; (1987) 78 A.L.R. 567.

Two questions of law were identified by the Commissioner as having been involved in the Board's decision and thus permitting the appeal to be brought (sec. 196). The first is said to have been that raised by any claim for an outgoing of a private nature under sec. 51(1), as discussed by the High Court in
John v. F.C. of T. 89 ATC 4101; (1989) 166 C.L.R. 417. The second question of law is said to have been that involved in the application of sec. 51(1) to the facts of this particular case.

It was conceded by the Commissioner that the Board did not in fact deal with either question of law, but it was submitted that both were necessarily involved in every case such as the present. I do not agree. There is no necessary antipathy between an outgoing incurred in gaining assessable income and one of a private nature: John v. F.C. of T. at ATC p. 4108; C.L.R. p. 431. No question of law is involved where some principle of law was either necessarily applied by the Board in arriving at its decision or merely implicit or assumed in that decision; the question must be one which was actively involved in the Board's decision:
Boyded (Holdings) Pty. Ltd. v. F.C. of T. 82 ATC 4236 at p. 4239; (1982) 13 A.T.R. 127 at p. 130. That was not the case here. Moreover, the question whether a particular set of facts comes within the terms of a statutory definition which uses words according to their common understanding is one of fact, not of law:
Australian Gas Light Co. v. Valuer-General (1940) 40 S.R. 126 at pp. 137-138;
Hope v. The Council of the City of Bathurst 80 ATC 4386 at p. 4389; (1980) 144 C.L.R. 1 at pp. 7-8. It was eventually conceded in argument that the present case, like so many of them, involved a question of fact and degree (
F.C. of T. v. Forsyth 81 ATC 4157 at p. 4164; (1981) 148 C.L.R. 203 at p. 215), and that no submission of ``no evidence'' had been made to the Board and ruled upon by it either expressly or by implication: cf.
Lombardo v. F.C. of T. 79 ATC 4542 at p. 4546; (1979) 10 A.T.R. 310 at p. 314.

The Commissioner's appeal is therefore incompetent, and it must be dismissed upon that basis. As the appeal was argued as well on the merits of the taxpayer's claim, however, I am satisfied that the Commissioner's appeal should in any event also be dismissed on those merits.

The parties agreed that, in relation to the merits, I should rehear the issue which the Board determined, and that I should do so both upon the taxpayer's evidence before the Board and upon the further evidence adduced before me. The taxpayer accepted that he retained the burden of proving that the Commissioner's assessment was excessive. The Commissioner accepted that the quantum of the taxpayer's claims for deduction was not in issue.

The taxpayer (whose evidence I accept in its entirety) was during the relevant period under contract with the Western District Rugby League Football Club to play for that club in the Sydney Major Premiership Competition. By that contract, the taxpayer agreed to:

``... do everything necessary to get and keep himself in the best possible condition so as to render the most efficient service to the Club and [to] carry out all the training and other instructions of the Club through its responsible officials.''

The contract gave to the club the right to determine ``forthwith'' the agreement between them if the taxpayer failed to discharge his obligations thereunder or if he was guilty of disobedience. It provided a differential scale of payments according to the grade in which the taxpayer was selected to play. A win when playing in the first grade paid five times the amount for a win in reserve grade; substantial additional payments were to be made if the taxpayer was chosen to represent the State or Australia.

The taxpayer played in first grade for the most part and occasionally in reserve grade. In the first of the years of income involved he also represented the State. He derived income from the club of $9,905, $14,400 and $15,163 for those three years.

When the taxpayer started to play in first grade, some years before the relevant period, he noticed that he lost weight from the beginning of the pre-season training and continuing throughout the season. This

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coincided with the increased time which he was obliged to spend on training (once he ``really started getting serious about the game'', as the taxpayer put it in evidence). He trained with the team three nights a week, and he tried to train by himself on a further two nights a week. He found that, after starting at 17¼ stone, he would finish the season weighing just under 15 stone.

This weight loss affected the taxpayer's ability as a forward player. It resulted in a loss of strength, which in turn diminished his ability to break the opposing team's line. That was the task expected of him in first grade; such ability was important to his effectiveness as a forward and to the retention of his position in first grade. In evidence before the Board, the taxpayer described the importance to him of his strength in this way:

``... I found that... my optimum playing weight was around about 16 to 16½ stone.... I had a lot more strength. I could bust a line a lot better. But once I got around the 15 stone mark I found that I did not have that ability to break the line. That extra stone seemed to make a hell of a lot of difference in regard to my strength.... if you did not play first grade..., your earning capacity was limited. And that is the reason. I just wanted to keep my weight on.''

Although the taxpayer agreed in cross-examination that he was never told that he was being dropped from first grade because he ``had become too light'', it is obvious as a matter of common sense that, if his ability to barge through his opponents' defensive line was reduced (because he had lost the stone in weight which made all the difference), the taxpayer would be dropped from first grade. If he was so dropped, his income derived as a professional footballer would be reduced by 80% until he was promoted back into first grade. The loss of weight would accordingly be directly responsible for the reduction in assessable income derived by the taxpayer as a professional footballer.

On 12 October 1979, the taxpayer's coach (Mr Roy Masters) gave him the following ``instructions'' in writing:

``Mr R Cooper

12 October 1979

3 Yara Close,


Dear Bob,

Now that the season has ended and in preparation for next year's season I would like you to follow the instructions below from this date:


Ensure that you maintain your reflex speed and endurance by playing squash at least once, preferably twice per week, all year round.


Attend a Gym, either locally or at Wests League Club, to build up your physique and strength, preferably once per week.


As you have a tendency to lose weight which affects your playing ability during the season, I want you to eat the following items each week in addition to your normal meals:

  • 1. 3 kilos of steak, only medium cooked.
  • 2. Potatoes at each meal, 1 kilo per week.
  • 3. Bread at each meal, at least three loaves per week.
  • 4. Beer is an excellent method of increasing weight, therefore at least 1 dozen cans per week.
  • 5. At least one glass of Sustagen per day.

General Exercise:

Ensure that for general conditioning you do as much running as possible.

I appreciate that the above will involve you in extra expense but I am sure that you will be recompensed by the Club when your contract comes up for renewal.



The taxpayer estimated that, in carrying out the instructions concerning the additional food and drink consumed by him, he incurred outgoings of $682, $751 and $640 for the three years of income involved. The estimates (which

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were not challenged as to amounts) represented the additional amounts expended by the taxpayer's wife on food during the pre-season training period and the football season for each of those years. The taxpayer was unable to relate specific amounts to so much steak, so many potatoes and so much Sustagen purchased in addition to that or those which would otherwise have been purchased. The taxpayer said that he would eat a fourth meal each day, either during the afternoon or late at night. He stuck as rigidly as possible to the insturctions given by Mr Masters, although obviously enough they required him to eat bread and potatoes at each meal and not just at the fourth meal each day. The fourth meal was generally consumed at home (70% of the time).

When disallowing the taxpayer's claims, the Commissioner wrote:

``As a person must of necessity eat and drink, expenditure on food must be incurred whether or not income is earned, and consequently it cannot be said to be related directly to the gaining or producing of assessable income. Moreover, as the essential character of the expenditure is of a private or domestic nature, it is specifically excluded from the allowable deductions in terms of [sec. 51(1)] (despite being requested by the coach).''

That opinion overlooked the prescription by the taxpayer's coach that he eat the food in addition to that which he would otherwise normally have eaten. It also imposed a necessary characterisation upon outgoings for this additional food and drink as private or domestic.

Before me, counsel for the Commissioner took a somewhat more realistic view of life and of the relevant authorities. He conceded in the course of argument, as he had to, that the essential character of such outgoings was not necessarily of a private or domestic nature; it was, he said, a question of fact and degree. He nevertheless argued that the outgoings should be characterised as private in this case. Having made the realistic concession to which I have referred, he went on to submit that there was no logical basis for distinguishing one lot of food which the taxpayer ate from any other food which he ate. He pointed to the taxpayer's inability to identify the outgoings relevant to any particular piece of steak or potato, and to the fact that mostly the extra food was eaten at home and not at work. Even though eating less food would have affected the taxpayer's ability to play football (and thus his ability to gain assessable income), it was submitted that, as eating the food in question related to the taxpayer's physical sustenance, it was all a private or domestic matter only.

That argument concentrates solely upon the common characterisation of food, and it overlooks the relevance of the additional food which was eaten - and accordingly the relevance of the outgoing which was incurred - to the gaining of assessable income by the taxpayer:
Amalgamated Zinc (De Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295 at p. 309. Here, the additional food was consumed not to sustain the taxpayer (his ordinary consumption of food did that) but to ensure that he was able to derive five times the income which he would otherwise have been able to derive. The outgoing was directly related to gaining that additional assessable income. The taxpayer spent more in order to earn more. The essential character of the expenditure in question was to gain additional assessable income:
Lunney v. F.C. of T. 11 A.T.D. 404 at p. 412; (1958) 100 C.L.R. 478 at p. 497. It was not the remote connection for which the Commissioner contended. It was incurred pursuant to a contractual obligation to do so, and not merely because the taxpayer had been ``encouraged'' to incur it, as the Commissioner contended: cf.
F.C. of T. v. Hatchett 71 ATC 4184 at p. 4187; (1971) 125 C.L.R. 494 at p. 499.

An example may serve to underline the point which I am seeking to make. Most of us read the morning newspaper out of general interest or for personal enlightenment. If that were all, the outgoing incurred for those newspapers would therefore be of a private nature, and not an allowable deduction pursuant to sec. 51(1). Those persons whose assessable income is gained from their participation in public affairs would, however, read the newspaper also in order to equip themselves for that participation - to know what is going on, not just out of interest but also to enable them to debate the matters of public interest which are chronicled in those newspapers. One could point to politicians, television interviewers and the like to whose gaining of assessable income the outgoings for newspapers would be relevant in the sense required by sec. 51(1). Such a person

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would no doubt purchase more than one morning newspaper, so that he may come to know of differing viewpoints concerning those matters. The newspapers provide part of his armoury of information which he needs in order to gain his income from participating in such public affairs. He would be unable to say which particular newspaper satisfied his non-professional general interest or desire for personal enlightenment, but he would be able to say that, if he did not gain his assessable income from a participation in public affairs, he would only have purchased the one newspaper - so that the purchase of the additional newspapers, and the additional outgoing incurred, can be directly related to gaining that income. In such a case, that person would no doubt also concede that he mostly read all of the newspapers at home in the morning, and not in his office. But, without doubt, the outgoing would be relevant to the gaining of his assessable income, and directly related to it. Its essential character would make it an allowable deduction under sec. 51(1).

The outgoings in question in the present case were incurred in gaining the taxpayer's assessable income and, in the circumstances, they were by their nature excluded from the category of private or domestic outgoings.

I dismiss the appeal; I order the Commissioner to pay the taxpayer's costs. I enter judgment accordingly.

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