Case Q104
Judges: MB Hogan ChP Gerber M
GW Beck M
Court:
No. 3 Board of Review
Dr. G.W. Beck (Member)
This is another in the apparently never-ending series of cases in which school teachers seek to deduct the cost of overseas travel under sec. 51(1). Most of the cases have warranted scant attention, the expenditure being clearly of a private nature. This case is different and only after careful review of the circumstances of and reasons for the travel have I concluded that the deduction cannot be allowed. Indeed, if I applied my own interpretation of the decision in
F.C. of T.
v.
Finn
(1961) 12 A.T.D. 348
;
(1961) 106 C.L.R. 60
this taxpayer would succeed. However, I am constrained to adopt the interpretation of
Menzies
J. and other Judges.
2. The taxpayer impressed at the hearing as highly intelligent and ambitious and she had obviously given thought to what was required to achieve her ambitions. She was in 1979 calendar year a secondary school teacher and according to a note in her 1980 tax return she specialized in ancient history, archaeology, geography and literature. In evidence she said ``my two main specialisations were ancient history and literature''. She was enrolled for a Masters degree at a university and was active in what was described in the return as ``after school activity, including modern drama and sport''. She was married and it can be assumed there were household duties as well. Her husband did not accompany her on the overseas travel. The only evidence the Board heard about the travel was provided by the taxpayer.
3. In second semester 1979 she saw advertised on university notice boards a trip which was to take place from 2 January 1980 to 2 February 1980; it was to be ``escorted'' by two classics scholars from different universities and it apparently was described as an ``Historical and Archaeological Tour of Italy and Greece''. In answer to a question from one of my colleagues concerning the ``average participants'' in the trip, the taxpayer said ``Teachers and students of classics and art and ancient history''. The trip is an annual event, and is advertised only at the two universities concerned. The two escorting classics scholars took turns to give lectures in the foyers of the hotels providing accommodation, the lectures dealing with what was to be seen on any particular day and discussion groups were organised following the visits to the places on the itinerary. The taxpayer said notes that she took on the trip, photographs, slides, and maps and books purchased have been used ever since her return for teaching purposes. The day-by-day itinerary and the details of the claimed expenses are as set out below:
Day No. Detail Private
days
1 Depart Sydney - Athens
2 Arrive Athens
Morning free 1/2
3 Visit Acropolis
Afternoon free 1/2
4 Visit National Museum
Afternoon free
4. Ten months after returning from the trip the taxpayer applied for a lectureship at a college of advanced education and, being successful, commenced to lecture there from the start of the 1981 academic year. The salary was above that which she would have received teaching in the high school. In evidence the taxpayer referred also to two other factors, saying:
``The trip assisted me quite incidentally in the study for my Masters degree, since my final thesis used material gained from the - particularly the sites of Mycenae and bronze age Greece. I have since been awarded the Masters degree from the University of... Another factor was that I was at the time preparing an ancient history textbook for the use in high schools, together with another teacher, and this textbook is now going to be published and that did use material, photographs, gained from the trip to Greece and Italy.''
5. The following findings of fact are the basis of my subsequent determinations in law:
- (a) The taxpayer has indicated by the direction of her undergraduate and postgraduate studies that she has an interest in ancient history and obviously also in the region of the world relevant for a study of that discipline. In the wide range of subject areas in humanities it has to be said that one does not study ancient history as a means of livelihood in the way one might study accounting, law or medicine. Teaching is about the only real avenue of employment open to people pursuing university studies in ancient history and there are many subjects that one can teach. The selection of ancient history would, in my view, occur only if there was intellectual interest in it.
- (b) The taxpayer believed that first hand experience of such things as ancient sites would make her professionally better and would impress the people that she would need to impress to progress to higher positions via promotion or other means.
- (c) She did collect material during the trip which has been used in the course of her work since returning and which has been used in a book that she expects will produce royalties.
- (d) The trip was at least partly for self-education purposes in so far as it provided material for her Masters degree, but it was for self-education purposes in a wider sense than that.
- (e) She wanted the trip to make her more competent in her teaching, more educated in her selected field, and, perhaps most importantly, more impressive to her professional peers and superiors.
- (f) The itinerary for the trip is such that it would be of interest to many individuals both inside and outside universities and inside and outside the teaching profession. There was no test of professional or educational affiliations that had to be satisfied before people could participate; it seems that anyone could have joined the travel group.
ATC 529
- (g) The taxpayer was not carrying on any business in the year in question and her claim falls for consideration only under the first limb of sec. 51(1).
6. These facts lead to the familiar path of
Ronpibon Tin N.L. and
Tongkah Compound N.L.
v.
F.C. of T.
(1949) 78 C.L.R. 47
;
F.C. of T. v. Finn
(1961) 12 A.T.D. 348; (1961) 106 C.L.R. 60;
F.C. of T.
v.
Hatchett
71 ATC 4184
;
F.C. of T.
v.
White
75 ATC 4018
;
F.C. of T. v. Smith
78 ATC 4157; and most recently
F.C. of T. v. Wilkinson
83 ATC 4295. To trace this path is surely not necessary and I therefore set out in briefest summary the extant law as I see it.
- (a) Losses or outgoings must be both ``incidental and relevant'' for the deriving of assessable income and incurred in the course of doing the things that are productive of, or would be expected to be productive of, income before they are allowable deductions. (Ronpibon.)
- (b) A taxpayer who is in employment and who incurs expenditure to obtain increased knowledge which ``makes his advancement in the service more certain'' and which might prove decisive in promotion is entitled to a sec. 51(1) deduction for that expenditure provided ``advancement in grade and salary formed a real and substantial element in the combination of motives'' that led to the incurring of the expenditure. ( Dixon C.J. in Finn at A.T.D. p. 350; C.L.R. p. 67.)
- (c) It is not sufficient that expenditure is likely to make a taxpayer a more skilled and/or more efficient employee and therefore more likely to obtain promotion. ( Hatchett. )
- (d) It is not sufficient that the qualification impresses the employer and thereby increases the chances of promotion. ( Smith. )
- (e) However, a taxpayer who ``in reliance upon the condition of his employment spends money to earn more'' will fall under sec. 51(1) ( Hatchett ). This was restated by Waddell J. in Smith (at p. 4162): ``... in incurring the expenditures in question the taxpayer, in reliance upon the prospects of promotion which appeared reasonably to be present, spent money to earn more in the future''. In essence, this was the basis upon which this Board found in favour of the taxpayer in Case P124, 82 ATC 629 and upon which G.N. Williams J. found for him on appeal in Wilkinson.
7. The words ``in reliance upon the conditions of his employment'' and ``in reliance upon prospects of promotion which appeared reasonably to be present'' seem to me to be of critical importance and to impose an obligation on taxpayers to show that at the time the expenditure was incurred the conditions of employment made it a rational expectation that advancement would result from the course of action on which money was about to be spent. This taxpayer's case founders on this obligation. There was absolutely no evidence that there were reasonably-anticipated prospects of promotion at the high school at which she was teaching in 1979. As can be seen from the preceding paragraph her subsequent successful application for a more highly paid lecturer's post at a college of advanced education does not assist her. For expenditure to be considered to be ``in the course of earning assessable income'' the conditions of the existing employment must be such as to make an increase in income a reasonable expectation. It is not sufficient that the taxpayer is seeking qualifications that will enable the securing of a new and more highly paid job.
8. Mention should be made of the fiscal significance of the material collected on the trip and used in the taxpayer's teaching and in a forthcoming textbook. She did not contend that the trip was undertaken to collect classroom resource material or photographs for the textbook and the acquisition of the items must be regarded as quite ancillary to the main purpose of the trip. As such it cannot assist in bringing the costs of the trip under sec. 51(1). The taxpayer was allowed a deduction for some slides and photographs but not the full amount claimed. At the hearing she abandoned the balance of her claim for slides and photographs, as well as claims for dry cleaning, magazines and depreciation on household curtains.
9. I confirm the assessment.
Claim allowed
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