Commission of Taxation v. Wilcox, W.A. [1982] FCA 190

Appellant AND: . WILLIAM ALFRED WILCOX Respondent Coram: Fox, Toohey and Fitzgerald JJ. REASONS FOR JUDGMENT FOX J. 2 SEPTEMBER 1982

The facts in this case are stated in the joint judgment of Toohey and Fitzgerald JJ. and their considera- tion of them and of relevant legal matters enables me to confine myself to what appear to me to be the critical

The question, and T think the sole question which arises, 18 whether to be deductible under s.74(1)

of the Income Tax Assessment Act, 1936 expenditure must

be incurred after the issue of the writ for the election.

• 2+ It is submitted that there cannot be a contest for an election until there is an election on foot, and,

in constitutional and parliamentary practice that 1s when

the writ issues. There is a seductive but, I think,

misleading logic about the submission. The English i language being capable of an infinite shade of meanings, . one must pay close attention to the words used in the sub-section and endeavour to ascertain their meaning 1 according to ordinary usage. The sub-section refers to

| "expenditure incurred ... in contesting an clection ...". } There is in the first place no plain indication that "election" is being used in a technical sense. Then, | the sub-section does not say "expenditure incurred

during an election" or even "during the contest for an '

election". Further, the participle "contesting" is used

and not the noun "contest'"'. I think the phrase "in contesting" is suggestive of a longer or more protracted period of time than the formal duration of the election process. This accords with what would seem to have been the Parliamentary intention, and with common sense. Presumably Parliament intended to make deductible the cost to a candidate or potential candidate of his expenses in contesting an election. The period between the issue of a writ and the day of "holding the election" 1s often very short, and potential candidates, if they

are to hope for success, will often have to spend money

relative to the election before the issue of the writ.

I agree in.this respect with what was said by the learned

judge and by Dr. Gerber, whose decision as a member of

Taxation Board of Review No. 3 in the present case was

Section 74(1) contains two limbs. I have been discussing the second. The first provides for the deductibility of expenditure incurred in being elected. It has been accepted by counsel for the parties that the first limb refers to a successful candidate who is

elected, and the second to an unsuccessful one, and I see

no reason to disagree with that view. This is not to say

that the second limb may not also apply to a successful candidate. The point which should be made for present purposes is that the phrase "in being elected" does not

limit expenses to those incurred during the election

process, any more than does the second limb. The construc- tion which I prefer does not create any anomaly or imbalance

between the two limbs. In accordance with long-established

authority, the words "incurred in", as relating to both

limbs, should be read as meaning "incurred in the course

of the present case. There has been no debate as to the

nature of the test which should be applied once it is

determined that some expenses which pre-date the issue

decisions in relation to s.51(1) to provide the principal guide, notwithstanding differences between that sub-section and s.74(1). <A submission that some of the items allowed

as deductions in this case by the learned judge and by

the Board of Review should not be allowed has been expressly

I am aware that the conclusion I have reached may permit of the deduction of expenditure incurred before the issue of a writ for an election, even although the potential candidate does not nominate as a contestant for the election. This is an unlikely situation, just as it is unlikely that, having nominated, he does not thereafter take any part in the election. The construction of the sub-section cannot be influenced either way by events of such remote possibility. The tests which govern the relationship between expenditure and an election, but which were not debated before us, will limit even further the deductibility of expenses in the situations I have

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QUEENSLAND DISTRICT REGISTRY ) Qld G61 of 1982 GENERAL DIVISION ) BETWEEN:

This is an appeal brought by leave by the Commissioner of Taxation from a 'judgment of the Supreme Court of Queensland. The Supreme Court dismissed with costs an appeal by the Commissioner from a decision of a Board of Review. The Board had held that, in the year of income ended 30 June 1979, the taxpayer was entitled to a deduction in respect of expenditure totalling $1185.00. The basis upon which the deduction was allowed was that such expenditure had been incurred by the taxpayer in that

year of income "in contesting an election for membership"

of the Queensland Parliament. Expenditure incurred in contesting an election for membership of a State Parliament is an allowable deduction by virtue of sub-s. 74(1) of the Income Tax Assessment Act, 1936,

"74.(1) Expenditure incurred in the year of income by the taxpayer in being elected as a member, or in contesting an election for membership, of the Parliament, of the Parliament of a State or of the Legislative Assembly of the Northern Territory of Australia shall be an allowable deduction."

The taxpayer had unsuccessfully contested the electorate of Salisbury in general elections for the Queensland Parliament which were held in 1974 and 1977. On 28 September 1978, he was officially endorsed as his party's candidate in the same electorate for the next election, which,

Act, 1890, (Qld), had to be held by the end of 1980. The expenditure in respect of which a deduction was claimed was incurred by the taxpayer between

November 1978 and 30 June 1979. During that period, no date was fixed for the holding of an election, and no other candidate in respect of the electorate of Salisbury was announced. The taxpayer anticipated

member, who had defeated him in the elections in 1974 and 1977. The writs for the 1980 elections were issued on 27 October 1980; the taxpayer submitted his nomination on 3 November 1980; the closing date for nominations was 7 November 1980; the polling date was 29 November 1980; the poll was declared on 8 December 1980;and the writs were

The debate throughout has centred upon whether or not the expenditure by the taxpayer was incurred too early to be deductible under sub-s. 74(1) of the Act. The principal submission for the Commissioner was that the only expenditure in respect of which a deduction is allowable under sub-s. 74(1) is expenditure incurred in the course of the contest which takes place during an election; that an election begins only on the issue of the writ: see Hodge v. The King (1907) 5 C.L.R. 373,

at p.379 and Vardon v. O'Loghlin (1907) 5 C.L.R. 201,

at p. 211; and that an election cannot be contested prior to the issue of the writ since, until then, there is no election in progress. The Commissioner sought to relate the commencement of the election contest to the taxpayer's nomination, a date

It is the received view that if a loss or outgoing is to be deductible under sub-s. 51(1) of the Act as "incurred in gaining or producing ...

course of doing so: see, for example, Amalgamated Zinc (De Bavay's) Limited v. Federal Commissioner

of Taxation (1975) 54 C.L.R. 295, at pp. 303, 309 and Ronpibon Tin N.L. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 47 at pp. 56-57. We accept

the Commissioner's submission that equally expenditure

must have been incurred in the course of contesting

That, however, is not the same thing as saying that the expenditure must have been incurred in the course of an election in the sense contended for by the Commissioner, i.e., during a period delineated by reference to the issue and return of the writ for

the election. The central feature of an election viewed as a contest 1s the voting at the poll which takes place during the electoral process initiated

by the issue of the writ and terminated by its return. Wesee no reason either in logic or in the language

of sub-s. 74(1) of the Act for denying that a contest in respect of an election, at least an election which must occur, may begin notwithstanding that the formal election process has not commenced. Conversely, expenditure incurred after the poll but before the return of the writ is not likely to have been incurred

The Court was referred to a number of English decisions concerned with petitions alleging corrupt an@ illegal electoral practices. Some of these recognize that work may begin and expenses may be incurred in connection with an election before the occurrence of a vacancy or the issue of a writ (see

for instance Channell J. in The Borough of Great Yarmouth

Case (1906) 5 O'M & H 176 at p.188). However the language

of the legislation with which the courts were concerned differs from that in the present case and we prefer to base our decision upon the language of sub-s. 74(1)

Counsel for the Commissioner handed up certain material concerning proceedings of the Commonwealth Parliament in 1936 when sub~-s. 74(1) was passed in its present form, so far as is now relevant. We have no need to express a view as to the admissibility of such material. Whether or not the separate provision made in respect of a successful candidate by sub-s. 74(1), by which a deduction is allowed of expenditure incurred in the year of income "by the taxpayer in being elected as a member", is either tautologous or a mere historical anomaly, the language of that part of sub-s. 74(1) last quoted does not of itself support the contention that only expenditure after formal commencement of an election is deductible by an unsuccessful candidate. That part of sub-s. 74(1) 1s in no respect inconsistent with the view which we take that such expenditure may be incurred

in contesting an election although the election process

The Commissioner's alternative submission was also centred upon the time at which the expenditures were incurred by the taxpayer. No real argument was addressed to the question whether sub-s. 74(1) is concerned with the purpose of expenditures or their character or both, and we think that we should not pass on that subject in the circumstances. In the context of sub-s. 74(1) the purpose and character of expenditures may not always be clearly separate questions, and both may be among the relevant factors for

The Commissioner's submission was that, on the facts of the present case, the proper conclusion was that the taxpayer's expenditures were not made in the course of contesting the 1980 elections in respect of the electorate of Salisbury but preparatory to contesting that election. The thrust of the argument was that, even if it is not possible to define a point of time which marks the beginning of all election contests for the purpose of sub-s. 74(1) of the Act, in each case there must be a time prior to which expenditures of a taxpayer are not properly

On the facts of this case, according to the Commissioner, the taxpayer's expenditures can be seen to fall on the wrong side of the boundary, wherever it is to be drawn. Marshalled against the taxpayer are a formidable array of relevant considerations. For example, the expenditures occurred up to two years and not less than about one and a half years before the election in fact occurred. When the expenditures were incurred, no more was known than that an election must take place at some time in the future, certainly no later than when it did. There was no opposing candidate. The electoral rolls had not closed, and there would be some changes to the eligible voters in the electorate. The taxpayer might die, have his endorsement withdrawn by his party, or become ineligible to stand in the electorate. He might simply change his mind and decide not to nominate. On the other hand, the facts that

the taxpayer had been chosen as his party's candidate and his candidacy announced are entitled

The Board accepted that there was a sufficient connection between the expenditures claimed and the taxpayer's unsuccessful attempt to win the electorate,

a view shared by the learned judge and not challenged

on the facts before us. In the circumstances, it would need to be an exceptionally clear case before this Court could arrive at a contrary

Accordingly, in our opinion the appeal fails and must be dismissed. The Commissioner Must pay the taxpayer's costs of the application

for leave to appeal and of the appeal, to be taxed.

I certify that this and the SEVEN (7) preceding pages are a true copy of the reasons for judgment herein of their Honours Justices Toohey and