Case F32

Judges:
JL Burke Ch
RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 2 July 1974.

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J.L. Burke (Chairman); R.E. O'Neill and C.F. Fairleigh, Q.C. (Members): The taxpayer is a professional musician. The Commissioner has made adjustments to the income as returned for the years ended 30 June 1970 and 30 June 1971 by disallowing deductions as under -

   Year ended 30 June 1970

(a) Motor vehicle expenses and          Disallowance of $824 (allowance of $235
depreciation - claim of $1,059 (after   being 1/6th of total)
reduction by taxpayer of 1/4th
as private)

(b) Loss on sale of motor vehicle       Disallowance of $208 (allowance of $60
- claim of $268 (after reduction        being 1/6th of total)
by taxpayer of 1/4th as private

(c) Hire of T.V. receiver -             Disallowance of $48
claim of $48

(d) Purchase of phonograph records -    Disallowance of $26
claim of $51                            (allowance of $25)

(e) Subscription to Y Club -            Disallowance of $6
claim of $6

Year ended 30 June 1971

(i) Motor vehicle expenses and          Disallowance of $702 (allowance of $201
depreciation - claim of $903 (after     being 1/6th of total)

(ii) Purchase of phonograph records -   Disallowance of $21 (allowance of $22
claim of $43
        

2. The objections of the taxpayer to the decisions of the Commissioner have been duly referred to the Board for review.

3. The Commissioner's representative has submitted that notwithstanding the allowance in part for (a) and (b) and (i) as above, no deduction is allowable for any of those items, particularly as the taxpayer was an employee and not an independent contractor. However the Board was not requested to increase the assessments.

4. The taxpayer's representative has submitted that it should be held that the taxpayer was not an employee, in reliance on
Crowe v. Commr. of I.R. (N.Z.) (1954) 10 A.T.D. 372 which was concerned with the relationship between the leader of a dance band and its members.

5. The return of the taxpayer for the year ended 30 June 1970 shows the assessable income to have been received as to the greater part from a suburban R.S.L. Club as ``employer'' and as to the remainder from X Pty. Ltd. as ``employer''. The return for the year ended 30 June 1971 shows the greater part of the assessable income to have been received from the same two sources as in the previous year as ``employer'', and relatively small amounts to have been received as ``fees, commission'' from a recording studio and

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ATC 186

from the Y Club. (The question concerning the relationship of employer and employee does not arise with respect to fees and commissions received by the taxpayer.)

6. The oral evidence of the taxpayer on the subject of employment is to the following effect -

• (i) The R.S.L. Club engages musicians to perform in a band at the club at a weekly remuneration with provision for three weeks annual holiday leave. (Some of the questions in evidence in chief were directed to prove that neither a club official nor the leader of the band is exercising control over the taxpayer with respect to his manner of playing whilst he is playing an instrument. Doubtless that would be so for any band of musicians except perhaps under extreme circumstances which do not arise for consideration.) The taxpayer is required to be present at the R.S.L. Club and to play in the band on the days and for the hours nominated by the R.S.I., Club but he has the privilege of substituting another musician as deputy in his place if he desires to absent himself on a particular occasion, e.g., where he has the opportunity of a private engagement. The taxpayer is required to provide and maintain his instruments (which for ease of reference herein will be taken to include equipment such as amplifiers); in the first instance the taxpayer obtained the ``job'' with the R.S.L. Club consequent upon being in the band at the Y Club; the leader of the band at the R.S.L. Club had left it to the section leader to choose the bass man, and he selected the taxpayer; the manager of the R.S.L. Club had nothing to do (presumably meaning in a direct way) with the engagement of the taxpayer as a band musician; the taxpayer was paid by the R.S.L. Club each week an amount fixed by reference to the number of occasions in the week he (or the musician deputizing for him) had played in the R.S.L. Club band; the compere of the R.S.L. Club handed the pay packet to the taxpayer each week; the band played at the R.S.L. Club an average of five nights a week, and on ``ladies' day'' once a month and the band had a rehearsal on one afternoon each week; there were also occasional band performances at what were referred to as ``smokos, prawn nights and things like that''.
• (ii) X Pty. Ltd. controlled a ``Band'' which did not have a permanent place for performance; it accepted engagements as the opportunity arose, e.g., university concerts, midnight to dawn concerts at the Y Club, and concerts at various localities; there were probably 10 concerts in the 1969/1970 year; the ``Band'' rehearsed during the week and again on Saturday; some of the members, and in particular the taxpayer, were shareholders in X Pty. Ltd.; those musicians in the ``Band'' who were not members of the company were paid after each performance, and the balance of the company's receipts went into the general funds of the company; it was only after provision had been made for the purchase of sound equipment and for other commitments that the ``Band'' musicians who were also members of the company received their remuneration; the taxpayer was unable to say how the amounts received from the company as set out in his income tax returns had been calculated, as he left it to those controlling the company who had the books and attended to the investment and disbursement of company funds.

7. There is such scant evidence on the issue whether the taxpayer was an employee that it is fortunate in the circumstances of this case that the issue is not of critical importance. Were it otherwise, it would have been desirable for the evidence in chief to have been presented with far greater particularity than occurred. There are difficulties in probing in cross-examination an issue which has not been developed in chief in its essential features, and more so where, as in the instant case, the taxpayer was obviously at a loss at times to understand the purport of the questions.

8. Clearly the taxpayer was not contracting to supply his labour only. A contract where a musician is to provide a performance with a cheap instrument obtainable from a supermarket may be one

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ATC 187

substantially for labour only, but perhaps not so where he is obliged, explicitly or tacitly, to provide musical instruments of great value. The written down value of the instruments in the present case at 30 June 1971 was in excess of $1,600. The entries on the returns which show the R.S.L. Club, and similarly X pty. Ltd., as an ``employer'' of the taxpayer have no significance on the question whether the relationship of employer and employee exists. Those entries are designed to meet the requirements of Div. 2 of Part VI of the Income Tax Assessment Act which contains in sec. 221A extended definitions applicable solely for the purposes of Div. 2, and are of peripheral relevance on the general question.

9. The evidence, such as it is, leads to the conclusion that the taxpayer was an employee of the R.S.L. Club and similarly of X Pty. Ltd. (cf.
F.C. of T. v. Maddalena 71 ATC 4161; (1971) 45 A.L.J.R. 426). There is no evidence of any substance to support the contrary position. There is a sufficient degree of control appropriate to the relationship of master and servant (cf.
Neale v. Atlas Products (Vic.) Pty. Ltd. (1955) 94 C.L.R. 419 at p. 428). The new test as referred to in
F.C. of T. v. Barrett & Ors. 73 ATC 4147; (1973) 47 A.L.J.R. 616, involves the question whether a man's work is done as an integral part of another's business or is only accessory to it, or as Stephen J. put it (op. cit.) whether the person is performing the relevant services as a person in business on his own account. This test has been subject to considerable criticism. In the present circumstances, it is clear enough that the taxpayer's work as a musician has been done as an integral part of the business of the R.S.L. Club, and similarly as an integral part of the business of X Pty. Ltd. On this test also the taxpayer stands in the relationship of employee to the R.S.L. Club and to X Pty. Ltd.

10. Two photographs became exhibits in the case so as to illustrate the instruments which the taxpayer plays (and makes use of to amplify or blend sound effects), viz., trumpet, acoustic bass, electric bass, flugelhorn and amplifiers. The photographs indicate that it is probable that it would take any person three journeys to carry these instruments by hand from one place to another. Some understanding of the task of transporting the instruments is apparent from one of the photographs which shows the instruments placed alongside the taxpayer's station wagon vehicle. There was also evidence that from about February 1969 to September 1969 the taxpayer used a Volkswagen ``beetle'' model car for carrying the instruments and this made the car so crowded that it was uncomfortable to drive, and so he sold that car and bought the station wagon. On occasions when he has been carrying only one bass instrument (as occurs for example when it is taken for repairs) he is ignored by taxi drivers plying for hire, and he is unable to use public transport.

11. None of the reported cases on claims for allowances for travelling to work touches on the problems which confront the musician who needs and uses instruments of the subject kind to earn his assessable income.

12. There is no prohibition on the taxpayer leaving the instruments at the R.S.L. Club, or at the place where the ``Band'' performs, when a concert is completed at either place, but prudence dictates that he should not do so, quite apart from the need to transport the instruments from the last place of performance to the next ensuing; place of performance. It would be impracticable to leave musical instruments at a club to which numerous people resort, particularly where there is no suggestion of any safe place to store the instruments. Furthermore the instruments are all needed for rehearsals and some are required for practice sessions at times which intervene between the dates for engagement at the R.S.L. Club, and similarly for performances elsewhere. There is no practical alternative in the general run of things to transporting the instruments at his own expense to his home after each performance or rehearsal wherever it occurs; some exceptions can be envisaged but they do not arise for consideration on the evidence in the present case.

13. As mentioned above the taxpayer does not offer on the labour market only his skill as a musician; he provides, as well, instruments worth in the vicinity of $1,600

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ATC 188

even on a written down value as in the depreciation schedule. The expense of transportation of those instruments back and forth from his home to the R.S.L. Club (and the various places where he is engaged to play) is an outgoing incurred in the course of earning his remuneration. This would be so if he paid for a hired car to transport the instruments, whilst he travelled independently to his place of work. In that event doubtless the cost of personal travel would not be within sec. 51(1), though it is considered that the hire car charges would be. The fact that he drives the vehicle in which the instruments are carried (and so arrives at his place of work with the instruments) does not make the expenses associated with the vehicle outgoings of a private or domestic nature. In the circumstances of this case,
Lunney v. F.C. of T. (1958) 100 C.L.R. 478 is not in point.
Lodge v. F.C. of T. 72 ATC 4174; (1972) 46 A.L.J.R. 575, and F.C. of T. v. Maddalena 71 ATC 4161; (1971) 45 A.L.J.R. 426 are distinguishable as being concerned with expenditure which comes at a point too soon to be properly regarded as incurred in gaining assessable income. The car expenses in the present case are incidental and relevant to and productive of the assessable income
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 78 C.L.R. 47;
F.C. of T. v. Green (1950) 81 C.L.R. 313). Therefore the car expenses for travelling and depreciation on the vehicles and the loss on sale of the car are allowable, subject to quantum, as a deduction.

14. Apart from occasional trips to the beach (about four miles each way) the taxpayer, who lived in a built-up area, made practically no use of the cars for daily shopping excursions. In the winter of 1970 he travelled to the Snowy Mountains area, approximately 1,000 miles. The taxpayer's estimate of an average total annual mileage of 8,500 is supported by the evidence that the Volkswagen ``beetle'' registered 4,500 miles in the period February to September 1969. Trips to and from the R.S.L. Club would have run up something in excess of 4,000 miles and at least one-half again of this mileage would be accounted for by trips in connexion with the ``Band'' and incidental engagements. Rounding off total annual mileages at 8,000 miles the taxpayer's estimate of three-quarters for ``deduction'' purposes both for sec. 51(1) and sec. 61 is fully supported.

15. Turning to the other matters in issue the evidence is that the taxpayer did not hire a television receiver. A friend who shared his flat entered into a contract to hire a television set for his own entertainment and it became part of the domestic furnishings of the flat. From time to time that friend asked the taxpayer to contribute a sum equivalent to one-half of the hiring charges as they fell due. This expenditure by the taxpayer is an outgoing of a private or domestic nature regardless of the evidence of the taxpayer as to the use he made of the television programmes. The taxpayer fails on this claim.

16. The taxpayer said that the claims for records were based on actual costs incurred by him. All of the records were made in America, where he said the best music comes from (presumably meaning most suitable for his purposes) and he has no alternative to buying the records to hear the musicians and to keep up to date with the latest artists; there must be phrasing with the horns and the records are essential to enable him to keep up his standard of playing with respect to techniques, style and composition (cf.
F.C. of T. v. Finn (1961) 106 C.L.R. 60). The taxpayer has established his right to a deduction under sec. 51(1) for the total outlay for records.

17. The taxpayer said that $6 is the annual subscription to the Y Club and that he could not have played in the ``Band'' concerts if he had not been a member of the Y Club. That evidence is sufficient to establish his claim to the allowance of the annual subscription to the club.

18. Subject to the disallowance of $48 in the year ended 30 June 1970 for hire of a television set, the deductions as claimed are allowed and the assessments are to be amended accordingly.

Claims allowed in Part