Case R88

Judges:
MB Hogan Ch
P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 14 September 1984.

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M.B. Hogan (Chairman), Dr. P. Gerber and Dr. G.W. Beck (Members)

This taxpayer is employed as a safety officer by a large public utility's organisation in one of Australia's cities. In the year in question, 1981, he was enrolled part-time at a college of advanced education in a degree course in business, majoring in industrial management. He claimed the associated costs as a deduction under sec. 51(1) and his claim was rejected. He was granted the self-education concessional rebate in respect of $250 of the expenditure.

2. Born in 1926, he held an overseas degree and had worked as a mining engineer overseas and in Australia before joining the public utility in 1976. His work as a safety officer did not call on his professional engineering skills except in the most general way, and the position involved such things as identifying hazardous conditions and situations, organising lectures and similar worker education programmes in safety, preparing films on safety, investigating accidents and drawing together statistics and information about accidents, injuries and so on. The taxpayer said he discussed the course he was considering taking with his immediate superior who gave ``support and encouragement'' and with a more senior superior who thought it might be of use in his work and he therefore enrolled in 1978. The subjects of the course included such disciplinary areas as finance, law, economics, data processing, statistics, management science, quality control and industrial practice and it was successfully completed in June 1984 just prior to the hearing of his case. The taxpayer was at that time about 58 years of age.

3. Nothing that the taxpayer said in evidence led to the conclusion that he expected the business degree to enable him to obtain promotion with his present employer or some other employer outside the area of safety. There were, he said three safety officers in the utility, one at Level Grade I and two at level Grade II. He occupied a Grade II position and he said progress from Grade II to Grade I was by ability and experience, and staff establishment was not restricted to just one Grade I officer. The staff development officer from the utility, when called by the Commissioner, said there was an establishment restriction to one Grade I officer and the position was filled in 1981 and was still filled. This witness also said that there had been organisational changes in the utility recently and two new positions had been created which would be of interest to people with the taxpayer's background and experience. One of these positions had already been filled - the taxpayer being an unsuccessful applicant - and the other position had not yet been advertised. The forthcoming establishment of these positions would not have been known to employees in 1981, the tax year in question, or in 1978 which was the year the taxpayer commenced his course. The witness also said that undertaking the course was not a condition of the taxpayer's employment but the taxpayer had been granted one-half day per week as study leave. This study leave was granted only when the course was deemed useful for the development of the employee. It was the employer's policy that staff generally be encouraged to study. The taxpayer said that since completing the course he had been recommended for promotion by the Chief Engineer, Administration. At the date of hearing he remained a Grade II officer.

4. The circumstances described above leave us in no doubt that as the law stands the taxpayer must fail. He set out on a programme of self-improvement and we accept that he believed this would assist him to impress his employer with his dedication and would also improve his efficiency. He hoped these factors would result in promotion; indeed, he might have expected that they would so result, but, given the circumstances of his employment, such an expectation would have to be regarded as exaggerated. The words of Menzies J. in
F.C. of T. v. Hatchett 71 ATC 4184 at p. 4187 when considering a claim for deduction of university fees by a school teacher still apply:

``... 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 outgoings and assessable income.''

This inability to identify a ``connection'' between the outgoings and assessable income emerges also from the facts of this case. There

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ATC 597

was not here an express or implied condition of employment that the course be undertaken, nor were there circumstances that would allow the line of reasoning adopted in cases such as
F.C. of T. v. Smith 78 ATC 4157 and
F.C. of T. v. Wilkinson 83 ATC 4295 to be applied. That reasoning is perhaps encapsulated in the words of Waddell J. in Smith at p. 4162 that outgoings by an employee are deductible if ``the taxpayer, in reliance upon the prospects of promotion which appeared reasonably to be present, spent money to earn more in the future''. It would be stretching the facts in this case to claim that prospects of promotion appeared ``reasonably to be present'' in the 1981 tax year.

5. The Commissioner's decision on the objection should stand.

Claim disallowed