Case S31

Judges: HP Stevens Ch

TJ McCarthy M
PM Roach M

Court:
No. 1 Board of Review

Judgment date: 3 May 1985.

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T.J. McCarthy (Member)

In his return of income for the year ended 30 June 1983 the taxpayer made a part-year claim for a spouse rebate and the amount claimed was $562, being 7/12ths of $963. The taxpayer's claim was based upon the view that he contributed to the maintenance of his wife throughout the last seven months of the year of income but not otherwise in that year, and therefore the Commissioner should be satisfied, pursuant to sec. 159J(5), that even though the taxpayer and his wife resided together during the whole of the year the taxpayer did not contribute to her maintenance during the first five months of the year. In assessing the taxpayer the Commissioner disallowed the rebate claimed and he subsequently also disallowed the taxpayer's objection in relation thereto. The question at issue is whether, upon the evidence given by the taxpayer and his wife at the hearing, the Board should be satisfied that the taxpayer did not contribute to the maintenance of his wife during the period of five months from 1 July 1982 to 30 November 1982. It is common ground that if the Board is so satisfied the taxpayer should be allowed the rebate of $562 which he claimed.

2. The taxpayer was born in 1948 and was married on 31 May 1980. In February 1981 the taxpayer and his wife purchased a property as joint tenants and at all material times resided together there. Funds for the purchase came in part from the sale proceeds of a unit which the taxpayer had owned. Later in 1981 the wife (who was working) commenced to make a contribution of $700 each month towards the expenses of the household. This financial arrangement continued until the wife ceased work on 1 December 1982 and was originally made at the wife's instigation so that she could more effectively manager her own money. On 2 December 1982 the wife gave birth to a son and it is not in dispute that for the remainder of the year ended 30 June 1983 the taxpayer contributed to his wife's maintenance. In the taxpayer's objection dated 21 March 1984 the amount of $700 was calculated as follows:

                            ``$

      First mortgage       504

      Second mortgage      525

      Electricity           15

      Telephone             10

      Water rates           30

      Council rates         28

      Car expenses          25

      Living expenses      260

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      Total             $1,397

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      One-half, say       $700''
        

3. Each month in the period from 1 July 1982 to 1 December 1982 the sum of $700 was withdrawn by the taxpayer from his wife's savings account save that the November payment was actually withdrawn in December. Some of the cash was used to pay household expenses and the balance was banked by the taxpayer into his bank account. Cheques drawn to pay household expenses (such as second mortgage payments, council rates, electricity, car insurance and registration) were drawn solely by the taxpayer as his wife did not have a cheque account, and such expenses were paid by the taxpayer as they fell due even if the relevant contribution had not been received from his wife. Although the amount of $700 had been determined in 1981, the amount was never adjusted to take account of inflation. No records were kept of the actual household expenditure in the period from 1 July 1982 to 1 December 1982 (although the mortgage payments were fixed and were known) and the taxpayer was therefore unable to confirm that the actual household expenses did not exceed $1,400 per month. However, the wife testified that if her share had been higher than $700 per month she would have paid the excess but she was never asked to do so.

4. In relation to other expenses the position in the first five months of the year of income may be briefly stated as follows. The taxpayer and his wife shopped together at a supermarket and one or other handed over $60-$65 in cash as payment for items purchased. Each had single scale health insurance. When they dined together at a restaurant it appears that the taxpayer normally paid although the wife paid occasionally on her separate Bankcard. The taxpayer candidly admitted that house and contents insurance had been overlooked in calculating the amount of $700 and that this

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expense was paid solely by the taxpayer. A personal loan was taken out by the taxpayer in 1979 for the purchase of a car; in 1981 the car was sold and the proceeds were used to purchase household furniture and also another car which was registered in the taxpayer's name; the loan was discharged by the taxpayer in January 1983 out of funds obtained from a refund of superannuation contributions which he had made. In the relevant five months in 1982 the wife used the car to drive between home and work and it appears that she outlaid the moneys for petrol from her own funds. The wife also used her own funds to pay for her clothes, cosmetics and hair expenses and for charges on her Bankcard. During the period from 1 July 1982 to 1 December 1982 she earned $9,517 in salary.

5. In his address the Commissioner's representative submitted that: (1) the taxpayer had failed to establish on the balance of probabilities that the taxpayer did not contribute to the maintenance of his wife during the period from 1 July 1982 to 30 November 1982; (2) the Board could not therefore have the requisite satisfaction for the purposes of sec. 159J(5); (3) by virtue of that subsection the taxpayer was therefore to be regarded as having contributed to the maintenance of his wife (with whom he resided) for the whole of the year of income; (4) thus sec. 159J(3)(a) did not apply; (5) the wife was therefore a dependant (as defined in sec. 159J(1)) for the whole of the year of income; (6) as the separate net income derived by her while she was a dependant exceeded $4,133, the rebate otherwise allowable ($963) was reduced to nil by virtue of sec. 159J(4).

6. The taxpayer's argument, on the other hand, was that the Board should be satisfied that the taxpayer did not contribute to the maintenance of his wife during the relevant period. The Commissioner's representative conceded that if the taxpayer's argument was to be accepted then the taxpayer's argument was to be accepted then the taxpayer was entitled to the part-year rebate of $562 which he claimed.

7. In relation to the meaning of the phrase ``contributes to the maintenance of a person'', the Commissioner's representative drew attention to the remarks of Scott L.J. in
Acworth v. Acworth (1943) P. 21 at p. 22 :

``Maintenance is a very wide word... it includes much more than food, lodging, clothes, travelling and so on. It includes, for instance, charity and making arrangements for the future... and it is wrong to limit it to any particular form of expenditure.''

The Commissioner's representative also referred to the observations of Mayo J. in
Kallin v. Kallin (1944) S.A.S.R. 73 at p. 75 :

```Maintenance' means the act of maintaining, and denotes the regular supply of food, clothing and lodging; the provision of the necessaries and of the conveniences of life... But maintenance may also lawfully be provided for either wholly in kind, house furnishings, clothing, food, recreation and entertainment, or entirely by the payment to a `dependant' of moneys with which to procure what is necessary.''

8. The question in the present case is not whether the taxpayer provided reasonable maintenance for his wife, but whether, for the purposes of sec. 159J, the taxpayer has established on the balance of probabilities that he did not contribute to the maintenance of his wife during the relevant period. Perhaps other situations may assist in understanding the concept involved. For example, if two friends share a flat and the various household expenses are equally shared, it would be difficult to say that one contributes to the maintenance of the other. Each pays his or her own way. This would be so, I think, even if one person occasionally drew cheques in advance of contribution from the other. If that example is considered to be somewhat remote for the purposes of sec. 159J the example could be given of a taxpayer's parents who reside with the taxpayer at his house. Being proud of their independence the parents pay their own way and they make an appropriate contribution towards all the various household expenses. If those circumstances are established I do not think that the taxpayer could fairly be said to contribute to the maintenance of his parents. However, there may be a difference in the way such arrangements are carried out. The two friends may keep a record of their actual household expenditure, for example, by the use of a separate bank account, so that any excess over estimated expenditure may be duly shared, whereas it would probably be unusual for any shortfall to be recorded and duly shared where the taxpayer's parents are involved and especially where the arrangement is between the taxpayer and his wife.

9. In the taxpayer's notice of objection he advised that he was ``fully aware of the

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provisions of section 159J and therefore took steps to ensure that my spouse fully contributed to her own maintenance during the period 1 July 1982 to 30 November 1982''. Whilst some steps were taken, it is my view that the taxpayer was not successful in achieving this goal. Some household expenses, such as house and contents insurance, were overlooked when the amount of the wife's contribution was calculated. Despite inflation the amount of $700 did not vary from when it was originally set in 1981. And most importantly, no records were kept to enable any shortfall to be ascertained and shared equally. If there was a shortfall here, the taxpayer alone bore it. The taxpayer frankly admitted that he did not know whether in the relevant period the actual household expenses per month were $1,400 or $1,500 or whatever. He did not know because he did not keep detailed records, and he did not keep detailed records because, after all, the other person involved was his wife. In the result I am not satisfied that he did not contribute to the maintenance of his wife during the period from 1 July 1982 to 30 November 1982. Nevertheless the taxpayer did give his evidence in an honest and candid way, even when that testimony did not assist his case, and I think that this approach is to be commended. Further, if the taxpayer had kept detailed records which disclosed a shortfall and he had asked his wife to pay her share, my impression is that his wife would not have been pleased to receive such a request. Some things were obviously more important to the taxpayer than obtaining a part-year spouse rebate and if it matters I think that the taxpayer's priorities were correct.

10. I would therefore uphold the Commissioner's decision on the taxpayer's objection and confirm the taxpayer's assessment for the year ended 30 June 1983.