Case C47

Judges: FE Dubout Ch

G Thompson M
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 20 August 1971.

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Gordon Thompson (Member): This reference involves a claim for deduction, in respect of the year ended 30 June 1969 by a senior lecturer in the field of electrical engineering at an Australian University, of $449 incurred in connection with the attainment of a Doctor of Philosophy degree, and $12 for University parking charges. The claim is based upon sec.51 of the Act in that the outgoings were incurred in gaining or producing the taxpayer's assessable income.

2. Taxpayer obtained the degrees of Bachelor of Engineering and Bachelor of Science in New Zealand and subsequently came to Australia where he was appointed a lecturer at a University in a capital city. He was appointed at the sixth year level of the salary range for a lecturer, and in succeeding years progressed to the top of that salary range where, as he put it, he was held up by a salary barrier.

3. Taxpayer asserted in evidence that conditions of academic appointment changed, and doctorates became more in demand. Indeed he believed that it was essential to have a doctorate to achieve promotion to the higher rank of senior lecturer with its higher salary range. Consequently taxpayer undertook his Ph.D. course, and pursued it to graduation as a Ph.D. He was then appointed a senior lecturer and received a higher salary.

4. At the hearing of this reference, the Commissioner's representative submitted that the expenses incurred in connection with obtaining the Ph.D. degree were of a capital nature, and the parking charges were of a private nature.

5. Boards of Review in Australia have consistently held that expenses incurred in connection with studies or activities directed to the attainment of a higher degree or qualification are of a capital nature. This has been so held because a higher qualification imports a higher status, with either a higher income, whether by way of salary or professional fees and the like, or, at least, it brings in its train the opportunity or probability of gaining higher income. I do not consider it necessary to analyse the case law in detail, but reference may be made briefly to such cases as
8 T.B.R.D. Case H.118 where a navigator employed

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ATC 221

by an airline company unsuccessfully sought a deduction of expenditure incurred by him in taking lessons to qualify as a pilot; and
14 T.B.R.D. Case P.24 where a medical practitioner employed by a government department unsuccessfully claimed a deduction for expenses incurred in connection with obtaining a postgraduate degree necessary to qualify him as a specialist. Reference might also be made to the recent decision of this Board in Case C.15
71 ATC 70 where it was held that expenses incurred in travelling to a School of Mines by taxpayer to obtain the higher qualification of mining surveyor were of a capital nature.

6. This principle at Board of Review level has been firmly established in the above and many other cases on allied situations. However, even in a cursory examination of the authorities it is advisable to mention the relatively recent decision, by majority, of Board of Review No. 2 in Case B.78 70 ATC 362. In that case a primary school teacher claimed as a deduction certain University fees expended whilst pursuing studies directed at obtaining a Bachelor of Education degree, and fees for typing his theses for the Departmental Teachers' Higher Certificate. The Board, by majority, allowed taxpayer's claim, holding that ``he was merely extending or enlarging his knowledge, capacities and qualifications in a field of occupation in which he was already engaged''. The majority members went on to say: ``We think there is a sufficient connection between the expenses and his then occupation to categorise the expenses as outgoings incurred in the course of the gaining of his assessable income''.

7. The case of Case B.78 represents, perhaps, a departure from the firm line of Board decisions otherwise on the subject. It is understood that it is subject to a pending appeal to the High Court. In these circumstances, I do not propose to analyse the case in greater detail, since the subject matter is thought to be sub judice. However, I have come to the conclusion that at this juncture the present reference falls to be decided in conformity with the line of Board authorities which I have indicated above, and some of which I have instanced in these reasons.

8. The evidence in this reference clearly indicates that the attainment of his Ph.D. degree afforded taxpayer a higher status as a senior lecturer, and a higher income by way of salary. His expenses incurred whilst pursuing his Ph.D. course of studies are thus seen to be directed to obtaining a higher income-earning status, and in accordance with previous Board decisions, are thus thought to be of a capital nature. Cf.
Sun Newspapers Limited v. F.C. of T. (1938) 61 C.L.R. 337 . I am accordingly of opinion that the said sum of $449 is of a capital nature, and is not an allowable deduction under sec.51 of the Act.

9. The claim of $12 is, in my opinion, of a private nature in that it is allied to travelling from home to work and return. These travelling expenses have been excluded from deductions because of their private nature: See
Hayley and Lunney v. F.C. of T. (1958) 100 C.L.R. 478 : and
14 T.B.R.D. Case P.65.

10. I thus feel constrained by past authority to hold that both taxpayers' claims must fail. His objection must accordingly be disallowed, and the Commissioner's assessment confirmed.