WTPG and Commissioner of Taxation (Taxation) [2016] AATA 971 (30 November 2016) TAXATION AND COMMERCIAL DIVISION

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1 WTPG and Commissioner of Taxation (Taxation) [2016] AATA 971 (30 November 2016) Division: TAXATION AND COMMERCIAL DIVISION File Number: 2015/6427 Re: WTPG APPLICANT And: COMMISSIONER OF TAXATION RESPONDENT DECISION Tribunal Deputy President S A Forgie Date 30 November 2016 Place Melbourne The Tribunal decides to: affirm the reviewable objection decision of the respondent dated 9 November [sgd]. Deputy President CATCHWORDS TAXATION income tax deductions expenses incurred when applicant s wife accompanied him on work-related travel as personal carer whether expenses deductible expenses not incurred in course of gaining or producing applicant s assessable income expenses a loss or outgoing of private or domestic nature decision not made in breach of Disability Discrimination Act 1992 decision affirmed. Commonwealth of Australia 2016

2 DISCRIMINATION effect of Disability Discrimination Act 1992 on Income Tax Assessment Act 1997 no inconsistency between the two regarding expenses Commissioner not in breach of obligation under s 29 of the Disability Discrimination Act WORDS AND PHRASES discrimination LEGISLATION Administrative Appeals Tribunal Act 1975; s 43 Civil Aviation Act 1988; s 98(6B) Disability Discrimination Act 1992; ss 3, 4(1), 5, 6, 29, 47, 47(1), 47(1)(b), 47(1)(c), 47(1)(d), 47(2), 47(3), 47(4), 47(5) Disability Discrimination and Other Human Rights Legislation Amendment Act 2009; Item 3 of s 2(1), s 3, Item 72 of Sch 2 Disability Discrimination Regulations 1996; Sch 1 Equal Opportunity Act 2010 (Vic); ss 50, 50(1), 50(3) Income Tax Assessment Act 1936; s 51(1) Income Tax Assessment Act 1997; ss 4-15, 8-1, 8-1(1), 8-1(2), 8-1(2)(b), 8-1(2)(d), 26-1, 26-30, 26-30(1), 26-30(2), 995-1(1) Racial Discrimination Act 1975; s 10 Tax Law Improvement Act 1997 Taxation Administration Act 1953; Div 359 of Sch 1 Explanatory Memorandum to the Disability Discrimination Bill 1992 Explanatory Memorandum to the Tax Law Improvement Bill 1996 CASES Abbott v Transport Accident Commission [1991] VicRp 51; [1991] 2 VR 116 Certain Lloyd s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378; 293 ALR 412; 87 ALJR 131 Commissioner of Taxation v Cooper (1991) 29 FCR 177; 99 ALR 703; 91 ATC 4396; 21 ATR 1616 Commissioner of Taxation v Finn [1961] HCA 61; (1961) 106 CLR 60 Commissioner of Taxation v McMahon and Anor [1997] FCA 1087; (1997) 79 FCR 127; 149 ALR 159; 37 ATR 167 Commissioner of Taxation v Payne [2001] HCA 3; (2001) 202 CLR 93; 177 ALR 270; (2001) 75 ALJR 442; 46 ATR 228; 2001 ATC 4027 Federal Commissioner of Taxation v Anstis [2010] HCA 40; (2010) 241 CLR 443; 272 ALR 1; 76 ATR 735; 85 ALJR 122; 2010 ATC Federal Commissioner of Taxation v Maddalena (1971) 2 ATR 541; 45 ALJR 426; 71 ATC 4161 Fortescue Metals Group Limited v The Commonwealth of Australia [2013] HCA 34; (2013) 250 CLR 548; 300 ALR 26; 87 ALJR 935; 89 ATR 1 Lodge v Commissioner of Taxation [1972] HCA 49; (1972) 128 CLR 171; 3 ATR 254; 46 ALJR 575; 72 ATC 4174 Lunney v Federal Commissioner of Taxation [1958] HCA 5; (1958) 100 CLR 478 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 Purvis v New South Wales [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 Re Frisch and Federal Commissioner of Taxation [2008] AATA 462; (2008) 72 ATR 551; 2008 ATC Re Gilbert and Federal Commissioner of Taxation (1982) 82 ATC 141 Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1; 100 ALR 193; 65 ALJR 402 PAGE 2 OF 33

3 OTHER MATERIALS Productivity Commission, Review of the Disability Discrimination Act 1992 (Report No. 30), 30 April 2004; sections 9.1, 9.5 REASONS FOR DECISION 1. During the income year ending 30 June 2014 (2014 year), WTPG paid for his wife to travel with him to London so that she could be his personal carer while he attended two workrelated conferences. When he lodged his return on 18 December 2014 for the 2014 year, WTPG claimed his wife s airfares, amounting to $9, (Travel Expense), as a deduction. The Commissioner of Taxation (Commissioner) disallowed his claim for those expenses and, on 7 January 2015, issued a notice of assessment to WTPG for the 2014 year. On 9 June 2015, WTPG applied for a private ruling on whether the Travel Expenses were deductible for the 2014 year. The Commissioner made a private ruling on 29 June 2015 ruling that the Travel Expenses were not deductible. When WTPG objected to the private ruling, the Commissioner disallowed it in full on 9 November 2015 (objection decision). WTPG has applied for review of that objection decision primarily on the ground that it constitutes discrimination under the Disability Discrimination Act 1992 (DDA). I have decided to affirm the Commissioner s objection decision. THE ISSUES 2. The following issues are raised by this application: (1) Are the Travel Expenses deductible in the 2014 year under s 8-1 of ITAA97? (a) (b) Were the Travel Expenses incurred in gaining or producing WTPG s assessable income under s 8-1 of ITAA97? Were the Travel Expenses a loss or outgoing of a private or domestic nature so that they may not be deducted as a result of the application of s 8-1(2)(b) of ITAA97? (2) Does s of ITAA97 operate to deny WTPG a deduction for Travel Expenses in the 2014 year? BACKGROUND 3. I cannot go beyond the facts on which the Commissioner made his private ruling. They are these. 1 In or about May 2013, WTPG was invited to attend and speak at a conference related to the duties of his employment in Victoria. The conference was to be held in the United Kingdom. His employer approved his attending the conference in an official capacity as well as a second conference to be held in the United Kingdom. WTPG s 1 Commissioner of Taxation v McMahon and Anor [1997] FCA 1087; (1997) 79 FCR 127; 149 ALR 159; 37 ATR 167; Lockhart, Beaumont and Emmett JJ PAGE 3 OF 33

4 airfares were reimbursed by his employer. The conference organisers paid for the expenses of the accommodation for WTPG and his wife as well as other out-of-pocket expenses. 4. WTPG suffers from medical conditions that mean that he is unable to walk any distance without assistance and cannot stand for any length of time. As a consequence, he needs a carer not only to assist him with standing and walking but to use the toilet, shower and bathe and dress. WTPG s employer was aware of his disabilities but did not provide him with a carer or assistant to travel with him. None of the employer s other staff members were willing to accompany him to act as his carer. 5. WTPG s wife acted as his carer both on the flights to and from the United Kingdom and during his time in that country. During that time, she helped him to dress, assisted him with his personal hygiene, showering and toilet needs and supported him when he was walking and standing. Her assistance was necessary to enable WTPG to travel to, and attend, both conferences. In addition to his attendance at the two conferences, WTPG attended a series of meetings related to the duties of his employment during his time in the United Kingdom between 23 September 2013 and 4 October WTPG s wife did not perform any tasks relating to the duties he performed in the course of employment. She was not employed by WTPG s employer and did not receive any payment for the assistance that she gave him. 6. In response to WTPG s request for a private ruling, the Commissioner ruled on 29 June 2015 that: (1) the Travel Expense was not deductible pursuant to s 8-1(2)(b) of the Income Tax Assessment Act 1997 (ITAA97) as it was of a private or domestic nature; and (2) a deduction for the Travel Expense was, in any case, denied under s of ITAA97. LEGISLATIVE BACKGROUND Relevant provisions of ITAA97 7. A person s taxable income is worked out by subtracting the amount of any deductions from the amount of his or her assessable income. If the deductions equal or exceed the assessable income, the person does not have a taxable income. 2 Section 8-1 provides for what it describes as general deductions. For the purposes of this case, only ss 8-1(1) and (2) are relevant. They provide: 2 ITAA97; s 4-15 PAGE 4 OF 33

5 (1) You can deduct from your assessable income any loss or outgoing to the extent that: (a) (b) it is incurred in gaining or producing your assessable income; or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Note: Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income. (2) However, you cannot deduct a loss or outgoing under this section to the extent that (a) (b) (c) (d) it is a loss or outgoing of capital, or of a capital nature; or it is a loss or outgoing of a private or domestic nature; or it is incurred in relation to gaining or producing your *exempt income or your *non-assessable non-exempt income; or a provision of this Act prevents you from deducting it. For a summary list of provisions about deductions, see section Section is a provision of the sort contemplated by s 8-1(2)(d). Only ss 26-30(1) and (2) are relevant: (1) You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your *relative s travel, if: (a) (b) you travelled in the course of performing your duties as an employee, or in the course of carrying on a *business for the purpose of gaining or producing your assessable income; and your relative accompanied while you travelled. (2) Subsection (1) does not stop you deducting a loss or outgoing if: (a) (b) your *relative, while accompanying you, performed substantial duties as your employer s employee, or as your employee; and it is reasonable to conclude that your relative would still have accompanied you even if he or she had not had a personal relationship with you. 9. Among those regarded as a taxpayer s relative is his or her spouse. 3 A spouse of an individual is defined in s 995-1(1) to include: (b) (a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a *State law or *Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. 3 ITAA97; s 995-1(1), paragraph (a) of the definition PAGE 5 OF 33

6 Relevant provisions of the Disability Discrimination Act 10. Section 3 of the DDA sets out its objects: The objects of this Act are: (a) (b) (c) to eliminate, as far as possible, discrimination against persons on the ground of disability in the areas of: (i) (ii) (iii) (iv) work, accommodation, education, access to premises, clubs and sport; and the provision of goods, facilities, services and land; and existing laws; and the administration of Commonwealth laws and programs; and to ensure, as far as practicable, that persons with disabilities have the same rights to equality before the law as the rest of the community; and to promote recognition and acceptance within the community of the principle that persons with disabilities have the same fundamental rights as the rest of the community. 11. Section 29 provides that: It is unlawful for a person who performs any function or exercises any power under a Commonwealth law or for the purposes of a Commonwealth program or has any other responsibility for the administration of a Commonwealth law or the conduct of a Commonwealth program, to discriminate against another person on the ground of the other person s disability in the performance of that function, the exercise of that power or the fulfilment of that responsibility. 12. ITAA97 comes within the expression Commonwealth law as it is defined in s 4(1) of the DDA. The word discriminate is given its meaning by ss 5 and 6. 4 with direct disability discrimination: Section 5 is concerned (1) For the purposes of this Act, a person (the discriminator) discriminates against another person (the aggrieved person) on the ground of a disability of the aggrieved person if, because of the disability, the discriminator treats, or proposes to treat, the aggrieved person less favourably than the discriminator would treat a person without the disability in circumstances that are not materially different. (2) For the purposes of this Act, a person (the discriminator) also discriminates against another person (the aggrieved person) on the ground of a disability of the aggrieved person if: (a) (b) the discriminator does not make, or proposes not to make, reasonable adjustments for the person; and the failure to make the reasonable adjustments has, or would have, the effect that the aggrieved person is, because of the disability, 4 DDA; s 4(1) PAGE 6 OF 33

7 treated less favourably than a person without the disability would be treated in circumstances that are not materially different. (3) For the purposes of this section, circumstances are not materially different because of the fact that, because of the disability, the aggrieved person requires adjustments. 13. Indirect disability discrimination is the subject of section 6. In this context, however, it is not relevant because there is no suggestion that the Commissioner requires, or proposes to require, WTPG to comply with any condition or requirement by reason of his disability or otherwise. OUTLINE OF THE SUBMISSIONS 14. On behalf of WTPG, Mr Nash QC of counsel acknowledged that the case of Re Gilbert and Federal Commissioner of Taxation 5 (Gilbert) was a case in which a deduction claimed in similar circumstances had been disallowed by the Commissioner. That case was decided, however, in 1982 and it is to be expected that such an outcome would, since the enactment of the DDA, constitute discrimination within the meaning of that legislation. 15. There is no conflict between s 8-1 of ITAA97 and the provisions of the DDA for the former section should be interpreted in light of the latter. That means that the expenses of engaging a carer or physical assistant that are necessarily incurred in performing a taxpayer s duties as an employee and to the extent that they are so used can no longer be treated as personal or domestic expenses. 16. The reference to expenses of a private or domestic nature must be understood in light of the DDA. That legislation changed the context in which s 8-1 and the tax law generally must be construed. Even in 1958 in Lunney v Federal Commissioner of Taxation 6 (Lunney), Dixon CJ had expressed reservations about the established law regarding the interpretation of what constituted expenditure of a private or domestic nature. The introduction of the DDA into the context means that, to adapt his Honour s words, it is now necessary to work the matter out all over again according to reason Mr Nash submitted that there appears to be a conflict between s of ITAA97 and s 5 of the DDA. That conflict may be resolved by taking the purposive approach to statutory construction as required by Project Blue Sky v Australian Broadcasting Authority 8 (Project Blue Sky). Section is concerned with the deduction of expenses of a relative as a 5 (1982) 82 ATC 141; Messrs Stevens, Chairman, Harrowell and Pape, Members 6 [1958] HCA 5; (1958) 100 CLR 478; Dixon CJ, Williams, Kitto and Taylor JJ; McTiernan J dissenting 7 [1958] HCA 5; (1958) 100 CLR 478 at [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490; McHugh, Gummow, Kirby and Hayne JJ; Brennan CJ dissenting PAGE 7 OF 33

8 relative and not as a carer. Mrs WTPG was not travelling in her capacity as a relative. Although dealing with a completely different subject matter, the reasoning required is apparent in the judgments of the Full Court of the Supreme Court of Victoria in Abbott v Transport Accident Commission On behalf of the Commissioner, Mr Flynn QC of counsel submitted that s operates to deny WTPG a deduction for the travel expense of his wife in the 2014 year. As she was his wife, it followed that the Travel Expense was attributable to a relative s travel when she accompanied him as he travelled in the course of performing his duties as an employee for the purpose of gaining or producing his assessable income. The qualification to that conclusion did not apply as she had not performed substantial duties as an employee of WTPG or of his employer. 19. That interpretation of s is not inconsistent with the DDA when properly construed. Even if it were, the DDA would not override it, Mr Flynn submitted. While accepting that the DDA can apply to the Commissioner in performing his functions and exercising his powers, it is not intended to affect the application or interpretation of the legislation. Had it been intended to have that effect, it would have included a provision such as s 10 in the Racial Discrimination Act 1975 (Racial Discrimination Act) and s 50 of the Equal Opportunity Act 2010 (Vic) (EO Act). 20. In relation to s 8-1, Mr Flynn submitted that the Travel Expense is not deductible for two reasons. The first was that it was incurred too soon to be deductible so that it was not incurred in gaining or producing WTPG s assessable income. It was incurred in order to put WTPG in a position where he could undertake the tasks from which income would be derived. The second was that it was of a private or domestic nature and so specifically denied under s 8-1(2)(b). CONSIDERATION What is discrimination within the meaning of the DDA? 21. In Fortescue Metals Group Limited v The Commonwealth of Australia 10 (Fortescue Metals) the High Court considered the concept of discrimination in the context of s 51(ii) of the Constitution. It provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to taxation; but so as not to discriminate between States or parts of States. It had been 9 [1991] VicRp 51; [1991] 2 VR 116; Crockett, McGarvie and Southwell JJ 10 [2013] HCA 34; (2013) 250 CLR 548; 300 ALR 26; 87 ALJR 935; 89 ATR 1; French CJ, Hayne, Crennan, Kiefel, Bell and Keane JJ PAGE 8 OF 33

9 submitted that, in imposing a mineral rent at a uniform cumulative rate throughout the Commonwealth, the Minerals Resource Rent Tax Act 2012 (MRRT Act) discriminated among the States by equating the sacrifice of miners in low royalty States with that of miners in high royalty States. 22. In their joint judgment, Hayne, Bell and Keane JJ observed that, to the extent that the amount of minerals resource rent tax (MRRT) paid varies from State to State because different rates of royalty are charged, those variations are due to the different conditions that exist in those different States and differences in their legislative regimes. 11 observed that: They To discriminate against someone or something is to make an adverse distinction with regard to; to distinguish unfavourably from others And, of course, there has evolved a developed body of thinking about how the notions of adverse or unfavourable discrimination are to be understood and applied. Discrimination connotes comparison It directs attention to whether like cases are treated alike and different cases differently. But there may be two distinct questions that must be answered. First, are the cases that are being compared alike or different? Secondly, are the two cases treated alike or differently? It is particularly in the context of questions of adverse or unfavourable discrimination (or their converse cases of preference or advantage ) that comparison is central to identifying discrimination. In undertaking the task of comparison, it is often necessary to exercise great care when identifying the relevant comparator ; for it is necessary to identify a comparator that will enable identification of some relevant difference in treatment of cases that are alike, or some relevant identity of treatment of cases that are different. And it is in that same kind of context that it may be necessary to examine the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified In applying the limitation contained in s 51(ii), there is no question about selecting an appropriate comparator. Section 51(ii) expressly provides for the comparison that must be made. Does the impugned law discriminate between States or parts of States? Section 51(ii) thus provides that, whatever differences may be observed between States or parts of States, a law of the Parliament with respect to taxation may itself neither create nor draw any distinction between States or parts of States In support of their statement that discrimination connotes comparison, Hayne, Bell and Keane JJ cited the case of Purvis v New South Wales 13 (Purvis), which had been decided under the DDA. That case concerned s 22(1) of the DDA. That section made it unlawful for an educational authority to discriminate against a person on the ground of the person s disability by refusing, or failing to accept, that person s application for admission as a 11 [2013] HCA 34; (2013) 250 CLR 548; 300 ALR 26; 87 ALJR 935; 89 ATR 1; at [107]; 602; 60-61; 963; [2013] HCA 34; (2013) 250 CLR 548; 300 ALR 26; 87 ALJR 935; 89 ATR 1; at [111]-[113]; ; 61-62; ; (citations omitted) 13 [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570; Gleeson CJ, Gummow, Heydon and Callinan JJ; McHugh and Kirby JJ dissenting PAGE 9 OF 33

10 student or in the terms or conditions on which it was prepared to admit that person as a student. As a consequence of suffering a severe brain injury resulting from an illness when he was a baby, Daniel had behavioural problems. The Human Rights and Equal Opportunity Commission (HREOC) upheld a complaint that he had been discriminated against by the State of New South Wales by being treated less favourably in his education and by his suspension, and subsequent exclusion, from a State school by its principal on the ground of his violent behaviour towards staff and other students. His violent behaviour was held to result from his disability. 24. Mr Nash referred me to two passages from the judgment of McHugh and Kirby JJ. They are not consecutive but I will set them out as a group: 93. In most, but not all, areas in which the Act operates there is an exception that allows for discrimination to occur if it would impose unjustifiable hardship on the discriminator to provide the services or facilities required by the person with the disability. Section 4(1) declares that unjustifiable hardship has the meaning given by s 11. Section 11 states that in determining what constitutes unjustifiable hardship, all relevant circumstances are to be taken into account. They include, relevantly, the nature of the benefit or detriment likely to accrue to, or be suffered by, the persons concerned, the effect of the disability, and the financial circumstances and the estimated amount of expenditure required to be made by the person claiming unjustifiable hardship. 97. The Supreme Court of Canada has explained why a requirement of accommodation is necessary to achieve true equality for the disabled. In Eaton v Brant County Board of Education, Sopinka J said: "Whether it is the impossibility of success at a written test for a blind person, or the need for ramp access to a library, the discrimination does not lie in the attribution of untrue characteristics to the disabled individual... Rather, it is the failure to make reasonable accommodation, to fine-tune society so that its structures and assumptions do not result in the relegation and banishment of disabled persons from participation, which results in discrimination against them. The discrimination inquiry which uses 'the attribution of stereotypical characteristics' reasoning as commonly understood is simply inappropriate here. It may be seen rather as a case of reverse stereotyping which, by not allowing for the condition of a disabled individual, ignores his or her disability and forces the individual to sink or swim within the mainstream environment These passages appear, however, in the joint judgment of McHugh and Kirby JJ who were in dissent. The majority took a different view. It is illustrated by Gleeson CJ in the following passage from his judgment: The Act deals with discrimination in a normative, not a value-free, context. Section 22, with which this case is concerned, proscribes discrimination 14 [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [93] and [97]; ; ; 18-19; PAGE 10 OF 33

11 against a person on the ground of the person s disability. In some contexts, discrimination may be regarded, in terms of values, as neutral, or even positive; but not in this context. The Act is concerned with discrimination of a kind that the legislature regards as unjust, and makes unlawful. The question is whether the Act treats certain action taken in respect of conduct that affects, not only the person said to be the victim of the discrimination, but other persons whom the alleged discriminator is obliged by law to protect, as unjust and unlawful discrimination In the context of the factual circumstances under consideration in that case, Gleeson CJ analysed the issues in his conclusion: In identifying and considering the basis of, and/or the legitimacy of, a decision, for the purpose of measuring the conduct of an alleged discriminator against the requirements of the Act, it is proper, and may be necessary, to have regard to the objects of the Act as defined in s 3, and to the scope and purpose of the legislation. Even though functional disorders may constitute a disability, and disturbed behaviour may be an aspect of a disability, it is not contrary to the scheme and objects of the Act to permit a decision-maker to identify a threat to the safety of other persons for whose welfare the decision-maker is responsible, resulting from the conduct of a person suffering from a disorder, as the basis of a decision. Just as questions of causation may be affected by normative considerations arising out of the legal context in which they are to be answered, a statutory question as to the basis of a person s decision may be affected by similar considerations. There is no reason for rejecting the principal s statement of the basis of his decision as being the violent conduct of the pupil, and his concern for the safety of other pupils and staff members. It is not incompatible with the legislative scheme to identify the basis of the principal s decision as that which he expressed. On the contrary, to identify the pupil s disability as the basis of the decision would be unfair to the principal and to the first respondent. In particular, it would leave out of account obligations and responsibilities which the principal was legally required to take into account In their joint judgment, Gummow, Hayne and Heydon JJ considered a submission made on behalf of Mr Purvis that the decisions to suspend and ultimately exclude Daniel were brought about by his disability. If it is right to characterise Daniel s disturbed behaviour as part of his disability, Daniel was treated as he was because of his disability. It followed, the submission continued, that he was treated less favourably than a person without a disability because his behaviour was brought about by his disability. The relevant comparator was said to be Daniel without his disturbed behaviour. 28. Their Honours rejected this submission saying that it sought to direct attention to a wholly hypothetical set of circumstances defined by excluding all features of his disability. They said that: 15 [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [7]; 99; ; 4; [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [14]; ; ; 6; PAGE 11 OF 33

12 In requiring a comparison between the treatment offered to a disabled person and the treatment that would be given to a person without the disability, s 5(1) requires that the circumstances attending the treatment given (or to be given) to a disabled person must be identified. What must then be examined is what would have been done in those circumstances if the person concerned was not disabled. The appellant s argument depended upon an inversion of that order of examination The approach required by s 5(1) is this: Once the circumstances of the treatment or the intended treatment have been identified, a comparison must be made with the treatment that would have been given to a person without the disability in circumstances that were the same or were not materially different. Section 5(1) then presented two questions: (i) How, in those circumstances, would the educational authority have treated a person without Daniel s disability? (ii) If Daniel s treatment was less favourable than the treatment that would be given to a person without the disability, was that because of Daniel s disability? Section 5(1) could be engaged in the application of s 22 only if it were found that Daniel was treated less favourably than a person without his disability would have been treated in circumstances that were the same as or were not materially different from the circumstances of Daniel s treatment Gummow, Hayne and Heydon JJ went on to identify five reasons why their interpretation does not frustrate the proper interpretation of the DDA. Only the final three are relevant in this case: The third point to make about the construction of s 5(1) which we have proffered is that, on that construction, the provision still has very important work to do by preventing the different treatment of persons with disability. As pointed out earlier, other legislatures have sought to go further than provide for equality of treatment. But s 5(1) does not take that further step. Rather, it requires comparison with a person without the disability, in the same position in all material respects as the aggrieved person. Fourthly, it is a construction of the section which does not depend upon distinguishing between the cause of a person's disability and the effects or consequences of it. Indeed, it is a construction which embraces the importance of identifying (as part of the relevant circumstances) all the effects and consequences of disability that are manifested to the alleged discriminator. What then is asked is: how would that person treat another in those same circumstances? Finally, it is a construction which gives separate and important work to all of the elements of s 5(1). The answer to the question presented by treatment because of disability does not determine the separate, comparative, question which must be asked: how would the discriminator treat or have treated a person without the disability in the relevant circumstances? [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [223]; 160; 185; 39-40; [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [224]-[225]; 161; ; 40; [2003] HCA 62; (2003) 217 CLR 92; 202 ALR 133; 78 ALJR 1; 77 ALD 570 at [229]-[231]; 162; ; 40-41; PAGE 12 OF 33

13 Interaction of the DDA and ITAA97 A. Relevant provisions of the DDA and ITAA97 not inconsistent with each other 31. Section 3 of the DDA sets out its objects. Those objects are an important element in establishing the purpose of the legislation. That purpose is itself an essential element in interpreting the provisions of the legislation and it is, in part, to be found in an enactment s stated objects as well as in its text and structure informed, as appropriate, by extrinsic material. 20 What those objects do not do is to establish standards regulating behaviour. Those standards are to be found in remaining provisions of the DDA. Therefore, for example, when ss 3(a)(iii) and (iv) provide that two of the objects of the DDA are to eliminate, as far as possible, discrimination against persons on the ground of disability in the areas of existing laws and the administration of Commonwealth laws and programs, the relevant tenets are to be found in ss 29 and On its face, s 29 relates not to the content of the law but to the performance of a function, exercise of a power, administration of a Commonwealth law or conduct of a Commonwealth program. In the performance of that function, the exercise of that power or the fulfilment of that responsibility, it is unlawful for a person to discriminate against another person on the ground of the other person s disability. In limiting the scope of the circumstances in which discrimination is prohibited to the performance of a function, exercise of a power or fulfilment of a responsibility, it could be argued that s 29 does not extend to the application or interpretation of the legislation itself. But is that a valid argument? If a decision-maker is required by a particular enactment to exercise a power to make a decision on grounds that themselves discriminate against a person on the grounds of a person s disability, will he or she not be in breach of s 29 in exercising that power? It seems to me that the decisionmaker will clearly be in breach. That follows from the clear words of s 29, which do not provide for any exemption or amelioration from the prohibition it imposes. 33. That conclusion also follows from s 47 of the DDA as currently drafted and from its legislative history. As currently drafted, s 47 deals with two discrete areas. The first is found in s 47(1) and it has two parts. The first of those parts, set out in ss 47(1)(b) and (c), provides that Part 2, which includes s 29, does not render unlawful anything done by a person in direct compliance with an order of a court or, in certain circumstances, with instruments that are instruments under the Fair Work Act 2009 or the Fair Work (Transitional Provisions and Consequential Amendments) Act The second part of 20 Certain Lloyd s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378; 293 ALR 412; 87 ALJR 131; French CJ, Hayne and Kiefel JJ; Crennan and Bell JJ dissenting at [25]; ; ; 138 per French CJ and Hayne J and see also [70]; ; ; per Kiefel J PAGE 13 OF 33

14 s 47(1) is set out in s 47(1)(d) when read with ss 47(4) and (5). They provide that Part 2 of the DDA does not render unlawful anything done by a person in direct compliance with an order, award or determination of a court or tribunal having power to fix minimum wages to the extent that specific provisions are made for persons who are in receipt of salaries or wages determined by reference to their capacity and who, if not in receipt of those salaries or wages, would be eligible for a disability support pension within the meaning of the Social Security Act 1991 (SS Act). 34. The second area dealt with in s 47 is set out in s 47(2) when it provides: This Part does not render unlawful anything done by a person in direct compliance with a prescribed law. Those laws that come within the description of a prescribed law are set out in Schedule 1 to the Disability Discrimination Regulations 1996 (DD Regulations). They include Part 9D of the Commonwealth s Broadcasting Services Act 1992 and Civil Aviation Order as well as certain New South Wales and South Australian legislation. ITAA97 is not a prescribed law. 35. The note to s 47(5) of the DDA refers to s 98(6B) of the Civil Aviation Act 1988 (CA Act). That legislation allows regulations made under it to contain provisions that are inconsistent with the DDA if the inconsistency is necessary for the safety of air navigation. There is nothing in ITAA97 to that effect. 36. It follows that, unless a law is a prescribed law or unless the enactment itself provides that it may contain provisions that are inconsistent with the DDA, a decision-maker in breach of s 29 cannot call in his or her defence the fact that the decision was made in direct compliance with the law. 37. That conclusion may seem unfair for a decision-maker carrying out an executive function under an enactment has no responsibility for, or power over, the legislative arm of government that has made the law. When regard is had to the history of the section, it can be seen that Parliament has evinced an intention to remove from the statute book any discrimination on the grounds of disability. When first enacted, s 47(1)(b) and (c) was to the same broad effect as it is today. So too was s 47(2) but there was also enacted s 47(3) which applied more broadly when it provided that: During the period beginning at the commencement of this section and ending 3 years after the day this section commences, this Part does not render unlawful anything done by a person in direct compliance with another law. PAGE 14 OF 33

15 The word law was defined to mean a law of the Commonwealth or of a State or Territory or any regulations or any instrument made under such a law The reason for enacting s 47(3) was set out in the Explanatory Memorandum to the Disability Discrimination Bill 1992 but I will also include the passage relating to s 47(2): Subclause 2 recognizes that there will be some laws which will continue to discriminate against people with disabilities notwithstanding the provisions of this Bill. In particular it is not intended that this Bill would override the provisions of the State legislation in certain areas, for example mental health. This subclause allows for regulations to be made setting out legislation that will be exempted from the operations of this Bill. So as to allow for laws which do discriminate to be modified, subclause 3 provides that where someone operates in accordance with an existing law this Part does not make that action unlawful. This provision lasts for only 3 years from the day that Clause 47 comes into force. 39. Section 47 came into force on 1 March It was repealed by s 3 and Item 72 of Schedule 2 of the Disability Discrimination and Other Human Rights Legislation Amendment Act 2009 with effect from 5 August As cl 103 of the Explanatory Memorandum noted, the period of three years had then expired and the provision was redundant. Even before the repeal of s 47(3), it is clear from those laws that are prescribed laws that Parliament intended that the Commonwealth s laws and those of the States and Territories would be reviewed to ensure that, subject to the need to protect other essential interests such as public safety, they were not discriminatory on the grounds of disability. 40. In view of that, there has been no need for Parliament to include in the DDA a provision such as s 10 of the Racial Discrimination Act (RD Act). Section 10(1) is directed to the content of the law. It is headed Rights to equality before the law and provides: If, by reason of, or of a provision of, a law of the Commonwealth or of a State or Territory, persons of a particular race, colour or national or ethnic origin do not enjoy a right that is enjoyed by persons of another race, colour or national or ethnic origin, or enjoy a right to a more limited extent than persons of another race, colour or national or ethnic origin, then, notwithstanding anything in that law, persons of the first-mentioned race, colour or national or ethnic origin shall, by force of this section, enjoy that right to the same extent as persons of that other race, colour or national or ethnic origin. 41. Section 50 of the Victorian EO Act is cast in equivalent terms in relation to the disposal of land. In summary, its prohibition on discrimination in the disposal of land or regarding the 21 DDA; s 47(5) 22 Disability Discrimination and Other Human Rights Legislation Amendment Act 2009; Act No. 70 of 2009; s 2(1), Item 3 PAGE 15 OF 33

16 terms of that disposal applies regardless of any provision in any other Act or document. 23 Again, there is no provision to that effect in the Commonwealth s DDA and no need for it. 42. Mr Flynn drew my attention to the Productivity Commission Inquiry Report entitled Review of the Disability Discrimination Act 1992 dated 30 April drew my attention stated: The extract to which he As noted in section 9.1, the original Disability Discrimination Bill included provisions that would have allowed people to use the DDA to challenge legislation that was discriminatory, similar to provisions of the Racial Discrimination Act These provisions were dropped as a result of concerns about their possible effect on special legal regimes in relation to people with disabilities, including guardianship and mental health legislation An examination of the Disability Discrimination Bill 1992 as introduced in Parliament does not contain any such provisions but section 9.1 of the Productivity Report explains that: The DDA contains few, if any, substantive provisions that relate directly to the object of equality before the law. As the Human Rights and Equal Opportunity Commission (HREOC) stated the reach of the substantive provisions of the DDA is limited compared to this object (sub. 143, p. 39). Early drafts of the Disability Discrimination Bill contained specific provisions on equality before the law, but these were dropped before the Bill was presented to Parliament (section 9.5). 44. The omission of such provisions is one of the issues to be kept in mind when construing the DDA and a later enactment such as ITAA97. I am mindful of the general rule of construction set out by Gaudron J in Saraswati v The Queen. 26 That rule is: It is a basic rule of construction that, in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless an intention to that effect is necessarily to be implied. There must be very strong grounds to support that implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other More particularly, an intention to affect the earlier provision will not be implied if the later is of general application and the earlier deals with some matter affecting the individual Nor will an intention to affect the earlier provision be implied if the later is otherwise capable of sensible operation The history of s 47 and its current context, including that of s 29, in light of the object of the DDA leads me to conclude that Parliament intended that it would take one of two courses if 23 EO Act; ss 50(1) and (3) 24 Report No Report No. 30; section [1991] HCA 21; (1991) 172 CLR 1; 100 ALR 193; 65 ALJR 402; Toohey, Gaudron and McHugh JJ; Deane and Dawson JJ dissenting 27 [1991] HCA 21; (1991) 172 CLR 1; 100 ALR 193; 65 ALJR 402 at 17-18; 204; 408 PAGE 16 OF 33

17 it thought that there were some policy reason justifying discrimination on the basis of a person s disability. One course was to prescribe the relevant law for the purposes of s 47(2). The second course was that taken by Parliament in relation to s 98(6B) of the CA Act. It included a reference to that provision in a note to s 47(5) of the DDA. In that way, Parliament clearly signalled its intention that, to the extent that s 98(6B) was inconsistent with the DDA, s 98(6B) was to prevail. 46. When Parliament came to enact ITAA97 and ss 8-1 and in particular, it intended that they be understood and applied by the Commissioner in a manner that does not discriminate against another person on the ground of that other person s disability. In view of what I think is the ordinary and intended meaning of the relevant provisions of ITAA97 and to which I will come below, I do not think that the DDA and those provisions are inconsistent with each other or that they overlap. B. Administration of ss 8-1 and of ITAA Even though there is no inconsistency between the DDA Act and the relevant provisions of ITAA97, regard still has to be had to the way in which ITAA97 is administered and the way in which the Commissioner exercises his powers. Whether there has been any discrimination in the way in which the Commissioner has made his ruling in this case will depend first upon an analysis of the relevant provisions for they form the circumstances in which the discrimination is said to arise. The next question to be answered focuses on how the Commissioner would have decided a claim for deduction made by a person without WTPG s disability. Having determined that, was the decision that the Commissioner made in relation to WTPG s claim less favourable than the decision he would have made in relation to a claim for deduction made by a person without that disability. If so, was the reason for the Commissioner s decision being less favourable WTPG s disability. ITAA97 and section 8-1(1)(a) 48. Subject to the qualification in s 8-1(2), a taxpayer can deduct from his or her assessable income any loss or outgoing to the extent that it was incurred in gaining or producing [his or her] assessable income. This is paragraph (a) of the first limb of s 8-1(1). Paragraph (b) does not apply as WTPG was not carrying on a business. The qualification in s 8-1(2) is the second limb. It excludes from s 8-1(1) those losses or outgoings that are of a private nature. PAGE 17 OF 33

18 A. The first limb: 8-1(1)(a) A.1 The authorities 49. Section 8-1 is to the same effect as s 51(1) of the Income Tax Assessment Act 1936 (ITAA36), which has been interpreted by previous authorities. Reference to some of those authorities by the High Court in the case of Federal Commissioner of Taxation v Anstis 28 (Anstis) where the plurality said: [T]he test to be applied to deductions under s 8-1(1)(a) is not materially different from its predecessors, and regard may be had to the decided cases concerning the latter The preposition in found in the phrase in gaining or producing has long been understood as meaning in the course of gaining or producing In Ronpibon Tin NL v Federal Commissioner of Taxation, when dealing with s 51(1) of the 1936 Act, this Court held that for a loss or outgoing to be deductible it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income The plurality pointed out that: The notion of gaining or producing income within the meaning of s 8-1(1)(a) is wider than those activities which may be said to earn income. According to its ordinary meaning, to gain means not only to earn or obtain (a living) but to obtain, secure or acquire or to receive Similarly, the ordinary meaning of the verb produce is to bring (a thing) into existence and is not limited to bringing something into existence by mental or physical labour. Essential to the inquiry of deductibility is the identification of that which is productive of the assessable income To put it another way, one must ask how the assessable income was (or was expected to be) gained or produced The analysis that is required is illustrated by the facts in Anstis. Ms Anstis, a full-time university student, qualified for the payment of Youth Allowance (YA) under the SS Act. She was required to satisfy the activity test in order to retain the YA and did so by undertaking full-time study. In her income tax return, she returned the YA payments as assessable income and claimed an amount of self-education expenses as an allowable deduction. The Commissioner disallowed her claim. On appeal, the High Court held that the YA payments were income according to ordinary concepts because a recipient could expect to receive and rely on them provided he or she satisfied the requirements of the SS Act. Ms Anstis had satisfied those requirements. In doing so, she had incurred the selfeducation expenses. Putting it another way, the reason for the expenditure was to be 28 [2010] HCA 40; (2010) 241 CLR 443; 272 ALR 1; 76 ATR 735; 85 ALJR 122; 2010 ATC [2010] HCA 40; (2010) 241 CLR 443; 272 ALR 1; 76 ATR 735; 85 ALJR 122; 2010 ATC at [27]; 455; 9; 744; 129; per French CJ, Gummow, Kiefel and Bell JJ with whom Heydon J agreed (citations omitted) 30 [2010] HCA 40; (2010) 241 CLR 443; 272 ALR 1; 76 ATR 735; 85 ALJR 122; 2010 ATC at [29]-[30]; ; 9-10; 745; 130; PAGE 18 OF 33

19 found in what Ms Anstis did to retain her entitlement to YA, and so what she did to gain or produce her income. Her reason for embarking on the course of study at all was not determinative of the question whether she was entitled to that deduction. 52. The case of Anstis underlines the need to analyse the nature of the expenditure and its relationship to the gaining or production of the income very carefully. Although in a very different context, the analysis required in finding the nexus between gaining or producing income and a loss or expenditure incurred in the course of its gain or production is not so different from that undertaken by the Victorian Court of Appeal in Abbott v Transport Accident Commission 31 (Abbott). That was a case to which Mr Nash referred me. The late Mr Abbott had been accidentally killed when a tree fell upon him. A wire from an electric winch fitted on a Toyota Land Cruiser had been attached to the tree. The winch was battery powered and was controlled by a remote control switch attached to a wire plugged into a socket in the vehicle. In order not to flatten the battery, it was desirable to run the motor of the vehicle. 53. The issue was whether Mr Abbott s death arose out of the use of the motor vehicle within the meaning of s 3 of the Transport Accident Act Crockett J s approach to the issue was consistent with those of McGarvie and Southwell JJ when he said: I think that the respondent is correct when he contends that the first step is to categorise the vehicle. The second, then, is to determine whether there was a relevant use of it as a categorised vehicle. If there was then it is sufficient if that use is one that is not utterly foreign to its character as a motor vehicle thus categorised But the first step remains to characterise the vehicle. The vehicle plainly was not a mobile winch in the sense that a vehicle may be a mobile crane or compressor with a specific use (or even have dual uses). The use of a vehicle as a motor vehicle will vary according to the nature of the vehicle. Just as the incident arose out of the use of a winch so, equally plainly, it did not arise out of the use of the land cruiser as such. It was utterly foreign to the normal use of the motor vehicle Examples in the context of the predecessor of ITAA97, ITAA36, were referred to by counsel. In Commissioner of Taxation v Finn 33 (Finn), the High Court considered expenses incurred by an architect, Mr Finn, in travelling overseas for the purpose of bringing himself up to date with the current trends, improving his skills and of bettering the prospects of his being promoted in the future by his employer. As for promotion, he had a particular promotion in mind. He was the most senior architect at his level in a State Government Department and he hoped that his additional knowledge would put him in a good position to 31 [1991] VicRp 51; [1991] 2 VR 116; Crockett, McGarvie and Southwell JJ 32 [1991] VicRp 51; [1991] 2 VR 116 at [1961] HCA 61; (1961) 106 CLR 60; Dixon CJ, Fullagar, Kitto and Windeyer JJ PAGE 19 OF 33