Hill J

Federal Court

Judgment date: Judgment handed down 4 December 1991

Hill J

The applicant, the Commissioner of Taxation, appeals against the decision of the Administrative Appeals Tribunal constituted by a Deputy President [reported at 91 ATC 2007], setting aside an objection decision of the Commissioner and allowing to Mr Studdert, the respondent in the present application, a deduction from assessable income in the sum of $7,240.

The appeal, which comes to the Court pursuant to s. 44 of the Administrative Appeals Tribunal Act 1975 (Cth) is an appeal ``on'', that is to say limited to, a question of law. The respondent submits that the appeal is not competent in that no question of law is involved. By consent, the issue of competency was argued together with the substantive issue and not treated as a separate question.

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The Tribunal found that Mr Studdert was in the relevant year of income (that ending 30 June 1987) a flight engineer employed by Qantas Airways Ltd, plying his profession in Boeing 747 passenger transport aeroplanes. Such planes carry a flight engineer to supervise and regulate the delivery of power to the aeroplane from the jet engines. To carry out this function the flight engineer sits directly behind the first officer, who in turn sits next to the captain with direct access to four levers which control the thrust of the four jet engines of the aeroplane. The major instruments and controls are directly accessible by the captain and first officer.

The duties of a flight engineer are detailed in the Qantas Flight Operations Policy and Administration Manual which was in evidence. Clause 8 reads relevantly:


  • (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.''

During the year of income Mr Studdert expended the sum of $7,240 on flying lessons. No question arose before the Tribunal as to quantum, nor was any suggestion made, before the Tribunal, that there should be any apportionment made. Either the whole amount was allowable or none was. Mr Studdert claimed to be entitled to deduct this amount in determining his taxable income pursuant to the provisions of s. 51(1) of the Income Tax Assessment Act 1936 (Cth) (``the Act'').

The Tribunal found as a fact that the lessons assisted Mr Studdert in carrying out the duties enumerated. The Tribunal said [at 2008]:

``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.''

There was no challenge to this finding. The Tribunal then discussed a distinction between the present case and Case V132,
88 ATC 842, commenting that in the present case there was a connection between the outgoing and the gaining of Mr Studdert's income. By contrast in the former case, which concerned a librarian taking a course in computers, there was merely a hope of promotion.

The Tribunal then considered a matter that had been raised in evidence and argument, namely whether the expenditure increased Mr Studdert's prospects of promotion. The Tribunal said [at 2009]:

``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.''

After a discussion of the decision of Menzies J in
FC of T v Hatchett 71 ATC 4184; (1971) 125 CLR 494, to which reference will shortly be made, the Tribunal continued:

``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.''

A final matter discussed in the reasons was a submission by the Commissioner that the applicant undertook the flying lessons to achieve retraining for the duties of a flight officer, rather than to improve his capacity as a

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flight engineer. There was some evidence before the Tribunal which supported this possibility. After referring to this evidence the Tribunal said [at 2010]:

``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.''

The purpose stated in the return to which the Tribunal referred was expressed in the following terms:

``These flying lessons are necessary to understand and interpret navigation date, 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.''

The Commissioner submitted that the Tribunal had erred in law in two respects in reaching its conclusion favourable to Mr Studdert. First, it was said that the Tribunal had failed to make clear findings with respect to two matters of fact relevant to the issues between the parties. Second, it was submitted that to the extent that the Tribunal's sole basis of decision was that the flying lessons improved the respondent's proficiency as a flight engineer and that this sufficed to make the cost of those lessons deductible, the Tribunal erred in law. I shall deal with each of these matters separately.

Was there a failure to find relevant facts?

Section 43B of the Administrative Appeals Tribunal Act 1975 (Cth) requires the Tribunal, where it gives in writing the reasons for its decision, to include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based. Failure to supply reasons may constitute an error of law:
Opitz v. Repatriation Commission (1991) 29 FCR 50 at 60-61 and the cases there cited, to which may be added
Casarotto v Australian Postal Commission (1989) 86 ALR 399 at 402-403. The Tribunal is not, however, a court and the obligation imposed upon it by s. 43B must be read accordingly. In determining whether s. 43B has been complied with, it is necessary to consider the reasons of the Tribunal as a whole and determine whether there has been ``substantial compliance'': Bisley Investment
Corporation Ltd & Anor v Australian Broadcasting Tribunal & Anor (1982) 59 FLR 132, per Lockhart J at 151-152 and per Sheppard J at 155-156.

For the Commissioner it was submitted that the evidence before the Tribunal concerned essentially three matters:

``(a) whether the undertaking of the flying lessons improved the Respondent's skills as a flight engineer;

(b) whether the undertaking of the flying lessons enhanced the Respondent's prospects of promotion as a flight engineer; and

(c) whether the undertaking of the flying lessons was an initial step in the Respondent's plans to qualify for a different position, as a commercial pilot.''

It was submitted that in respect of the second and third of these matters the Tribunal had not made any clear findings of fact with respect to them. I shall deal with each in reverse order.

It is true that the Tribunal made no finding of fact in respect of the third matter. The Tribunal was of the view that there was no need to do so. It considered a submission made to it on behalf of the Commissioner 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 Tribunal accepted as a fact that the lessons were taken to improve Mr Studdert's performance as a flight engineer but then went on to assume that he also had a motive to consider a possible transfer to a different occupation. It reached the conclusion that this did not matter, in so far as it did not detract from accepting Mr Studdert's evidence as to his purpose of undertaking the lessons.

Perhaps the findings of fact could have been clearer, but in my opinion reading the reasons as a whole, and not in a pedantic way, it seems to me that the Tribunal clearly rejected the submission, if it were made, that the sole motivation was to achieve retraining as a flight officer. It left open the possibility that a motive was to undertake such retraining. It did so in the context of a finding of fact that, looked at

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objectively, there was a real relationship between the undertaking of flying lessons and Mr Studdert's duties as a flight engineer.

Nevertheless, counsel for the Commissioner submitted that the Tribunal should have gone on to consider whether the dominant motivation or purpose of Mr Studdert was to assist him in becoming a flight officer. Certainly the Tribunal made no finding on such a matter. The question is, having regard to the findings made, whether such a finding could have affected the outcome. If not, then there could be no error of law in failing to deal with the matter, because it would not have been a relevant matter.

The submission raises once again the relevance of subjective purpose or motive in the determination whether an outgoing is deductible under s. 51(1).

The first limb of s. 51(1) says nothing of purpose or motivation. It postulates a question of fact, namely whether the outgoing was incurred in, that is to say, in the course of gaining or producing assessable income. The leading authority (at least out of the context of tax avoidance) on the role of purpose in the resolution of this question of fact, is to be found in
Magna Alloys & Research Pty Ltd v FC of T 80 ATC 4542; (1980) 49 FLR 183. In that case it had been found at first instance to be the fact that the outgoings for legal expenses of the directors on charges, inter alia, of criminal conspiracy, were incurred with the dominant motivation or reason of protecting the interests of the directors, albeit that the motive of protecting and preserving the taxpayer's business was also present. On this basis it was held that the amounts in question were not deductible under the second limb of s. 51(1) which, like the first limb, makes no reference to the purpose of the taxpayer, although it refers to the purpose of the taxpayer's business. The decision at first instance was overruled.

The leading judgment was that of Deane and Fisher JJ. Their Honours said (at ATC 4560-4561; FLR 210):

``An outgoing can, in the relevant sense, be necessarily incurred in carrying on a business notwithstanding that it flows from a sense of moral obligation to those involved in the business. In particular, the fact that the needs of some directors and agents provided the occasion of an outgoing and that the resulting benefit to directors or agents constituted the dominant motive of a taxpayer for incurring it does not, of itself, preclude the outgoing from being necessarily incurred in carrying on the taxpayer's business for the purposes of sec. 51(1). Whether a voluntary outgoing was so incurred depends upon the answer to the composite question which we have indicated, namely, whether the outgoing was reasonably capable of being seen as desirable or appropriate from the point of view of the pursuit of the business ends of that business and, if so, whether those responsible for carrying on the business so saw it.''

Although that case was decided under the second limb of s. 51(1), there is no reason to doubt that their Honours would have reached the same conclusion under the first limb. Indeed, as has often been remarked, the second limb adds little to the first limb (see eg
FC of T v Snowden & Willson Pty Ltd (1958) 11 ATD 463 at 464; (1958) 99 CLR 431 at 436). Brennan J, in Magna Alloys, actually pointed out in a separate judgment, reaching the same conclusion, that the same kind of factors were material whichever limb was considered. His Honour said (at ATC 4545; FLR 185) that:

``... neither motive nor either kind of purpose [subjective or objective] is a criterion of deductibility.''

At ATC 4547; FLR 189 his Honour expressed the relevance of purpose in the following terms:

``Though purpose is not the test of deductibility nor even a conception relevant to a loss involuntarily incurred, in cases where a connection between an outgoing and the taxpayer's undertaking or business is effected by the voluntary act of the taxpayer, the purpose of incurring that expenditure may constitute an element of its essential character, stamping it as expenditure of a business or income-earning kind.''

Later (at ATC 4548; FLR 191) his Honour returned to the question of purpose, expressing himself in the following terms:

``Similarly, when the question is whether expenditure is incurred in gaining or producing assessable income, the connection between the advantage for the

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taxpayer which the incurring of the relevant expenditure is calculated to effect and the taxpayer's income-earning undertaking or business must be considered. If the advantage can be sufficiently identified by reference to a contract, and the taxpayer's undertaking is known, the connection between the incurring of the expenditure and the undertaking is manifest, and it would be otiose to refer to the purpose of incurring the relevant expenditure. But purpose is relevant to describe an element of connection between expenditure and a taxpayer's undertaking or business in cases where a taxpayer incurs expenditure or agrees to incur expenditure without any antecedent obligation to do so or where the occasion of the expenditure (unlike the purchase of trading stock) is not manifestly to be found in whatever is productive of assessable income or in whatever would be expected to produce assessable income, or in the carrying on of a business.''

In the event, his Honour was of the view that the expenditure bore the character of expenditure necessarily incurred in the carrying on of the appellant's business, and that this character was not lost because the expenditure was apt to serve both the business purpose and the purpose of defending the directors, nor because the principal or dominant reasons for incurring the expenditure was to defend the directors.

Whether one applies the twofold test of Deane and Fisher JJ, or that propounded by Brennan J, the answer in the present case is the same. Looked at objectively, the expenditure had the necessary connection (so it was held) with the gaining or producing of the assessable income of Mr Studdert. One of the purposes, at least of the expenditure, looked at objectively, was related to Mr Studdert's activities as a flight engineer. The essential character of the expenditure on the flight lessons can be seen to fall within the first limb of s. 51(1) and that character would not be lost because the principal or dominant reason for incurring the expenditure related to a possible application for retraining as a flight officer. It follows on either basis that it was not relevant to the decision to find whether the retraining motivation was or was not dominant.

I should not be taken as suggesting that the deduction would not have been allowable if the sole motivation had, contrary to the facts as found, been to facilitate Mr Studdert undertaking retraining as a flight officer. That would have involved consideration of the sort of matters involved in
FC of T v Highfield 82 ATC 4463, where expenditure by a dentist on a course involving specialisation was found to be deductible.

Counsel for the Commissioner referred me to the decision of the Full Court of this Court in
Fletcher & Ors v FC of T 90 ATC 4559; (1990) 23 FCR 134. Since the present case was argued, the decision of the High Court in Fletcher allowing an appeal from the decision of the Full Court of this Court has been handed down (see 91 ATC 4950). The case concerned the disallowance of a deduction for an outgoing for interest in calculating a partnership loss where there was a large discrepancy in the year of income between the amount of the outgoing and the amount of assessable income derived. The unanimous judgment of all members of the Court points out that the question whether an outgoing was, for the purpose of s. 51(1), wholly or partly incurred in gaining or producing assessable income is a question of characterisation in which the motive of the taxpayer is a ``possibly relevant factor''. The Court said (at 4957):

``At least in a case where the outgoing has been voluntarily incurred, the end which the taxpayer subjectively had in view in incurring it may, depending upon the circumstances of the particular case, constitute an element, and possibly the decisive element, in characterisation of either the whole or part of the outgoing for the purposes of the sub-section.''

Much of what is said by their Honours in Fletcher must be seen against the background of the facts of the case, involving as it did what appeared to be an audacious tax avoidance scheme. The Court emphasised the necessity for a common sense appreciation of all relevant facts and counselled regard to be had to the ``reality of the situation''.

Nothing said by their Honours in any way detracts from the decision of this Court in Magna Alloys, which is cited in the course of the judgment without apparent disapproval, and which was decided in a context divorced from tax avoidance and from circumstances where the relationship between the expenditure and

ATC 5012

the production of assessable income was other than a genuine and not colourable one. While the motivation of the taxpayer in a case such as the present is not an irrelevant matter in the question of characterisation, once it was found that Mr Studdert did have, as one of his purposes or motives in incurring the outgoing, the improvement of his performance as a flight engineer, it was unnecessary for the Tribunal to determine whether, if he also had the motive of undertaking retraining as a flight officer, the latter motive was dominant or not.

The second matter raised can be disposed of more shortly. It is said that the Tribunal made no finding on the objective question of fact whether the undertaking of the flying lessons enhanced Mr Studdert's prospects of promotion as a flight engineer, but rather only made a finding as to Mr Studdert's belief as to this matter. With respect this is not so. The Tribunal, in a passage to which I have already referred earlier in this judgment, made two findings of fact. The first was that Mr Studdert believed that proficiency in flying and the attaining of a licence would assist him in promotion to the higher grades of Training Flight Engineer and Senior Check Flight Engineer. The second was that this belief was correct. The reference to ``rightly so'' was not a mere affirmation that it was correct that Mr Studdert held the belief, it was intended as a finding that the lessons would assist in the relevant promotion.

The Commissioner did not appeal on the basis that this finding was against the weight of the evidence, although some of the submissions seemed to go to this question. No application was made to amend the grounds of appeal to permit such an issue to be argued, and accordingly I do not propose to examine the evidence before the Tribunal on this matter.

Whether the finding that the undertaking flying lessons improved the respondent's proficiency as a flight engineer was sufficient to ground the conclusion reached by the Tribunal

The question whether, the facts having been determined, a case necessarily falls within or without a particular provision necessarily involves a question of law:
FC of T v Cooper 91 ATC 4396 at 4409; (1991) 29 FCR 177 at 194. Accordingly the issue for decision is whether, given the finding of fact which is unchallenged that the flying lessons improved Mr Studdert's proficiency as a flight engineer (it being accepted that this was a purpose of incurring the expenditure), the cost of those lessons was deductible. In considering this issue I put to one side, for the moment, the factual finding that the lessons also improved Mr Studdert's prospects of promotion. I do so because the Tribunal reached the conclusion that it was unnecessary for its decision to decide if promotion prospects were themselves a ground of deductibility. I would understand this comment to relate to the question whether promotion prospects on their own were an independent ground of deductibility, it being obvious that the question whether the outgoing improved a taxpayer's promotion prospects was not an irrelevant consideration. Indeed, put together with the finding that the lessons would better equip Mr Studdert to perform his duties as a flight engineer, the finding that they improved his promotion prospects made Mr Studdert's case virtually unassailable.

At the heart of the Commissioner's submissions was the decision of Menzies J in FC of T v Hatchett (supra). That case has been the subject of some criticism: eg Income Taxation in Australia, R.W. Parsons, Law Book Company Ltd 1985 at 464. The comments made by his Honour in that case must, however, be seen in the context of the facts of that case. Although no reference is made in the decision of Menzies J to Mr Hatchett's actual employment situation, other than that he was a teacher (but see the reference to ``large primary schools'' at ATC 4185; CLR 496), it is clear from a perusal of the decision in the Taxation Board of Review, reported as Case B78,
70 ATC 362, that Mr Hatchett was a primary school teacher (see at 363). There were two items of expenditure which Mr Hatchett sought to deduct. The first was expenditure in connection with the submission of theses for the purpose of gaining a Teacher's Higher Certificate. If it matters, these theses concerned subjects which impinged upon his employment, being apparently concerned with the safety of children attending primary schools. Mr Hatchett was successful in obtaining the Certificate.

In respect of this expenditure the taxpayer was successful in claiming a deduction. The evidence showed that the possession of a Teacher's Higher Certificate would not only

ATC 5013

enable Mr Hatchett to earn more in the future but that it entitled him to be paid more for doing the same work as he had previously done. In these circumstances there was an obvious connection between the outgoing and the gaining of assessable income generally.

The second amount of expenditure was incurred by Mr Hatchett for university fees in a course encouraged by the Education Department, which in fact contributed to those fees. The course, in the Faculty of Arts (an initial three subjects were in the Faculty of Education, and credit was given for them in the Faculty of Arts) was such as to be necessary for promotion to the position of headmaster or a deputy headmaster of a secondary school. The taxpayer had over ten years obtained passes in only six subjects, and had never been awarded a degree. In these circumstances, Menzies J rejected the claim for the university fees as a deduction. His Honour said (at ATC 4186; CLR 496-497):

``Any relationship between any assessable income of the taxpayer and the payment of university fees is problematical and remote. Having regard to the taxpayer's lack of success in passing university examinations it is not possible to find affirmatively that there exists any connection between the payment of university fees in 1967 and the earning of assessable income at any time in the future. The prospects of the taxpayer obtaining a university degree leading to his promotion to positions in the service for which a university degree is prerequisite affords no ground for concluding that the Commissioner was in error in refusing to allow the fees paid as deductions. If these fees are deductible it must be on a simpler footing, namely that expenditure upon university study, which the department encourages teachers to undertake, is, without more, incurred in gaining assessable income as a teacher.''

After considering a question whether the acquisition of knowledge could be seen to be the acquisition of capital, his Honour continued to deal with the university expenditure as follows (at ATC 4187; CLR 499):

``Here I am not dealing with the general question whether the payment of university fees can ever afford a deduction from assessable income; I am dealing with the particular question whether the fees paid by the taxpayer in the circumstances already stated are deductible. As I have said, I am not able to find any connection between the payment 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 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 connection between the outgoing and assessable income. Had the taxpayer paid fees for subjects in the Faculty of Law, it would, I think, have been obvious that the fees were not allowable deductions. In my view the payment of such fees would have as much connection with the taxpayer's assessable income as the fees in fact paid.''

The above passage no doubt explains why the Tribunal put to one side the promotion question as a separate matter in considering deductibility.

A number of comments must be made. It is obvious on the facts of Hatchett that the university course had no more relevance to Mr Hatchett's position as a primary teacher than a law degree would have had. Second, his Honour appears to have placed weight on Mr Hatchett's unsuccessful academic career in reaching his conclusion. Perhaps it is a matter of degree, but the mere fact that a taxpayer has been unsuccessful, would not to me, with respect, seem to be a matter which would deny deductibility. It is true that in the passages quoted by Menzies J some emphasis was placed on the fact that the qualification of a degree would not have any effect on Mr Hatchett's assessable income. Given the facts, that factual conclusion was no doubt correct. However, it does not follow from that that a deduction is not allowable.

To fall within s. 51(1) it is not necessary to show that a particular outgoing will, on the balance of probabilities, produce an increase in assessable income in the future. So much was decided by the High Court in
FC of T v Smith 81 ATC 4114; (1980-1981) 147 CLR 578, where the payment of a premium by an employee on a loss of income policy was held deductible,

ATC 5014

irrespective of the fact that no income might ever be derived under the policy, and indeed, where presumably the employee might have desired that no income be derived under the policy. See too FC of T v Cooper (supra) at ATC 4412; FCR 197. As I said in the latter case, the true principle is that enshrined in the famous passage from the decision of the High Court in
Ronpibon Tin NL v FC of T (1949) 8 ATD 431 at 436; (1949) 78 CLR 47 at 57:

``In brief substance, to come within the initial part of the subsection it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income.''

In its reformulated form in later cases, eg Smith, the principle has been expressed as follows [at ATC 4117; CLR 586]:

``What is incidental and relevant in the sense mentioned falls to be determined not by reference to the certainty or likelihood of the outgoing resulting in the generation of income but to its nature and character and generally to its connection with the operations which more directly gain or produce the assessable income.''

Where an outgoing is shown to contribute or to be likely to contribute to increased income, it will normally be the case that the necessary connection will exist between the outgoing and the activities of the taxpayer which more directly contribute to the gaining or production of assessable income. Cooper is perhaps, on one view, an illustration of an exception to this general rule. However, it is not necessary for an outgoing to be deductible that a taxpayer be able to show a likelihood of increased income. In the present context, were this to be so, it would mean that a person who had reached the peak of his income-producing position, would never be entitled to a deduction for self-education expenses. Thus, the Commissioner of Taxation, having no public service office to which he could ordinarily expect to be promoted, could never obtain a deduction for a course of instruction that could be shown to better equip him in the performance of his duties as Commissioner. So to state the problem is to expose the fallacy in the argument. If the Commissioner were to undertake a course which would be objectively seen as improving or tending to improve his proficiency in his office, that would better equip him so to do, there is no reason to suppose that a deduction would not be allowable for expenditure which he incurred on such a course. There would be a relevant (or to use the words of Menzies J in Hatchett a perceived) connection between the outgoing and the activities of his office which more directly produce his assessable income (ie his statutory remuneration).

There have been a number of cases besides Hatchett which have considered the deductibility of self-education expenses. The starting point of any discussion is the decision of the High Court in
FC of T v Finn (1961) 12 ATD 348; (1961) 106 CLR 60. That case, as is well known, concerned the deductibility to a government architect of expenses of an overseas tour to Europe, made of his own volition, but which at the request of his employer included a visit to South America, found to have been devoted to architecture and its study and to have advanced his knowledge of architecture and the development of his architectural outlook and skill. The High Court unanimously found the expenditure deductible.

Dixon CJ (at ATD 350-351; CLR 67) expressed the view that there were three or four conclusions which governed the question on the facts of the particular case. The first, was that the increased knowledge made Mr Finn's advancement in the service more certain. The second, ``so far as motive or purpose'' was material, was that the advancement in grade and salary formed ``a real and substantial element in the combination of motives which led to his going abroad''.

It may be noted, in respect of the very first submission made in the present case that Sir Owen Dixon, even expressing the qualification that he did about the significance of motive or purpose, spoke in terms of ``a real and substantial element'', not the dominant element in the taxpayer's motivation.

The third matter to which Dixon CJ adverted, was that the employer had treated the visit as being one of importance to it. The fourth matter was that the trip was undertaken while in the employment of the government and acting in accordance with his conditions of service.

These four elements in conjunction were, in his Honour's view, a firm foundation for the

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conclusion that the expenditure was incurred in gaining or producing the taxpayer's assessable income. However, nothing in the judgment suggests that each and every one of the elements there involved was necessarily to be found in arriving at this conclusion, or that his Honour was purporting to set out a test comprising the four elements, to which each (perhaps without the element of purpose or motivation) was relevant.

Kitto J, who was of the same conclusion, was prepared to put to one side the relevance of the expenditure to Mr Finn's prospects of promotion, thereby indicating in his Honour's view that that matter was not essential to the decision on the facts of the particular case. His Honour was of the view that it was incidental to the proper execution of Mr Finn's duties that he undertook the trip. This was despite the fact, which his Honour acknowledged, that he could not lawfully have been required to undertake the trip by the Department. It was incidental to his office that he should avail himself of opportunities to increase his knowledge relevant to his profession. The same may be said of Mr Studdert in the present case.

Finally, Windeyer J, who expressed the truism that each case must depend upon its own facts, propounded what may perhaps be an even wider view of deductibility when his Honour said (at ATD 352; CLR 70):

``Generally speaking, it seems to me, a taxpayer who gains income by the exercise of his skill in some profession or calling and who incurs expenses in maintaining or increasing his learning, knowledge, experience and ability in that profession or calling necessarily incurs those expenses in carrying on his profession or calling.''

If what is said by Windeyer J is applied in the present case (and it must be conceded that his Honour's remarks go beyond those of Dixon CJ or Kitto J) it is obvious that Mr Studdert would be entitled to a deduction on the facts of the present case.

Reference was made by counsel for the Commissioner to a number of later cases, all depending upon their own facts, eg
FC of T v White 75 ATC 4018; [1975] 1 NSWLR 1; FC of T v Smith 78 ATC 4157 and
FC of T v Wilkinson 83 ATC 4295, in none of which, so it was submitted, was it thought to be sufficient to deductibility that the course of study improved the taxpayer's proficiency in his occupation.

It is not necessary for me to comment in detail upon White and Smith, save to remark that the former, a decision of Helsham J, appeared to propound a test, not supported by Finn, on which his Honour appears to have relied, that an outgoing to be deductible for self-education expense has either to be shown to have been incurred in carrying out the employee's duties (see the above comments as to the factual situation in Finn) or have a direct effect on income. It may, however, be that his Honour's comments on the necessity that the course of study be ``part and parcel'' of the taxpayer's employment can be read in a less restrictive way. Be that as it may, I would prefer to rely upon the words of s. 51(1) itself and pose the question, which involves a conclusion of fact, whether the outgoing was incurred in gaining or producing the assessable income?

Wilkinson's Case deserves some comment because the facts are closer to those of the present case. In Wilkinson, the taxpayer was an air traffic controller employed by the Department of Aviation. The deduction claimed was for the cost of taking flying lessons. Flying experience was neither a prerequisite for the job (as here) nor was it a prerequisite of promotion (as here). Nevertheless, it was found that the taking of lessons would make it inherently likely that the taxpayer would be promoted and thereby earn a higher salary. It was held that these matters in combination provided a foundation for the conclusion that the expenditure was incurred in gaining the taxpayer's assessable income. In so doing GM Williams J, of the Supreme Court of Queensland, with respect correctly criticised the reasoning of the Board of Review which had applied a test that an outgoing was not deductible unless the incurring of that outgoing was an express or implied term of the taxpayer's employment.

Although the two matters of promotion and efficiency were both present in that case and in combination enabled his Honour to reach the factual conclusion that he did, it does not follow from this that a factual finding that undertaking the course better equipped the taxpayer to perform his job was not, of itself, sufficient to enable a conclusion in favour of deductibility to be reached in that case.

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Particularly so, where, as here, it was also found as a fact that a motivation for undertaking the course was the gaining of that proficiency.

I am of the view that in the present case these facts on their own, without reference to the effect of the course on promotion were sufficient to found the Tribunal's conclusion that the outgoing for the flying course fees had the necessary connection with the gaining or production of Mr Studdert's assessable income. They were relevant and incidental to that end, and relevant and incidental to the activities as flight engineer which more directly gained or produced that income. Put in another way, it was open to the Tribunal to reach the conclusion which it reached.

But if I be wrong in this it would, on the facts of the present case, be futile to remit it to the Tribunal for reconsideration. There is, as well, the additional finding that proficiency in flying would assist the taxpayer in promotion to higher grades in his current occupation. Although this does not appear to be a matter which the Tribunal took into account in reaching its conclusion, that finding, in combination with the other findings of fact, make the conclusion inexorable that the outgoing in question was incurred by Mr Studdert in gaining or producing his assessable income.

It follows that the appeal must be dismissed with costs.

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