Case G67

Judges: JL Burke Ch

RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 24 October 1975.

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R.E. O'Neill (Member): Substantially for the reasons he has given I agree with my colleague Mr. Fairleigh that as against the 80% claimed by the taxpayer and the 40% allowed by the Commissioner, the taxpayer is entitled to deduct 60% for the 1970 tax year and 70% for the 1971 tax year of his total motor vehicle running expenses (sec. 51) and depreciation otherwise allowable (sec. 61). Virtually the same criteria are applicable in determining both the deductions to be allowed under sec. 51 in respect of car running expenses and the quantum of the deduction allowable in terms of sec. 61 for depreciation.

2. Throughout both years, except for five or six weeks in May/July 1970, the taxpayer performed regularly 4 nights a week in a western suburb of Sydney at a social club 7 miles from where he lived in an eastern suburb and he also played there on an estimated other 26 occasions in each year. That was his main source of income and it was plainly his principal or normal place of employment. Stating sums in round amounts, his gross income from it was $6,400 in 1970 and $7,000 in 1971. In those respective years he earned another $1,600 and $1,400 from numerous engagements at other places and from fees for musical arrangements. I agree with my colleague's findings as to the mileages for which a deduction should be allowed in each year and, on the facts, I agree that taxpayer's use of his car for such mileages other than those travelled in relation to his activity as a musical arranger is within the principle of
F.C. of T. v. Vogt 75 ATC 4073 .

3. Taxpayer was self-employed in his activity as a musical arranger and whether or not he was an employee in any or all of the engagements he had outside his principal employment with the social club is of little moment in considering the application of relevant provisions to the cost of his travel. As it was put for the Commissioner (and I quote): " There is little practical difference between the two positive limbs of sec. 51
(Ronpibon Tin N.L. v. F.C. of T. (1949) 78 C.L.R. 47 ) so that the tests of deductibility remain the same whether a taxpayer is self-employed or an employee. " I take the relevant passage in Ronpibon to be: ``But in actual working it (the second limb of sec. 51) can add but little to the operation of the leading words, `losses or outgoings to the extent to which they are incurred in gaining or producing the assessable income'. No doubt the expression `in carrying on a business for the purpose of gaining or producing such income' lays down a test that is different from that implied by the words `in gaining or producing'. But these latter words have a very wide operation and will cover almost all the ground occupied by the alternative. '' (my emphasis)

4. Excepting travel in his work as a musical arranger the cost in 1970 of the 1,500 miles and in 1971 of the 1,900 miles travelled on ``outside'' engagements is, as I have said, within Vogt (mileage figures rounded). However, assuming that Vogt is not applicable, I think that the cost of the whole of these mileages is allowable on another basis which is more fully developed in my reasons in Case G66,
75 ATC 486 (Ref. No. 28/1974) than it need be here because those reasons are to be taken as being incorporated herein mutatis mutandis.

5. Outside his principal employment with the social club taxpayer pursued his calling as a musician at numbers of other places. In the nature of things his choice of where he should live cannot be equally free in regard to those various places at once and so the sub-stratum of the reasoning in
I unner and Hayley (100 C.L.R. 478 ; 11 A.T.D. 404 ) is taken away. Travelling for those various engagements represents an element of unavoidable cost in earning the income he got from them in a way that distinguishes it from the simple case of the man who has one employment only at a fixed location.

6. In increasing his income by undertaking numerous engagements outside his principal employment the taxpayer was in a practical sense carrying on his profession or vocation as a musician: see generally the judgment by Lush J. of the Supreme Court of Victoria in
F.C. of T. v. Bolwell (1967) 1 A.T.R. 862 which was concerned with the classification of musicians as employees or independent contractors. Whether or not taxpayer was in law a casual employee when he performed those engagements the expenses of travelling between his home and the various places to which he had to go take on the character of expenses of travelling in the course of his

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ATC 500

calling and so they are incurred ``in gaining or producing'' his assessable income.

7. In
Horton v. Young (1972) 1 Ch. 157 a ``labour only sub-contractor'' claimed the running expenses of his car in travelling each day between his home and the site where the main contractor, a Mr. Page, was building a house. Horton was the leader of a bricklaying team, which generally consisted of three men. He collected the other men in his car and conveyed them to the work in hand. He worked on each site for three weeks or so. In the relevant period he worked in eight different areas being from 5 to 50 miles from his home. It was a Schedule D case so that to be deductible the expense had to satisfy the statutory requirement of being ``money wholly and exclusively laid out or expended for the purposes of the trade''. Allowing Horton's appeal Brightman J. said at p. 164: ``In my view, where a person has no fixed place or places at which he carries on his trade or profession but moves continually from one place to another, at each of which he consecutively exercises his trade or profession on a purely temporary basis and then departs, his trade or profession being in that sense of an itinerant nature, the travelling expenses of that person between his home and the place where from time to time he happens to be exercising his trade or profession will normally be, and are in the case before me, wholly and exclusively laid out or expended for the purposes of that trade or profession.'' The Court of Appeal (Lord Denning M.R., Salmon and Stamp L.JJ.) unanimously dismissed the Crown's appeal. At p. 170 there appears the following Reporter's note: ``The case of Weston v. Young (Inspector of Taxes) was listed at the same time as Horton v. Young. The facts were substantially the same except (1) that Mr. Weston, a self-employed plasterer, stored tools at his home and (2) Mr. Weston did not collect members of a team and drive them to the site. The decision was the same and no separate judgments were given.'' (my emphasis)

8. In
Newsom v. Robertson (1953) Ch. 7 (also a Schedule D case) it was held that a barrister's travelling expenses from his home to his chambers were not deductible because, even though he did much of his work at home, his chambers were his base. However in Horton v. Young the Court at p. 168 considered that a circuiteer barrister's base is his home rather than his chambers, so that travelling expenses between his home and the courts in the circuit are deductible. In Lunney the majority (C.L.R. 499-500; A.T.D. 413-414) quoted from Newsom with approval a lengthy passage from the judgment of Denning L.J., as he then was, in which the base of operations test was first propounded. I would assume that an Australian Court would likewise approve Horton v. Young.

9. Taxpayer's home was in a real sense the base from which he pursued his calling in relation to ``outside'' engagements. There he kept not only his trombone and electric bass guitar but also a classical type guitar and organ and, in the 1971 tax year, a tape recorder, extension speaker and headphones. All of that equipment he used not only for practising and as a performer but also in his work of composing musical arrangements the compositions being done at his home. One-half of the expenses of his telephone have been allowed by the Commissioner as well as the cost of records, tapes and sheet music. In the 1970 assessment ``agents' commission $40'' has also been allowed. None of these items was spoken to in evidence but they all point to his ``outside'' engagements having the character of itinerant activities so that the expenses of the relevant travel are properly designated as being incurred ``in gaining or producing'' his assessable income therefrom. As was said by Dixon J. in
Amalgamated Zinc (De Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295 at p; 309 : ``The expression `in gaining or producing' has the force of `in the course of gaining or producing' and looks rather to the scope of the operations or activities for the relevance thereto of expenditure than to purpose in itself.'' (my emphasis)

10. For the reasons given I would allow the taxpayer's objections to the extent indicated in the first paragraph hereof.