Case Q57

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 1 July 1983.

---

K.P. Brady (Chairman), J.E. Stewart and D.J. Trowse (Members)

This reference relates to a claim made by a senior art teacher for expenditure incurred in travelling to Greece and Crete during the 1978 year. The journey was undertaken by the taxpayer in order to update her knowledge and to keep abreast of art concepts so as to maintain and improve the quality and content of the subject being taught. It was the taxpayer's submission that the associated costs were allowable deductions in terms of sec. 51(1) of the Income Tax Assessment Act.

2. The Commissioner, in assessing the taxpayer's 1978 return, disallowed as a deduction the amount of $1,499 on the basis that the outgoings were of a private nature. The taxpayer objected against the resultant assessment and contended that the expenses were incurred in producing assessable income and in maintaining and improving her income in future years, and that they were not of a private or capital nature. The objection was disallowed, and the question has been referred to this Board for review.

3. The taxpayer, who was employed by a State Education Department, had been a teacher for many years and for the past 17 years was responsible for the teaching of Art to senior classes at a high school. Her employment with the Government was classified subdivision 12, and according to evidence she had attained maximum grading relevant to her qualifications and was thus not eligible for any further promotion nor increases in salary other than normal cost of living adjustments. Additional formal study had not been undertaken because of family commitments.

4. The overseas trip commenced on 16 May 1978, and concluded on or about 8 June 1978. The claim for the expenditure so incurred was detailed as follows in the taxpayer's 1978 return:

                                                $
      Return economy air fare to Athens       1,099
      Return economy Athens to
         Heraklion                               40
      9 nights accommodation (no meals)
         $100 - claim                            60
      Fare and accommodation for 12
         nights to visit archaeological sites
         of Peloponnese-Tyrins,
         Mycenae, Olympia, Corinth,
         Epidauros, Cyclades  -  including
         Delos, Naxos, Thera, Paros; also
         Delphi $260 (no meals included)
         - claim                               200
      Fares on local transport, and
         entrance fees to visit archaeological
         sites                                  100
                                             ------
                                             $1,499
                                             ------
          

The countries of Greece and Crete had been selected for the specific purposes of studying at first hand the architecture and sculpture of ancient Greece and the creation of a slide record of relevant aspects of sites and museum works as these topics formed part of the school curriculum under the taxpayer's control. A comprehensive itinerary was supplied to the Board, and whilst it is not necessary, in our opinion, to repeat same in these reasons, we accept the submissions of the taxpayer as to both the purpose of the journey and to the fact that she was fully occupied in these pursuits whilst overseas.

5. The taxpayer, in order to find the time required for the journey, made application to the Education Department for two weeks of her long service leave entitlement. That request was denied, and she thereupon successfully appealed to the Teachers' Tribunal against the decision.

6. The Commissioner called as a witness a senior industrial relations officer from the Education Department who established that:

• (a) it was not a condition of employment that the taxpayer travel overseas in the fulfilment of her duties;
• (b) the taxpayer was not requested nor directed by the employer to undertake a trip to Greece and Crete;
• (c) the making of the overseas journey would not be used as a criterion in the determination of promotion.

Here, in our opinion, we have a situation of a dedicated and no doubt capable teacher voluntarily incurring expenses for overseas travel with the intention of increasing academic knowledge so as to ultimately benefit her students.

7. However, the taxpayer, to succeed, must bring her claim under the provisions contained in sec. 51(1), and in particular the

---

ATC 309

first limb, recognising that the definition of business in sec. 6 excludes her occupation as an employee, and therefore the application of the second limb of that section. The first leg of the section states that all losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature. The question in this reference is whether it can be said that the expenses associated with the overseas travel were incurred in gaining the salary income received from the Education Department.

8. The High Court considered a claim for overseas travel by an employee in
F.C. of T. v. Finn (1961) 106 C.L.R. 60, and held, having regard to the particular facts, that the expenditure was deductible in terms of sec. 51(1). In that case the taxpayer, a senior design architect employed by the Public Works Department in Western Australia, went on an overseas tour for the express purpose of studying current trends in architecture with a view to improving his prospects of future promotion. At the request of his employer, he did include in his itinerary a visit to South America with the employer paying the additional costs resulting from that extension. The taxpayer had incurred these outgoings in accordance with the conditions of his service. Dixon C.J. stated at pp. 67-68:

``He was in fact complying with the desires, and so far as going to South America was concerned, with the actual request of the Government. His journey abroad and what he did while in Europe, as well as in South America in the following year of income, was therefore in a correct sense incidental to his employment and most relevant to it.''

In Finn's case the expenditure was incurred in the process of carrying out the duties which gave rise to the assessable income. That aspect, in our opinion, is absent in the current issue.

9. Study expenses by a teacher were the subject matter before the High Court in
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494. The taxpayer, who was employed by the Education Department of Western Australia, had paid an amount of $89 in connection with the submission of theses for the purpose of gaining a Teacher's Higher Certificate. The possession of this qualification resulted in an immediate increase in earnings. He also outlaid $90 as university fees for enrolment to subjects in the Faculty of Arts. The taxpayer was successful on the first of these issues, and the comments of Menzies J. at ATC p. 4186; C.L.R. p. 498 are of interest:

``The taxpayer, in reliance upon the conditions of his employment, spent money to earn more. In these circumstances the outgoings necessary to obtain the certificate ought, I think, to be regarded as outgoings incurred in gaining assessable income.''

It was held on the question of the university fees that there was not a sufficient nexus between the outgoing and the gaining of assessable income to give rise to an allowable deduction. Menzies J. stated at ATC p. 4187; C.L.R. p. 499:

``As I have said, I am not able to find any connection between the payment of fees and the assessable income of the taxpayer beyond the circumstance, which I take to be self-evident, that a teacher who has pursued university studies is likely to be a better teacher than if he had not done so and is therefore more likely to obtain promotion within the department. In my opinion this general consideration is not enough to make the fees deductible; there must be a perceived connection between the outgoing and assessable income.''

10. Helsham J., in
F.C. of T. v. White 75 ATC 4018, referred to the decisions in Finn and Hatchett and had the following to say at p. 4022:

``As the result of the decision in the two cases it seems to me possible to say that expenses incurred in pursuing studies associated with employment will qualify as allowable deductions under sec. 51 when it can be said that those studies are part and parcel of the employment, which means that the expenditure is incurred in the process of carrying out the employee's duties, or, even if they are not such, they

---

ATC 310

can be seen to have a direct effect on income. Where that cannot be seen, I think it will be difficult to establish the necessary connection between the study activity and the employment so as to give study expenses the character of outgoings incurred in gaining or producing the income derived from the employment.''

11. It is our view that the costs associated with the travel to Greece and Crete were not incurred by the taxpayer in the process of carrying out her duties as she undertook the trip very much as a result of her own volition and choice, and thus the expenditure was of a private nature. Nor, in the light of the evidence adduced, did (or indeed could) the outgoings result in any increase in assessable income. We therefore conclude that the expenses were not incurred in gaining or producing the assessable income, and thus no deduction is permitted in terms of sec. 51(1) of the Act.

12. We uphold the Commissioner's decision on the objection and confirm the assessment in issue.

Claim disallowed