Case J64

Judges:
AM Donovan Ch
RK Todd M
LC Voumard M

Court:
No. 2 Board of Review

Judgment date: 28 October 1977.

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A.M. Donovan (Chairman), R.K. Todd and L.C. Voumard (Members): The taxpayer in this reference is an undergraduate student at a university. As a student he is obliged under the university's rules to pay a compulsory fee at the time of enrolment each year. In his income tax return for the year ended 30th June, 1976, this fee was described as one paid to the Australian Union of Students; in subsequent correspondence it was referred to as a fee paid to the (University) Association of Students. In fact it is clear from the evidence given by an officer of the university that the fee is correctly described as a union fee. The annual amount is paid to the university, by which it is used to assist in providing funds for the various services, activities and facilities provided by or through the university union. The council of the university makes funds available to the union, which operates in the same way as any department within the university, and allocates differing amounts to its various activities. The actual funds are, except in one case, disbursed by the university's finance branch. In the year in question the union fee paid by the taxpayer was $112.

2. The Education Department had awarded the taxpayer a studentship which involved that he be paid a regular income, in return for which he undertook to pursue an approved course at the university, and on its completion to serve the Education Department for a minimum period.

3. In his return for the year ended 30th June, 1976, the taxpayer claimed a deduction of the amount of the union fee he paid during that year. It emerged that the claim was made on the basis of sec. 51(1) as an outgoing incurred in gaining the assessable income that he received under his studentship, or on the basis of sec. 73(3) as a periodical subscription paid in respect of his membership of a trade, business or professional association. The Commissioner disallowed the claim, and the objection that followed, on the ground that the amount concerned was subject to the general rebate provisions as expenses of self-education, pursuant to sec. 159U.

4. There was some doubt whether the taxpayer's objection raised sec. 73(3) as an issue, but having regard to what has been said already about the nature and purposes of the union fee, we think it is perfectly clear that the fee could not properly be described as paid in respect of the taxpayer's membership of a trade, business or professional association. In our view sec. 73(3) cannot, therefore, apply.

5. In pressing his claim that sec. 51(1) alone governed the deductibility of the amount in question, the taxpayer faced two problems. First, he had to show that the union fee represented an outgoing that was incurred in gaining the income provided by the Education Department, and having achieved that he then had to show that the fee did not represent expenses of self-education, for if it did sec. 82A would prevent any effective deduction under sec. 51(1) because the amount of this claim fell well short of the $250 referred to in the former provision, and no other expenses of self-education were incurred in the relevant year. On the first point his argument was that the union fee was an expense the incurring of which was obligatory if he were to attend the university; attendance at the university was necessary in order to gain the studentship income from the Education Department; therefore the payment of the fee was incurred in gaining assessable income. We understood the Commissioner's representative to concede, for the purposes of this case, that the union fee did fall within sec. 51(1), although as no argument was advanced as to the nature of the connection between the expense on the one hand and the gaining of assessable income on the other we should not wish it to be thought that we assent to the proposition advanced by the taxpayer. But assuming that the expenditure did fall within the first limb of sec. 51(1), there remained the sec. 82A obstacle. As to this, the taxpayer argued that in the year in question he was not involved in self-education; but rather that his attendance at the university was in order to meet his agreement with the Education Department from whence he derived his income.

6. In our opinion this argument leaves out of account the definition of ``expenses of self-education'' in both sec. 82A and sec. 159U. In each case (ignoring, for the moment, the

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ATC 546

excluding words of the latter definition) the expression is given, as a composite phrase, a special meaning by being defined to mean ``expenses necessarily incurred by the taxpayer for or in connexion with a prescribed course of education''. We do not see any escape from the conclusion that the union fee was an expense necessarily incurred in connexion with his university course, for in the absence of such a course the question of payment of the union fee would not have arisen. The fee paid, therefore, falls within the expression ``expenses of self-education'' as defined. From this conclusion two consequences follow. First, sec. 82A(1) operates to deny any deduction under sec. 51(1) because even if in all other respects the union fee paid were to fall within sec. 51(1), the amount of the deduction allowable under that section is still nil because the ``net amount of expenses of self-education'' (as defined in sec. 82A(2)) does not exceed $250, being merely $112. The second consequence is that the claim cannot be brought within the excluding words of the definition of ``expenses of self-education'' in sec. 159U as ``expenses in respect of which a deduction... is allowable... under any other provision of this Act''. It follows therefore that the union fee of $112, being expenses of self-education for purposes of sec. 159U, was correctly treated by the Commissioner as subject to the general rebate provisions of the Act.

7. We would therefore uphold the Commissioner's decision on the objection and confirm the assessment.

Claim disallowed