Case U103

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 22 April 1987.

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K.L. Beddoe (Senior Member)

The question at issue in this case is whether the applicant is entitled to a deduction under subsec. 51(1) of the Income Tax Assessment Act in respect of travel, accommodation, and conference expenses incurred by the applicant in respect of his wife.

2. The only provision of the Income Tax Assessment Act which can be relevant to this claim is subsec. 51(1). The applicant has not sought to claim the deduction under any other section.

3. During the year ended 30 June 1979 the applicant and his wife undertook an overseas

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ATC 630

trip to Hong Kong and Singapore. Approximately one week was spent in each place. The first week was spent in Hong Kong and was taken up principally with the applicant's attendance at a conference of the Taxation Institute of Australia. There is no dispute before the Tribunal in relation to expenses incurred by the applicant on his own behalf. His claim for a deduction in respect of these expenses has been allowed by the respondent Commissioner.

4. The second week was spent in Singapore making various investigations into financial and tax matters including investment prospects for clients and establishing contacts with business and professional people in that city. Once again there is no dispute between the applicant and the respondent as to the allowability of expenses incurred by the applicant on his own behalf. Such claims by the applicant have been allowed by the respondent.

5. All this is understandable when it is realised that the applicant is a principal in a firm of chartered accountants which apparently specialises in taxation and investment matters but performs a broad range of accounting functions for its clientele. The applicant described the practice as a flourishing chartered accountants' practice although the figures in the applicant's income tax return hardly support such a view. No doubt further enquiry would establish the validity of the applicant's claim but this is beyond the scope of these proceedings.

6. The applicant claims deductions for the conference fee of $130 paid to the Taxation Institute of Australia so that his wife could attend the convention functions and half of an amount of $989 paid to a travel agent for a travel and accommodation package as it relates to his wife for travel from Australia to Hong Kong and then to Singapore and return to Australia.

7. The respondent put in issue the question as to whether the expenditure had been incurred. Exhibit E is a statement of account from the travel agent which clearly establishes that the tour cost was $989 per person and an attachment to Exhibit B is a brochure apparently issued on behalf of the Taxation Institute of Australia advertising the convention and making it quite clear that the registration fee for an accompanying person is $130. The applicant's evidence is that these amounts were incurred and the documentary evidence supports the applicant's oral evidence. I am satisfied that the amounts of $989 and $130 were in fact incurred by the applicant.

8. The applicant gave evidence that there was considerable advantage to him in having his wife accompany him to the convention. The applicant had some difficulty, however, in demonstrating how this advantage arose except in respect of one matter. It appears that the wife made a practice of attending the social functions at the convention but not what might be called the technical sessions. At one of these social functions the applicant's wife made the acquaintance of an accountant from another State and duly introduced the accountant to the applicant. This resulted in the accountant referring work said to be worth thousands of dollars in fees to the applicant's practice. It was claimed therefore that the wife had been instrumental in deriving assessable income for the applicant. The applicant's evidence went further, however, and sought to establish that by having his wife present it was easier to develop contacts which were beneficial to the firm.

9. Exhibit C is a list of contacts made by the applicant including the one initiated by his wife which was said to be of some benefit to the firm. There are 16 persons included on the list, two of whom are well-known barristers practising in Australia, four others appear to be accountants practising in Australia including the accountant mentioned earlier and the remainder are persons located in Hong Kong and Singapore and with whom the applicant could expect to have business relationships, given that his practice apparently includes overseas investment on behalf of clients. I fail to see how developing contacts with barristers can result in the applicant deriving additional assessable income. I also fail to see how the presence of the applicant's wife is in any way relevant to the income-producing activities of the firm of which the applicant is a partner. It is undoubtedly more pleasant to have lunch or attend a cocktail party in mixed company. It is probably the case that the applicant's wife has an abiding interest with the welfare of the applicant's business and would therefore act accordingly. What is not demonstrated by the applicant's evidence is how there is any causal connection or nexus between the wife's

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ATC 631

presence at the Taxation Institute of Australia Convention with the accounting practice which resulted in the firm deriving assessable income. I have come to the same conclusion in relation to the Singapore trip.

10. I agree with the submission by the respondent's representative when she submitted that there was altogether too tenuous a connection (if any at all) between the expenditure incurred by the applicant in respect of his wife and the income-producing activities of the firm of chartered accountants.

11. In Case A44,
69 ATC 251 Taxation Board of Review No. 3 allowed deductions in respect of travel expenses incurred by a director and substantial shareholder of a softgoods wholesaler. As I understand the majority decision the applicant was able to establish that because he was out of date in the fashion world he had to rely heavily on his wife's expert advice when travelling overseas to purchase stock for the company. In that situation the majority of the Board was content to find that the outgoings were incurred by the taxpayer in the course of earning his salary and this was emphasised by the fact that the taxpayer's wife was well qualified to give the taxpayer advice in fabric and dress designing because of her experience in the field. That is not the case here; it was readily conceded by the applicant that his wife was not qualified in accountancy although she had had experience as a personal secretary in stockbroking and also as a legal secretary. No doubt this made her comfortable in the surroundings of a Taxation Institute social function but she is not in the same position as the wife of the taxpayer in Case A44.

12. I cannot see that the present application is any different to the facts considered by Taxation Board of Review No. 2 in Case C35,
71 ATC 153 where the Board held that the nexus between the wife's presence and the taxpayer's business was not close enough to bring any portion of the relevant costs within the positive limbs of sec. 51.

13. The respondent's objection decision will be affirmed.