Decision impact statement

Frisch and Commissioner of Taxation

Court citation:
[2008] AATA 462
2008 ATC 10-031
72 ATR 551

Venue: Administrative Appeals Tribunal
Venue Reference No: 2007/4517-4521
Judge Name: Deputy President Block
Judgment date: 4 June 2008
Appeals on foot:
No appeal to be lodged

Impacted Advice

Relevant Rulings/Determinations:

• None.

Subject References:
Deduction
outgoing incurred
outgoing incurred to enable employee to undertake employment duties
outgoing of a private nature
employee of employee
delegation
delegatus non potest delegare maxim
Rebate
concessional rebate
rebate for medical expenses

Précis

This case sought to test whether expenditure incurred by a taxpayer with disability in employing an assistant to assist and attend to the taxpayer in or in relation to their disability while the taxpayer carries out their employment duties is deductible under s 8-1 of the Income Tax Assessment Act 1997

Decision/Outcome

Adverse

Brief summary of facts

The taxpayer requested a private ruling in relation to the deductibility of outgoings incurred by her in employing someone to provide the assistance needed by her because of her disability to fulfil the obligations and functions of her employment.

The taxpayer suffers from cerebral palsy. She has limited motor skills, her speech is impeded and she is permanently confined to a wheelchair/bed. At the time she requested the private ruling, she was studying law and planning to become a solicitor. During a semester break, she obtained employment as a law clerk and hired an assistant to help her while she did her work. The duties of the assistant included typing notes, photocopying, arranging items on the desk (non-personal services) and providing some personal care assistance (personal services). The amount sought to be deducted included wages and superannuation, advertising, insurance and training of the assistant.

The ruling and objection decisions were that no deduction was available but that any amount paid as remuneration to an attendant for medical services could be taken into account in determining whether a concessional rebate for medical expenses was available.

Issues decided by the tribunal

Outgoing incurred in gaining or producing assessable income

The Tribunal found that the taxpayer does not delegate any of the employment tasks to the attendant. Rather, the attendant merely performs necessary physical tasks under the direction and control of the taxpayer and the taxpayer merely obtains the assistance needed by her to fulfil her obligations and functions as an employee.

Accordingly the Tribunal decided that, to the extent that the expenditure of the taxpayer is in relation to non-personal services, the outgoing is incurred to enable the taxpayer to undertake her employment duties and is thus incurred in gaining her employment income. A deduction is available under s 8-1 ITAA 1997.

Not an outgoing of a private nature

The Tribunal found that any deduction under subsection 8-1(1) in relation to outgoings incurred on non-personal services is not denied to any extent under subsection 8-1(2) because the outgoings are not outgoings of a private or domestic nature.

In reaching this decision, the Tribunal noted that an expense incurred to overcome physical disability will probably in most cases be non-deductible as private or domestic, although this is not a rule which applies invariably. Outgoings incurred to acquire items required to overcome a disability are generally not deductible - for example, the cost of items such as spectacles, hearing aids, wheelchairs and crutches - as such items are not required only at and for work.

Here, however, the outgoings are to acquire services required and provided only at and for work. The Tribunal found that these are services without which the taxpayer could not fulfil her work obligations and, accordingly, the outgoings on the non-personal services are not outgoings of a private or domestic nature.

Interaction between s 159P ITAA 1936 and s 8-1 ITAA 1997

The Tribunal decided that the fact that a rebate under s 159P ITAA 1936 is available in relation to an amount paid as remuneration for medical services would not preclude a deduction under s 8-1 ITAA 1997 in relation to that outgoing.

Tax Office view of Decision

Outgoing incurred in gaining or producing assessable income

The Tax Office argued that this is an outgoing incurred to address the physical disability of the taxpayer which, although incurred for the purpose of gaining or producing her employment income, does not meet the essential character test of being incurred in gaining or producing the employment income.

On the facts of this case, the Tax Office accepts the Tribunal's decision that the outgoing is incurred not merely to put the taxpayer in a place or a position in which she could undertake her employment duties, but to enable her to undertake the employment duties.

This was not a case involving delegation of duties by an employee. The taxpayer did not delegate her employment duties, nor any discrete part of them, to her assistant. Although the maxim delegatus non potest delegare was discussed by the Tribunal, it acknowledged that there had been no delegation and the taxpayer had merely incurred expenditure to acquire services to enable her to undertake her income earning employment duties.

Not an outgoing of a private nature

The Tax Office also accepts, on the facts of this case, that the outgoings incurred by the taxpayer on non-personal services are not outgoings of a private or domestic nature. However, the Tax Office agrees with the Tribunal that an expense incurred to overcome a physical disability will probably in most cases be private and domestic, and non-deductible.

Interaction between s 159P ITAA 1936 and s 8-1 ITAA 1997

An amount paid by a taxpayer permanently confined to a wheelchair/bed as remuneration for services necessitated by the taxpayer's confinement which are rendered by the recipient as an attendant of a person so confined can be taken into account in determining whether a rebate for medical expenses is available to the taxpayer under s 159P ITAA1936.

Any deduction available in relation to such an amount under s 8-1 ITAA 1997 is not precluded because the outgoing is an amount paid within the ambit of this concessional rebate.

Administrative Treatment

None. The decision was open to the Tribunal based on the particular circumstances of the case.

Implications on current Public Rulings & Determinations

None.

Implications on Law Administration Practice Statements

None

Legislative References:
Income Tax Assessment Act 1997
8-1

Income Tax Assessment Act 1936
159P

Case References:
Australian Air Express Pty Limited v Langford
[2005] NSWCA 96
(2005) 147 IR 240
[2006] ALMD 3683

Commissioner of Taxation v Edwards
(1994) 49 FCR 318
(1994) 94 ATC 4255
(1994) 28 ATR 87

Commissioner of Taxation v Payne
[2001] HCA 3
(2001) 202 CLR 93
2001 ATC 4027
(2001) 46 ATR 228

Lodge v Federal Commissioner of Taxation
(1972) 128 CLR 171
(1972) 72 ATC 4174
(1972) 3 ATR 254
(1972) 46 ALJR 575

Lunney v Commissioner of Taxation
100 CLR 478, 498-499
1958) 11 ATD 404
(1958) 32 ALJR 139
[1958] ALR 225

Wells v Commissioner of Taxation
[2000] AATA 920
2000 ATC 2077
(2000) 45 ATR 1145