Case K71

Judges:
AM Donovan Ch
LC Voumard M

Court:
No. 2 Board of Review

Judgment date: 7 December 1978.

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A.M. Donovan (Chairman); L.C. Voumard (Member): A claim to deduct $2,002, representing the cost of fares involved in overseas travel and a small amount in respect of accommodation abroad, was rejected by the Commissioner. The deductibility of the amount is the question for the Board's decision in this reference.

2. At the relevant time, the taxpayer was a teacher employed by a State Education Department. He had graduated as a Bachelor of Arts in History and Politics and held an Honours degree in the latter subject. He had also obtained a Diploma of Education. At the beginning of the 1973 year he obtained his first appointment and was posted to the N Boys high School, his classification being that of Assistant. There he taught Social Science to students of years 9, 10 and 11 for approximately 32 periods each week, that being the number of actual teaching periods teachers were expected to take.

3. It was explained that Social Science is a relatively new field in secondary education and that it is distinct from but has elements in common with History, Geography and the Humanities in general and ``had to do with people and with environments''. It is, the taxpayer said, ``... about life styles, living conditions, about social and private behaviour in a certain environment. It is also the laws of the land, the various groups within the society and the form of the economy... It is looking at a totality of experience of life.''

4. No curriculum for the subject had been developed by the Department, nor had it laid down guidelines for teachers. Instead, the taxpayer and the other teachers at the N Boys High School, subject however to oversight by a senior master, decided upon the courses which they ``considered appropriate for that subject and for our students''.

5. It was while he was attached to this school that the taxpayer became involved in what was referred to as a Social Education Materials Project, which it seems had been initiated at Commonwealth level. Three teachers from the taxpayer's State were seconded to the project, one being the taxpayer's senior master at the N High School. He issued an invitation to the taxpayer to join the project on a voluntary basis, and this the taxpayer accepted. The senior master, it seems, arranged for the taxpayer to be relieved from teaching duties for two periods per week while he was so engaged.

6. The project extended over a period of two years, but the taxpayer's involvement with it was restricted to half of that period because of his departure overseas. Altogether he was concerned with three sections of the project, but had most to do with the H segment. The result of his labours was not exhibited to the Board, but was briefly described. It involved a ``kit'' which was available for purchase by schools and consisted of a number of photographic slides, cards and a booklet. Not much significance appears to have been attached by the taxpayer to the booklet, which seems to have done little more than explain to teachers in general terms the use of the kit and point out that it was not necessary to use any particular part of what was supplied.

7. In explaining the use of the kit, the taxpayer instanced two slides. One depicted a youngster in bed and his mother pointing to a clock on a wall. Another showed a child on a pushbike having been stopped by a policeman. The cards provided for use in conjunction with these slides were intended by the questions they contained to stimulate class discussion concerning the possible reasons for the child's apparent conflict with parental and State authority. From this point it was intended that there would be a progression to examination of the balance between, on the one hand the restrictions imposed on an individual by family and State, and on the other hand personal freedom. The overseas trip had no relevance to the work done by the taxpayer for this project, which in any event was not income producing as far as he was concerned.

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ATC 675

8. Promotion within the teaching service in general terms is from Assistant to the position of Senior Master, then Deputy Principal and finally Principal. Appointment to each successive position is made from a list of persons eligible for appointment to that status, and inclusion on the relevant list depends upon satisfactory assessment of a candidate, by a panel comprising the Principal of the candidate's school and a Principal Education Officer.

9. During the first term of 1975, the taxpayer made application for assessment for eligibility for promotion to the position of Senior Master. The assessment took place in December 1975, and he was regarded as not being suitable for promotion at that stage but the reason for this conclusion is not known. On advice, the taxpayer immediately applied for a further assessment. This was conducted about July 1977, after his return from abroad. It involved assessment in four areas, which were designated ``Personal Influence'', ``Scholarship and Teaching Skills'', ``Degree and Quality of Involvement'' and ``Professional Responsibility''. The taxpayer was awarded ``A'' grading in the first and third categories, and was treated as satisfactory in the remaining two, and he became eligible for promotion. The notice of the result of the assessment showed that the taxpayer's subject field for senior appointment was ``Social Science''.

10. When he had married in 1971, the taxpayer and his wife resolved to go abroad and there had in the meantime been some prompting by his wife to embark on the trip. As early as 1974 the taxpayer applied for leave of absence without pay for one year. This request was at first refused but finally granted, and he was on leave throughout the entire 1976 school year. His absence was not regarded as in any way terminating his appointment, and as we understood it was treated as service for the purposes of superannuation and long service leave entitlements. The taxpayer stated that ``the reasons behind my application (for leave) were many, but some of them were important and involved having insight in trying to envisage things from afar. I was developing courses for secondary students throughout Australia on topics that I would only read about and which I had not had the opportunity to experience''. He said that the trip was undertaken largely for the purpose of experiencing conditions in other places and that he made it his business to visit those countries in which he took particular interest as part of his teaching commitment. He said that in talking to his students about and writing materials on such issues as socialism, free enterprise and capitalism, he had to rely previously only upon the concepts he had derived from literature. He resolved therefore to look at the life styles of peoples living in countries different from Australia, including the Soviet Union, Great Britain and the United States of America.

11. Accompanied by his wife, the taxpayer left home in December 1975, travelled by air to Japan, and then crossed Russia by the Trans Siberia Railway, with three stopovers, which together occupied a little more than a week. He proceeded to London where he took employment as a clerk for about 2½ months, and then went to Israel where he worked for about the same time on the kibbutz. Thereafter, about a week was spent in Greece and three weeks on an Adriatic island. He returned to London, and almost immediately proceeded to the U.S.A. where he purchased a car and travelled extensively. He visited and stayed with people there whom he had met while in Israel. This part of the trip occupied some three months. He went back to London, and shortly afterwards spent six weeks touring the European Continent by car before returning to London again where he spent about three weeks before proceeding more or less directly to Australia. He arrived back in this country in mid-December 1976, after an absence of almost precisely one year.

12. The taxpayer was then appointed to a different school where he taught the subject ``General Studies'', which he described as being similar to Social Science. No doubt with the authority of a senior master, he developed the courses in this subject for his particular classes, which comprised year 8 and combined years 9/10 students. The children in these classes were described as particularly slow learners.

13. Subsequently the taxpayer applied for and was appointed to a position within the Department connected with sport which carried a salary and had a status equivalent to that of Senior Master. Although it was not

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ATC 676

so stated, it is a reasonable assumption that the appointment was not open to people other than those who had been assessed eligible for appointment to a Senior Master's position. A substantial part of the taxpayer's time in this new position was devoted to administrative duties, but he was also required to spend two-tenths of the normal week in actual teaching duties. The subject taught on this occasion was History and the lessons were delivered at yet another school. Further promotion would probably not be available unless the taxpayer transferred again to full time teaching.

14. The Commissioner's representative conceded that the amount of expenditure claimed by the taxpayer in relation to the trip had in fact been incurred and that it properly related to the year ended 30th June, 1976, which is the year before the Board. The question at issue is therefore solely whether that expenditure was incurred ``in gaining or producing the assessable income'' of the taxpayer within the meaning of that expression as it appears in sec. 51 of the Act.

15. The taxpayer's evidence emphasised factors which sought to relate the trip to his income producing activities as a teacher. Yet the trip must be seen as being substantially of the same type as is ordinarily regarded as a holiday, albeit in part a working holiday. The taxpayer went to Asia, Europe and America, he saw places commonly visited for general interest, he took employment, he visited friends, he toured by car, he took photographs and kept a diary. He undertook no formal studies, made no formal investigations and, apart from the diary (which was not produced to the Board), kept no written record of any technical knowledge which came to him, nor did he collate any information from the trip after his return. To a person unfamiliar with the decisions of the Courts in relation to sec. 51 of the Act, it would no doubt seem strange that an argument could be mounted that the costs involved in such a trip were incurred in gaining the taxpayer's income as a teacher in Australia.

16. It was argued strongly, however, that on the authority of
F.C. of T. v. Finn (1961) 106 C.L.R. 60, the expenditure was deductible. It was submitted that the purpose and effect of the trip were to improve the taxpayer's capacity to do the work for which he was paid, that undertaking the trip was incidental to the proper performance of his job and was fairly to be seen as part and parcel of it, and that the position he occupied made it encumbent upon him to acquaint himself progressively with the subjects with which he was involved as a teacher. It was argued too that the trip played a significant part in the taxpayer's promotion to his present position which carried a higher salary than that which he earned as an Assistant.

17. The reliance put upon Finn's case makes it necessary to refer to the facts there under consideration in some detail. In 1926 the respondent had joined the Public Works Department of a State and had qualified as an architect in 1932. In 1936 he went abroad for four years working and studying in Europe and America. Upon his return to Australia he was only able to follow the developments in architecture abroad through literature. By the time he left on his overseas trip in 1957 he held a senior position in the Government Service and could aspire to promotion to the most senior architectural position. He was asked by his Department to extend his trip to visit South America for the purpose of examining developments there, and in fact the Government made a contribution to his expenses. At p.65 the Chief Justice was able to say: ``... 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.'' The judgment of the Chief Justice continued at pp. 68-69:

``The money was laid out by the taxpayer in the acquisition of better knowledge of a skilled profession. The pursuit of information concerning the modernisation 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.''

18. The Court was thus concerned with a situation in which the respondent was a very senior Government officer who, during his period overseas, devoted himself exclusively to the enhancement of his familiarity with developments in his discipline and who, at official request, made professional enquiries

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ATC 677

while he was abroad and who received a contribution to his expenses from the Government. All these factors operated to give the trip and the relevant expenses a close and intimate connection with the performance of his job and the income he derived from it, and it was held that the expenses of the trip were deductible.

19. The taxpayer in this reference, however, stood in an entirely different position. He had little more than passed the threshold of his official career. Whatever else his trip did, it provided him with a holiday. There was no encouragement financially or otherwise by the Department for him to undertake the trip, and we were not told whether the branch of knowledge comprising Social Science was settled or whether it was undergoing development and change abroad. Thus, there is not sufficient similarity in the facts to justify on that account alone a decision in the taxpayer's reference similar to that in Finn's appeal.

20. It is necessary therefore to consider the other arguments advanced on the taxpayer's behalf. Some aspects of the evidence emphasise factors to support these submissions. The taxpayer had an extensive photographic record of the places he had visited, some of these photographs had been used by him in class and it was said that, apart from those of personal subjects, the remainder was available to be so used. The taxpayer, in effect, said that his studies and reading had left him with impressions of what life was like in other countries, but it was desirable to have first hand experience of these conditions and that during the trip he observed the relationship of the individual with the community in which he lived and the relationship of both to the physical, economic and social environment in which they existed. An example of the process was given by the taxpayer in a letter to the Deputy Commissioner written in December 1977. In referring to his stay on the Adriatic island, he wrote:

``My intention in staying (there) was to experience an easy paced, unpressured type of life where the obligations of work, domestic chores and time were non existent. To draw water from community wells, to swim all day in deep, crystal clear water, to relax without the anxiety of `wasting time', and eating at taverns where the locals were fun loving and genial, to see donkeys overladen with hay and observing peasant women working in the fields all contributed to an understanding of an alternative lifestyle of which most would be unaware.''

21. We accept that while on the trip the taxpayer made observations of the type referred to and that he compared the results obtained with the understanding he had gleaned from his earlier reading. We also accept that upon his return to active teaching he was able, as he said, to speak to his students with greater authority and confidence, and that he used some photographic material he collected abroad and that, where possible, he introduced his classes to topics with which he gained some familiarity while he was away. In this sense he was, we think, a more able teacher after his return than before his departure, but, notwithstanding these findings, the connection between the trip and its cost and the taxpayer's position and the income he got from it was tenuous in the extreme and falls far short of the degree of relevance which is required by sec. 51. It is simply not possible to say of the cost that it was an expense incurred ``in the course of gaining or producing the assessable income'' derived by the taxpayer from teaching (
Amalagamated Zinc (de Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295 at p. 303). The improvement in the taxpayer as the result of the trip is very much of the kind to which Menzies J. referred in
F.C. of T. v. Hatchett 71 ATC 4184. There, he was considering the deductibility of costs associated with a university course which a school teacher was undertaking, and at p. 4187 observed:

``As I have said, I am not able to find any connexion between the payments of fees and the assessable income of the taxpayer beyond the circumstance, which I take to be self evident, that a teacher who has pursued university studies is likely to be a better teacher than if he had not done so... In my opinion, this general consideration is not enough to make the fees deductible; there must be a perceived connexion between the outgoing and assessable income.''

There is certainly no ``perceived connexion'' between the trip and the taxpayer's work. To express this conclusion

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ATC 678

in another way, and to borrow the phrase used by Helsham J. in
F.C. of T. v. White 75 ATC 4018, the trip was not ``part and parcel of the taxpayer's employment''.

22. It remains to consider the submission that the trip was instrumental in getting promotion and thus increased salary for the taxpayer, and that on the authorities (Finn's case (supra) and Hatchett's case (supra)), the relevant expense was deductible. As we have already mentioned, some half year after his return from abroard the taxpayer was assessed for a second time, and on this occasion was regarded as eligible for promotion to the position of Senior Master. We were asked to infer that it was as a result of the trip that he succeeded on this occasion where previously he had failed. There is simply no evidence on which we could find that this was so. We have already mentioned the areas of assessment, and on their face they contained nothing on which the trip could have a bearing other than of a most general kind. In any event, successful assessment had the effect merely of making the taxpayer eligible for promotion, and it was not suggested that the actual promotion which he obtained resulted from anything arising out of the trip. On the contrary, if any inference is to be drawn it would be that the taxpayer's interest and experience in sport were responsible for his selection for his present position. The situation is entirely different from that in Hatchett's case (supra) where obtaining the qualification automatically increased the taxpayer's income.

23. For the reasons expressed, the costs associated with the taxpayer's trip aboard do not satisfy the requirements of sec. 51 of the Act.

24. The objection lodged on the taxpayer's behalf was also directed against the partial disallowance of a claim in respect of motor vehicle expenses. A further part of the claim was subsequently admitted, and the matter was then not pursued before the Board.

25. In the circumstances, therefore, the Board upholds the Commissioner's decision on the objection and confirms the amended assessment giving effect to the additional allowance in respect of the motor vehicle expenses.

Claim disallowed