Blackford v Commissioner of Taxation

[1999] AATA 611

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(Decision by: J Block, Senior Member)

Re: MICHELLE BLACKFORD, Applicant
And: COMMISSIONER OF TAXATION, Respondent

Tribunal:

Member:
J Block, Senior Member

Subject References:
INCOME TAX
Allowable deductions
Travel expenses incurred by a travel agent in the course of overseas and interstate travel
Whether deductible pursuant to section 8-1 of the Income Tax Assessment Act 1997

Legislative References:
Income Tax Assessment Act 1997 - section 8-1

Case References:
Brimo v Federal Commissioner of Taxation - 98 ATC 2338
Federal Commissioner of Taxation v Studdert - 91 ATC 5006
Commissioner of Taxation v Finn - (1961) 106 CLR 60
Federal Commissioner of Taxation v Hatchett - (1971) 125 CLR 494
Paramac Printing Co Pty Ltd v Federal Commissioner of Taxation - (1964) 111 CLR 529; (1964) 13 ATD 418
Lunney & Hayley v Federal Commissioner of Taxation - (1958) 100 CLR 478; (1958) 11 ATD 404
Federal Commissioner of Taxation v Cooper - (1991) 29 FCR 177
Federal Commissioner of Taxation v Klan - (1985) 80 FLR 320; 85 ATC 4060
Martin v Federal Commissioner of Taxation - (1984) 2 FCR 260
Amalgamated Zinc (De Bavay's) Ltd v Federal Commissioner of Taxation - (1935) 54 CLR 295
Ronpibon Tin NL & Anor v Federal Commissioner of Taxation - (1949) 78 CLR 47
Case B78 - 70 ATC 362
John v Federal Commissioner of Taxation - 89 ATC 4101

Hearing date: 4 August 1999
Decision date: 19 August 1999

SYDNEY

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Decision by:
J Block, Senior Member

REASONS FOR DECISION

1. The objection decision in this matter is the disallowance by the Respondent of an objection dated 18 December 1998 against Notice of Assessment No. 202751/001 issued on 8 December 1998 in respect of the year ended 30 June 1998 (the 'relevant year').

2. The Applicant was represented by Mr George Cooley, a tax agent, while Mr Peter Hefford, an officer of the Respondent, appeared for the Respondent.

3. The Tribunal had before it the T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 together with Exhibits as follows:

*

Exhibit A1 is a letter from Traveland to Mr Hefford dated 1 August 1999;

*

Exhibit A2 consists of a number of references by clients of Traveland in respect of the Applicant;

*

Exhibit A3 is a large album of photographs taken on the four trips which are referred to later in these Reasons;

*

Exhibit R1 is a facsimile by the Respondent to the Tribunal dated 14 May 1999 including a number of annexures thereto, and in particular:

(a)

a questionnaire from the Respondent to the Applicant's employer, Traveland, and dated 14 April 1999;

(b)

a letter from Traveland in response to the Respondent's questionnaire and dated 5 May 1999;

(c)

a document styled "Traveland Policy Educational Assignments"; and

(d)

a letter by the Applicant to Mr Cooley dated 4 May 1999.

4. The Applicant gave evidence on her own behalf; the Tribunal accepts that notwithstanding a number of inconsistencies between her oral evidence and evidence contained in the T Documents and the Exhibits (which inconsistencies are referred to later in these Reasons), her oral evidence at the hearing was truthful. Her evidence can conveniently be summarised in this clause 4 (and also other later numbered clauses in these Reasons) as follows:

(a) The Applicant is a senior travel consultant employed by Traveland in its Miranda office. She has been employed in the travel industry for approximately 20 years, and for the past 18 years by Traveland. She has been offered, and has refused, promotion to a managerial position, because she considers that her particular talents lie in the sales area and moreover that she does, in fact, enjoy her ongoing contact with the clientele. She gave evidence as to the fact that she often obtains repeat business; she pointed also to the references in Exhibit A2 as indicative of her ability and skill in her job.

(b) During her period of 18 years employment with Traveland, her annual salary has risen from approximately $24,000 to approximately $31,000. The Applicant does not receive, and is not employed on the basis of, a commission. However, as a travel agent, she is able to obtain discounts on airfares, hotel and tour costs, which are not available to the public at large. Moreover, Traveland has a policy of providing travel allowances and discounts in the form of educational assignments; that policy is set out in the document which forms a part of Exhibit R1 and reads as follows: "Traveland Policy Educational Assignments

Eligibility

Educationals are only available to Permanent full time or part time colleagues (not casuals) who are selling consultants and who have been employed for 12 months continuously by Traveland prior to the commencement of the educational.

Frequency

Frequency of educational assignments will be determined by commercial requirements and the training needs of each individual colleague.

Educational Assignment

Traveland Colleagues are entitled to up to 10 working days Educational Assignment per year from colleague's Anniversary date, for company endorsed Educationals. All selling colleagues will be considered for educational assignments.

Invitations

Invitations are to be made to the Sales Co-ordinator who will liaise with the Sales Manager for approval. Invitations cannot be accepted without Sales Manager approval.

Non Preferred Supplier

It is Traveland policy that educational offers from non-preferred suppliers may not be taken under any circumstances by wholly owned travel centre colleagues.

Participation Fees & Expenses

The Company will contribute participation fees to a maximum of $400 per individual per educational. Any costs above this are to be borne by the colleague. The Company will pay up to $200 claimable business expenses (upon receipt of travel diary) per educational to be documented with receipts against educational itinerary inclusions.

Distribution of Offers

All offers of Educationals from preferred partners are offered via the regional office with the Sales Manager to determine those consultants likely to benefit the most from the assignment."

(c) During the relevant year the Applicant travelled on four occasions; she claimed certain expenses in respect of those trips (as set out in the Findings which form part of the Statement of Findings on Material Questions of Fact, Evidence and Reasons for the Decision contained in the T Documents) as follows:

(d) Exhibit R1 includes a letter by Traveland to the Respondent dated 5 May 1999; paragraph 2 of that letter states that during the relevant year the Applicant "did not participate in any educational/familiarisations". Moreover, paragraph 6 of that letter indicates that annual leave was taken by the Applicant during the following periods:

It is conceivable that the USA trip ended on 26 September 1998 rather than 30 September 1998; the latter date was obtained from the Applicant's own tax return and as to which see T4 (page 5) of the T Documents; nothing however turns on whether the correct date is 26 September 1997 or 30 September 1997.

(e) The statement contained in paragraph 2 of the letter dated 5 May 1999 was subsequently contradicted by Exhibit A1 which, inter alia, reads as follows:

"2. The second trip was a "Top Achiever's Educational" in recognition of Ms Blackford's sales accomplishments for that particular year. This trip is also regarded as an educational, as the return fare, accommodation costs and the leave 12 - 18 September were borne by Traveland. Ms Blackford did choose to extend her trip and was granted annual leave for the period 22-26 September 1997 and met any additional costs incurred in that period herself."

(f) Although there was no other evidence tendered in respect of Traveland (and in particular no oral evidence by any of its officers) as to any of these aspects, the Tribunal accepts that the Applicant's trip to Zimbabwe was a trip taken in accordance with her employer's Educational Assignments Policy (referred to in clause 4(b) of these Reasons). The Tribunal also accepts that the first part of the Applicant's trip to the USA was an award made in consideration of her sales accomplishments.

(g) In respect of the USA trip, the Applicant at first said that the reward portion (that being the first part of the trip) involved travel to Las Vegas and then to New York; she subsequently corrected that evidence in order to substitute New Orleans, Memphis and New York for the destinations previously given. During the second part of her USA trip, taken as part of her annual leave, the Applicant took a Globus tour through New England. That extension of her USA trip required her (inter alia) to expend $706 in flight costs back to Los Angeles in order to catch her return flight to Sydney.

(h) The Applicant took the trip to Tasmania in company with her husband because, so she said, she had never been to Tasmania. Her husband is a builder and developer; the Applicant said in a letter to Mr Cooley dated 30 September 1998 (T6, pp.11 - 12) that her husband "attended to his business". In her oral evidence she said that she travelled with her husband, who during the course of the trip made one or two business calls. She said that although she travelled with her husband she bore her own expenses as referred to in her claim.

(i) At pages 5 and 6 of Document T4, there is an attachment to the Applicant's tax return for the relevant year and in which the deductions aggregating $10,039 were claimed as deductions referable to the relevant year; it reads as follows:

"Other expenditure incurred in earning income Mrs Blackford is a Senior Travel Consultant with Traveland Pty Limited and, as part of her employment, is required to undertake educational and familiarisation inspection tours. Whilst major expenses are bourne [sic] by her employer and/or tour operators, considerable out of pocket expenses have been incurred by Mrs Blackford for which no reimbursement is received. Expenses include additional fares, accommodation sundry meals, etc. as disclosed in the detailed itenary [sic]/expenses schedules held by Mrs Blackford and summarised below:

(a) Educational Training Programme - USA 12/9/97 - 30/9/97

26/8/95 - 8/9/95
Internal Flights USA	$701.00
Accommodation/Rail	326.00
Tours	959.00
Taxi Fares	91.00
Meals	720.00
Sightseeing	354.00
Insurance	160.00
Film and processing	110.00
Reference Books	60.00
	$3481.00

(b) Educational trip to Africa 6/11/97 - 13/11/97

Tour participation fee	$815.00
Extra sightseeing/drives	165.00
Insurance	102.00
Films and processing	145.00
Reference books	50.00
	$1277.00

(c) Educational trip to Tasmania 24/3/98 - 4/4/98

Air fares	$252.40
Car	506.60
Accommodation	1251.00
Sightseeing/Park entry	124.00
Meals	522.00
Film and processing	30.00
	$2686.00

(d) Educational tour Ireland and UK 9/4/98 - 24/4/98

International air fares - London/Dublin/London	$231.00
Cosmos tour	715.00
Additional accommodation	428.00
Meals	474.00
Sightseeing	493.00
Taxi/Rail	59.00
Insurance	115.00
Film/processing	80.00
	$2595.00"

(j) That attachment gives rise to an inference that all four trips were taken in accordance with the Applicant's employer's educational/familiarisation policy; this was so, however, in respect of the Zimbabwe trip only. The first part of the USA trip was of course, and as previously indicated, a reward, and not within the terms of that policy. Her return necessarily gives rise to another inference, and that is that she was required to take the trips; that also was not true. The trips to Ireland and Tasmania were taken entirely of her own accord as was the extension to her USA trip. Moreover, the Zimbabwe trip was offered to her and her participation was by no means compulsory.

(k) The letter dated 30 September 1998 and which is located at pages 11 and 12 of the T Documents states in paragraph M that "I did not receive a travel allowance during the period ending June 30, 1998".

(l) Paragraphs S and T of that letter read as follows:

"S. My travel to USA was a training and educational tour. My travel to Africa was an educational trip. My travel to Tasmania was an educational and familiarisation inspection tour and my travel to Ireland was a [sic] educational tour.

T. Approx. 75% of my time would have been spent on business activities during each trip."

However, the Applicant's evidence before the Tribunal was that she did receive a payment of $400 from her employer in respect of the Zimbabwe trip; in the light of this, the Applicant accepted that her claim in respect of the Zimbabwe trip should be reduced by an equivalent amount. In addition, her categorisation of the trips as outlined in paragraph S was inaccurate.

(m) In her oral evidence, the Applicant noted certain corrections to paragraphs 1 and 2 of her letter dated 4 May 1998; corrections were required because there were references in that letter (which is contained in Exhibit R1) to "1998" (in clauses 1 and 2) which should correctly have referred to 1997. That letter also contains a note immediately following clause 2 which reads "A portion of the USA trip was educational leave and the balance was from recreational leave".

(n) In her letter dated 4 May 1998, the Applicant claimed that the trip to Ireland was taken with a client, Mrs J Stubbs. However, the Applicant's evidence before the Tribunal was that Mrs Stubbs was (or is) a friend and that she had agreed to accompany Mrs Stubbs, as a friend, and to provide her with company, on a trip overseas provided the destination chosen was one which she, the Applicant, had not previously visited.

(o) In the letter dated 4 May 1999, the Applicant further stated that "I maintain that participating in tours and trips both on educational leave and recreational leave increases my expectation of future promotion and I believe that my employer values highly my gain in expertise."

In her evidence before the Tribunal, the Applicant said that, in fact, she had reached her particular salary ceiling; promotion to managerial status which had been offered and refused would involve a comparatively small pay rise and that, as set out previously, she had refused promotion, preferring to remain involved on the selling side of her employer's business.

5. Further as to the Applicant's evidence:

(a) Exhibit A5 contains photographs taken by the Applicant of her four trips during the relevant year.

(b) The trips to Tasmania and Ireland when aggregated with a part of the trip to the USA (the second part) involved a period of more than four weeks; the Tribunal accepts that the Applicant used leave accumulated from prior periods of leave entitlement, to the extent that the aggregate period involved was in excess of four weeks.

6. It may be noted at this point that there was no issue of substantiation before the Tribunal and so that (as Mr Hefford conceded) if the Tribunal were to find in favour of the Applicant in respect of any given trip, the Applicant's claim should be allowed. The Applicant said that she did not at any stage receive an amount of $200 from her employer in accordance with the policy which forms part of Exhibit R1.

7. The Applicant said that in respect of every trip she kept notes, took photographs and generally retained records which were made available and were of assistance to her work colleagues, her employer and her employer's clientele. She also testified that she had sold trips which she had herself undertaken to clients of her employer.

8. Reduced to its essential details, the Applicant's case is that travel both within and out of Australia makes her a better and more informed travel agent; her first-hand "on the ground" experience of a particular trip enables her, so she contends, to be more informative when offering advice as to the suitability and quality of those trips. Mr Cooley argued that this factor resulted in increased revenue; however, bearing in mind that any increased revenue flowed to her employer alone, and that she received no commission or any other part of that increased revenue or any other direct benefit, that argument could not be said to assist the Applicant.

9. During the hearing, the Tribunal referred both of the parties to its decision in Brimo v Federal Commissioner of Taxation 98 ATC 2338 and in particular to references therein to the decision of Hill J in Federal Commissioner of Taxation v Studdert 91 ATC 5006 and the decision of the High Court in Commissioner of Taxation v Finn (1961) 106 CLR 60 ; clauses 7 and 8 of the decision in Brimo's case are, as a matter of convenience, reproduced (but without the added emphasis) in this decision as follows:

"7.(a)

It is convenient at this juncture to consider the legal aspects of deductibility of expenditure of this kind (often referred to as self-education expenditure) under section 51(1) of the Income Tax Assessment Act 1936 which provides:

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

(b)

The decision of Hill J in FC of T v Studdert 91 ATC 5006 put to rest, once and for all, a previously held view that self-education expenses are deductible only if it could be shown that it would contribute, or would be likely to contribute, to increased income, and whether in consequence of promotion or otherwise. In Studdert's case, Hill J made it clear at pages 5013 and 5014 that this is not the case; see in particular the following passage from his judgment (and in respect of which emphasis has been added by the Tribunal) as follows:

"To fall within s 51(1) it is not necessary to show that a particular outgoing will, on the balance of probabilities, produce an increase in assessable income in the future. So much was decided by the High Court in FC of T v Smith 81 ATC 4114 ; (1980-1981) 147 CLR 578 , where the payment of a premium by an employee on a loss of income policy was held deductible, irrespective of the fact that no income might ever be derived under the policy, and indeed, where presumably the employee might have desired that no income be derived under the policy. See too FC of T v Cooper (supra) at ATC 4412; FCR 197. As I said in the latter case, the true principle is that enshrined in the famous passage from the decision of the High Court in Ronpibon Tin NL v FC of T (1949) 8 ATD 431 at 436; (1949) 78 CLR 47 at 57:

'In brief substance, to come within the initial part of the subsection 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.'

In its reformulated form in later cases, eg Smith, the principle has been expressed as follows [at ATC 4117; CLR 586]:

"What is incidental and relevant in the sense mentioned falls to be determined not by reference to the certainty or likelihood of the outgoing resulting in the generation of income but to its nature and character and generally to its connection with the operations which more directly gain or produce the assessable income."

Where an outgoing is shown to contribute or to be likely to contribute to increased income, it will normally be the case that the necessary connection will exist between the outgoing and the activities of the taxpayer which more directly contribute to the gaining or production of assessable income. Cooper is perhaps, on one view, an illustration of an exception to this general rule. However, it is not necessary for an outgoing to be deductible that a taxpayer be able to show a likelihood of increased income. In the present context, were this to be so, it would mean that a person who had reached the peak of his income-producing position, would never be entitled to a deduction for self-education expenses. Thus, the Commissioner of Taxation, having no public service office to which he could ordinarily expect to be promoted, could never obtain a deduction for a course of instruction that could be shown to better equip him in the performance of his duties as Commissioner. So to state the problem is to expose the fallacy in the argument. If the Commissioner were to undertake a course which would be objectively seen as improving or tending to improve his proficiency in his office, that would better equip him so to do, there is no reason to suppose that a deduction would not be allowable for expenditure which he incurred on such a course."

It is clear, having regard to the decision in Studdert's case, that the Applicant need not show any connection or anticipated connection between the musical cost deductions and promotion or increased income.

(c)

In FC of T v Finn (1960) 12 ATD 348 ; (1961) 106 CLR 60 , the High Court dealt with the case of an employed senior design architect who claimed the costs incurred by him in respect of activities abroad devoted to architecture and its study. In the following quoted passages emphasis has also been added by the Tribunal. The deduction was allowed; at ATD pages 351 - 352; CLR pages 68 and 69 Dixon CJ said:

"There remains the question whether the taxpayer's expenditure upon his journey in gaining improved and up-to-date architectural knowledge is to be considered as falling within the exception of losses or outgoings of capital or of a capital, private or domestic nature. This question should be answered by a definite negative. The money was laid out by the taxpayer in the acquisition of better knowledge of a skilled profession. The pursuit of information concerning the modernization or improvements in an art is part of the constant process of keeping up to date which skilled professions call upon those who practise them to pursue, though sometimes in vain. Had he dwelt nearer to the sources of such knowledge and information he doubtless would have visited them from time to time in his career. As it was he had been able to do so only once before and in the meantime had depended on literature. It is simply a false analogy to treat him in his visit abroad as engaged in the equivalent of the acquisition of something of an enduring nature and therefore capital. You cannot treat an improvement of knowledge in a professional man as the equivalent of the extension of plant in a factory. Unfortunately, skill and knowledge of most arts and sciences are not permanent possessions; they fade and become useless unless the art or the science is constantly pursued or, to change the metaphor, nourished and revived. They do not endure like bricks and mortar."

(d)

In the same case (Finn's case) Kitto J said at ATD page 352; CLR pages 69 and 70:

"... It was therefore, I think, plainly incidental to the office that the respondent should avail himself of such opportunities as might arise to add, in the interests of the State even if also in his own interests, to his knowledge and understanding of architectural achievements and trends overseas, both in design and in construction, and of endeavours made and being made to solve architectural problems such as might from time to time confront his Government."

(e)

And, also in Finn's case, Windeyer J at ATD page 352; CLR page 70 said:

"... Generally speaking, it seems to me, a taxpayer who gains income by the exercise of his skill in some profession or calling and who incurs expenses in maintaining or increasing his learning, knowledge, experience and ability in that profession or calling necessarily incurs those expenses in carrying on his profession or calling. Whether he be paid fees by different persons seeking his skilled services from time to time, or be paid a regular salary by one person employing him to exercise his skill, matters not in my opinion. Moreover, it would surely be wrong to assume that the Crown is so indifferent to the professional attainments of those whom it employs that their rights and prospects in its service are not affected by the true measure of those attainments. That was not so in this case. Outgoings incurred for the genuine purpose of acquiring or maintaining knowledge and skill in a vocation do not become an outgoing 'of a private nature' simply because the taxpayer got pleasure and satisfaction in increasing his knowledge and attainments."

(f)

The case of Paramac Printing Co Pty Ltd v FC of T (964) 13 ATD 418 ; (1964) 111 CLR 529 was concerned with visits to art galleries and other places of general tourist interest by certain persons. Owen J said at pages 537 and 538:

"... In his case, it was certainly a business trip. On the whole I think Mrs McWilliam's and Jan's journeyings should also be so regarded. They were members of the team of 'creative thinkers' and to have had the opportunity of seeing for themselves what was being done overseas in the advertising and printing world would and did, I think, advance their own techniques, widen their minds and given [sic] them new ideas which would be of real benefit to them and to the business in which they were engaged. ... It is not, I think, to the point to say of such persons that visiting overseas art galleries and exhibitions, and I give this as only one example of their activities abroad, is a usual tourist activity and that the expense incurred cannot therefore be treated as a deduction for income tax purposes whether the claim for a deduction be made by the individual concerned, as in Finn's Case, or by those who employ him to use his artistic and creative abilities."

(g)

In Case B78, 70 ATC 362 Mr A M Donovan delivered a minority decision in which he said at 364:

"... It is probably true to say that most callings require familiarity with a body of knowledge that is constantly undergoing change and enlargement. For a qualified person to keep abreast of such developments is an incident of his occupation, and the cost of so doing is deductible. On the other hand, it is also probably true to say that knowledge in a broader sense and outside the narrow field peculiar to a taxpayer's calling also assists him in the exercise of his professional skills. In these cases, however, it will usually be found that the connection between that knowledge and the taxpayer's income producing activities is tenuous, so that it is not in any real sense an incident of his calling. In such instances, the occasion of the expense incurred in acquiring such knowledge is not found in whatever is productive of the assessable income and the cost is not comprehended by sec 51."

8.

It is perhaps relevant to note that while Mr Donovan was in dissent in respect of Case B78, that part of his decision appears to have been (if only implicitly) accepted by Menzies J when the matter came before the High Court in FC of T v Hatchett 71 ATC 4184 , a case in which the taxpayer succeeded in his appeal in relation to an amount of $71 paid for university fees, but was otherwise dismissed. The Tribunal considers that Mr Donovan's statement quoted above constitutes an admirable summation of the manner in which claims of this nature are to be approached.

9.

Deductibility under section 51(1) of the Income Tax Assessment Act requires a sufficient nexus between the loss or outgoing and the assessable income; see in this context Dixon CJ in Finn's case, in particular at page 68. Furthermore, the "essential character" test enunciated by the High Court in Kenneth Edmund Lunney v FC of T (1958) 11 ATD 404 is also used to determine whether an outgoing is a private expense. The currently accepted view is that there is no "necessary antipathy between a loss or outgoing incurred in gaining or producing assessable income and a loss or outgoing of a private nature" John v FC of T 89 ATC 4101 at 4108. And as Windeyer J said in Finn's case, "outgoings are not private because the taxpayer gains pleasure from the activity in question."

10. The Tribunal accepts Mr Hefford's contentions that the "essential character" or "incidental and relevant" test as laid down in decisions such as Lunney & Hayley v Federal Commissioner of Taxation (1958) 11 ATD 404 ; (1958) 100 CLR 478 , Amalgamated Zinc (De Bavay's) Ltd v Federal Commissioner of Taxation (1935) 54 CLR 295 and Ronpibon Tin NL & Anor v Federal Commissioner of Taxation (1949) 78 CLR 47 is the test to be applied, and that having regard to the decision in Martin v Federal Commissioner of Taxation (1984) 2 FCR 260 , the test is not, as suggested by Menzies J in Federal Commissioner of Taxation v Hatchett (1971) 125 CLR 484 , a "perceived connection" test which might in some respects be less onerous than that encompassed by the "essential character" test. See also Federal Commissioner of Taxation v Klan (1985) 80 FLR 320 ; 85 ATC 4060 where Ormiston J held that the Board of Review was in error to the extent that it relied on the "perceived connection" test as the appropriate test of deductibility.

11. Mr Hefford referred the Tribunal to certain other relevant passages from the decision in Finn's case as follows:

(a) Dixon CJ at page 65:

"It was admitted on behalf of the Commissioner of Taxation that all the taxpayer's activities abroad were devoted to architecture and its study. He kept a written record of what he did and of the buildings he visited and studied. It is clear that he covered a great deal of architectural ground, that he concentrated upon it for seven days a week throughout his tour and that he made voluminous notes, took numbers of photographs and made many sketches and wrote up reports and records. In short there can be no question that all his available time was devoted to the advancement of his knowledge of architecture and the development of his architectural equipment, outlook and skill. If the point be whether the money claimed as a deduction were laid out for the improvement of his capacity to do the work for which he is paid, there could be no doubt that the whole expenditure was directed to that purpose. But the case for the Commissioner is that that is not the point or, at all events, it is a fact that is insufficient to support the claim for the deduction. In the first place, so it is contended for the Commissioner, the improvement of his capacity to do the work for which he is paid does not mean that he will be paid more, that his title to be paid will be better secured or that any chance of promotion to a higher position will be increased and, if there be any chance of his present status being diminished, that that chance would be lessened or removed. Thus in no way, it is said, were the costs of his search abroad for better knowledge "incurred in gaining or producing the assessable income" derived from the State."

(b) Dixon CJ at pages 67 and 68:

"From the facts that have been stated above three or four conclusions may be drawn which perhaps may be considered to govern the question whether the expenditure was incurred in gaining or producing the assessable income. In the first place it seems indisputable that the increased knowledge the taxpayer sought and obtained of his subject and the closer and more realistic acquaintance he secured of modern developments in design and construction made his advancement in the service more certain, and that in respect of promotion to a higher grade these things might prove decisive. This was put clearly by the Principal Architect, though in a letter written ex post facto, "I understand from you that the Commissioner now desires to know whether the experience obtained and the large amount of data collected will result in an increase in your income. To me, it is obvious that this must increase your professional efficiency, and hence your value to this Department, and must materially assist your future advancement to a higher position in the Department with consequent increase in income". In the second place, so far as motive or purpose is material, advancement in grade and salary formed a real and substantial element in the combination of motives which led to his going abroad. In the third place it is apparent that the heads of his Department, and indeed the Government itself, treated the use which he made of his long service and other leave to study architecture, increase his professional knowledge and study modern trends, as a matter not only of distinct advantage to his work for the State but of real importance in at least one project in hand. In the fourth place it was all done while he was in the employment of the Government, earning his salary and acting in accordance with the conditions of his service. He was in fact complying with the desires, and so far as going to South America was concerned, with the actual request of the Government. His journey abroad and what he did while in Europe, as well as in South America in the following year of income, was therefore in a correct sense incidental to his employment and most relevant to it."

Of course Studdert's case is now authority for the proposition that a deduction will not be denied merely because advancement prospects are not demonstrated. But in any event, the Tribunal does not consider that the employment of the Applicant as a travel agent is analogous with office of the architect in Finn's case.

12. It is, as Mr Hefford contended, altogether to the point to consider whether the expenditure was of a private nature and thus excluded under the negative limb of section 8-1 of the Income Tax Assessment Act 1997 ('1997 Act'). See in particular in this context, Mr Justice Hill's remarks in Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177 at page 201 where he said:

"Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home. No such circumstance, however, intervenes here. In particular, the mere fact that Mr Masters suggested or even directed Mr Cooper to eat particular food, does not convert the essential character of the food as private into a working expense.

In my view, the expenditure in question fails to be deductible because its essential character remains private. The analogy with medication is not an apt one even if it be correct that such medication be deductible. The medication does not have the essential character of a private expense to start with."

13.(a) In respect of the relevant year, the Applicant derived taxable income of $31,694 (T10, p.55) and claimed travel deductions amounting in aggregate to $10,039 for the four trips undertaken by her during the relevant year (T10, p.57).

(b) The evidence before me indicates that the trip to Zimbabwe did indeed fall within the educational/familiarisation policy of Traveland and that Traveland paid the costs of the flight, and also contributed, under its policy, $400 towards other expenses. That trip fell squarely within the terms of the Applicant's employment with Traveland. It was taken during a period of additional leave especially made available by Traveland to its employees for this purpose. Accordingly, and notwithstanding the belated nature of the Traveland correction of an earlier contradictory statement contained in Exhibit A1, and notwithstanding also the fact that no officer of Traveland gave oral evidence before me, I am prepared (albeit with some hesitation) to accept that in respect of the Zimbabwe trip the necessary nexus is established. Accordingly, a deduction in an amount of $877 ($1,277 being the amount claimed less the employer's contribution of $400) should be allowed. I have come to this conclusion because it is at least conceivable that the educational/familiarisation trips awarded by Traveland to its employees, and to which it contributes a part only of the costs incurred, are perhaps capable of being construed as analogous to fringe benefits, made to its employees to compensate them at least in part for the fact that their salaries are low. It must be remembered that after 20 years in the travel industry the Applicant earns approximately $31,000 annually. Nevertheless, and as I have noted, despite the fact that the Applicant was by no means compelled to accept the trip in question, that trip was at least sufficiently connected with the Applicant's employment to enable me, on balance, to find that the Applicant is entitled to a deduction for the costs borne by her, and reduced only by the employer's contribution.

(c) The Applicant's extension of her trip to the USA occurred during her annual leave, and her employer made no contribution to the costs incurred by her. I accept that the New England tour would have been of benefit to her as a travel agent; travel might be thought, in general terms, to be educational for all and certainly must be so for a professional travel agent. The fact that she took a particular tour is of no specific relevance; there are many thousands of tours available throughout the world and it may be that this particular tour in the autumn, when the leaves are falling, was chosen by virtue of its popularity. According to the evidence of the Applicant, it is a tour which is most extraordinarily popular, to the extent that it is necessary to book well in advance, so that, it could be said, the tour 'sells itself'. The USA extension, even if it satisfies the first positive limb of the section, fails under the negative limb.

(d) The trip to Tasmania with her husband (a self-drive tour) during her annual leave, and the trip to Ireland (with a friend and also during her annual leave) were clearly stamped with a private character. The Applicant said that she had been under some stress (although details were not given) and that she needed a holiday; by way of contrast, the Applicant said that the trips to Zimbabwe and the USA were by no means to be characterised as holidays, as one was always "on the go". It is to be doubted whether the trips to Tasmania and Ireland satisfy the first positive limb of the section; but in any event they must fail under the negative limb.

(e) In effect the Applicant is claiming that she spent her entire annual leave (and including some accumulated leave from a prior period) in a manner which allows her a deduction for the entire cost. This claim is made notwithstanding that the aggregate deduction is approximately one third of her entire income for the relevant year. Although the Applicant's oral evidence before the Tribunal was, so I have found, truthful, certain written evidence furnished prior to the hearing was, putting it at its kindest, inaccurate or misleading. The mere fact that the Applicant is a travel agent cannot entitle her to claim the cost of her holidays, simply because they are taken away from her home, and whether in or out of Australia. That each and every holiday away from her home must benefit the Applicant, to some greater or lesser extent as a travel agent, is not in my view to the point; the relevant trips were taken in respect of her own holiday, and in respect of which all relevant choices were made by her; they were thus private.

14. In the closing reply, Mr Cooley invited me (although very much as an after-thought) to apportion; however, he could not suggest a method of apportionment, and in any event there was no evidence before me to this effect.

15. Accordingly, and save only that a deduction is allowed in an amount of $887 for the trip to Zimbabwe, the objection decision under review is affirmed.