Case U83

Members:
BJ McMahon SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 26 March 1987.

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B.J. McMahon (Senior Member)

The applicant seeks a review of a decision disallowing a claim for $1,328 for orthodontist expenses as a deduction in the year ended 30 June 1983. His claim is made under sec. 51(1) of the Income Tax Assessment Act 1936 ("the Act") which is in the following terms:

"51(1) [Deductions for losses and outgoings] All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income."

2. He is a musician whose principal instrument is the trombone. Some years prior to 1981 he had had a lower tooth removed due to decay. At the time he did not think that this would have any effect on the way in which he used his lips and mouth for the playing of his instrument. However, about 1981 while teaching at a suburban private school as a casual tutor and bandmaster, he began to notice that the mouthpiece of the brass instruments that he played were starting to drift across. They were following the line of lower teeth which had been drifting across to fill the gap created by the loss of the decayed tooth. At the time he was tutoring about 55 students per week and was conductor of a brass band as well.

3. The embouchure is the formation of the lips and the muscles surrounding them required by brass players in order to position the lips so that a vibration is produced as the origin of the sound, to be transmitted by the instrument. His embouchure became more and more painful and the applicant became more and more conscious that he was not playing as well as he could.

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ATC 482

4. He was not affected by the loss of the tooth in any other way, but decided that to preserve his job as a brass instrument player he should seek dental advice. He told his dentist that he wished to arrange for the centre of his top teeth and bottom teeth to be realigned. He was referred to an orthodontist who reported as follows:

"This will serve as a summary of treatment proposed for you. The following features of your dentition are those requiring treatment: prominence of the upper and reduced angulation of the lower anteriors, crowding of the lower left third molar (wisdom tooth) area, an excessive amount by which the upper anteriors overlap the lowers, and displacement of the upper midline to the left and lower midline to the right.

Your treatment will involve the extraction of one upper and one lower permanent back tooth to provide space for the correction of the above factors.

Upper and lower fixed appliances will be used to bring about the desired tooth movements and a retainer may be required when bands are removed.

Time of treatment will be approximately twenty-four months including a period of retention. Cost of treatment will be $1,578.00. Accounts will be sent over the first fifteen months on this basis: -

     $ 98.00   examination/consultation
      480.00   when appliances are placed
      250.00   for each of four increments
          

These amounts are current and may be varied without notice.

Please retain this letter for Multicover rebate."

5. The applicant undertook the treatment shortly after it was recommended on 10 June 1982. The amount of $1,328 was claimed as the expenses paid during the year in question. The total of the payments made during the year were put in issue at the hearing as there was some confusion as to whether a simple error had been made in not claiming the whole of the $1,578 or whether the final balance of $250 of the $1,578 quoted by the orthodontist was paid in the subsequent year. It will not be necessary to resolve this inconsistency.

6. During the course of the treatment, the applicant took up employment with another private college. It was essential that he continued to tutor students. The evidence was that unless he did so and unless he contributed their tuition fees to the college, there would not have been an economic basis for engaging him (as he is now engaged) as that college's director of bands. Tutoring, of course, necessarily involves demonstrating on the instrument.

7. Since the orthodontic work has been carried out he has been much more comfortable in his playing and has felt more secure in his employment.

8. His present job is to tutor all brass students of the college, to co-ordinate private music teachers who come to the school and to conduct three bands, two of which are concert bands and the third a stage band. His duties constitute full-time employment. They also involve giving approximately 30 performances with the bands per year, sometimes within and sometimes outside the college. He continues to tutor 30 children on brass instruments. He also carries out administrative work which he estimates would take up about one-quarter of his time.

9. It will be noted in the report of the orthodontist that reference was made to the "prominence of the upper and reduced angulation of the lower anteriors". In common parlance this is a description of "buck teeth". The applicant agreed that these had been a feature of his mouth all his life but not a prominent feature so that they were not noticed immediately at first glance. The orthodontic work (he said) was not done for cosmetic purposes, nor to assist him in speech, nor in eating, nor for any other reason but to improve his ability to play brass instruments. He gave evidence that the orthodontist had told him it was necessary to treat the "buck teeth" as well as the other teeth in order to stop the drift.

10. It was clear that the drift of his lower teeth, which caused the original problem, was not caused by playing brass instruments. It was, however, necessary to rectify this drift (as he submitted) in order to enable him to secure his income as a tutor. It was, to use his words, "to ensure longevity as a musician".

11. It will be noted that the applicant did not claim the deduction pursuant to the provisions of sec. 159P of the Income Tax Assessment Act as a concessional expenditure item. He claimed to be entitled to deduct the amount in question

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ATC 483

under sec. 51(1) of the Act as a loss or outgoing incurred in gaining or producing assessable income.

12. His claim was opposed by the Commissioner on three grounds. Firstly, it was argued that the test of deductibility under sec. 51(1) is not a "but for" test. Notwithstanding that an expense may be needed, necessary or even intended to assist in the derivation of income, it is not by that reason alone necessarily brought within the section. He cited
Lunney v. F.C. of T. (1957-1958) 100 C.L.R. 478 and
Lodge v. F.C. of T. 72 ATC 4174; (1972) 128 C.L.R. 171. I will return to the relevance of the judgment in Lunney.

13. Secondly, it was argued that the expense fell within the exception of private expenditure. It was contended that all work done to one's anatomy is necessarily private or personal (see
Norman v. Golder (1945) 26 T.C. 293). There is some suggestion in the judgment of Pennycuick J. in
Prince v. Mapp (1970) 1 W.L.R. 260 that medical expenses incurred in the restoration of a specific bodily function that is necessary for the process of income derivation in which the applicant is engaged could attract deductibility. In that case the applicant had a finger tendon repaired in order to enable him to play the guitar professionally. Because of the provisions of the English legislation it was not necessary for the Court to decide the question of deductibility as it was clear that the medical expenses in that case were not "wholly and exclusively laid out for the purposes of the trade profession or vocation" as would be required by the relevant statute. The reasoning of Pennycuick J., however, is in the nature of the "but for" argument which has been specifically rejected by the High Court as a basis for approaching sec. 51(1). In Lunney at pp. 498 and 499, their Honours in a joint judgment said in relation to a claim to deduct fares on the grounds that if not incurred, the taxpayer would not be able to attend his place of work:

"The question whether the fares which were paid by the appellants are deductible under s. 51 should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as `incidental and relevant' to the derivation of such income. No doubt both of the propositions involved in this contention may, in a limited sense, be conceded but it by no means follows that, in the words of the section, such expenditure is `incurred in gaining or producing the assessable income' or `necessarily incurred in carrying on a business for the purpose of gaining or producing such income'. It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a applicant's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income. Whether or not it should be so characterised depends upon considerations which are concerned more with the essential character of the expenditure itself than with the fact that unless it is incurred an employee or a person pursuing a professional practice will not even begin to engage in those activities from which their respective incomes are derived."

14. Reference was also made on the Commissioner's behalf to Case P 31
(Gilbert v. F.C. of T.) 82 ATC 141 where a quadriplegic was denied a deduction for the cost of an attendant, without whom the quadriplegic could not travel on business, both on the grounds of relevance and on the grounds of domestic expenditure.

15. Thirdly, the Commissioner argued that the expenditure lacked a working or revenue nature. In other words, it was expenditure of a capital nature. The result of the expenditure was that the applicant would have a lasting advantage and subsequent events were to prove that this investment achieved the results it was intended to achieve. This argument, it was submitted, had particular relevance in view of the fact that the expenditure was a one off expense, even though paid by instalments. The ability to earn as a tutor was to be regarded as a structural asset which was, if not thereby acquired, then was substantially improved by the capital expenditure in having the orthodontic treatment.

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ATC 484

16. It seems to me too extreme a view to say that all work done to one's anatomy must necessarily be private or personal and must necessarily fall within the exception contained in sec. 51(1). It might be thought that such a view was espoused in Norman v. Golder (1945) 26 T.C. 293 where Lord Greene said at p. 298:

"True it is that if you do not get yourself well and so incur expenses to doctors you cannot carry on your trade or profession, and if you do not carry on your trade or profession you will not earn an income, and if you do not earn an income the Revenue will not get any tax. The same thing applies to the food you eat and the clothes that you wear. But expenses of that kind are not wholly and exclusively laid out for the purposes of the trade, profession or vocation. They are laid out in part for the advantage and benefit of the taxpayer as a living human being. Paragraph (b) of the rule equally would exclude doctor's bills, because they are, in my opinion, expenses of maintenance of the party, his family, or a sum expended for a domestic or private purpose, distinct from the purpose of the trade or profession."

17. His Lordship of course was dealing with English legislation which, as pointed out above, differs in an important respect from the Australian legislation.

18. Some doubts about the absolute nature of these observations were expressed by Pennycuick J. in Prince v. Mapp (supra). I would also respectfully draw attention to some possible cases of medical treatment where the cost might conceivably be deductible under sec. 51(1) of the Income Tax Assessment Act.

19. It may well be that the cost of treatment of a condition caused by working should not be regarded as a private outgoing. Similarly, the cost of protection against a specific work hazard, such as the application of a protective cream, may conceivably be regarded as non-private in nature. The possibility of medical outgoings being classified as non-private in their nature was recognised in
F.C. of T. v. Hatchett 71 ATC 4184 where Menzies J. said at pp. 4186-4187:

"It must be a rare case where an outgoing incurred in gaining assessable income is also an outgoing of a private nature. In most cases the categories would seem to be exclusive. So, for instance, the payment of medical expenses is of a private nature and is not incurred in gaining assessable income, notwithstanding that sickness would prevent the earning of income."

20. In my view, the present application does not constitute one such rare case. The expenses involved are no different in their essential nature from the cost of spectacles for a musician with defective eyesight who has difficulty in reading music. They are no different from the expenses of an airline pilot attending "keep fit" classes. They are no different from the expenses of a spinal laminectomy in the case of a labourer for whom a strong back is essential in earning a living. All these types of expenditure may well have a beneficial effect on the taxpayer's income earning capacity. Indeed it is possible to visualise cases where the expenditure is necessary for that purpose. The authorities, nevertheless, compel me to treat the essential nature of those expenses and of the expenses of the present applicant as private.

21. Defining the nature of the applicant's expenses is further complicated by the dual purpose of the orthodontistry which was undertaken on his mouth. Although I accept that he did not request the dentist or the orthodontist to rectify his "buck teeth", nevertheless they are referred to as features of his dentition that required treatment. The work that was carried out, as appears from the orthodontist's report, was work of general dentition improvement. There is no reference in the report to the specific object of any work as being related to the playing of brass instruments. It may well be that, as a result of the work, the applicant is more comfortable and proficient in the playing of his instrument and indeed I accept his evidence to that effect. This does not, however, make it either specific to the need that he sought to satisfy, nor does it make it relevant in the sense of a working expense. The expenses cannot be viewed as other than private expenses and therefore as being excluded from the category of deductible expenses under sec. 51(1).

22. The decision under review is affirmed.