Case P103

Judges: MB Hogan Ch

P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 29 November 1982.

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Dr. P. Gerber (Member)

The taxpayer in this reference is a Stipendiary Magistrate who in the year of income (1979/80) claimed the sum of $1,666 as ``allowance as Judicial Officer (5%) as agreed between the Chief Justice of Aust. and the Commissioner of Taxation''. This was elaborated on in the objection where it was asserted that:

``... the allowance granted to judges including judges of the District Court and Land Court judges should also be granted to Stipendiary Magistrates. All are judicial officers...''

2. Some recent correspondence was tendered to demonstrate that the Commissioner has adopted a practice of allowing judges an amount equivalent to 5% of their gross salary for ``unvouched expenses''. From this, Mr. Gordon Thompson, counsel for the taxpayer, sought to argue that a similar indulgence should be granted to magistrates.

3. Let me say at the outset that I entertain no doubt that it is incompetent for a Board of Review to grant this kind of absolution. Any taxpayer - which includes Judges wheresoever in the judicial hierarchy - is only entitled to deduct losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income. It may serve as a timely reminder that whilst the Commissioner may - and apparently does - apply some kind of fiscal shorthand whereby, for purposes of administrative convenience, an arbitrary figure of 5% of gross income is struck which may be claimed by some taxpayers as ``unvouched expenses'', no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act. A taxpayer who comes before a Board of Review to challenge the amount disallowed by the Commissioner bears the onus of showing that the amount has not only been expended, but that such expenditure was incurred in producing the assessable income. It follows from this that any agreement reached between the Commissioner and the Chief

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Justice of Australia is irrelevant in any hearing before a Board of Review, even if the Chief Justice of Australia himself were the appellant.

4. In the alternative, it was sought to justify an amount of $1,666 by tendering evidence of expenditures incurred. The taxpayer readily admitted that he kept no records since he ``only became aware of the 5% rule some time in 1979''. He agreed that he had only claimed minor amounts in earlier years, asserting that he was unaware that the items now under review were deductible.

5. An amount of $520 was claimed for the use of a private motor vehicle. The objection states that ``use of private motor vehicle (was) for reasons of avoiding embarrassment possibilities and security purposes on public transport''. This is a recapitulation of the argument advanced in Burton's case 79 ATC 4318 where a Perth magistrate considered that it was ``wrong for him to mix with the public as an ordinary member of the public to a greater extent than was necessary'' (p. 4320). This point was not pursued in argument on appeal (at p. 4323). There is, therefore, no judicial guideline on this aspect of the claim. It was, however, conceded in argument in this case that magistrates in Queensland are expected, wherever possible, to use public transport. On the occasion when the use of their own car is authorized (e.g. travelling on circuit where public transport is inconvenient or impossible), they are reimbursed at 10 cents/kilometre. In the circumstances, I am not persuaded that the claim of $10 per week, based on some calculations carried out by a local Automobile Association, has been made out.

6. An amount of $400 was claimed for:

``Official Functions, Engagements, etc. - These are an integral part of our judicial functions. This requires the attendance of your wife with the concomitant expenses of clothing and accessories; hair care; taxis; etc. Minimum $400.''

It became clear during the hearing that magistrates in country towns automatically become chairmen of the local Hospital Board and the local Board of the Sugar Cane Prices Board. These appointments are thus the fasciculus of judicial office in country towns, and any incidental expenses thus incurred (to the extent that these are not met by emoluments of the office, as to which there is no evidence) are an allowable deduction. However, no evidence was led which would enable the Board to quantify such expenditure. In the circumstances, I do not propose to examine whether such outgoings as ``clothing and accessories; hair care; taxis; etc.'' are sufficiently proximate to the ``official functions, engagements, etc.'' to which they were attached, or are excluded by sec. 51 on the basis that they are an expenditure of a private or domestic nature.

7. An amount of $700 was claimed for:

``Membership of Organisations. The Attorney-General expects that we participate not only in Clubs or Associations for business and professional purposes, but also take part in local and community associations and activities. This not only involves membership fees, but also entertaining associates and resulting expenses. Included in this category is membership of an institution for physical health and fitness. Total costs estimated $700. Claim $350.''

Suffice it to say that little attempt was made to particularise this part of the claim in any manner which would enable a Board to quantify the expenditures - even assuming that any item as particularised qualifies as an allowable deduction. I cannot refrain from expressing some surprise that judicial officers, appointed quamdiu se bene gesserit, are nonetheless subject to certain restraints as part of their term of office (``The Attorney-General expects...'').

8. A sum of $300 was claimed for:

``Conferences: To keep abreast of matters concerning the profession; professional problems; questions of law, appeals, amendments, etc. Minimum $6 per week. $300.''

There can be no doubt that it is an implied term of any office, let alone a judicial one, that the holder of such office ``keep abreast of matters concerning the profession''. Regrettably, the evidence does not enable me to arrive at any meaningful figure. The ``minimum $6 per week'' was a mere

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ATC 549

estimate, much of it taken up by refreshments, which I conclude, are too remote from the activity of ``questions of law, appeals, amendments, etc.''.

9. An amount of $300 was claimed for:

``Clothing. Distinct from normal or street clothing. Good quality suits and clothing accessories are a necessity and expected to be worn at all times whilst on the Bench and on judicial duties. I believe claims are allowed for Barristers' robes. I do not wear robes but suits are substituted therefor. I estimate additional cost to be minimum $300.''

The taxpayer asserted that he kept a separate wardrobe for his judicial functions. This is not enough to enable the cost of such clothing to be claimed under sec. 51(1). In Case N97
81 ATC 521 , I had occasion to examine the law with respect to ``conventional clothes''. I concluded that the cost is an expenditure of a classically private nature and that the decision in
Mallalieu v. Drummond (Inspector of Taxes) (1981) STC 391 , where a lady barrister in the United Kingdom successfully claimed an amount of £ 464 spent on drab clothes worn in Court, when her own inclination lay more towards the ``adventurous and coloured'', may well have been coloured by a more adventurous judicial attitude. In the present state of the law as applied in this country, I am not prepared to depart from a long line of cases which have denied such an expenditure the necessary nexus with the derivation of income to make it an allowable deduction.

10. A sum of $200 was claimed as follows:

``Other items and outgoings. It is necessary to attend countless functions, seminars, services, gatherings, as part of my official functions. Quantification is almost impossible but an estimated minimum would be $200.''

If a taxpayer finds that ``quantification is almost impossible'', it is difficult for a Board of Review to do any better. In any event, the taxpayer has not persuaded me that what he regards as part of his official functions is not really part of the fasciculus of a high standing in the community. The expenditures are thus not incurred in the performance of judicial duties, but in the upkeep of his position. As Vaisey J. put it in
Lomax (H.M. Inspector of Taxes) v. Newton (1953) 34 T.C. 558 at p. 562 ``an expenditure may be `necessary' for the holder of an office without being necessary in the performance of the duties of that office''. In that case, an army officer was denied a deduction for his mess subscription, share of mess guests expenditure, payments to a batman, hire of camp furniture and the cost of tickets to sergeants' dances, etc.

11. An amount of $150 was claimed for:

``Security. This includes both at home, for self and for motor vehicle. This entails malicious damage insurance premiums on vehicle, home, contents, and also security doors, night-latches, locks, etc. These are essential due to threats to judicial officers (Judges and Magistrates inclusive). Judge Opas of the Family Court being killed is an instance of threat being put into execution. Magistrates' jurisdiction in Family Court Matters is almost co-existent with Family Court Judges, and are daily in that jurisdiction. There are other `cranks' who relate their grievances to private residences or families. For peace of mind of self and more particularly whilst at work, peace of mind of family, security measures are vital. Additional cost at least $150.''

The matter was, properly, not pressed at the hearing. In the circumstances, I do not propose to deal with it.

12. An amount of $200 was claimed for home office expenses as follows:

``Use of Home as Office. I am aware of a recent decision in this matter but not of the reasons therefor. However, I believe that as judicial officers we are distinguishable. It is necessary to use the home for the purpose of legal research, recent decisions, updating law. A conservative cost for this work alone I estimate at least $4 per week to cover electricity, use, cleaning, power, etc. $200.''

The evidence disclosed that the office was used predominantly by the taxpayer for such pruposes as writing reserved judgments and similar judicial duties. In the present state of the law, cost of electricity, depreciation of office furniture and such like are clearly deductible. This is clear from the decision of

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Mason J. in
F.C. of T. v. Faichney 72 ATC 4245 notwithstanding that his Honour himself observed in
Handley v. F.C. of T. 81 ATC 4165 that the distinction between the deduction for electricity and a proportion of rates and interest, ``albeit a fine one'' was nevertheless one which appeared to him at the time to be justifiable. Wilson J. opined that ``in a proper case'', he might come to a different conclusion with respect to the cost of lighting to that reached by Mason J. in Faichney. Be that as it may, some part of the cost of electricity is at this time an allowable deduction. The Commissioner allowed an amount of $20 under this head. Regrettably, the evidence in this case does not enable me to arrive at any more meaningful figure.

13. The final item was $150 for:

``Other Entertainment and Donations. There are other donations to various collectors and causes, charitable and otherwise, to which it is expected one contributes in the community principally because of the position of Stipendiary Magistrate. There are also functions with visiting legal associates and judicial dignitaries not included in any of the above heads. Estimated costs $150.''

For the reasons I advanced in para. 10 above, I am not persuaded that any items under this head are allowable. Certainly no attempt was made to arrive at any meaningful amount actually expended under this head.

14. In addition to the amount of $20 allowed for home office expenses, the Commissioner allowed an amount of $200 for ``entertainment functions'' - $220 in all out of a claim for $1,666. Whilst the evidence has not persuaded me that any of the entertainment deposed to arose out of the taxpayer's duties as a Magistrate or was other than expenses of a private nature, the taxpayer's objection, although widely and elegantly phrased, objects only against the disallowance of his claim, not that his claim should be decreased . In the circumstances, I feel disinclined to reduce the amount of entertainment expenses the Commissioner has seen fit to allow.

15. In the result, the problem comes to this: How much of the claim for $1,666 has this taxpayer proved beyond the amount of $220 conceded by the Commissioner? Put this way, the answer is short - nothing. In fairness to the taxpayer, he was less concerned with evidence than with principle; viz. that he should be allowed to deduct 5% of his gross income as a Magistrate as ``unvouched expenses''. Be that as it may, it is difficult to see how one can build a ``principle'' on estimates, which constituted the sole basis of quantification of the various items claimed for deduction. I have made the point repeatedly in earlier decisions; although an estimate may be a short-hand device acceptable to the Commissioner, IT CAN NEVER FROM THE BASIS OF AN APPEAL BY A TAXPAYER WHO DISPUTES THE COMMISSIONER'S DECISION. Like equitable estoppel, an estimate may be a shield, it can never be a sword.

16. Having said this, it is appropriate to add that I can well understand this taxpayer's irritation that he should be treated differently from judicial officers in other jurisdictions who have ( semble ) received dispensation from the requirement of having to quantify their allowable expenditure and assert the nexus with the derivation of assessable income; an indulgence which enables them to claim a flat 5% of gross income. Historically, the last issue of indulgences led to the Reformation - and ended on the Hundred Years War.

17. I would uphold the Commissioner's decision on the objection.

Postscript: After the hearing of this reference had concluded, the Board was informed that another Queensland magistrate had taken a similar appeal to the Supreme Court of Victoria. In the circumstances, we decided to defer publication of this reference until the Victorian decision became known. That case has now been published (
Frankcom v. F.C. of T. 82 ATC 4599 , handed down on 25th November, 1982). Having read the decision of Kaye J., I am satisfied that there is nothing in his Honour's reasoning which causes me to alter mine.