Case Q117

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 25 November 1983.

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

The question for decision in this reference is whether a prescribed fee paid by the taxpayer, a post-graduate student, to a University Student Union during the year of income ended 30th June 1980 is an allowable deduction in terms of sec. 51(1) of the Income Tax Assessment Act.

2. The taxpayer, who had previously obtained the degree of Bachelor of Science, was engaged throughout the year in undertaking further study and research in the field of applied mathematics towards the degree of Doctor of Philosophy. Those activities were performed at a university where he was an enrolled candidate. It was a condition of enrolment that all students join the University Student Union and pay the prescribed statutory fee; in the case of the taxpayer the amount so paid in the year under review was $127. Membership of the Union enabled the taxpayer to pursue the selected course and to utilise the computer and library facilities provided by the University.

3. The taxpayer had been granted a post-graduate research award, and in that respect had received allowances totalling $4,300 during the 1980 year. It was agreed, as between the parties, that the amounts so received constituted assessable income in the hands of the taxpayer. These awards are made available by the Commonwealth Government to students involved in full time post-graduate research normally leading to the degree of Master in the chosen discipline and/or Ph.D. at an Australian university. The grant was made under sec. 14 of the Student Assistance Act 1973, which states:

``An authorized person may, subject to and in accordance with the regulations, approve the grant of a Post-graduate Award to a person who is an Australian citizen or a permanent resident of Australia and is undertaking, or proposes to undertake, as a full-time student at a university or at an advanced education institution, a post-graduate course of study, instruction or research approved by the Minister for the purposes of this section.''

4. The Commissioner disallowed the taxpayer's claim for a deduction of the fee paid to the Union, and stated his reasons on the adjustment sheet which accompanied the assessment notice as follows:

``Not an allowable deduction. A rebate is allowable in respect of this expenditure when total concessional expenditure exceeds $1,590.''

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ATC 608

It appears that no other expenses associated with the course were incurred by the taxpayer during the relevant year. Upon the disallowance of the resultant objection, the taxpayer requested that the matter be referred to a Board for review.

5. At the time of the hearing the taxpayer was employed overseas, and was thus unable to attend. He was represented by his accountant, and the Commissioner by one of his officers. The hearing proceeded on the basis of the facts previously agreed upon as between the taxpayer and the Commissioner.

6. It was the taxpayer's submission that, because he was required, as a condition of the award, to carry out the study and research at a university, the compulsory fee of $127 was expenditure incurred in the production of assessable income, and that therefore the outgoing was deductible under the first limb of sec. 51(1). Additionally, he contended that his pursuits did not come within the definition of ``prescribed course of education'' contained in sec. 82A. That section restricts the deduction allowable in terms of sec. 51 for expenses of self-education to that part of the outgoing in excess of $250. If the fee paid correctly represents ``expenses of self-education'', as also defined in sec. 82A, then the operation of that section will prevent any effective deduction under sec. 51(1) as the amount under consideration falls below the stipulated figure of $250. The Commissioner conceded that the student union fee would have qualified as a deduction under sec. 51(1) but for the limitations imposed by sec. 82A, and stated that the outgoing was an expense of self-education and that as such it fell for consideration under sec. 159U, the effect of which is to regard the fee paid as concessional expenditure and rebatable only to the extent that all such expenditure exceeds the amount of $1,590. As the taxpayer had no other expenditures qualifying for rebate, the concession afforded by sec. 159U would be of no benefit to him.

7. The definitions relevant to the current reference and contained in sec. 82A are:

```expenses of self-education' means expenses necessarily incurred by the taxpayer for or in connexion with a prescribed course of education; `prescribed course of education' has the same meaning as in section 159U.''

The definition in that last mentioned section means: ``a course of education provided by a school, college, university or other place of education and undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade or in the course of any employment''. The taxpayer's representative put the view that the outgoing in question did not come within the description of expenses of self-education because:

• (1) the taxpayer had not undertaken a course of education in the manner generally understood. It was not a course whereby knowledge was imparted in a formal way, nor with a systematic course of instruction embracing the normal student teacher relationship, and
• (2) as the taxpayer had previously been awarded an honours degree and the degree of Bachelor of Science in his chosen discipline, he already possessed the qualifications for use in the carrying on of a profession, business or trade or in the course of any employment.

8. In examining the first of those submissions, we referred to a copy of the Regulations laid down by the Board of Research Studies at the University. The following extracts are recorded with the intention of providing a better understanding of the format of the course.

``BOARD OF RESEARCH STUDIES

PH.D.

REGULATIONS

OF THE DEGREE OF DOCTOR OF PHILOSOPHY REGULATIONS

I. GENERAL

...

II. ENROLMENTS

...

III. WORK FOR THE DEGREE

7. (a) A candidate shall pursue, to the satisfaction of the Board, and in accordance with any special conditions that may be specified in his case, an approved course of study and research in

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ATC 609

the University under a supervisor or supervisors appointed by the appropriate Faculty and approved by the Board. At least one supervisor shall be internal to the University.

(b) At the end of each year of candidature a supervisor shall submit to the Board a written report on the work of each candidate in his charge. He shall report to the Board at any time if in his opinion a candidate is not making satisfactory progress in his work or is otherwise not fulfilling the conditions laid down for him, or appears unlikely to reach the standard of the degree.

8. A candidate for the degree shall devote his whole time to the pursuit of his approved course of study and research;...

9....

10 (a)...

• (b) At the end of his approved course of study and research a candidate shall present to the Academic Registrar, in such form as the Board prescribes, not fewer than three copies of a thesis embodying the results of his study and research...''

9. Additional information on the format is gained by referring to the Notes and Instructions issued by the University to candidates pursuing higher degrees, and the relevant sections are repeated hereunder:

``NOTES TO CANDIDATES FOR HIGHER DEGREES

ALL FACULTIES

AND BOARDS

NOTES AND INSTRUCTIONS TO CANDIDATES FOR HIGHER DEGREES (BY THESIS)

I. GENERAL

...

4. The supervisor will maintain fairly close contact with the student, who should regard it as his duty to keep his supervisor fully informed of the progress of his research, and to consult him about proposed future work and about the general planning of his thesis. If not consulted fairly frequently, the supervisor will satisfy himself that the research student is working satisfactorily.

5. The function of the supervisor is not to plan at all directly the work that the research student should do, rather to provide a trained mind upon which the student may test his ideas and so be led to develop his own critical faculties. The thesis itself should represent largely the student's own work, assisted only by the general aid obtained by discussion with the supervisor as to the most satisfactory method of developing and presenting his material...''

10. The Professor and Chairman of the Department of Applied Mathematics at the University was called as a witness for the taxpayer, and in his evidence he further elaborated on the student-teacher relationship. It appears that the taxpayer had regular weekly sessions lasting one hour with his supervisor, and that during those periods he was required to report on progress made in the preparation of the thesis and would seek assistance and guidance on problems encountered.

11. The question is whether the activities as described constitute a course of education. The meaning of the word educational was considered by the High Court in
Lloyd & Anor. v. F.C. of T. (1955) 93 C.L.R. 645, and the following quotation from the judgment of Dixon C.J. at p. 660 is pertinent:

``No doubt the word `educational' may be used with reference to any process of instruction direction or control to which the young are submitted, however intermittently, if it has a purpose or tendency, or supposed tendency, of developing some of the faculties or of forming character.''

In the instant case it is our belief that the taxpayer was a student under the direction and guidance of the appointed supervisor, and that the purpose of the study and research undertaken was to further develop and advance the taxpayer's knowledge in the discipline of applied mathematics. In our opinion, he was undertaking a course of education provided by a university as mentioned in the definition of ``prescribed course of education''.

12. As to the second limb of the taxpayer's submission, we have formed the

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ATC 610

opinion that the purpose in gaining a doctorate in Philosophy was for use in the course of his employment. The taxpayer's employment history, itemising appointments accepted after gaining the additional qualification, was disclosed, and it appears from the evidence adduced that the holding of such a degree was instrumental in the winning of some of those appointments. We find it difficult to comprehend that the qualification achieved would not be used by the taxpayer in his position as a professional person engaged in a field directly related to the science of mathematics.

13. It is our conclusion that the fees paid to the Student Union were expenses necessarily incurred by the taxpayer for or in connection with the pursuit of a prescribed course of education and, as such, they are correctly described as being expenses of self-education. Therefore, the provisions contained in sec. 82A operate to restrict the deduction allowable under sec. 51(1) to that amount which exceeds $250. As the amount expended was less than the stipulated figure, no deduction is permitted in terms of sec. 51(1).

14. Our attention was referred to Case J64,
77 ATC 544, which was decided by this Board as it was then constituted. We do not agree with the submission made by the taxpayer's representative that the facts differed significantly with those existing in the present reference, and we consider that that decision is supportive of our findings.

15. For the reasons given above, we uphold the Commissioner's decision on the objection and confirm the assessment before us.

Claim disallowed