Case L43

Judges:
HP Stevens Ch
CF Fairleigh QC
JR Harrowell M

Court:
No. 1 Board of Review

Judgment date: 6 July 1979.

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H.P. Stevens (Chairman); C.F. Fairleigh Q.C. and J.R. Harrowell (Members): The taxpayer is employed by the State Government (at relevant times) as a school teacher at a high school and on some evenings at a technical college. His return of income for the year ended 30 June 1975 was adjusted by the Commissioner (so far as presently relevant) in respect of claimed deductions as follows:

• (a) Overseas travelling $400 disallowed.
• (b) Cost of lighting and heating in home $30 reduced to $10.
• (c) Purchase of ``reference'' books $60 disallowed.

2. The taxpayer's return of income for the year ended 30 June 1976 was adjusted by the Commissioner in respect of claimed deductions as follows:

• (a) Overseas travelling $1,300 disallowed.
• (b) Cost of lighting and heating in home $30 reduced to $10.
• (c) Depreciation on ``professional library'' $105 reduced to $43.

3. In each instance the taxpayer objected thereto, the Commissioner decided to disallow the objection and that decision was referred to a Board for review.

4. The taxpayer now concedes the issues 1(c) and 2(c).

5. The relevant provisions as set out in respective returns to support the claimed deductions at issue are:

1975 year

• (a) Educational tour to Fiji Honiara - engaging of Indian guide - driver 2 days Fiji - 1 day Honiara see film cards enclosed, lectures and use of snaps and details to pupils English and SS. masters.
• We spent two days in Fiji and one in Honiara with out native guides (see attached cards). As per photos, we tasted a typical Indian lunch and spent the days with their families. Estimated cost $2,500.
• (b) Lighting and heating while preparing time tables, Lectures marking for school purposes.

1976 year

• (a) Educational tour on ``Australis'' visit to Auckland (N.Z.) Islander problem Rotorua Hot Springs geology Suva Tonga to assist in colour problem (... State High School) Larger aboriginal population habits, housing food (see itinerary film) New Hebrides to study volcanic activity (science/geology) weathering sea and water erosion. Lectures to teachers pupils at... State High Schools. Material lent to History Geography and Science Departments Aboriginal Education Department of Aboriginal Education (see photostat Visitors Book scil. which shows entries of 18 February 1976 and 14 July 1976 by persons associated with the education of aborigines).
• (b) Heating and lighting. Marking preparation of courses, lectures.

6. The only part of each notice of objection which needs to be set out concerns travelling expenses, viz., (i) 1975 year objection: Tour - both last year and the previous year 1974 (sic) were along exactly similar lines to a tour conducted by a group of teachers and private individuals in May 1972 and this was allowed as a taxation deduction. (ii) 1976 year objection: Tour - The nature of the cruise meant (a) I met a variety of professions and occupation to broaden my outlook my education and my community involvement, far beyond the scope around the school; (b) with visits to New Zealand and the contact with Mr.... contractor and a leading citizen in... Auckland, it was possible to get first hand information in the effect of the Islanders on New Zealand and their effect on the Maori population by personal contact; (c) using... born Indian in... taxi driver car No.... personal introduction to indigenous people and their problems 20-80% ratio similar to... High (school) with 20% aboriginal and 80% white population; (d) each and every

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ATC 270

occasion I have an overseas trip ``my horizons are broadened to keep up with the experience of my own staff, a large number spend their vacation overseas''. In the letter which requested reference to the Board of Review of the decision on the 1975 objection the taxpayer said: The educational tours previously approved and granted for myself and other similar excursions were acclaimed by pupils and teachers of... High, a school where I was Deputy Principal last year.

7. The deductions allowed to the taxpayer for expenditure on overseas travel in assessments for previous years have no bearing on the question whether any deduction for outlays in the years here in issue should be allowed for overseas journeys: the earlier assessments do not raise any estoppel in the present proceedings; those assessments were made on such material as was then before the Commissioner; errors may occur in the compilation of assessments for such reasons as incompleteness of information placed by the taxpayer before the Commissioner (whether or not the taxpayer is at fault in the matter); the Board of Review is bound to endeavour to reach the right conclusion on the documentary evidence and oral testimony placed before it regardless of what has occurred with earlier assessments which are not in issue. As it happens the taxpayer was mistaken as to what occurred in earlier assessments, but there is no point in pursuing the matter.

8. The taxpayer and others who are unfamiliar with the requirement of the first positive limb of sec. 51(1) (i.e., losses and outgoings to the extent to which they are incurred in the course of gaining or producing the assessable income) have the misunderstanding that expenditure on an overseas journey (even as here a standard New Year's holiday cruise enlarged by travelling to remoter areas not on the regular tourist schedule) comes within that requirement if the activities so undertaken can be shown to be of assistance in performance of the duties of the employment. The misunderstanding is often thinly disguised by the use of a phrase such as ``perceived connection'' or ``incidental and relevant'' as a talisman; when those phrases, properly understood, are only comments made by judges on particular facts.

9. Whilst there is an observation by Dixon C.J. in
F.C. of T. v. Finn (1961) 106 C.L.R. 60 at p. 68; 12 A.T.D. 348 at p. 351 with respect to outlaying money ``in the acquisition of better knowledge'' the gravamen of the judgment is the stated conclusions of Dixon C.J. the fourth of which is that ``it was all done while he was... acting in accordance with the conditions of his service''. So also Kitto J. C.L.R. at p. 70; A.T.D. at p. 352 said that ``in making the investigations and studies which he pursued during his period of leave, (he) was acting within the scope of his office, and therefore in the gaining of his salary''. In agreeing, Windeyer J. said that each case of this sort must depend on its own facts (at p. 70; 352).

10. The other leading authority on this subject is
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494 where Menzies J. drew the distinction between the teacher's High Certificate which resulted ipso facto in an automatic increase in salary (possession of the certificate carrying with it a higher salary range immediately) and the university degree which did not have that result.

11. The taxpayer does not assert that there was a term implied in the conditions of his employment (nor was there any express condition) that he should undertake the journey overseas and incur the expenditure which is here in issue. There was not any ``automatic'' increase in salary as a result of the journey and investigations overseas; and it does not assist the taxpayer merely to achieve a higher income after his return to Australia.

12. In any consideration of the right of an employed person to a deduction for expenditure under sec. 51(1) it is necessary to confine attention to the first positive limb of sec. 51(1) where the deduction is not lost by reason of the exclusions set out in sec. 51(1).

13. It is not sufficient for an employee as a matter of choice, even with the encouragement of an employer (and not as a condition, i.e., a term implied or express, of the employment) to undertake expenditure which the employee believes will increase his prospects of promotion or otherwise enhance his ability to earn income. The relevant case law has been analysed in recent decisions of this Board, e.g., the quorum decision in Case K29,
78 ATC 281 and the joint decision in Case L28,
79 ATC 138.

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ATC 271

14. The taxpayer became a school teacher in 1941 and after war service he returned to that employment with leave taken to obtain, as a full-time student, a B.Sc. achieved in 1948. In the course of time he became a deputy principal at a school which has a considerable number of children who are aborigines (or of aboriginal descent) and after transfer to another school the taxpayer held the hope that one day he would return to the first-mentioned school as principal and thereupon he would carry out his ideas for a special school curriculum for the benefit of those and other disadvantaged children. The taxpayer succeeded in this objective with a consequent increase in salary and he attributes his success in part to those journeys undertaken in 1975 and 1976 tax years.

15. The first journey of any consequence was to Cairns in May 1972 and the next was to Norfolk Island in August 1972, during school holidays in each instance. He was accompanied by some members of his family and other persons. In New Year 1974 he journeyed to islands in the South Pacific accompanied as before. The trips at issue (New Year 1975 and New Year 1976) were also South Pacific cruises with the taxpayer similarly accompanied.

16. The particular attraction of northern Queensland and South Pacific islands was the similarity of the conditions and life style of the indigenous people with that of aborigines. His special interest in this subject has led in 1979 to visits to his school of persons from Island countries.

17. Although by reason of what is set out in para. 9 to 13 hereof it is of little consequence, it is necessary to say that the taxpayer's statement of expenditure has not been supported by his evidence. In respect of the first cruise there was a discrepancy of about $700 from the stated estimated total cost for which the only possible explanation advanced was the cost of hospitality to others on board the cruise ship in efforts to engage them in useful conversation. One of these persons was a senior official of the State Public Service Board previously unknown to the taxpayer. The conversation with that person was directed mainly to the problems which would arise if school children took part in work programmes in say factories and were injured and the parents sought to sue the Government or the employer for damages, perhaps for failure to provide safe working conditions. A discrepancy also exists between the proved costs of the second cruise and the claimed amount - this amount being far in excess of the proved costs in respect of the taxpayer himself.

18. Photographs taken by the taxpayer, or on his behalf, during these cruises are now in the school's ``archives'' together with his diary notes of the things of interest seen by him on these journeys. The evidence is that these documents are of value to his staff in teaching curriculum subjects. This circumstance does not enable the taxpayer to bring any part of his expenditure within the first positive limb of sec. 51(1).

19. The only remaining issue is the allowance for electricity used at night-time by the taxpayer in his home study whilst he was carrying out the usual after-hours work of a school principal. He estimates the time as being two or three hours a night five nights a week for 42 weeks in the year. An exhibit tendered by the taxpayer indicated, inter alia, his electricity accounts for both years dissected into ordinary and off-peak amounts, tariff charges and the hourly costs of running certain appliances. Regard to the details contained therein does not demonstrate that the Commissioner's allowance of $10 for each year is inadequate.

20. The decisions on the objections are upheld and the respective assessments are confirmed.

Claims disallowed