Case N106

Judges:
HP Stevens Ch
JR Harrowell M
BR Pape M

Court:
No. 1 Board of Review

Judgment date: 2 December 1981.

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H.P. Stevens (Chairman); J.R. Harrowell and B.R. Pape (Members)

The taxpayer concerned in this reference is a young High School teacher who mainly teaches the subject of geography. A university graduate she became a teaching assistant in 1975 at a school where the majority of children were from overseas with few having an English speaking background. In her return of income for the year ended 30 June 1977 a number of claims for deductions were made.

The particular items in dispute are as set out hereunder:

        
         Item                   Claim            Allowed           In Dispute
                                    $                $                   $
Electricity (home office)          34               10                  24
Telephone                          26                5                  21
Replacement teaching slides        83               21                  62
Clothing                           54               42                  12
Maintenance Clothing               76              nil                  76
Overseas travelling             2,006              nil               2,006
                               ------              ---               -----
                               $2,279              $78               2,201
                               ------              ---               -----
      

2. Insofar as the major issue of overseas travelling is concerned, the taxpayer and her husband (also a teacher) left Australia on 18 December 1976. The outgoing passenger card signed by the taxpayer indicated the ``Main reason for going abroad'' as ``Holiday'' - and returned on 24 January 1977. The countries visited were Greece, Italy, Switzerland, Germany, Yugoslavia and Hong Kong.

3. The issue of overseas travelling expenses by school teachers has been the subject of many previous decisions, e.g. Cases J68,
77 ATC 572; K39,
78 ATC 367; K71,
78 ATC 673; L21,
79 ATC 103; M7,
80 ATC 61; M61,
80 ATC 429; N4, N24, N29, N37, N62, N71 and N74,
81 ATC at pp. 32, 131, 159, 191, 331, 382 and 389 respectively. The above range of cases includes decisions by all three Boards and a diversity of subjects taught (includes social science and geography). As consistently explained the relevant test is whether there exists an express or implied requirement by the employer that the employee incur the relevant expenditure. It is not sufficient that an employer encourages certain activities or that the incurring of the expenditure may enable the employee to be more effective in the carrying out of his duties and, therefore, more likely to be eventually promoted.

4. On the evidence in this case we are unable to find as a fact that the necessary express or implied condition of employment exists. Although much reliance was placed by the taxpayer's representative on various provisions of the N.S.W. Teaching Services Act, 1970 (No. 4) (sec. 16, 17, 23, 27 and 49) and Regulations thereto (reg. 3, 8, 34(e), 35, 36, 38, 40, 45 and 49) they do not in our view assist. If a newly appointed teacher does travel overseas and, for that (or any other) reason, is a more efficient teacher than she otherwise would have been, she may more readily pass inspection (after a minimum of five years teaching experience) and be placed on a promotions list (actual promotion relying on vacancies occurring and seniority on the list). However that is a far different thing to saying she is required to travel as a condition of her employment. The taxpayer admitted there was no requirement per se.

5. It follows we agree with the disallowance of the claim for overseas travelling expenses.

6. Turning to the other items (except electricity) they can be dealt with shortly. The same test applies as for overseas travelling and there is no evidence that the taxpayer was required to incur the expenditure concerned. The teaching slides were not in fact replacements but rather represent film exposed by the taxpayer on the overseas trip and processed into slides. We would accordingly uphold the disallowances in relation to these other items.

7. With reference to the electricity (home office) claim reference is made initially to
F.C. of T. v. Faichney 72 ATC 4245; (1972) 129 C.L.R. 38 and to the recent majority decisions of the Full High Court in
F.C. of T. v. Forsyth 81 ATC 4157 and
Handley v. F.C. of T. 81 ATC 4165. In the earlier case Mason J. was considering a claim for, inter alia, proportion of home electricity by a scientist employed by the C.S.I.R.O. who ``was not required by the terms of his employment to perform the duties of his employment at home'' but who did in fact spend ``an appreciable amount of time at home working on matters that related directly to the actual work in which he was engaged in his employment''. His Honour found that the cost of providing electricity and heating whilst so working was within the opening words of sec. 51(1) and was ``not an expense of a private or domestic nature''.

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ATC 595

8. The recent cases were heard by the same bench - Stephen, Mason, Murphy, Aickin and Wilson JJ. - and in both Stephen and Aickin JJ. dissented. Neither concerned a claim for electricity expenses. However in Forsyth's case Wilson J. said at p. 4165:

``It may be that the opinion that I have expressed could lead me in a proper case to a different conclusion with respect to the cost of lighting and heating to that reached by Mason J. in Faichney; on the other hand, it may be said at once that there would seem to be a closer connection between such costs and the gaining of assessable income than is the case with the payment of rent in this case. The question must be as to the application of the exception. In any event, the general character of outgoings for lighting and heating was not canvassed before us, and I prefer to say nothing directly about them.

I would make one further comment, dealing with the effect of the words `to the extent to which' first appearing in sec. 51(1) in the context where there is an outgoing which requires to be apportioned between the gaining of assessable income and otherwise. In a case where the whole of that outgoing bears some association with the home, it is in my view a misconception to think that the result of the process of apportionment is necessarily to deny a continuing domestic character to the portion of the outgoing so identified. So to read the subsection is to misread it.''

Mason J. at p. 4159 said he was in general agreement ``with what Wilson J. has written in this case'' but this agreement was ``to be read in the light of my reasons for judgment in Handley v. F.C. of T.''. In Handley's case Mason J. at p. 4172 said:

``There is no occasion for me here to re-examine that part of the decision in Faichney that resulted in the allowance of expenditure incurred by the taxpayer for light and heating whilst he was working in his study at home. At the time it seemed to me that a distinction, albeit a fine one, could justifiably be made between expenditure incurred in connexion with the acquisition of the study as part of the home and expenditure not so incurred, but necessarily incurred in the course of engaging in revenue earning activities which the taxpayer undertook in his study. As I say, that question does not presently arise.''

The other member of the majority Murphy J. said nothing presently relevant in Forsyth's case but in Handley he said at p. 4174:

``The appellant claimed that the allowance by the Commissioner of apportioned amounts for heating and cleaning of the study is inconsistent with the disallowance of the disputed amounts for interest and insurance. In my opinion there is force in this contention, but the correctness of the allowance for heating and lighting is not open for decision in this appeal.''

9. A Board of Review is required to decide cases ``by ascertaining the facts and applying the law as it sees it'' (
Sutton v. F.C. of T. (1959) 100 C.L.R. 518 at p. 523). In determining such law a Board is not, in our view, entitled to disregard relevant High Court decisions just because there is obiter dicta in later cases raising some doubts concerning those decisions. It is therefore considered that the law to be applied is that laid down by Mason J. in Faichney's case. Provided a similar finding of fact can be made in the present case the taxpayer is entitled in principle to the deduction claimed.

10. The taxpayer's attendance at school was split into 40 periods per week, of these she, in the relevant year, spent 26 teaching (geography except for some commerce in 1977), 2 in careers advising, 3 for sports (jazz ballet winter, tennis summer) with the remaining 9 for lesson preparation, etc. In addition to teaching in the classroom the taxpayer had to set assignments and examinations (and mark them) as well as take up the students' books for marking. This required work to be done outside normal school hours. Also, as an inexperienced teacher, the topics taught were new to her and research was involved in drawing up lesson plans, etc., both for the delivery of lessons and submission to her subject master. Not all this could be performed during the actual time spent at the school and work was done at home. There is no doubting the sincerity of the taxpayer's testimony or her dedication to teaching and we would make the necessary finding of fact.

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ATC 596

11. Insofar as quantum is concerned the total electricity bill - in respect of an all electric house with, inter alia, a wall oven and hot plates, a TV set, a stereo system, washing machine and an instantaneous HWS - for the period 9 June 1976 to 17 June 1977 was $155.18 (4 540 kW hrs). The tariff charged was on the basis of 6.80c pu for the first 120 units per quarter, 4.10c pu for the next 390 units and 2.60c pu for any excess usage. The electricity account was apparently in the name of the husband. During the relevant period the residence was a jointly owned two storied townhouse whilst both their salaries were paid into a joint cheque account from which all accounts were paid. On this basis it was said that the taxpayer should be regarded as incurring the applicable expenditure. We doubt whether this is a correct conclusion to reach but we put it to one side for the moment.

12. Both the taxpayer and her husband worked at home. The taxpayer in a second bedroom upstairs with the husband downstairs - he liked to have music playing as he worked but the taxpayer preferred quiet. This bedroom contained a desk, bookcase and wardrobe (no bed). The bookcase held her library and together with the desk her notes - the wardrobe housed some old clothes. There was a 100 W ceiling light, a 100 W desk lamp, a 2 bar heater (2000 or 2400 W) and, for a time a 60 W fan (the area used by the husband was, except for the fan, similarly equipped).

13. Although it was admitted there was some variation - more at certain times of the year than others and, if TV was watched, the time would have to be made up - the taxpayer tried to get two hours work done after arriving home from school and then another three hours after tea (she and her husband cooking alternative nights). Over a weekend six to eight hours would be spent working. She estimated about 25-27 hours were so spent each school week. Her husband was said to work about the same period but she did more in the weekend as he played hockey on Saturday afternoon during the winter. On the basis that both lights were used at all times and the radiator half the time (second term and part third) it was estimated that 1310 kW hrs. were used by the taxpayer in the course of her work at home - of this number of hours the radiator accounts for 1092.

14. We have considerable doubt as to whether usage was this high. On the basis of her husband's usage being approximately the same only 1920 kW hrs. were applicable to normal household activities (cooking, washing, ironing, bathing, radiator when relaxing, etc.). Also if the usage for working purposes was so high, one would expect a substantial variation in the quarterly usage of kW hrs. - particularly as the high radiator usage was seasonal and the taxpayer and her husband were overseas for five weeks. However such variation does not exist. The kW hrs. for the quarter during which they were away (8 December 1976 - 11 March 1977) were only 110 less than for the preceding quarter whilst the usage for the period 11 March to 17 June 1977 (including part of second term when the radiator was used) was only 120 in excess of that for the quarter during which they were overseas. This analysis leaves it open to conclude that the taxpayer's evidence (although honestly given but based on recollection rather than contemporaneous details) has somewhat overstated the actual usage for the claimed purposes. The claim pursued was, we think, on a proper basis, i.e. not for a proportion of the total account but for 1310 kW hrs. at the marginal rate of 2.60c per kW hr. and the question arises as to what usage figure has exactly been established?

15. Without being forced to guess we cannot determine an appropriate usage. This is sufficient to determine the issue and it is, therefore, unnecessary to determine the question we put to one side in para. 11.

16. For the above reasons we would uphold the Commissioner's decision on the objection and confirm the taxpayer's assessment for the year ended 30 June 1977.

Claim disallowed