Case M6

Judges:
HP Stevens Ch
CF Fairleigh QC
JR Harrowell M

Court:
No. 1 Board of Review

Judgment date: 6 March 1980.

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H.P. Stevens (Chairman); C.F. Fairleigh Q.C. and J.R. Harrowell (Members)

The taxpayer's notice of objection to an assessment for the year ended 30 June 1976 contains paragraphs to the following effect:

``The lump sum of $11,347 was received in the said income year but actually related to services that were to be rendered by me in the year of income ending 30 June 1977.

It is not assessable income within the terms of Section 25(1)(a) nor within the definition of `Income from Personal Exertion' under Section 6(1) of the Income Tax Assessment Act, 1936-1976.

It was a lump sum advance against a future salary and the college was in error in issuing a group certificate for the said sum in that year in lieu of the succeeding year and not having recorded the payment as a loan.

My contract of employment entitles me to receive an annual salary at the level of Head of Department - Principal Lecturer, Level 1, viz. presently $25,466 and therefore it would be impossible for me to be legally entitled to receive $32,129 which the Commissioner has included as my assessable income for the said income year.

According to general law a group certificate is only prima facie evidence of all it contains, but not absolute evidence and therefore it should not be used wholly and solely as evidence of receipt of income derived.

Section 19 operates to make the `advance' payment of $11,347 income of the succeeding year.

This situation appears to have no precedent in that Boards of Review decisions that I have reviewed relate to only retrospective payments received in a year of income and not advances against future income.

My employment could have been terminated, for any reason, any time after receiving the said sum and up to 30 June 1976, and then the said lump sum advance would therefore have been a legal debt owing by me and repayable to the college.''

2. The notice of objection was accompanied by (i) a copy of the scale of fees payable to the taxpayer pursuant to the conditions of his employment by the college of advanced education; and (ii) a letter from the chairman of the Council of that college who was also chairman of the staff

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ATC 60

development project committee. That letter contains paragraphs to the following effect:

``In 1975 we granted leave to (the taxpayer) to enable him to further his studies in Europe.

The taxpayer made application to the college for an advance against his income for the year 1976-1977 and this was granted by the college accountant in the nature of a loan against income to be earned whilst he was overseas.

We would be pleased therefore if you would treat the monies received by the taxpayer as a loan against income and not income earned during the year ended 30 June 1976.''

3. The Commissioner decided to disallow the objection and his decision was referred to this Board for review. Quantum was not in issue; nor the receipt of the money in the year of assessment.

4. At the outset of the hearing of the reference the Commissioner's representative informed the Board that the aforesaid letter was not accepted as proof of the matters alleged therein. That letter had been included in the file of documents which became Exhibit A, as being only a document which contained details of the taxpayer's claim (vide reg. 35(1)(b)).

5. Neither party was able to place before the Board the conditions of employment at the material time and it is necessary to apply documents of later date by the doctrine of presumption of continuance from an earlier point of time. So far as the statute (Colleges of Advanced Education Act (No. 11), 1975 amended by Act No. 47, 1975) is concerned, it need only be said that it contains the usual restriction on investment (a fortiori unsecured loans) as for authorized trust fund investments, except where approved by the Governor upon the recommendation of the Minister.

6. The current (1979) conditions of employment set out that when study leave is granted the payment of salary and/or a travelling allowance will be as ``determined by the college having regard to the circumstances of each case and the financial resources available to the college for the purpose''.

7. A resolution of the council of the college (10 September 1976) sets out that normal salary will be paid whilst a staff member is on study leave and at the request of an applicant, a portion of the salary normally not exceeding one half of the salary for the period of leave may be paid in a lump sum in advance; the maximum entitlement of leave for a ``staff development project'', by accumulation is one year; on making application to undertake a project the member is required to enter into a written undertaking to return to the college at the end of his leave and resume his duties for a period equal to the duration of his leave and on failure so to do or failure to perform his duties satisfactorily he is required to refund to the college, unless the council otherwise determines, any amount paid to him as grants towards fares and expenses; there is a formula for a refund of outside earnings which are obtained whilst a member is on such leave.

8. At a meeting on 16 May 1975 the college council approved leave for a ``development project'' by the taxpayer for the autumn and spring semesters 1976. He completed a roneo form which has the heading ``Application for Advance of Salary'' which shows his projected leave period as being from 29 December 1975 to 26 January 1977. This was approved by the college principal and it has the notation: Recreation leave from 29 December 1975 to 26 January 1976, and Staff Leave from 27 January 1976 to 26 January 1977. Although that document has provision thereon for signature by the college accountant it does not appear that he exercised that function, except perhaps to make that noting as to periods of leave. Probably the taxpayer made the application in or about October or November 1975.

9. The taxpayer has the belief that he was only the second person (at least at his college) to receive such an advance of salary. Yet the provision of a roneoed form suggests that it was not an unusual application. He received a travelling grant as well.

10. The statements in the aforesaid letter are in conflict with the documentary evidence. Furthermore an advance against income in the nature of a loan is an ambiguous statement.

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ATC 61

11. Section 19 of the Income Tax Assessment Act (which deals with the subject of income being deemed to have been derived) does not have the result for which the taxpayer contends. Furthermore, he is mistaken in his belief that there is no earlier reported case concerning a payment by the employer to the employee in one income tax year, when it could have properly been paid later with the consequence that part would have been assessable in each of two successive years (cf. Case D7,
72 ATC 38; Case F27,
74 ATC 155; Case K67,
78 ATC 664; see also
Arthur Murray (N.S.W.) Pty. Ltd. v. F.C. of T. (1965) 114 C.L.R. 314; 39 A.L.J.R. 262; 14 A.T.D. 98 and Case G33,
75 ATC 192; Case G80,
75 ATC 564).

12. The weight of the evidence on the ordinary civil standard of proof results in the conclusion that the subject money was received by the taxpayer (``derived'' in the statutory concept) as assessable income in the year ended 30 June 1976.

13. The decision of the Commissioner on the objection is upheld and the assessment is confirmed.

Claim disallowed