Case F16

Judges: FE Dubout Ch

GR Thompson M
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 19 September 1973.

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G. Thompson (Member): The taxpayer, a surgical Registrar and Lecturer at a University in a capital city, in respect of the year ended 30 June 1971, claimed as a deduction under sec. 51(1) of the Income Tax Assessment Act 1936 as amended, the sum of $630.52 being travelling expenses from Australia to Great Britain. He also claimed as sundry expenses the sum of $25 which the Commissioner now concedes should be allowed. The Board will accordingly, in accordance with the agreement of the parties, allow this $25 as a deduction in any event. The question for decision in this reference is whether the travelling expenses claimed are properly allowable as an outgoing under sec. 51 of the Act.

2. The taxpayer was so employed as a tutor and lecturer at a University until 31 December 1970, when he resigned and left Australia, accompanied by his wife and three children, with the intention of residing in Great Britain for a period of approximately three years. Prior to his departure he sold the family home and his car to provide funds for his overseas trip and gave a Power of Attorney to an Agent in Australia in order to attend to his investments and to lodge his income tax return. He did gain some income from investments in Australia whilst he remained resident in Great Britain.

3. His intention at the time of his departure was to work in England for approximately three years in order to study the latest developments in his profession as a Surgeon, thereby gaining valuable experience in that field. Prior to his departure from Australia, he had completed the necessary registration formalities to enable him to practise as a Surgeon in the United Kingdom. Whilst there he did not study for any higher medical degree, but he did obtain his F.R.C.S. (Fellow of the Royal College of Surgeons). It was claimed at the hearing on his behalf that this did not necessarily constitute any higher qualification since he had already held the degree of Fellow of the Royal Australian College of Surgeons prior to his departure. I do not think that this particular aspect of the matter will be important to the final decision in this reference.

4. The taxpayer intended to return to Australia at the end of approximately three years, i.e. 1973 and hoped that he would be able to obtain a position in the academic field similar to but perhaps of a higher status than that which he held at the time of his departure. He hoped to obtain, for example, a position as a senior lecturer in Surgery at a University. Upon his arrival in the United Kingdom he met a Professor whom he knew in Australia and gained a position with a Teaching Hospital in Wales. He was so employed at the date of the hearing of this reference. It should also be mentioned that the University, where he was employed in Australia prior to his departure, had given no undertaking that he would be re-employed in any higher position upon his return to Australia, or indeed, that he would be re-employed at all.

5. At the time of the hearing taxpayer still held certain assets in Australia which I do not deem it necessary to set out in detail. Evidence at the hearing was given by the taxpayer's father who had personal knowledge of the relevant facts. My

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conclusion from the whole of the evidence is that there was no certainty that the taxpayer would return to Australia or would be re-employed in his former capacity or in a higher capacity whereby he could command a higher salary. Indeed it is difficult to judge the probabilities of the situation, which are perhaps infinite. The taxpayer seemed to be comfortably placed in employment in his chosen professional field in the United Kingdom and it appears that he had prospects of gaining a higher position with an increased salary in that country. It is true that the taxpayer's intention when he left Australia was to return, but a man's intention may change from time to time and according to circumstances. The circumstances of this particular taxpayer are no exception to that general rule. Indeed they are perhaps a stronger particular illustration of the principle that his intention might very well change. He could remain in the United Kingdom or indeed proceed to some other country other than return to Australia.

6. It is true that the taxpayer was obtaining particular clinical or practical experience as a surgeon in the United Kingdom, and as his father put it, he had done a good deal of work in connection with breast cancer. This would qualify him to enter into a high academic post or to branch out into private practice as a surgeon on his own account. But the question for decision remains, whether or not under sec. 51 of the Act, the outgoing claimed as travelling expenses from Australia to the United Kingdom is an outgoing properly allowable under that section. To so qualify it is trite law that it must be incidental and relevant to the gaining of his assessable income. As to whether the taxpayer would gain assessable income in Australia in the future at all or at what particular point of time is problematical. The evidence leaves the matter in doubt. The broad argument put for the taxpayer at the hearing was that there was sufficient nexus between the expenditure of the travelling expenses and the future gaining or earning of assessable income in the form of a salary upon his return to Australia in the future. His representative, an experienced chartered accountant, relied upon the reasoning in the cases of
F.C. of T. v. Finn (1961) 106 C.L.R. 60 ;
F.C. of T. v. Hatchett (1971) 71 ATC 4184 ; and a previous decision of this Board namely Case D1
(1972) 72 ATC 1 , where certain travelling expenses were allowed. But, in my opinion, there is one strong distinguishing feature between the cases cited and the present reference. In the above three authorities relied upon for the taxpayer, there was continuity of employment, and the taxpayer in each case was acting within the scope of his general contract of employment. As Dixon C.J. put it in Finn's case 106 C.L.R. at 67 -

``... it was all done while he was in the employment of the Government, earning his salary and acting in accordance with the conditions of his service.''

Again Kitto J. put the matter in the same case in these words (106 C.L.R. at 69):

``It is, I think, a correct application of the terminology of sec. 51 to say that he was engaged in `gaining' that salary whenever and so long as he acted in the fulfilment of his office; for the salary payable was his remuneration for everything comprised in or incidental to his service.''

7. I do not find it necessary in this case to undertake a major review of the case law on sec. 51 of the Act. Many of the important basic principles to be derived from the case law concerning the interpretation and application of the tests under sec. 51 will be found reviewed by members of this Board in Case A44
(1969) 69 ATC 251 . That case also dealt with the question of the allowability of overseas travelling expenses, but again it involved a senior employee of a company who was actually engaged in his employment and was performing the duties of his office as a director of the company. Further basic thinking on the subject of sec. 51 of the Act will be found in the case above cited, namely Case D1
(1971) 71 ATC 1 , where certain expenses were allowed. But again the case involved continuous employment.

8. In the present reference, and on the whole of the evidence, I am of opinion that the alleged nexus between the outgoing, namely the travelling expenses of the taxpayer and the gaining or earning of any

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future income in Australia is too remote. I am unable to perceive a nexus sufficient to satisfy the basic tests laid down by the case law under sec. 51(1) of the Act. In saying so, I bear in mind that expenditure is not necessarily to be related to the gaining of income in the same year or perhaps in the next year. I am left in doubt on the evidence in this case as to whether the taxpayer will return, and will in fact, on the balance of probabilities, earn assessable income in Australia in the future against which the outgoing could be considered. As a matter of law, then, I must hold on the evidence that the taxpayer has not discharged the burden of proof lying on him to satisfy the tests under sec. 51 sufficient to allow the travelling expenses claimed as a deduction.

9. In the circumstances, the taxpayer's objection on this particular subject matter must be disallowed. Of course, as I have said above, his objection in relation to the incidental expenditure of $25 will, by consent, be allowed and the assessment must be further amended accordingly.