KP Brady Ch
LC Voumard M
No. 2 Board of Review
K.P. Brady (Chairman) and L.C. Voumard (Member)
The taxpayer is a secondary school teacher employed by the (State) Education Department. Between 16th December, 1977, and 13th January, 1978, she undertook an overseas study tour to Thailand and via Hong Kong, to China, with most time being spent in China. The tour was organised by the Geography Teachers Association of Australia, of which the taxpayer was a member. In her return of income for the year ended 30th June, 1978, she claimed a deduction of $2,500 in respect of the tour, made up of the following items:
$ $ ``Cost of Study Tour to China 1986 Extra costs Tours -- Bangkok 28 -- Hong Kong 20 City Transport 36 84 --- Teaching aids -- maps, posters, artifacts, film, books, etc. 320 Special clothing for cold conditions 100 Medication 10 ------ $2,500'' ======
It is the Commissioner's disallowance of this claim, and of other claims for expenditure on newspapers ($15) and Time Magazine ($10), both at assessment stage and objection stage, that has resulted in this reference.
2. After completing formal qualifications (B.Ec. and Dip.Ed.) at a university, the taxpayer was appointed in 1973 to a teaching post at a secondary school as a secondary assistant teacher. In 1975 she transferred to the B High School. At all times since her first appointment she has taught geography and commercial subjects, and she also spent some time conducting a work experience program.
3. She had been a member of the Geography Teachers Association since she began teaching. The members of that association, all teachers of geography, meet
ATC 391from time to time to compile up-to-date information regarding geography and to discuss improvements in teaching methods, and so forth. During 1977 she learnt of a study tour of China and Thailand that was being organised by the association to undertake comparative studies in geography, and to supplement the limited information that was available about those areas, especially China. She successfully applied to join the tour.
4. The itinerary had been worked out in correspondence between the Australian tour leader and the authorities in China (and presumably in Thailand). The first six days were spent in Thailand looking briefly at ``agricultural and settlement areas, slum areas specifically in Bangkok and some traditional cottage industries in a settlement north of Bangkok'', as the taxpayer explained it. A letter dated 10th June, 1978, signed by the Australian tour leader, that was included in the taxpayer's return of income for the year ended 30th June, 1978, gave a much more elaborate description of the party's activities in Thailand, but we do not think it necessary to set these out in detail. Nor do we think it necessary to go into detail about the activities undertaken during the three weeks or so spent in China. It is enough to note that the group visited cultural centres, an art and craft factory, various schools, communes and factories, and the like, and some tourist attractions. The group appears to have had a very heavy schedule, and we accept that there was little that could be described as mere sightseeing. We also accept that the taxpayer learnt a great deal and gained some benefit from the trip, and that the information she gained was put to good use in her classroom teaching and elsewhere. For example, she contributed notes for use by the Geography Teachers Association in a publication (from which the taxpayer derived no income), and also for use in the designing of geography units in her school and in others in the immediate area. Moreover, the taxpayer impressed us as an extremely dedicated teacher, and we have no doubt that the tour would have improved her teaching qualities.
5. But the test of tax deductibility is to be found, not in terms of some (necessarily imprecise) relationship between the taxpayer's employment and the overseas study tour, but in the terms of sec. 51(1) of the Income Tax Assessment Act. As far as relevant, that provision permits the deduction of outgoings that are ``incurred in gaining or producing the assessable income'' provided, of course, that they are not outgoings of a private nature.
6. The taxpayer, who presented her own case, sought to bring her claim within this provision in two ways. In the first place, she submitted, the information she obtained as a consequence of making the trip could make her more eligible for promotion within the Education Department. But promotion depended upon a satisfactory assessment being made of her after not less than seven years as an assistant. In 1980 she was assessed as suitable for promotion to senior mistress, but that by itself did no more than ensure that she was listed for future promotion when a suitable vacancy should occur. Just what weight, if any, was given to the trip made to China and Thailand over two years earlier was not the subject of evidence. Secondly, the taxpayer argued, in just the same way as her geography students were obliged to take part in field excursions to see on the ground, as it were, various geographical features, so it was necessary for a teacher of geography to undertake similar excursions to relevant places, even though the teacher's employer might not require her to do so. The fact that the taxpayer is a teacher of geography enabled her to put her case at its highest, but notwithstanding this we are of the opinion that the expenses incurred on the study tour are not deductible under sec. 51(1).
7. This view follows, we think, from what was said by Helsham J. in
F.C. of T. v. White 75 ATC 4018, and by Smith J. in
Burton v. F.C. of T. 79 ATC 4318, in each of which decisions there is a discussion of the principal earlier decisions. In White's case, Helsham J. after examining
F.C. of T. v. Finn (1961) 106 C.L.R. 60 and
F.C. of T. v. Hatchett 71 ATC 4184, went on at p. 4022:
``As the result of the decision in the two cases it seems to me possible to say that expenses incurred in pursuing studies associated with employment will qualify as allowable deductions under sec. 51 when it can be said that those studies are part and parcel of the employment, which means that the expenditure is incurred in
ATC 392the process of carrying out the employee's duties, or, even if they are not such, they can be seen to have a direct effect on income. Where that cannot be seen, I think it will be difficult to establish the necessary connection between the study activity and the employment so as to give study expenses the character of outgoings incurred in gaining or producing the income derived from the employment.
In my view there is no sufficient association in the present case. It is not enough, as was said by Menzies J. in Hatchett's case, that the course of study relevant to his employment pursued by an employee should be likely to enable him the better to carry out his work and hence to obtain promotion, even if encouraged by his employer. It is not saying anything different if the situation be that without undertaking a course of study encouraged by his employer a person may not be able to improve his position in his employment. And there is nothing more than that here. It is not sufficient to enable the expenditure incurred in this case in connection with the study activities to be claimed as outgoings incurred in gaining or producing assessable income.''
And in Burton's case, Smith J. dealt with the ``condition of employment'' point, at p. 4321, in these words:
- ``There are exceptions to this principle'' (viz. that established in
Lunney and Hayley v. F.C. of T. (1958) 100 C.L.R. 478) ``but a perusal of the authorities since Lunney's case was decided shows that in respect of an employee the question invariably has been whether the evidence supported the conclusion that the outlay on travelling was incurred expressly or impliedly by reason of or in pursuance of the contract of employment.''
There was no express term, and the evidence did not disclose any basis for the existence of an implied term in the taxpayer's contract of employment that she should incur expenditure on a study tour of the kind undertaken. In fact, the Education Department was not advised of the taxpayer's intended trip, although her school principal and the regional consultant for the area were informed of it, and the latter asked that she take as many slides and acquire as much information as she could.
8. For this reason, and because the relevant expenditure did not have a direct effect on her income as a teacher, and also because it is not enough that the tour might have increased the taxpayer's chances of promotion, we find that the claim to deduct the tour expenses is not admissible under sec. 51(1). There are some additional comments that might be made on specific parts of that claim:
- (a) The purchase of special (ski) clothing ($100) and of medication ($10) represents outgoings of a private nature, which are specifically excluded from deductibility by the excluding words of sec. 51(1).
- (b) The purchase of teaching aids ($320) as detailed in para. 1 (supra) appears on the very limited evidence adduced to have included some outgoings of a private nature and some of a capital nature, neither of which meets the positive requirements of sec. 51(1). In the absence of details, we are unable to determine whether any part of the $320 might qualify for a depreciation claim under sec. 54, and in any case the taxpayer's objection raised only sec. 51(1). Hence, sec. 190(a) precludes us from considering the depreciation point.
9. We turn finally to the claim to deduct the amounts spent on the purchase of newspapers ($15) and Time Magazine ($10). Although some newspapers were kept in the school library, the taxpayer as a matter of convenience purchased papers and the magazine on what seems to have been an irregular basis in order to obtain topical information that might be useful in teaching some commercial subjects, notably legal studies. But there was nothing to indicate that she expended these moneys because her contract with the Education Department expressly or impliedly required her to. It follows that these outgoings, like the ones relating to the trip, were not incurred in or in the course of gaining the taxpayer's assessable income. Moreover, their essential character was that of an outgoing of a private nature.
10. For the reasons given, we would uphold the Commissioner's decision on the taxpayer's objection and confirm the assessment before us.