KP Brady Ch
JE Stewart M
DJ Trowse M
No. 2 Board of Review
K.P. Brady (Chairman), J.E. Stewart and D.J. Trowse (Members)
The taxpayer, a lecturer at a college of advanced education, and his wife acted as supervisor and co-supervisor respectively to a group of students who journeyed to Fiji on an educational tour. The question requiring decision in this reference is whether the travel expenses incurred by the taxpayer on behalf of his wife and himself are correctly deductible in terms of the provisions contained in sec. 51(1) of the Income Tax Assessment Act. The tour was undertaken during the 1978 income tax year, and the amount involved is a figure of $1,239.
2. The excursion, which was made under the auspices of the teaching authority employing the taxpayer, formed part of the official college programme. The fact that students are required to participate in that type of activity is confirmed by reference to the following extract taken from the 1977 College Handbook:
``Camps, Tours and Major Study Activities
Camps, Tours and Major Study Activities for first, second and third year students respectively are regarded as an integral part of the course and compulsory for all students unless exemption is granted by the Extra and Co-Curricular Activities Committee of the Board of Studies.
Camps, Tours and Major Study Activities will be scheduled each years as follows:
- Camps - before mid-April.
- Tours - during the last week of second term.
- Major Study Activities - during the last week of second term.
Unless otherwise agreed the maximum cost of Major Study Activities shall be no more than $50.
To facilitate maximum student participation in tours, a tour at maximum cost to students of $35 or the current cost of Camps, will be offered in conjunction with other tours.''
3. The principal course conducted at the College is the Diploma of Teaching (Primary), and it was maintained that the general aims of the tour were:
- To experience education in general and primary education, particularly in a foreign environment.
- To better appreciate a wide range of aspects of a different culture so as to consolidate College based theory and practices related to Social Science Education.
- To become better educated in a general sense.
4. The taxpayer, who was appointed to the teaching staff of the College in January 1975, was advised, at the time of the interview for that position, that all staff members were expected to participate in important activities, including the task of supervising students travelling on tours and excursions organised by the College. That requirement is further demonstrated by the following quotation taken from a letter written by the Registrar to the Deputy Commissioner of Taxation, and tendered at the hearing as evidence:
``Staff involved in teacher education courses are expected, as part of their employment, to participate in various out-of-college activities. Such things as supervising student camps, tours, excursions and school experience activities in training schools are examples of this. All of these activities, including the tour programme are acknowledged as integral parts of our teacher education courses and as such are referred to in our respective, nationally accredited course submissions.''
However, it seems that at the time of interview no indication was given that his wife might be required to accept the role of co-supervisor, nor did the taxpayer believe that his marital status was a governing factor in determining his appointment.
5. Prior to the selection of tour supervisors by members of the Extra-Curricular Activities Committee, staff members were issued with a circular letter, and it appears that that correspondence enquired as to whether the taxpayer was able and willing to act as a supervisor and, if so, did he have a preference for a particular tour. The taxpayer could not recall whether the letter raised the question of his wife being prepared to act as a co-supervisor. Whilst it appears that the taxpayer replied that he was willing to assist, he could not recall whether he stated a preference for the Fijian tour, or whether or when he provided an answer to the question of his wife's possible involvement. The Committee, in cognisance of the size of the party, the age of the participants and the fact that they comprised both sexes, resolved that a staff member and his wife be selected to the positions of supervisor and co-supervisor. The taxpayer and his spouse were appointed to those positions, the financial arrangement being that the College pay the fares for one of them. It seems that, in certain circumstances, the tickets for both supervisors might be provided on a gratuitous basis. That possibility was dependent on a sufficient number of students being involved in the tour, and we assume that the arrangement resulted from a concession made by the relevant travel agent. The wife did not receive any remuneration for the services so rendered. It appears logical to assume that the wife's assent to act as a co-supervisor was forthcoming prior to the engagement of her husband as tour leader, as such appointment would not have occured had she declined her husband's invitation. In that event, it seems probable that the taxpayer would have been chosen as a co-leader of one of the alternative excursions which did not necessitate the presence of a husband and wife team.
6. It is appropriate that we now refer to a letter written by the convenor of the Extra-Curricular Activities Committee to the Deputy Commissioner of Taxation, and which was tendered as evidence. In that correspondence the following statements were made, and we use the letter X as a substitute for the taxpayer's name:
``In August 1977 X was appointed to act as supervisor of the group touring Fiji.
As a condition of the appointment X was required to take his spouse in the supervision of the group, which was made up of both male and female students. The College paid the fare of one supervisor and X was required to pay the other.
At all times during the tour X was regarded as being on full-time official duties.''
At the hearing, the author of the foregoing was not called as a witness and, thus, we did not have the opportunity of questioning him on the assertion that the taxpayer ``was required to take his spouse''. We assume that such a situation arose because of the wife's prior assent, rather than as a condition of employment.
7. The tour extended over the period 13 to 26 August 1977. Those dates coincided with the times set down by the College for educational tours in its syllabus. It was not undertaken during vacation, and we experience no trouble in accepting the convenor's declaration that the taxpayer was on full-time official duties for the duration of the excursion. The itinerary was as follows:
``Saturday August 13, 1977 - Depart Melbourne to Sydney to Nadi. Sunday August 14 - Nadi to Paradise Point by bus. Visit nearby village to arrange early excursion to school. Monday August 15 - Visit school, interact with children and parents. Leave for Suva by bus. Tuesday August 16 - Visits to Draiba and Veiuto primary schools, informal teaching and interaction with pupils and staff. Visit a Campus of the University of the South Pacific. Visits and shopping in Suva. Wednesday August 17 - Bus to Man Friday resort. Arrange for working-party interactions with nearby village
members. Thursday August 18 to Interaction with Fijians in village on a range of Sunday August 21 - local projects to become acquainted with native village culture in working environments. Projects included a permanent water supply line from mountain dam and spring, house and shelter construction and food gathering. Monday August 22 - Return to Nadi by bus. Tuesday August 23 - Launch to Plantation Village island resort. Wednesday August 24 - Boat trip to small neighbouring island to experience small island trading village, its commerce and its customs as far as time permitted. Visit school and interact with teacher, pupils and parents. Thursday August 25 - Return to Nadi by launch. Friday August 26 - Return to Sydney to Melbourne by plane.''
8. It seems that the total cost of the trip was $1,820, of which $581 represented the cost of one supervisor's overseas air fare, and was paid for by the college. It seems further that the cost of that fare was never specifically designated as either the taxpayer's fare or his wife's fare; it was termed solely the fare ``of one supervisor''. (Having said that, it will be noted that, in the figures which are enumerated in the following paragraph, the taxpayer assumed that it was the cost of his own fare that was reimbursed to him, and consequentially he incurred the cost of his wife's fare.) The unrecouped portion of the outgoings thus amounted to $1,239, and the taxpayer has claimed that amount as a deduction in the preparation of his 1978 return. That claim was disallowed by the Commissioner on the grounds that it represented expenditure of a private nature. Upon the disallowance of the resultant objection, the taxpayer requested that the matter be referred to a Board for review. It should be observed that the Commissioner recited, in the statement required in terms of reg. 35(1), his reasons for disallowance as being:
``No part of the amount of $1,239 claimed by the taxpayer as overseas travelling expenses in respect of his wife is an allowable deduction under sec. 51(1) of the Act.''
9. In giving his evidence, the taxpayer informed us that only part of his claim related to his wife's expenses, and the information which he tabled in support of that contention, extracted from notes prepared at about the time that he lodged his income tax return, was as follows:
Type of Expenditure Total Taxpayer Wife $ $ $ Passport photos 6 3 3 Passports 40 20 20 Travel bags 74 48 26 Overseas air fare & insurance 581 - 581 Medical kit (for group use) 13 13 - Bank charges 10 10 - Meals 395 197 198 Excursions 30 30 - Taxi fares 30 30 - Extra accommodation 60 30 30 ------ ---- ---- $1,239 $381 $858 ------ ---- ----
The Commissioner's representative agreed that the miscellaneous costs applicable to the taxpayer's own travel were included in the unrecouped total. He went on to concede, subject to the taxpayer discharging the onus of proof, that the expenditure (indicated above as amounting to $381) was properly deductible under sec. 51(1) (see pp. 69, 73 and 74 of the
ATC 361transcript). In our view, the taxpayer has discharged that onus both by his own oral evidence given under oath and from the considerable amount of documentary evidence tendered by him, and accordingly his claim for that component of the unrecouped amount is allowed.
10. We do no, however, regard the claim for his wife's expenditure in the same light. Whilst we have no reason to doubt that she actively supervised the female members of the tour party and gave valuable support to her husband in his role as supervisor (which role we regard as an extension of his teaching function), we do not consider that that expenditure was incurred in gaining or producing his assessable income as those words have been judicially interpreted by the High Court (see
W. Nevill & Co. Ltd. v. F.C. of T. (1937) 4 A.T.D. 187 at p. 196; (1937) 56 C.L.R. 290 at p. 305). In our view, the expense incurred on account of the taxpayer's wife was that of a gratuitous outoing which was not directly or indirectly productive of his assessable income, for the only basis on which she made the trip was by way of an invitation from her husband. She did not enter into any contractual bond with the college and was not privy to the contractual arrangement which existed between her husband and the college. She derived no remuneration for the various tasks performed by her on the tour, and at all times remained a volunteer. As such, the college would have had no right of action against her had she refused to perform the various tasks required of her; also, it would seem that she would have no right of action against the college had she suffered injury at any time whilst on the tour. These various matters are mentioned to demonstrate the lack of ``perceived connection'' between the expenditures incurred by her husband on her account and his assessable income (see
F.C. of T. v. Hatchett 71 ATC 4184 at p. 4187). In our view too, the letter of the Extra-Curricular Activities Committee (see para. 5 supra) does not establish the nexus between the outgoing and the assessable income required by sec. 51(1), nor does the letter written by the convenor of that Committee detailed in para. 6 supra.
``... as the legislation stands such cases [i.e. cases where employees are seeking to better equip themselves in point of knowledge] cannot, unfortunately, be determined by any very broad proposition of law. For the issue must be whether the expenditure was incurred in gaining or producing the assessable income and, although the meaning and application of this phrase have been elucidated judicially, and perhaps may be further so elucidated, in the end the decision often will depend on the facts of the given case.''
That being so, there seems little point in citing the various authorities we have found cause to examine, particularly the older authorities, but the following cases decided by Boards of Review over very recent years indicate a common approach to the issues before them, and we have been fortified in our own conclusions by a study of them; they comprise Case M37,
80 ATC 282; Case N47,
81 ATC 235; Case P72,
82 ATC 342 and Case P34,
82 ATC 166.
12. For the reasons enunciated above, we direct that the taxpayer's assessment for 1978 be amended to allow deduction of the amount of $381.
Claim allowed in part