FEDERAL COURT OF AUSTRALIA Bartlett v Commissioner of Taxation; Falcetta v Commissioner of Taxation [2003] FCA 1125 INCOME TAX – whether the deduction for expenditure incurred of the kind referred to in s 25-5 of the Income Tax Assessment Act 1997 (Cth) should be interpreted in a narrow manner which limits the expression "tax affairs" to income tax as assessed under the Income Tax Act 1986 (Cth) or whether the expression extends to forms of tax which a taxpayer may owe to the Commissioner of Taxation but which are not the subject of assessment and which are not tax imposed under the Income Tax Act 1986 (Cth) – whether expenditure for managing tax affairs is deductible under s 8-1 of the Income Tax Assessment Act 1997 (Cth). WORDS AND PHRASES – "tax affairs" Income Tax Act 1986 (Cth) Income Tax Assessment Act 1936 (Cth) s 226G, s 227(3) Income Tax Assessment Act 1997 (Cth) s 8-1, s 25-5, s 960-100, s 995-1 Taxation Administration Act 1953 (Cth) s 14ZZO Tax Law Improvement Act 1997 (Cth) Commissioner of Taxation v Clyne (1958) 100 CLR 246 – referred to Commissioner of Taxation v Dalco (1990) 168 CLR 614 – applied Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70 – referred to Hooker Rex Pty Ltd v Federal Commissioner of Taxation (1988) 88 ATC 4392 – approved Smith's Potato Estates Ltd v Bolland [1948] 2 All ER 367 – cited Ian Charles Bartlett v Commissioner of Taxation N793 OF 2002 Max Falcetta v Commissioner of Taxation N792 OF 2002 HILL J 21 OCTOBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N793 OF 2002 BETWEEN: IAN CHARLES BARTLETT APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: HILL J DATE OF ORDER: 21 OCTOBER 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be allowed in part. 2. The respondent's objection decision dated 3 June 2002 in respect of the applicant's amended assessment issued on 6 February 2001 for the income year ended 30 June 1999 be set aside. 3. The objection be allowed in part by allowing to Mr Bartlett a deduction in the sum of $3,090. 4. The matter be remitted to the Commissioner of Taxation to be reassessed in accordance with these orders. 5. The applicant and the respondent file and serve submissions on costs within seven days. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N792 OF 2002 BETWEEN: MAX FALCETTA APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: HILL J DATE OF ORDER: 21 OCTOBER 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be allowed in part. 2. The respondent's objection decision dated 4 June 2002 in respect of the applicant's amended assessment issued on 7 February 2001 for the income year ended 30 June 1999 be set aside. 3. The objection decision be allowed in part by allowing to Mr Falcetta a deduction of $1,815. 4. The matter be remitted to the Commissioner of Taxation to be reassessed in accordance with these orders. 5. The applicant and the respondent file and serve submissions on costs within seven days. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N793 OF 2002 BETWEEN: IAN CHARLES BARTLETT APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT N792 OF 2002 AND BETWEEN: MAX FALCETTA APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: HILL J DATE OF ORDER: 21 OCTOBER 2003 WHERE MADE: SYDNEY REASONS FOR JUDGMENT 1 Before the Court are two applications, each filed by a taxpayer (Mr Bartlett in matter No N793 of 2002 and Mr Falcetta in matter No N792 of 2002) pursuant to which each appeals against an objection decision of the respondent Commissioner of Taxation disallowing an objection relating to an assessment of income tax for the year of income ending 30 June 1999. The two applications were heard consecutively, save that submissions were addressed by Counsel in the one address. Each application involves the disallowance of a deduction claimed for fees charged to the taxpayer by his accountant for what may neutrally be said to be accounting work undertaken by the accountant relating to the taxation obligations of entities associated with the taxpayer. 2 The two applications were said to be test cases. Apparently a number of taxpayers who were clients of the same tax agent, an accountant, Mr Sam Cassaniti ('the tax agent'), who practised under the name S P Cassaniti and Associates ('the firm'), had claimed fees payable as allowable deductions under s 25-5 of the Income Tax Assessment Act 1997 (Cth) ('the 1997 Act'). As is so often the case while there is a common question of law which arises in each case, the facts of each case differ so that there may be some difficulty in the two cases being really seen as test cases in the sense that expression is commonly used. The issues in the case of Mr Bartlett 3 In his tax return in the year of income Mr Bartlett claimed as an allowable deduction the sum of $15,000 described as the 'cost of managing tax affairs'. Mr Bartlett duly objected and the objection was disallowed. That sum was the amount shown in an invoice from the tax agent addressed to Mr Bartlett and dated 16 June 1999. The invoice did not detail the work done by the tax agent but contained only the narration '[b]eing provision of Accountancy services and Tax advices generally'. The invoice stated that the total was 'As Per Agreement'. Payment of the amount took place in the 2000 year of income when the tax agent received a cheque in favour of Mr Bartlett by way of refund in respect of the 1998 and 1999 years of income for $24,183.75. The tax agent banked the cheque it would seem in an account of the firm and deducted from it the sum of $15,000 in payment of the invoice. 4 The reasons for decision of the Commissioner disallowing the deduction, as reflected in the ultimate disallowance of Mr Bartlett's objection, show that the Commissioner did so for a number of reasons. Firstly, he took the view that any deduction was available to Mr Bartlett only in the year of payment. Secondly, the Commissioner was of the view that Mr Bartlett had been unable to provide information showing how the amount of $15,000 was arrived at and specifically whether the amount charged related to managing tax affairs as required by s 25-5 of the 1997 Act. The assessment issued by the Commissioner included a penalty imposed under s 226G of the Income Tax Assessment Act 1936 (Cth) ('the 1936 Act') on the basis that Mr Bartlett's behaviour in causing the tax shortfall was a result of a 'lack of reasonable care'. No remittance of penalty was said to be required in accordance with s 227(3) of the 1936 Act. 5 Section 25-5 of the 1997 Act when read together with the definition of 'entity' in s 960-100(1) of that act relevantly provides: '(1) You can deduct expenditure you incur to the extent that it is for: (a) managing your tax affairs; or (b) complying with an obligation imposed on you by a Commonwealth law, in so far as that obligation relates to the tax affairs of an entity; or (c) … (3) You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8-1) expressly prevents or limits your deducting it under section 8-1 (about general deductions). It does not matter whether the provision specifically refers to section 8-1.' 'Entitymeans any of the following: (a) an individual; (b) a body corporate (c) a body politic; (d) a partnership; (e) any other unincorporated association or body of persons; (f) a trust; (g) a superannuation fund.' 6 The 1997 Act did not, in the year of income, contain any definition of 'tax affairs'. There was, however, a definition of 'tax' contained in the 'Dictionary' to that act (s 995-1) namely: 'Tax means: (a) income tax imposed by the Income Tax Act 1986, as assessed under this Act: or; (b) income tax imposed as such by any other Act, as assessed under this Act.' 7 There were not then, and still are not, any provisions in the 1997 Act which deal with assessment. 8 Towards the end of the present proceedings the Commissioner accepted, for the purpose of the proceedings, that any deduction allowable to Mr Bartlett was allowable in the 1999 year of income. Accordingly the question of when the 'expenditure' of $15,000 was 'incurred' for the purposes of s 25-5 is no longer an issue in the present proceedings. Although that point is not without difficulty and was not argued before me I think the Commissioner's concession was correctly made. It is difficult to see that the slight change of language between s 25-5 and s 8-1 of the 1997 Act was intended to bring about the result that an amount charged by a tax agent otherwise deductible under s 25-5 was not incurred until payment had in fact been made. 9 At the commencement of the proceedings Senior Counsel for Mr Bartlett sought, and without objection was granted, leave to amend the grounds of objection so as to rely also upon s 8-1 of the 1997 Act. In doing so Senior Counsel widened, somewhat, the issues in the Statement of Facts, Issues and Contentions filed on behalf of Mr Bartlett by reliance upon s 8-1. However, Senior Counsel for Mr Bartlett conceded that there could be no issue arising in the case concerning penalties. The outcome of the application so far as it concerned the allowability of the deduction claimed would govern the question of penalties. Thus, if Mr Bartlett was successful in respect of the whole of the amount claimed as a deduction there could be no penalty. Likewise if Mr Bartlett was unsuccessful in his argument that the amount in question was deductible then the penalty was correctly imposed. If Mr Bartlett succeeded in showing that some part of the expenditure claimed was deductible then the penalty would be reduced to that extent. 10 After the evidence had concluded and during the course of submissions, Counsel for the Commissioner raised, for the first time, a question of construction of s 25-5 of the 1997 Act. In particular, Counsel sought to argue that s 25-5 should be interpreted as if in the year of income there had been a definition of 'tax affairs' similar to the definition which was inserted by Act No 179 of 1999 effective from 22 December 1999. The new definition, not made applicable to the year of income, when read together with the definition of 'tax' and the definition of 'income tax' in s 995-1(1) of the 1997 Act, is in the following terms: 'tax affairs means affairs relating to tax' 'taxmeans (a) income tax imposed by the Income Tax Act 1986, as assessed under this Act; or (b) income tax imposed as such by any other Act, as assessed under this Act.' 'income tax means income tax imposed by any of these: (a) the Income Tax Act 1986; (b) …' 11 Accordingly the issues which arise in Mr Bartlett's case can be summarised as follows: (1) Whether the deduction for expenditure incurred of the kind referred to in s 25-5 of the 1997 Act is limited, as submitted by the Commissioner, so that the expression 'tax affairs' is to be given the narrow meaning related to income tax as assessed under the Income Tax Act 1986 (Cth) and so as not to refer to group tax, prescribed payments or other amounts which under the Act a taxpayer may be required to pay to the Commissioner but which are not the subject of assessment and which are not tax which is imposed under the Income Tax Act 1986 (Cth). (2) If the expression 'tax affairs' is not to be given the narrow meaning referred to in (1) above, how much of the work performed by the tax agent and invoiced by him to Mr Bartlett related to expenditure which falls within the wider meaning contended for by the taxpayer. (3) If the expression 'tax affairs' is to be given the narrow meaning referred to in (1) above, how much of the work performed by the tax agent and invoiced by him to Mr Bartlett related to expenditure which falls within that narrow meaning. (4) Whether any part of the expenditure incurred by Mr Bartlett was deductible under s 8-1 of the 1997 Act, and if so how much was so made an allowable deduction under that subsection. 12 It may be said that the issue as so expressed are somewhat different from those that appear in the Statement of Facts Issues and Contentions filed by each party. The Court should be able to expect that the issues stated by the parties properly reflect the matters which are to be raised in a tax appeal where the Statement of Facts, Issues and Contentions are intended to take the place of pleadings so that both parties to the litigation know what the case is which they have to meet. Particularly a taxpayer should know in advance what construction of a section is to be advanced by the Commissioner if that construction differs from the construction which the taxpayer has clearly adopted. 13 It might also be said that the affidavits filed by the taxpayer did not descend into much detail in describing the work which the firm did and for which the firm invoiced the amount claimed and the detail only emerged in the course of oral evidence. This was the case notwithstanding that the taxpayer was clearly put on notice that the Commissioner required the taxpayer to prove precisely what the work was for which the taxpayer was invoiced and for which the taxpayer had claimed the deduction. In saying this I note that both taxpayers changed their representation immediately prior to the hearing so that such criticism as is here intended should not be taken to apply to the legal advisers who ultimately appeared for them. However, it should also be said that if it is intended by a party that evidence be led in amplification of matters which are at issue, that evidence should be in affidavit form, a copy of that affidavit should be given to the opposing party and leave should be sought from the Court to read the affidavit in the proceedings. The issues in the case of Mr Falcetta. 14 Mr Falcetta likewise retained the firm to act for him and was invoiced in the year of income for the work done in the amount of $9411.21. As will be seen the invoice may not have been actually sent or given to Mr Falcetta, but the amount of it was agreed. In the same tax year Mr Falcetta received a refund of income tax of the same amount, which was banked to the credit of the firm's bank account. Obviously if an invoice was sent the invoice was not prepared until at least the time the firm received Mr Falcetta's refund, since the two amounts coincided. The amount of the invoice, or the amount agreed as the case may be, was thus paid in the year of income unlike the situation in the case of Mr Bartlett. 15 Mr Falcetta claimed in his return for the year of income a deduction for the amount of $9,411.21 being for the provision of accountancy services and tax advice. The deduction was disallowed for reasons similar to those in the case of Mr Bartlett. A penalty was likewise imposed under s 226G of the 1936 Act on the basis that Mr Falcetta's behaviour involved a 'lack of reasonable care'. There was no remittance of penalty in accordance with s 227(3) of the 1936 Act. 16 Mr Falcetta duly objected against the assessment. He did so claiming that a deduction was allowable to him in the year of income for the $9,411.21 pursuant to s 25-5 of the 1997 Act. The objection related also to the imposition of penalties and remittance. The objection was disallowed and Mr Falcetta applied to the Court by way of appeal against the objection decision. 17 At the commencement of the proceedings Senior Counsel for Mr Falcetta sought and without objection was granted leave to amend the grounds of objection so as to rely also upon s 8-1 of the 1997 Act. It was conceded that if Mr Falcetta was unsuccessful in the argument concerning the allowance of the whole amount claimed as a deduction then the penalty was correctly imposed. It was likewise conceded that the penalty would be pro rata reduced to the extent of the success in the submissions relating to the allowance of the deduction. 18 The issues in the appeal are the same as those which arise in Mr Bartlett's appeal and are set out in par 11 of these reasons. The evidence in the case of Mr Bartlett and findings thereon 19 Mr Bartlett is a builder holding a builder's license registered with the Department of Fair Trading (NSW). Since 1992 he had carried on business as a home builder and renovator, either personally, or through a company controlled by him. He gave his evidence clearly to the extent of his recollection and I have no difficulty in accepting his evidence. There was no real attempt to impugn his credit. 20 From November 1992 until the company ceased trading in 1998, Mr Bartlett carried on business through the Bartlett Group Pty Ltd ('the Bartlett Group'). He was, since 30 November 1992, the public officer of Bartlett Group as well as a director and shareholder of the company. He was also an employee of that company and served as its qualified supervisor (a necessary prerequisite of a building license) until he resigned from the position around November 1998 and became the qualified supervisor of a new company, which was incorporated. 21 Mr Bartlett first engaged the tax agent to act as his accountant and as accountant for the companies associated with him in 1989. Then, and it would seem each year thereafter, usually around the time the income tax returns for the preceding year were ready for signature the tax agent produced standard form documents, being a letter of engagement, a letter of instruction and an authority to deduct fees for signature by Mr Bartlett. The standard forms may have varied from year to year, but nothing turns upon that. The documents relevant to the year of income and signed by Mr Bartlett can be shortly described as follows. (a) The Letter of Instruction 22 First was a document entitled 'Letter of Instruction'. It was signed by Mr Bartlett, who was described as 'the client' and dated 2 February 1998. The letter read, relevantly: 'I/We … Ian. C. Bartlett of 99 Bennett Rd, St Marys NSW 2760 hereby direct & instruct CASSANITI & ASSOCIATES to prepare and advise on my behalf or on behalf of any entity I am a Director, Beneficiary, Appointer, Trustee, Partner, Member or Controller of, the following documents or render advise, from time to time, as and when they fall due or as requested by me….' 23 There followed a list of some 27 documents or perhaps in some cases more accurately services, including 'Accounting and Management Services,' 'Annual Returns for the Australian Securities Commission', 'Loan Application (as requested)', 'Minutes of any meeting' (this appeared twice), 'Workcover Legislation Advice' and 'All documents what-so-ever to allow me to comply with all government and statutory bodies' and a category called 'OTHER'. 24 The 'Letter of Instruction' concluded with the following words: 'I personally undertake and guarantee to pay all professional fees and disbursements as specified by my letter of engagement or as agreed on behalf of myself or any entity previously mentioned. This does not diminish my rights.' 25 In so far as it is relevant Mr Bartlett in cross examination agreed that he understood when signing all the relevant documents that he was contracting on his own behalf and on behalf of the companies named in the documents. (b) The Letter of Engagement 26 This document was dated 3 February 1998. It took the form of a letter on the tax agent's letterhead addressed by hand to Mr Bartlett. In this letter, which referred to a 'discussion', the tax agent accepted appointment as 'your accountants (advisers, etc)'. The tax agent then undertook to be responsible for the '[p]reparation of annual and/or periodical financial statements, and income tax returns for the business and for the individuals'. There was no definition of what was meant by 'the business'. Other responsibilities included 'special assignments for such matters as management consulting services, business acquisitions and other similar matters' as well as '[a]ny other matters that may arise from time to time'. 27 The document then set out a fee structure for work the tax agent was to perform, which was in addition to disbursements. It was noted that any matters such as 'tax planning or specialist work' would be charged at a higher rate or 'as a percentage of taxes saved' and that work, which was unusually urgent, or complex or required 'unique skill' would attract special and higher rates. The charge-out rates listed ranged from $300 per hour for the work of a principal to $55 per hour for the work of a typist/general clerk. The effect of the letter was to continue into the future, subject to termination. 28 Specifically the letter noted that the addressee (ie Mr Bartlett) did 'undertake and personally guarantee the payment of all professional and out of pocket expenses incurred by the following companies, trusts, superfunds…'. Thereafter in handwriting appeared the names '[t]he Bartlett Group Building Services P/L', '[t]he Bartlett Group P/L' 'Amle Holdings P/L' and 'Elichoy P/L'. The document continued with a direction and authorisation from the addressee to the tax agent to deduct any fees from any monies held in trust 'on your behalf or any entity you may be a member of'. The letter was signed with the firm name and by Mr Bartlett as client. (c) The Authority to Deduct Fees 29 Thirdly, there was an authority under which Mr Bartlett directed and authorised the tax agent to deduct from: 'ANY tax refund cheques or any other monies received on my behalf or on behalf of any company, trust, partnership or other legal entity of which I am a Director, Shareholder, Beneficiary, Appointor, Trustee, Partner or in which I hold any membership or interest, all fees in regard to tax returns prepared, accounting work performed, advice provided, disbursements, and any other fees incurred on my instructions, or the instructions of any person or entity listed below… paid on behalf of…' 30 There followed a list which included the person giving the authority, any relative, any company of which that person was inter alia a director, shareholder or public officer, or any person related, connected or associated with the person giving the authority. In addition the person signing the letter undertook 'to pay all fees (accounting, advice, disbursements) incurred by the following companies/trusts…'. There followed a list of the same companies as were listed in the letter of engagement. The authority was to remain in force unless revoked in writing. The authority referred to there being consideration for the authority. However, it is not necessary in the present case to determine whether the authority was contractually binding. 31 Mr Bartlett at relevant times dealt not only with Mr Sam Cassaniti, but also with his cousin Mr David Cassaniti and an employed senior accountant, Mr Denis Markou, who at the time of the hearing had ceased to be employed by the firm, was overseas and was unable to be located by Mr Cassaniti. Mr David Cassaniti, who, it seems, did some, at least of Mr Bartlett's work did not give evidence in the proceedings. However, Mr Sam Cassaniti exercised a general supervisory function over the day-to-day work done by Mr Markou and probably, although he did not say so, Mr David Cassaniti. 32 The Bartlett Group ultimately encountered financial problems. There had been complaints from clients about two jobs which the Bartlett Group contracted to do. The complaints concerned foundations and, ultimately, found their way before the relevant building tribunal. The clients blamed the Bartlett Group. Some time in October 1998 it was apparent that the Bartlett Group should not continue to trade as a builder. Mr Bartlett consulted the tax agent on this matter and particularly on the establishment of a new company and the change of name of the Bartlett Group so that if it failed, that failure would not affect the Bartlett family name. For that reason a new company was formed with the name Bartlett Group Building Services Pty Ltd ('Bartlett New') At the same time the name of the previous company was changed to Bombay Constructions Pty Ltd ('Bombay'). Hereafter, references to Bombay are thus references to the Bartlett Group. Mr Bartlett then resigned from Bombay and secured a building license for Bartlett New. There is some confusion in the evidence (it stems from Mr Bartlett's recollection) as to whether an administrator was first appointed to Bombay, before the company went into voluntary liquidation in October 1998. Nothing turns upon this. However, it seems that despite Mr Bartlett's recollection, an administrator was appointed to Bombay in April 1998. It is clear that the building tribunal, acting on the applications filed by the two clients of the Bartlett Group who had complained, made orders against the Bartlett Group and that the company could not continue to trade by October 1998 if not earlier. Thus, it was clear that in early 1998 Mr Bartlett needed the firm's services to assist him in dealing with creditors of Bombay as well as to assist him in setting up a new company through which he could safely trade. 33 In early July 1998 Mr Bartlett attended at the firm's office and handed to Mr David Cassaniti the books and records of Bombay to enable the firm to prepare a tax return for the company and associated accounts. Part of the work the firm was to perform involved reconciliation of the statement required for the prescribed payments system. The firm was to be responsible for the preparation of group certificates as well as the preparation of a balance sheet and the profit and loss account. Mr Bartlett also instructed the firm to prepare his personal tax return. 34 On 24 July 1998 Mr Bartlett signed his personal income tax return for the 1998 year and signed the payment summary for the prescribed payment system prepared by the firm or perhaps Mr Bartlett's secretary. He sent to the firm cheque butts, bank statements, receipts, invoices and other records to enable accounts and income tax returns to be prepared for Bombay. Ultimately these books and records including the accounts and income tax return of Bombay for the year of income ended 30 June 1998 were delivered by the firm to the liquidator. 35 Following the liquidation of Bombay the firm assisted Mr Bartlett in providing details of creditors to the liquidator and arranged for the liquidator to have the corporate records. One of the creditors was the Commissioner for group tax and tax relating to prescribed payments, which it seems had not been remitted. Another was the firm in the sum of $4500. 36 As already noted the firm acted on the incorporation of Bartlett New and the necessary registrations and filings for that company. Bartlett New was incorporated in February 1998, although it did not commence trading until around January 1999. The professional work in respect of incorporation was separately invoiced by the firm to Mr Bartlett and does not form part of the $15,000 invoice with which the present appeal is concerned. It seems that Bartlett New likewise went into liquidation in November 1999 as a result of its participation in a large development project for which ultimately it was not paid, at least not in whole. Nothing, however, turns on this either. 37 While the firm attended to the statutory requirements of Amle Holdings Pty Ltd and Elichoy Pty Ltd it seems those companies did not trade in the year of income. The firm separately invoiced the respective companies for work it did for them and it would seem the invoice of $15,000, the subject of the present proceedings, did not include work for these companies either. Apart from the invoices for work for Bartlett New, Amle Holdings Pty Ltd and Elichoy Pty Ltd, to which reference has already been made, the only invoice from the firm addressed to Mr Bartlett for work the firm performed for him or companies or entities under his control in the year of income was the invoice for $15,000. 38 Mr Bartlett did not require the firm to itemise the invoices sent to him in the year of income or to allocate amounts as between the legal entities for which work was done. Mr Bartlett said that he did not question the accounts because he knew that the firm had done a lot of work for him in the year because he 'had a lot of difficulties and problems to deal with.' Mr Bartlett's evidence concerning the work done by the firm and which was the subject of the invoice of $15,000 was, to say the least, rather sparse. He said in his affidavit in chief: 'During the income year 1998 to 1999 I received a considerable amount of tax advice from Cassaniti & Associates including the preparation of my own 1998 return, as well as, before the liquidator was appointed, the 1998 tax return and accounts for Bombay which I believe was reflected in the invoice received by me on or about 16 June 1999.' 39 Mr Sam Cassaniti also gave evidence and was subjected to cross-examination. I accept his evidence and note that, ultimately, no submission was made concerning his credit by Counsel for the Commissioner, nor was it suggested that I not accept Mr Cassaniti's evidence. 40 Mr Cassaniti maintained a file containing correspondence, returns, documents, notices, notes and records of attendance whether by himself or by other members of the firm. He also maintained a diary. Since the firm had been required to deliver up the books and records of Bombay, his files were necessarily incomplete, at least so far as they had previously included the books and records handed to the liquidator. The file, with its record of attendances and documents together with the diary formed the basis for preparation of accounts invoiced to clients, including invoices sent to Mr Bartlett. 41 In his affidavit in chief Mr Cassaniti recorded in summary form the work which he had done for Mr Bartlett. This included the usual accountancy and taxation services, such as preparing profit and loss accounts from material provided by Mr Bartlett, and taxation returns for Mr Bartlett and Bombay. The firm also prepared prescribed payment summaries, wrote up cashbooks, reconciled cheques with bank statements, dissected receipts and prepared draft accounts. 42 According to Mr Cassaniti in preparing the invoice of $15,000 he perused the file and made a mental assessment of the work done by him and his employees for preparing Mr Bartlett's own return and the return and accounts of Bombay with supporting schedules. He estimated that more than 56 hours had been spent in the preparation of these tax returns and schedules and rounded the amount arrived at down to $15,000. He emphasised that the invoice did not include work performed for Mr Bartlett 'other than on the preparation of the 1998 accounts and tax return for the company and the Applicant's personal tax return'. Other work was separately billed. 43 In cross-examination Mr Cassaniti produced a spreadsheet in which he had reconstructed from material retained in the firm's file for Mr Bartlett and his companies the account for $15,000. In doing so he made it clear that this was a reconstruction, and not directly the calculation made at the time of the $15,000 invoice. The reconstruction produced a calculation of approximately $20,000. This supported Mr Cassaniti's evidence that the figure he determined at the time had been in excess of $15,000, but had been 'rounded down'. The figures included, so Mr Cassaniti said charges for all amounts discoverable from the file, although not all related to taxation and were not, therefore, included in the ultimate invoice for $15,000. 44 The reconstruction was somewhat inexact as may be expected. A perusal of the documents produced by Mr Cassaniti demonstrated that some items on the spreadsheet dealt with matters which clearly were not directly related to income tax. For example, there was a file note of a conversation by telephone relating to a trust of which no mention was otherwise made in evidence. The note suggested that Mr Bartlett's parents had been 'hassling' him concerning the trust. The real subject matter of the conversation could not be ascertained and since Mr Cassaniti had not been party to it he was unable to elucidate it. Clearly the amount was somewhat small. Another item concerned perusal of building contract and specifications, bank progress payment documents and the like which had no relationship to taxation at all although it was obviously relevant to the business of Bombay and its creditors. 45 Other items were more linked to taxation. For example, Mr Cassaniti, according to his diary, had had a discussion concerning 'financial position and liquidation and outstanding taxes'. The subject matter, he said, had been the possibility of Mr Bartlett's personal liability to creditors for the debts of Bombay and how this could be minimised and it would seem that this had been the subject of more than one discussion. The conference in question had taken one hour and a half. One concern Mr Bartlett had was that Bombay had not remitted monies to the Australian Taxation Office for group tax or prescribed payment deductions and Mr Bartlett might become personally responsible for these amounts. 46 Other attendances had concerned documents which Mr Bartlett had produced to enable the preparation of company accounts. In part Mr Bartlett required the financial position of the company to be established, although there was the need also to prepare the statutory accounts and income tax returns. One item, reflected in a file note related to meetings with the Department of Fair Trading. Other attendances concerned discussions with the liquidator of Bombay. To be fair to Mr Cassaniti I have here emphasised matters which might be thought not to have had much to do with taxation. On the other hand it is obvious that much of the charge would have related to the preparation of accounts and draft tax returns for Bombay and a small amount for the preparation of Mr Bartlett's own taxation return. The evidence in the case of Mr Falcetta and findings thereon. 47 Mr Falcetta was, between 1996 and 1998 a shareholder and director of GSA Formwork (NSW) Pty Ltd ('GSA') a company which carried on the business of constructing building form work. He was cross-examined somewhat briefly and no suggestion was made that I should not accept his evidence. I do. 48 On or about 4 February 1999 Mr Falcetta, in his capacity as director received penalty notices from the Commissioner advising that he could become personally liable to pay to the Commissioner group tax and prescribed payment deductions which GSA had not paid unless he took one of the courses shown in those notices. The notices referred to a total of approximately $240,000 for which he could become responsible by way of penalty. In consequence he consulted Mr Sam Cassaniti and subsequently engaged the firm to act for him and GSA. He signed on 8 February 1999 or 13 February 1999 the terms of engagement letter, letter of instructions and authority to deduct fees each in a form similar, if not identical to that signed by Mr Bartlett. As there were two sets of documents with different dates and dealing with different entities, it seems as if the two sets of documents were signed on different days as the documents themselves indicate, but nothing turns upon that. 49 At the first or subsequent meeting Mr Falcetta gave Mr Cassaniti the penalty notices and sought advice. Mr Cassaniti suggested that Mr Falcetta arrange for the company to be placed in voluntary administration, as liquidation would take too long and thus not lead to Mr Falcetta escaping personal liability under the penalty notices. Mr Cassaniti agreed to act and to obtain the assistance of solicitors and an administrator. 50 According to Mr Falcetta, Mr Cassaniti attended a number of meetings with Mr Falcetta and advised him concerning his personal liability and obligations as an officer of GSA. Mr Cassaniti also advised Mr Falcetta on other taxation matters such as maintaining motor vehicle log-books, and expenses, debit loan accounts Mr Falcetta had with GSA and the possibility of Mr Falcetta being assessed on amounts as a deemed dividend. He was also advised of possible deductions and the incorporation of a new company under which business could recommence as well as given advice concerning changes in the law and tax and concerning the circumstances in which he could become personally liable for the debts of the new company. 51 Mr Cassaniti advised Mr Falcetta to incorporate a new company which could employ him. The new company could own a car which it would provide to Mr Falcetta who would need to keep a log book. Mr Cassaniti agreed to set up a log book and assisted Mr Falcetta to keep a record of expenses incurred by him as an employee. He was advised of the necessity of keeping up to date with group tax and prescribed payment deductions and of the need to have a loan agreement with the company requiring payment of commercial interest to avoid being assessed on a deemed dividend. 52 Mr Falcetta instructed the firm to prepare his 1998 income tax return which it did and which Mr Falcetta signed and the firm lodged. 53 It is not clear whether Mr Cassaniti in fact rendered an invoice to Mr Falcetta. Mr Falcetta had no recollection of receiving an invoice. Mr Cassaniti believed that an invoice had been sent or given personally to Mr Falcetta but could locate no covering letter. When in the 1999 year of income Mr Cassaniti received a refund in favour of Mr Falcetta from the Australian Taxation Office (the refund was received on or about 25 February 1999), Mr Cassaniti made the appropriate entries in his firm's accounts crediting the refund to Mr Falcetta and debiting Mr Falcetta's account with the sum of $9,411.21 being the fees which the firm charged Mr Falcetta. It is obvious that because the amount of the invoice which was to be found in Mr Falcetta's file with the firm is precisely the amount of the refund of income tax that he received that the calculation of the amount owing and the preparation of the invoice must have followed the receipt of the refund. According to Mr Falcetta there was a conversation between Mr Cassaniti and Mr Falcetta in which Mr Cassaniti advised Mr Falcetta that the fees would be around $9,000 and that that amount would be deducted from the refund when it was received. Presumably that conversation preceded the date the refund was received. 54 Mr Cassaniti swore an affidavit in which he set out in more detail the general nature of the work he had done for Mr Falcetta and GSA and to which he annexed documents from Mr Falcetta's file including notes of conversations and diary notes. He was not cross-examined in Mr Falcetta's case. Many attendances were in connection with placing GSA into administration or for attendances at meetings of creditors or attendances with solicitors or others concerning Mr Falcetta's obligations under the penalty notices. Clearly some of the work concerned Mr Falcetta's income tax return (one attendance on this subject was for one hour) and another involved checking the assessment against the return. 55 Mr Cassaniti made a calculation of the amount which he claimed Mr Falcetta owed the firm in the same way as he made the assessment for the account invoiced to Mr Bartlett. He concluded that work valued at more than the amount charged had been done but limited the invoice ultimately rendered or at least applied against the refund monies to the precise amount of the refund. He did so because he was of the view that Mr Falcetta would be unable to pay more than the amount refunded. He estimated that he and an employed accountant had spent 20 hours and charged for that time at a time and a half premium. Work ensuring that Mr Falcetta complied with obligations under the penalty notices was charged out also at time and a half premium, that is to say at $450 per hour. Mr Cassaniti's summary of the work the firm performed on Mr Falcetta's instructions and which was included in the amount which Mr Falcetta paid was as follows: '[A]ccountancy and urgent advice was given to the Applicant included such matters as the deed of arrangement of GSA Formwork (NSW) Pty Ltd, the Applicant's company; correspondence from the administrator; advising the applicant on his personal liabilities under the deed of arrangement; his obligations under the tax office notices and what the applicant had to do in order to comply with his obligation under the notices; attending meeting as did members of my staff with the applicant and the administrator; attending the Applicant and instructing solicitors to further advise the Applicant regarding the liquidation of the Applicant's company within the prescribed time permitted under the director penalty notice; considering minutes, affidavits, court applications in connection with the liquidation; meeting with the Applicant to advise him regarding his personal income tax position, and his personal tax liabilities under alternative business structures; considering prior year income tax returns and preparing and lodging the Applicant's income tax return for 1998.' The Construction of s 25-5 of the 1997 Act. 56 Section 25-5 of the 1997 Act had, as its origin, s 69 of the 1936 Act, as substituted by Act No 20 of 1990, applicable to expenditure incurred on or after 1 July 1989. Section 69 as in force immediately before the enactment of the 1997 Act was in similar terms to s 25-5 save that, relevantly it provided for a deduction for expenditure incurred to the extent to which it was in respect of a 'tax related matter'. The expression, 'tax related matter,' was defined as being a reference to the management or administration of the income tax affairs of the taxpayer and additionally compliance with obligations imposed by Commonwealth laws 'in so far as that obligation relates to the income tax affairs of another taxpayer'. Excluded was expenditure which related to the commission of an offence. 'Income tax' was defined in s 69(11) to mean tax, however described, that was imposed by an Act other than the 1936 Act and was payable under the 1936 Act. 57 Section 69 replaced a much narrower deduction which had been introduced by the 1936 Act allowing a deduction for amounts paid to a tax agent for the preparation of an income tax return of the taxpayer. It coincided with the extension to the self assessment regime. It seems from the Second Reading debate on the bill which became Act No 20 of 1990 in the Senate that, in part at least, the widening of the deduction was a recognition that the costs of a taxation audit had become very heavy. The substituted section had begun as a Private Members Bill which had then been adopted by the government. It can be assumed that self assessment had increased the need for taxpayers to obtain advice from competent tax advisers and that the widening of the deduction recognised and encouraged this. 58 It is obvious, therefore, that parliament intended the substituted deduction in s 69 to cover expenditure which went beyond the preparation of an income tax return and that a deduction was to be allowed for professional advice not only where the tax advice related to the taxpayer's own taxation affairs, but also where it related to compliance with obligations imposed upon the taxpayer so far as those obligations related to the tax affairs of another taxpayer. The most obvious case which fell within the 'obligation' limb of subsection (2)(b) of the section would be obligations imposed upon the taxpayer where he or she was the public officer of some company or trust estate. Every company and every trust estate where the trustee or one of the trustees is not a resident is required to have a public officer: s 252 and 252A of the 1936 Act. The public officer of a company is 'answerable' for the doing of all things as are required to be done by the company under the 1936 Act and a similar provision relates to the public officer of a trust estate. There is no reason why the use of the word 'answerable' does not lead to the conclusion that the public officer has imposed upon him or her the obligations that are imposed upon the company itself. 59 Subsection (4) of the section restricted the deduction so far as it related to fees for professional advice concerning the operation of a law relating to taxation, to advice provided by a 'recognised professional tax adviser' as defined. Mr Cassaniti was a recognised professional tax adviser within the definition. There is a qualification that the deduction is not available where the expenditure related to the commission of an offence, but it is not suggested here that the expenditure in question was no deductible for this reason. 60 The 1997 Act was an outcome of the 'Tax Law Improvement Project' ('the Improvement Project') which was designed to rewrite the income tax law, progressively, in a simplified way. Section 25-5 was part of the second instalment of legislation which emanated from that project and was enacted by the Tax Law Improvement Act 1997 (Cth) (No 121 of 1997). The legislation which emanated from the Improvement Project did not, at least when enacted, purport to change the law but merely the style in which the previous law had been expressed by simplifying that style: s 1-3(1) and (2) of the 1997 Act. Hence s 1-3(2)(b) of the 1997 Act directed that the change of language in the case of a provision in the 1997 Act which, however, appeared to express the same idea as was expressed in a section of the 1936 Act, should not be taken to express a different 'idea'. Section 25-5 of the 1997 Act prima facie then amounted, when enacted, to no more than an expression in slightly different language of what had been enacted by s 69 of the 1936 Act. 61 As has already been noted, there was no definition of 'tax affairs' in s 25-5 of the 1997 Act at the time it was enacted, notwithstanding that there had been a definition of 'tax –related matter' in s 69 of the 1936 Act. However, as also noted, the word 'tax' was defined in the Dictionary to the 1997 Act and that definition required that to fall within it the tax had to be assessed under the 1997 Act when the 1997 Act contained no provision dealing with assessment at all. Assessment at the time the 1997 Act came into force, then was, and still is, a process which is provided for in the 1936 Act. It can be assumed that it was intended that the Tax Improvement Project would in due course prepare and Parliament would enact provisions in the 1997 Act dealing with assessment in substitution for the provisions still in force which are contained in ss 166 to 169 of the 1936 Act (and as to amended assessments, see s 170 et seq). 62 In an endeavour to comply with the directions of Parliament to be found in the Acts Interpretation Act 1901 (Cth), and so as to give effect to the intention of the legislature the reference to 'assessed under this Act' as contained in the 1997 Act must be read as either 'in accordance with the substantive provisions of this, ie the 1997 Act' or be read as 'assessed under (or perhaps payable under) the 1936 Act, the latter formulation being the language used in s 69 of the 1936 Act, and the "idea" which is expressed in slightly different words in the 1997 Act'. The result in both cases would be the same. It is necessary in one way or another to substitute the reference to the 1936 Act for the 1997 Act to cure what is an obvious legislative mistake. 63 It is clear that Parliament did not intend that the expression 'tax affairs' as used in s 69 of the 1936 Act should be limited to the income tax affairs of a taxpayer in the strict sense of the tax which is the subject of assessment under s 166 of the 1936 Act. If Parliament had so intended, it could have said so very simply. Take for example expenditure incurred by a taxpayer for advice on or in connection with the calculation of provisional tax. Strictly provisional tax is not itself income tax. While it is a tax and is payable under s 221YB of the 1936 Act it is not assessed under any act. The liability to provisional tax is ancillary to the liability to income tax and is not a separate tax: Commissioner of Taxation v Clyne (1958) 100 CLR 246 at 260 per Dixon CJ. The liability arises for the purpose of enabling the income tax of certain taxpayers to be collected during the financial year for which it is levied and in advance of assessment. Advice in relation to compliance with requirements for provisional tax clearly would involve a tax-related matter within the meaning of s 69 of the 1936 Act and thus potentially deductible under that section if all other requirements of the section were fulfilled. 64 Likewise, group tax, and prescribed payments tax are both taxes which are not the subject of assessment. They are both amounts which a taxpayer is required to deduct from amounts payable to others, the one from salary and wages paid to an employee and the other from amounts paid to contractors in certain industries. Like provisional tax group tax and prescribed payments tax are ancillary to the liability imposed for income tax on a person not being the payer of the amount from which deduction is to be made. They arise to ensure that income tax of a taxpayer will be paid to the Commissioner concurrently with the derivation of income and the liability to pay to the Commissioner is there to protect against payment of income tax being evaded. In my view advice concerning both would thus fall within the expression 'tax affairs' as used in the 1936 Act. 65 I think that a like view should be taken of the construction of s 25-5 of the 1997 Act, particularly when in the year of income there was no definition of 'tax affairs'. There may be occasions when a later amendment may throw light upon the interpretation to be adopted prior to the amendment being made: Grain Elevators Board (Vic) v Dunmunkle Corporation (1946) 73 CLR 70 at 85-6; Hepples v Federal Commissioner of Taxation (1992) 173 CLR 492 at 539 per McHugh J and see Commissioner of Taxation v Consolidated Press Holdings Ltd (No 2) (1999) 91 FCR 574 at par 61 per French, Sundberg and Sackville JJ. However, generally it can be said that there is little logic in interpreting a statute as if it had included an amendment later made, at least unless Parliament has made clear that this is what was intended by the amendment. There is nothing in the Explanatory Memorandum to the 1997 Act or the Second Reading Speech to that act which suggested that s 25-5 was to be give any different or narrower interpretation than s 69 of the 1936 Act or for that matter that it was to be given a wider interpretation. In my view in the relevant year of income here, and before s 25-5 was amended to include a definition of 'tax affairs' advice concerning provisional tax, group tax or prescribed payment deductions and obligations thereto were intended to be deductible. I reject the interpretation submitted for by Counsel for the Commissioner. 66 It follows in my view that to the extent that the fees incurred by either Mr Bartlett or Mr Falcetta were for advice related to group tax or prescribed payments tax or otherwise related to those taxes then the fees fell within s 25-5 and were allowable. So too were the fees to the extent that they related to the preparation of returns for the individuals themselves or for companies of which they were public officer. The more difficult question is the question of the extent to which the fees fell within the section since it is clear that some of the work performed by the firm for either taxpayer in the year of income fell outside s 25-5 and was not deductible. Clearly s 25-5 requires apportionment in a case such as the present if some part of the expenditure incurred fell within the section and some part did not. 67 Before considering that question I will briefly deal with the issue of s 8-1 of the 1997 Act. Section 8-1 of the 1997 Act as a source of deduction. 68 Section 8-1 provides for a deduction to a taxpayer for an outgoing which the taxpayer incurs either in gaining or producing the assessable income or in carrying on a business for the purpose of gaining or producing assessable income unless that outgoing is on capital account or is of a private or domestic nature. The question whether a taxpayer who incurred professional fees for the preparation of his or her own income tax return would be entitled to a tax deduction for those fees is itself a difficult one. It may be said that the preparation of a return is outside the income producing activity of a taxpayer so that no deduction arises, or that income tax is essentially a private expense, even if the source of the assessable income derived is a business activity of the taxpayer: Smith's Potato Estates Ltd v Bolland [1948] 2 All ER 367. That question need not be answered in Australia because the cost of preparing the taxpayer's own return is clearly deductible under s 25-5, so long as it is incurred. Likewise the costs of preparing accounts which form the basis of the return would be deductible under s 25-5 and if not, should be a business expense which is deductible under s 8-1 if incurred by a taxpayer carrying on a business. 69 However, s 8-1 of the 1997 Act does not avail either taxpayer here. It is difficult to see how costs of professional services performed for corporate entities of which the taxpayer was a director, a shareholder or public officer were deductible to the taxpayer. Despite a submission to the contrary by Senior Counsel, neither taxpayer on the facts before me carried on a business of being a company director, or public officer of these companies. There could be a case, of which the present cases are not an example, where a person might carry on a business of being a director or shareholders of companies where an outgoing incurred for the preparation of accounts of the companies might be deductible. But here, the expenditure incurred did not relate to any business of either taxpayer, nor did it relate to any income producing activity of either taxpayer. All the expenditure (other than in respect of the personal income tax return deductible in any event under s 25-5) related to the companies' businesses or the companies' income producing activities and not those of the taxpayers. Indeed, the expenditure which both incurred to the firm in the year of income was expenditure which, at least largely, could have been deducted by the corporations. There is much to be said for the view that the contractual relationship between the firm and each taxpayer as reflected in the documents signed was that each taxpayer contracted as agent for the relevant corporate entities in instructing Mr Cassaniti to perform services for the corporations and that each taxpayer guaranteed payment by the relevant corporation of the fees. Liability for amounts guaranteed was not, in the present circumstances, deductible. The requisite connection between the outgoing and the activity of the taxpayers directed at their gaining or producing assessable income, or any business they carried on did not exist. Further, money paid on a guarantee would in the present case be capital or of a capital nature: Hooker Rex Pty Ltd v Federal Commissioner of Taxation (1988) 88 ATC 4392. It would be otherwise if either taxpayer carried on a business of giving guarantees, but there is no foundation in the evidence for such a conclusion, notwithstanding that in the building industry, as the evidence showed, directors or shareholders were required to give guarantees of the debts of a building company. The quantum of the deduction – Mr Bartlett. 70 The onus is upon the taxpayer to show that the assessment under appeal is excessive: Taxation Administration Act 1953 (Cth) s 14ZZO. Likewise, a taxpayer does not succeed merely because he or she is able to show that the assessment was wrong. It is necessary that the taxpayer show the extent to which the assessment is excessive: Commissioner of Taxation v Dalco (1990) 168 CLR 614. Obviously the taxpayer need only show that 'extent' on the balance of probabilities and in so doing does not, as Hunt J, then of the Supreme Court of New South Wales once wrote in criticism of the approach taken by the then Taxation Board of Review No 1, have 'the weight of Atlas on his shoulders'. 71 It is clear that the evidence shows that Mr Cassaniti performed services for Mr Bartlett and the companies with which he was concerned in the year of income that did not fall within s 25-5. It is also obvious that he billed separately for other work and that some of the items which were not deductible under s 25-5 may have been included in other invoices and thus excluded from the invoice for $15,000 with which the present appeal is concerned. 72 The work charged and which fell within s 25-5 clearly included the preparation of Mr Bartlett's own return and preparation of the return for Bombay. The latter work necessarily involved preparation of financial accounts since without those accounts the tax return could not be prepared. It is likely, however, that the account of $15,000 included advice or other attendances concerning creditors of Bombay and the steps which should be taken by Mr Bartlett to avoid personal liability. Those steps included, probably, advice concerning claims against Bombay arising under building contracts entered into by it, attendances in connection with the management and liquidation of that company and perhaps at least in part some of the steps which involved the incorporation of a new company to arise, phoenix like, from the ashes after the building license had moved to a new company. However, I recognise that Mr Cassaniti did separately invoice Mr Bartlett for Bartlett New. 73 It will be recalled that the rate Mr Cassaniti charged as principal of the firm for non urgent and non tax planning work was $300. Some work which Mr Cassaniti regarded as special was charged by him at time and a half. The evidence does not permit me to know how the line between the two was drawn. There is little to suggest that any of the work Mr Cassaniti performed was special, at least not so much of the work Mr Cassaniti did which would fall within s 25-5 of the 1997 Act. Writing up cash books, preparing or reconciling prescribed payment summaries and the like may well have been to some extent work done by less qualified persons than Mr Cassaniti and attract a lower rate than $300. Advice as to how Mr Bartlett could limit his exposure to creditors may well be work which Mr Cassaniti would regard as special and charge out at a rate higher than $300 but that work would not fall within s 25-5. 74 I am conscious that Mr Cassaniti in his evidence of reconstructing the account he sent Mr Bartlett suggested that he would have spent more than 56 hours work and that this had been rounded down to the sum of $15,000. I am not satisfied on the balance of probabilities from a perusal of the spread sheet in evidence and of the material in Mr Bartlett's file that Mr Cassaniti personally performed 56 hours of work in the year of income on preparation of Bombay's tax return or advising Mr Bartlett on complying with his obligations for lodging tax returns, or in relation to group tax or prescribed payments. I think it is more probably than not that a percentage of the work Mr Bartlett did related to dealing with the liquidator of Bombay and with creditors, rather than advising Mr Bartlett on his tax obligations or assisting him in complying with them. Further I am sure that much of the work performed and invoiced was done by less qualified persons than Mr Cassaniti. 75 Much of the problem in this part of the case stems from the fact that neither Mr Cassaniti nor his staff kept time sheets such as would enable Mr Cassaniti to show how the account in question was really made up. The clients of a tax agent are entitled to assume that amounts invoiced and claimed by the tax agent as a deduction under s 25-5 are properly calculated and not the subject of a rough estimate. They are also entitled to assume that sufficient records are kept so that if there is a dispute with the Australian Taxation Office as to whether work fell within or without s 25-5 work done can be allocated into that which is deductible and that which is not. 76 Obviously I am unable to determine a precise figure which could be attributed to work which fell within s 25-5, although I am satisfied that some, indeed a considerable amount, of the invoice related to work which fell within s 25-5. I received no assistance from counsel on either side in making the calculation. Counsel for the Commissioner suggested that one hour related to the preparation of a tax return was deductible, otherwise nothing was. 77 I have taken each item to be found in the file tendered or which is referred to in the spreadsheet tendered in Mr Bartlett's case which had, on its face, any connection with taxation save that I have excluded items which seemed to relate to liquidations or attendances on liquidators or their solicitors. I have then estimated the time which was most likely to have been taken in dealing with the listed matters. I have allowed only one hour for preparation of income tax returns, although it is possible that more time was required. I have endeavoured to apportion, where necessary, work undertaken which relates to the liquidation or dealings with the liquidator and work which clearly relates to tax affairs. Work performed other than by Mr Sam Cassaniti (invariably David Cassaniti, who is represented by the initials DC) I have calculated at the rate of $300. I have generally assumed that work done by Mr Sam Cassaniti (represented by the initials SC) was charged at the rate of $450, although there is little work actually done by Mr Sam Cassaniti. The resultant figure is necessarily lower than what is probably the true figure. But this is the result of the evidence being insufficient to satisfy me that a higher figure should be adopted. 78 Work Person Time Amount 1998 Income Tax Return of Bombay Preparation DC 60 mins 300 1998 Income Tax Return of Ian Bartlett DC 60 mins 300 Instructions for both Income Tax returns (including financial Position of Bombay) SC 120 mins 900 1998 Income Tax Return –Bartlett Group Building Services P/L DC 60 mins 300 Instructions for preparation of Return Bartlett Group SC 60 mins 450 Attendances – PPS payment Summaries DC 120 mins 600 PAYE advice – Bartlett Group DC 24 mins 120 PAYE advice – Elchoy DC 24 mins 120 $3090 79 I am satisfied that at least $3090 of the amount invoiced to Mr Bartlett did relate to either the tax returns of Mr Bartlett or Bombay or other entities or advice concerning compliance with obligations of Bombay in respect of group tax or prescribed payments. I would accordingly set aside the objection decision and order that the objection be allowed in part by allowing to Mr Bartlett a deduction in that sum. The quantum of the deduction – Mr Falcetta. 80 The determination of the quantum of deduction allowable in the case of Mr Falcetta is even more difficult. This is so because for whatever reason no attempt was made to have Mr Cassaniti give evidence reconstructing the account he sent Mr Falcetta. No comparable spread sheet was tendered. 81 While I am of the opinion that advice which Mr Falcetta was given concerning compliance with his obligations in respect of group tax and prescribed payment deductions and advice concerning the keeping of vehicle log books and potential liability to pay tax on dividends deemed to have been paid to him out of profits and thus assessable income would fall within s 25-5, I do not think that advice concerning incorporation of a new company to trade once GSA was placed into administration or advice concerning his personal liability to creditors as such would fall within that section, even if one of the creditors was the Commissioner for group tax or prescribed payment deductions not withheld or remitted. Advice on how a new company should comply with its tax obligations (whether income tax as such or group tax or prescribed payments deductions would likewise be deductible as would the work done to prepare Mr Falcetta's tax return and checking the assessment received against the return. Attendances concerning the deed of arrangement and attendances at meetings with the administrator of GSA, or of creditors of that company and attendances concerning the liquidation of GSA in my view would not fall within the section, nor would attendances on solicitors in connection with these matters. 82 Again it is impossible for me on the evidence to arrive at a precise figure. While I accept that Mr Cassaniti (or his senior staff) did 20 hours of work which was charged out at the special rate of $450 an hour the problem is determining how many hours related to the matters which fell within s 25-5 and how many hours related to matters involving creditors. On the whole I think it is more likely than not that the majority of the work performed fell within the latter category, although obviously some of the work done did fall within the subsection. 83 In order to arrive at a figure being at least the minimum charged for work which was deductible I have prepared from the material in Mr Falcetta's file an itemisation of the work which seems to have relation to tax. I have endeavoured to apportion where the work dealt both with taxation and other matters, such as liquidation and the like. The outcome may well be less than Mr Falcetta is entitled to. But it is all I am able to deduce from the sparse material before the Court. Work Person Time Amount Attendances – penalty notice Markou 12 mins 60 Preparation income tax return Mr Falcetta- SC 60 mins 450 1997-8 Preparation income tax return Mr Falcetta –1999 SC 60 mins 450 Checking assessment SC 12 mins 90 Attendances-group tax SC 60 mins 450 Attendances – default in Group tax Gino 12 mins 60 Attendance re penalty Notice SC 30 mins 225 Conference re information Concerning work related Expenses ? 6 mins 30 $1815 84 Accordingly I would set aside the objection decision in relation to Mr Falcetta and order that the objection decision be allowed in part by allowing to Mr Falcetta a deduction in the sum of $1815. Conclusion 85 Each taxpayer has been partly successful before me. There remains, however, the question of costs. The parties indicated that they would wish to make submissions on costs after perusing my reasons for decision. In these circumstances I would direct that there be filed on behalf of each applicant and on behalf of the Commissioner such submissions as the parties may be advised to make within seven days of these reasons being delivered. I shall then deliver a brief judgment dealing with the appropriate cost order. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill. Associate: Dated: 21 October 2003 Counsel for the Applicants: D McGovern QC with IE Davidson Solicitor for the Applicants: Stoikovich Macri Counsel for the Respondent: PM Fraser Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 10 September 2003 and 11 September 2003 Date of Judgment: 21 October 2003