Case D 19

Judges:
FE Dubout Ch
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 12 May 1972.

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F.E. Dubout (Chairman); N. Dempsey (Member): In 1962, the taxpayer in this case was awarded a studentship under the Teaching Service Act 1958 (Victoria), and entered into a standard form of agreement with the Minister of Education, whereby in consideration of the benefits to be provided, he undertook to observe the conditions of tenure of the studentship. One condition was that upon the termination of the course, he was to perform teaching services in any school or schools to which he might be appointed, for a certain number of days. In the event of breach or non-observance of the conditions, the taxpayer would become liable to pay to the Minister on demand a sum equal to the total of what, for brevity, may be described as all the allowances paid to him by the Minister.

2. The taxpayer relinquished his studentship in 1966, and having failed to meet his obligations under the agreement, was called upon to pay an amount in excess of $2,000. This he arranged to pay off over a period of years. In his return of income of the year ended 30 June 1969, he claimed to deduct an amount of $230, being part of the total sum payable as aforesaid. (At the hearing, it was ascertained that the actual amount paid in the year in question was only $185). Disallowance by the Commissioner of the taxpayer's claim has led to the present reference.

3. At the hearing, the Board was referred by the Commissioner's representative to four cases decided by Boards of Review on the same subject matter:
9 T.B.R.D. Cases J. 20 and J.60,
14 T.B.R.D. Case P.20 and Case A59,
69 ATC 334. The Board was unable to find that the facts in the present reference differ in any material way from the facts of the cases mentioned above. In short, as was decided in those cases, the liability to make the subject payment arose from breach of the agreement, and was not incidental to the gaining or producing of assessable income.

4. The most that can be said for the payment is that it was expenditure incurred by the taxpayer in choosing between two possible avenues of employment. As such, it is similar to the type of expenditure contemplated by Menzies J. in
F.C. of T. v. Maddalena, reported in 71 ATC 4161 where his Honour said -

``Had the taxpayer claimed as a deduction the expenses of changing from one job to another as an employee electrician, his outlay would not have been an allowable deduction. The expenditure would have been incurred in getting, not in doing, work as an employee.''

5. The moral, or equitable, issue to which reference was made by the taxpayer, that he had paid tax on income which he has

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ATC 114

since had to refund, was adverted to and dealt with in the previously decided cases. Under the circumstances, the Board finds itself in agreement with the decisions given in the abovementioned cases, and its conclusion is that the amended assessment dated 9 December 1969, must be confirmed.

Claim disallowed