Case M61

Judges:
KP Brady Ch
LC Voumard M
JE Stewart M

Court:
No. 2 Board of Review

Judgment date: 5 September 1980.

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K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)

The taxpayer concerned in this reference has for many years been a teacher employed by a State Education Department, initially at primary schools, but later, and for a considerable time now, as a teacher of manual arts at senior his schools. About 1968 he was promoted to Senior Master, which remains his present classification. In that capacity he continued to teach manual arts subjects, the main ones of which were described as woodwork, metalwork and metal machining, photography, various types of pre-vocation courses and aspects of technical drawing. About half of his normal available time was devoted to teaching; the balance, apart from about four periods per week set aside for preparation, was given over to administrative duties. It is not necessary to recite these; it is sufficient to say that as a senior master in charge of the manual arts department at the schools at which he was employed, he was responsible for all aspects of the teaching of

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manual arts subjects, as well as having his share of the responsibility which any senior master has to assist in the general running of his school.

2. During the year ended 30 June 1977 the taxpayer participated in three overseas group tours. In point of time, the first took place between 28 August and 12 September 1976 and embraced visits to various educational institutions in Thailand and Hong Kong (``the Thailand-Hong Kong tour''). The outgoings incurred by the taxpayer totalled $990, of which he claimed to deduct $707 pursuant to sec. 51(1) of the Income Tax Assessment Act, the remaining $283 being treated by him as expenditure of a private nature. The second tour involved a visit to Dacca, Bangladesh (to attend a conference) and to India and Thailand, where once again different educational institutions were visited. This tour (``the Dacca tour'') took place between 31 December 1976 and 22 January 1977. The full cost of the tour, $1,337, was claimed as a sec. 51(1) deduction. The third tour covered visits to China and, very briefly, the Philippines, extending from 16 May to 27 May 1977. The object of this tour was to visit educational institutions in those two countries, although it appears that little more than one day was spent in the Philippines, where only one school was visited. Again the taxpayer's total expenses of the tour, $1,201, were claimed to be fully deductible under sec. 51(1). The total deductions claimed in respect of the three overseas tours were thus $3,245.

3. In each case the touring party included a number of teachers and, in some cases, their spouses. The present taxpayer was accompanied by his wife, who was also a schoolteacher, although neither counsel for the taxpayer nor the Commissioner's representative treated this as a relevant circumstance. Nor do we.

4. In issuing the taxpayer's 1977 assessment, dated 20 February 1978 the Commissioner disallowed in full the deduction of $3,245 claimed in the return. The taxpayer's objection suffered a like fate, and the matter is now before us for review.

5. Because the taxpayer is an employee, and is not carrying on a business, his claim will succeed only if and to the extent that the outgoings in question were incurred in gaining or producing his assessable income in the form of his salary as a Senior Master of Manual Arts during the year ended 30 June 1977 and were not outgoings of a private nature. The evidence by which the taxpayer sought to establish that his claims fell within the first positive limb of sec. 51(1) is summarised in succeeding paragraphs, but by way of introduction three points might be made. First, for part of his own evidence the taxpayer's recollection of events was assisted, without objection, by notes he had made, and this did not improve the quality of his evidence. Secondly, and notwithstanding the notes, his evidence was often vague and indecisive. For example, in answer to many questions that one would have expected to draw a ``yes'' or ``no'' answer, the taxpayer asserted ``I would have...'', thereby leaving uncertain the question whether he did or not. And finally, our general impression was that the taxpayer overstated his case. Thus, one of the documents before us (which may have been included in the taxpayer's return, but whose author was unidentified) asserted that at a stage just before arriving in Dacca at the beginning of 1977, the taxpayer was occupied with "Delhi and Agra visits to

• 1. Government Model School Old Delhi,
• 2. St. Xavier's Secondary School,
• 3. Lent School at Old Delhi

and discussion with principals and teaching staff". This gave the impression of visits to a school in Agra, but asked which school he visited there he replied: ``I don't know the name of the school''; then he did not recall whether he visited a school there at all; and finally agreed that what he had visited at Agra was the Taj Mahal. It might incidentally be noted that this suggests an element of private expenditure concerning the Dacca tour, notwithstanding the statement to the contrary by the taxpayer in the relevant return.

6. The taxpayer's academic qualifications consisted of a teacher's certificate, a teacher's higher certificate and a diploma of educational administration. The latter was awarded about 1968 or 1969, that is, at much the same time as he became a senior master. During the 1976 and 1977 academic years he was stationed successively at the M Senior High School (1976) and the G Senior High

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School (1977), and at both schools he was in charge of the Department of Manual Arts. He was involved both in teaching and in administrative duties to the extent explained in paragraph 1 of these reasons. He was a member of the (State) Institute of Educational Administration, although as he now (1980) lived farther out from the city he took a less active role in it than hitherto. For a period he was also a member of a body called the (State) Comparitive Education Society, which is referred to later (see paragraph 9). There is no doubt that the taxpayer had a keen interest in education in general and educational administration in particular, although such an interest by itself does not of course establish the nexus required by sec. 51(1) between the outgoing and the production of assessable income.

7. Leaving to one side for the moment the conference that the taxpayer attended in Dacca, it is possible to consider all three tours together, for they all involved visits to educational institutions ranging from kindergartens to universities and, in the case of China, to schools associated with communes as well. The procedure at the institutions visited was much the same in every case; a welcome, a discussion with the principal or other staff member(s), an inspection and sometimes a final discussion with the staff. These visits, it was said, assisted the taxpayer in relation to both his teaching and administrative duties, and some examples were given in support of this contention.

• (a) Between 1974 and 1976 the taxpayer was responsible in whole or in part for implementing some changes in the manual arts areas in the schools to which he was attached. These involved the inclusion in ordinary classes, rather than the segregation in special classes, of blind and other incapacitated pupils; an emphasis upon equal opportunity by allowing girls to study manual arts, and the use of open area teaching techniques. But all these changes were implemented before any of the tours that concern us were undertaken, and could in no sense have been inspired by them. The most that could be said was that to the extent that he observed similar practices being followed in the schools visited, he was heartened in his belief that the changes he had implemented were justified improvements.
• (b) It was said that the visits to schools, etc. gave him an insight into the administration of those schools that was of assistance to him in Australia. But little specific information was given to us as to the nature of this assistance. We were told of (i) recommendations he made in January 1979 for the redesign of a photography area under his control; (ii) recommendations in a letter dated 9 March 1979 to alter the layout of machinery in an engineering room on the grounds of safety and efficiency; and (iii) a further letter to the Superintendent of Manual Arts dated 23 October 1979 regarding the conversion of a composite teaching area at the C Senior High School into a full woodwork area. The time-lag between the end of the third tour and the making of these submissions was attributed to a need for preliminary discussions between the taxpayer and the Education Department; but the explanation of the relevance of the tours to those recommendations was not really persuasive. The recommendations, said the taxpayer, arose ``as a result of my overseas experiences and observations''. He was only a little more precise in the matter of the January 1979 recommendation (item (i) supra). This he attributed, at least in part, to the conference in Dacca, Bangladesh (described in para. 10) on aspects of education. ``My experience at the (conference),'' he said, ``in reading... the papers and talking with the delegates convinced me that some changes should be made in my particular field. The conference dealt with planning and curriculum and by recommending that these alterations be made I was better able to have that (sic) curriculum implemented''. There was no further explanation.

8. As a special matter arising out of the China tour, the taxpayer referred to an interest he had in the production, or attempted production, of steel by the Chinese ``from very small furnaces'', and sought to connect this with some small furnaces which had been constructed at some

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time in some manual arts departments in his State. However, no such furnaces were operating in China at the time of the tour, and the taxpayer's explanation did not demonstrate how that attempted method of steel production was linked with his duties or his income as a Senior Master of Manual Arts.

9. The Thailand-Hong Kong tour, and the China tour, were sponsored by the Comparative Education Society mentioned in para. 6 of these reasons. It was founded about 1974-1975 with some 20 members. Thereafter the membership fluctuated, increasing before and levelling off after a tour. By the time of the hearing the society had at least fallen into disuse, if it had not actually been dissolved. Its principal purpose seems to have been to organise overseas tours on a group basis, with consequential discounted fares. The taxpayer became a member of the society in 1976, and described himself as a ``distant member'' of it as at the date of the hearing. As he had not paid a subscription since the year of the 1977 tour, and as the society had since fallen into disuse, this strange description seemed scarcely appropriate to the facts.

10. The school visits undertaken during the Dacca tour have already been referred to. All that needs to be added is the observation that the copy of the itinerary included in the taxpayer's relevant return of income included school visits on 15 and 17 January, which the taxpayer could not have undertaken because between 11 and 18 January he was attending all sessions of a conference at Dacca, Bangladesh. The discrepancy was noted but not explained. The conference was organised as the Third Regional Conference of the Commonwealth Council for Educational Administration. We do not think it necessary to go into any detail about the proceedings of and the papers presented at the conference, except to note that under the general theme of ``Education for Development'' the conference was concerned with ``Education Planning for Development'', ``Curriculum Construction'' and ``Structuring Educational Systems''. A significant part of the proceedings seems to have been devoted to these matters in relation to Bangladesh, Singapore and South East Asia generally.

11. In cross-examination the taxpayer freely conceded that he was not obliged by the terms of his employment with the Education Department to undertake those tours, or any of them. Nor was any evidence given to suggest that teachers were encouraged by the Department to undertake them. In fact, one M (a School Principal employed by the State Education Department, who was called as a witness by the taxpayer), pointed out that no approach had been made to the Department to subsidise the tours because the Department ``could not see the direct relevance of the tour to the work of a teacher on the job''. This same witness had been the secretary of the Comparative Education Society and the organiser of the Thailand-Hong Kong and China tours. It appeared, too, that as the tours were undertaken during vacation time, the question of seeking departmental approval to undertaking them did not arise.

12. There remains the question of the effect, if any, of the overseas tours on the taxpayer's promotional prospects. He did not himself give any evidence on this point, but the witness B (also called by the taxpayer) did. He explained that promotion in the teaching service was still governed by seniority, and that a senior master's experience of overseas educational systems and his attendance at conferences such as that held at Dacca, would not be of assistance in gaining promotion, except perhaps in some types of special appointments, of which no details were given. On the evidence, therefore, we must conclude that the tours had no connection with any future income the taxpayer might derive because of promotion.

13. In the circumstances outlined above, has the taxpayer brought his claim within the ambit of sec. 51(1)? In our opinion he has not. The outgoings concerned were not, in our view, incurred in (or in the course of -
Amalgamated Zinc (De Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295) gaining his assessable income. On his behalf it was submitted that his overseas experiences and activities were of assistance to him in the performance of the duties for which he was employed and remunerated by the Education Department. But it is no doubt equally true to say that virtually any experience, and the acquisition of any knowledge, will contribute

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to an individual's own development, with consequent benefit to him including, perhaps, a greater ability on his part to exercise his own talents. Yet, expenses incurred in acquiring this knowledge and experience do not thereby become expenses incurred in gaining his income.

14. On the evidence presented to us, we are clearly of the view that the necessary connection between the taxpayer's expenditure and his income earning activities did not exist in any relevant sense. Whether the necessary connection be thought of as requiring the expenditure to be ``part and parcel'' of the duties the employee is engaged to carry out (
F.C. of T. v. White 75 ATC 4018), or as a case of the taxpayer spending more to earn more in the future (
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494), or as fitting the notion conjured up by other catchwords, the question in the end comes back to the words used in the Act. We were pressed, on the authority of
F.C. of T. v. Finn (1961) 106 C.L.R. 60, to hold that the expenditure in question did fall within the section, but neither that decision nor its successor seems to assist the taxpayer. As Smith J. pointed out in
Burton v. F.C. of T. 79 ATC 4318 at p. 4321, in Finn's case Dixon C.J. took the view that on the facts the taxpayer ``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 employer). His journey abroad and what he did while in Europe, as well as in South America, was therefore in a correct sense incidental to his employment and most relevant to it''. See, too, the observation of Kitto J. in the same case that ``in making the investigations and studies which he pursued during his period of leave, (Finn) was acting within the scope of his office, and therefore in the gaining of his salary''. The position in the present case is vastly different. There was not and could not be any suggestion that the expenditure incurred by the present taxpayer was incurred by him expressly or impliedly by reason of or in pursuance of the contract of employment between him and the Education Department (cf. Smith J. in Burton v. F.C. of T. (supra) at p. 4322). Whichever way one looks at the matter, none of the expenditure falls within the first limb of sec. 51(1), but is rather of a private nature. Hence, it is unnecessary to consider the argument addressed to us on the question of apportionment.

15. We have considered the other decisions to which counsel for the taxpayer referred us, but as they were decisions that turned on their own facts we do not think it necessary to discuss them. We would uphold the Commissioner's decision on the objection and confirm the assessment before us.

Claim disallowed