CJ Bannon QC

Administrative Appeals Tribunal

Decision date: 23 January 1991

CJ Bannon QC (Deputy President)

With the consent of the parties, the Tribunal has published the name and details relating to the applicant in this proceeding.

Wayne Studdert (``the applicant'') lodged an objection to the assessment of his income tax for the financial year ending 30 June 1987. When this was disallowed he sought review by

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this Tribunal. The matter in issue concerns the disallowance of an expenditure of $7,240 on flying lessons. This includes some subsidiary and small amounts with regard to other learning material set out in detail in the annexure to his income tax return (Exhibit 3) under Item 17. However, at the hearing it was agreed between the parties that no question arose as to the quantum and the real question was whether or not the taxpayer was entitled to a deduction for flying lessons pursuant to s. 51(1) of the Income Tax Assessment Act 1936 (Cth.) (``the Act'').

At all relevant times the taxpayer was a qualified Flight Engineer employed by Qantas Airways Ltd., flying in Boeing 747 passenger transport aeroplanes of the types B747-200, B747-300 and B747-SP. Such planes carry a Flight Engineer to supervise and regulate the delivery of power to the aeroplane from the jet engines. In order to do this, the Flight Engineer sits directly behind the First Officer who sits at the controls on the right hand side of the plane, while the Captain sits beside the First Officer with a similar set of controls on the left hand side of the plane. In front of both Flight Officers, and beside the Flight Engineer, are a bewildering array of instruments and switches. In front of the Flight Engineer, and between the Flight Officers, are four levers which control the thrust of the four jet engines of the aeroplane. The instruments are illustrated in the photograph Exhibit D.

In his tax return the taxpayer in Item 17 stated:

``These flying lessons are necessary to understand and interpret navigation data, identify navigation aids, monitor the pilots [sic] action. This makes it more efficient in the performance of my duties and it also enhances my prospect of promotion.''

In his oral testimony the taxpayer expanded upon his assertion and referred, in particular, to the matters set out in Annexure B-1 to the affidavit of Mr B. James dated 28 November 1990 (Exhibit 1). He said in regard to the Qantas Flight Operations Policy and Administration Manual (Exhibit A, Annexure B) that the flying lessons assisted him in his duties as a Flight Engineer in carrying out the duties set out in Clause 8(b) to (g) inclusive. Clause 8 reads as follows:


  • b) Monitor all terminal area departure and arrival procedures.
  • c) Monitor communications during departure and arrival phases.
  • d) Monitor switching carried out is in accordance with requirements, whether it be instruments, radios, lights etc.
  • e) Read and monitor Normal, Emergency/Abnormal Check Lists and Alternate Operations as applicable.
  • f) When requested by the Captain copy weather reports.
  • g) Maintain visual alertness in terminal areas for conflicting traffic.''

I accept the applicant's evidence on this point. Having regard to the close consultation needed between the officers and engineer in bringing these complex machines with their passengers in safety from one place to another, and the desirability of the engineer understanding not only the mechanism of power delivery, but also the intricacies of take off and landing of these aeroplanes, it seems to me to be a matter of common sense that the engineer understands not only his own duties as to delivery of power, but also the interrelated combination of factors relating to the duties of the pilot which lead to the successful take off and landing of the flying machines of Australia's international carrier. Support for this view is to be found in the affidavit of Mr A. Lawson dated 12 November 1990, Exhibit A, paragraph 7.

Mr S. Abadee, on behalf of the applicant, pointed out to the Tribunal that Qantas required consistent proficiency from its officers and that a lapse in efficiency resulted in suspension from duties. The situation is quite different from the Tribunal decision quoted to me by Mr S. Fortescue, on behalf of the respondent, of a librarian taking a course in computers in the hope of promotion Case V132,
88 ATC 842). In this respect, the affidavit of Mr R.J.G. Male dated 20 December 1990 (Exhibit 2) filed on behalf of the respondent, in the Tribunal's opinion, misses the point of the applicant's argument. He is not saying he cannot perform his duties, but that he will be better equipped to perform them by reason of his flying lessons.

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There is a connection between the outgoing and the gaining of his income.

The second point which arose in these proceedings, related to the prospects of promotion. The taxpayer believes, and rightly so in the Tribunal's opinion, that possession of proficiency in flying, and of a private pilot's licence, will assist him in promotion to the higher grades of Training Flight Engineer and Senior Check Flight Engineer. In his affidavit (Exhibit 2) at paragraph 5, Mr Male says of these and other promotions:

``Promotion from the position of Flight Engineer to any of the positions shown in paragraph 3(ii)-(iv) is by invitation from within the Management Group of Flight Engineers only and does not depend upon the applicant having any type of pilot's licence.''

There is nothing novel in that proposition. It applies to Government appointments and other appointments. Persons of capacity are not necessarily appointed to higher positions. This can be due to many causes. The proposition set out in Mr Male's affidavit is not inconsistent with the advantage possessed by those who have additional qualifications in being considered for promotion even if their hopes are not always realised.

Mr Fortescue cited the decision of the Hon. Mr Justice Menzies in
FC of T v Hatchett (1971) 125 CLR 494; 71 ATC 4184 as a reason for denying the applicant the deduction claimed. He referred me in particular to Sir Douglas' words CLR p. 499; ATC p. 4187 where he said:

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

On behalf of the applicant, Mr Abadee urged that the words of Menzies J were too broad, and were basically inconsistent with the judgments of a full court of the High Court in
Commissioner of Taxation v Finn (1961) 106 CLR 60. He said support for this view is to be gained from Professor R. Parsons' learned work Income Taxation in Australia.

It is neither within this Tribunal's province, nor within my desire, to purport to distinguish or not follow a decision of such an eminent and learned judge as Sir Douglas Menzies. Furthermore it is not necessary for my decision to decide if promotion prospects are a ground for deductibility. I prefer to rest my decision upon the uncontradicted evidence of the applicant that his flying lessons improved his proficiency as a Flight Engineer. Any person who has entrusted his personal safety to an aircraft carrier, in my opinion, will feel a sense of comfort in the fact that the person in charge of the power of the aircraft also understands the landing signals and other matters referred to in Clause 8(b) to (g) inclusive of the Qantas Flight Operations Policy and Administration Manual.

The Tribunal was told that from the year 2000 AD onwards, it is proposed in the new B747-400 to replace the Flight Engineer with a computer. All that needs to be said for the safety of the passengers of the future is Heaven help them. In the meantime, it appears proper and apposite to allow the objection and to direct that the objection decisions under review be set aside. I so direct, and direct that the respondent give the applicant an amended assessment, allowing the deduction, in accordance with this decision.

One other matter was raised in these proceedings which should be considered. On behalf of the respondent it was submitted that the applicant's real motive in engaging in flying lessons was to achieve retraining for the duties of a Flight Officer and not to improve his capacity as a Flight Engineer. The applicant agreed that he made such an application on 9 March 1987, as set out in the affidavit of Mr B. James of 28 November 1990 (Exhibit 1). However, that application was made long after he embarked upon the flying lessons. An offer to retrain selected Flight Engineers as flying officers is referred to in paragraph 8 of Mr Male's affidavit dated 20 December 1990 (Exhibit 2). The offer purports to be made on 27 February 1986, and is set forth as Annexure B to Mr Male's affidavit. Internal evidence suggests that it is wrongly dated and, was

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probably made in February 1987 as per the application form, part of the Annexure. In any event, the applicant reiterated that the lessons were taken to improve his performance as a Flight Engineer. Even if he also had a motive to consider a possible transfer to a different occupation, it does not, in my opinion, detract from accepting his evidence that the lessons were taken for the purpose stated in his income tax return.

As previously stated, the objection decision is set aside. It is further directed that the prescribed filing fee paid by the applicant on lodging his application for review be refunded to him.

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