Case L51

Judges:
AM Donovan Ch
LC Voumard M
G Thompson M

Court:
No. 2 Board of Review

Judgment date: 3 September 1979.

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A.M. Donovan (Chairman); L.C. Voumard and G. Thompson (Members): The taxpayer is employed by a State Education Department as a teacher. His teaching classification is Senior Master, a classification which he has held since 1972. His qualification is that of Diploma of Teaching (Secondary) which was awarded to him by his Teachers' College. He entered that college in 1960, and commenced teaching in 1963 at a technical high school.

2. When the taxpayer first started teaching he taught a variety of subjects, predominantly mathematics and science, but with some English, social studies and physical education added. In 1967 he transferred to another technical high school where he was in charge of the mathematics department. In 1969 he went to another technical high school and was promoted to Acting Senior Master. He studied part-time and it was in fact while he was still at this school, in 1973, that he completed his Diploma, the final examinations for which having been passed by him in 1972. In 1973 he ``put in'' for promotion to Principal Class 2 (Deputy Principal) and was refused. At the beginning of 1978 he transferred to another high school.

3. During the academic year 1976 the taxpayer taught the following subjects at the A High School:

      Mathematics        20 periods of 35
                            minutes
      English             5 periods of 35
                            minutes
      Gliding (Elective)  3 Periods
      

During the academic year 1977 he taught the following subjects at the other High School:

      Mathematics        24 periods
      Gliding             2 periods
    

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4. The avenues of promotion now open to the taxpayer lead either to special Senior Master where he would be in charge of, and adviser on, mathematics for several schools in an area, or to Principal Class 2 (Deputy Principal). In the criteria for assessment for eligibility for promotion to special Senior Master there are included ``Breadth of outlook, receptiveness to new ideas, initiative, familiarity with a wide variety of teaching methods''. The criteria for assessment for promotion to Deputy Principal (which as previously stated the taxpayer was refused in 1973) include ``professional background for making considered judgments''. The promotion panel consisted of two persons, one of whom is a ``principal education officer''. When the taxpayer's 1973 application was refused he received satisfactory gradings in two of the three areas of assessment, and in the one in which he was not deemed satisfactory the principal education officer wrote ``Wider and deeper experience needed''. One way of obtaining such experience was to change schools, and the taxpayer did this as soon as an appropriate opportunity offered itself. Another way, he said, was to undertake the trip to China the cost of which is the subject of this reference and to which we now turn. It may be added that the taxpayer's present principal, who would form one half of the promotion panel, went on record, apparently for the purpose of this reference, as saying that ``I strongly support the gaining of wider experience in teaching methods and school systems through participation in overseas study tours such as the... China tour''. He is a keen advocate of this sort of tour and has been on some similar type of study tour previously himself. The taxpayer feels that this attitude to his China tour will stand him in good stead when he applies for promotion.

5. The China tour was brought about, with some help at a political level, by a senior lecturer in staff development at a College of Advanced Education in a State Department of Further Education and by a senior lecturer in the sociology of education in the education department of a University. An annexure to the taxpayer's income tax return for the year ended 30 June 1976 managed to convert these facts into a statement that ``During the year the Education Department and the University of... organised a tour of China...'', a statement that was plainly incorrect and might have had a tendency to mislead an assessor, but we make no criticism of the taxpayer himself as it rather appears that he did not himself prepare the return, and while he of course signed the return he does not appear to have authenticated the annexure nor was he asked anything about the matter at the hearing.

6. The taxpayer was approached by the first mentioned of the organisers and was informed that the trip was a possibility. The tour was not advertised except on a personal contact basis. The idea was to get a group of teachers into China for the purpose of looking at education systems in China, and the political approaches were made on this basis. The main point is that the tour was certainly not a commercial type of tour organised by travel agents, although a travel agent was engaged to organise the travel for the party to the point of entry into the People's Republic of China and back again from the point of exit therefrom.

7. The taxpayer said that the aim of the tour ``was to examine the education system in all aspects in China with an eye to increasing our own knowledge and experience and keeping up to date in any new trend in education. The reason we picked China is because they have made probably the most rapid progress in the last 30 or 40 years''. He went on:

``We had meetings before we went. Probably the most important meeting was where everybody who intended to go made a submission on what they wanted to see and why, so we could reach some consensus on where to go. There were one or two people on the schools commission based in Canberra. There were some from tertiary, secondary and primary. We all submitted our own ideas of what we wanted to see...

I wanted to see the development of their secondary education: how they organised secondary education, their type of assessment procedures, what secondary prerequisites are there for going to tertiary institutions, the time allotted to secondary schooling in their society, and the main thrust of what they were doing. I suppose the main thrust of what they were doing probably sums it up.

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ATC 379

It is fairly important not to take this in isolation. My particular field is secondary, but the thrust these days is education right across the board, even in Australia. There are moves afoot in (taxpayer's State) to get a whole programme from pre-school to matriculation, rather than in two segments. There is work going on now.

Q. Are you involved in that type of work?

A. Only within my own school. I am not on the panel that organises it for the whole State. I get reports on the progress of the R-12 committee, which means from pre-school to year 12. My job as senior master is officially six-tenths teaching and four-tenths administrative. That means I have to help train new teachers and keep teachers informed. I am jointly the head of the mathematics department.

The preparation for the trip: we were given a recommended reading list. I read several books... I read Mao Tse-Tung and Education by John Hawkins, New China's First Quarter Century, which does not have an author. It is printed by the Foreign Languages Press, Peking. It has a section on education in China. I also read two supplements from China Reconstructs; More Basic Facts About China and Some Basic Facts About China, which have segments on education. I read a couple of general books, but I cannot remember which ones.

There were about four meetings. I was able to attend two of them. The most important one was to submit what you wanted to see and plan the thing as best we could. The theme of the others was what to expect in China, how to behave in China and so on.

We had to submit to the Chinese what we wanted. They had the ultimate decision in what we could in fact do. We did not get a completed itinerary of exactly where we would go. They said they would do the best to accommodate us. We did not know exactly which institutions we were going to see until either we met the representatives in Hong Kong or just over the border, when we met the Chinese people's representative and they gave us a detailed itinerary.''

8. When the tour got under way, the party included three persons who were not teachers or persons involved in education. This was because the last three places had not been filled. One of the three was the taxpayer's wife, a trained nurse.

9. On the tour itself, the group visited one or more of the following types of educational institution: residential kindergarten, day school kindergarten or infant school, primary school, secondary school, university, physical culture institute, teacher training institution, factory school, commune school, vocational school and ``cadre'' or ``May 7th'' school, this last being a school at which people in the professions attend voluntarily, it was said, to keep in touch with the peasants in the countryside and thus avoid the perils of educational elitism.

10. At all the schools or educational institutions visited, some 15 in total, there was a fairly standard procedure, which was to be welcomed by the revolutionary committee, being the council who run the school. Then there was a seminar, at which all went into a long conference room where there were tables set out and everybody sat down. The chairman of the council, the heads of departments and any other specialists were introduced. Then the group was given all the statistics about the school, was given all the statistics about the school what they were doing and why they were doing it, and a lot of general information. Questions and answers followed, and then there was an inspection of the school. After that it was back to the conference room for further questions and answers in case anything had arisen in the course of the inspection.

11. In evidence the taxpayer indicated that the educational system in action was very ``structured'', and disciplined, ``like we used to have in the case of schools in this State about 20 years ago''. Another noticeable feature however was that the whole thrust of the system was to link theory and practice. This applied right through, but a very clear example is the factory school, for people who had left school in the ordinary sense, but have a chance to complete their education in one of these schools.

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ATC 380

12. The tour was not confined to educational visits. The group went to: The Square of Heavenly Peace, the Forbidden City, the Great Wall, the Ming Tombs and the Chinese Opera in or from Peking; the Summer Palace, Belltower, Panpo Museum, General Hospital, Huaching Hot Springs, Shensi Provincial Museum and Big and Small Goose Pagodas in or from Sian; Provincial Museum, Cotton Mill, Air Raid Shelters and Pumping Station on Yellow River in or from Chengchow; Yangtze Bridge and River and East Lake (the latter twice) and a Department Store in or from Wuhan; an ivory carving factory and shops in Kwangchow. When one looks at the itinerary as explained by the taxpayer in evidence, it rather looks as though the tour activities were divided about equally between what may be called school visits and visits to places and institutions that could not be so described. We have taken into account the fact that sometimes for instance a visit to a factory should be put down as a school visit because of the importance of the factory school as previously explained. No doubt the ``non-school'' visits were informative and broadly educational in a cultural sense, and it would have been mistaken to have omitted them. The tour was strenuous and needed to be balanced, but the existence of them at least does not strengthen the taxpayer's case. On the other hand, neither does their existence give to the entire tour any of the complexion of an ordinary tourist venture.

13. The taxpayer's duties during the year of income in question were, he said, on two levels. The first was within his own mathematics department, where he was expected to programme and design the courses. He was responsible for standards and for innovations in new techniques brought into the mathematics department and was engaged in advising teachers on the techniques of teaching and in helping student teachers who came to the school for practical teacher training. In relation to techniques of teaching, the taxpayer pointed out that in his State there had been a big move towards open space education where the children progress on an individual basis and are free to move around the room. He went on:

``It is not a structured disciplined set-up as it used to be. In some schools that have been recently built and, as far as I know, all schools built in the last couple of years and all schools planned, are built on that basis. Traditional schools can maintain their traditional set-up, if they wish.

There is a vast difference between teaching the class where every kid has his own programme and goes along at his own pace, and teaching them in the structured classroom where you are trying to teach the lot and bring them along at an average pace. That is the sort of thing that would be very important, whether I advise or support the individual progression methods as against the more competitive structured type arrangement.

There are minor things like how you address the classroom, do not talk to them with your back and the correct them with your back and the correct questioning manner and so on. Also, how to design a test and all those other minor matters.''

14. The taxpayer enumerated five areas in which he said that the China tour had for him fulfilled its intended mission as set out in the opening sentence of para. 7 above, namely of examining the education system in all aspects in China ``with an eye to increasing our own knowledge and experience and keeping up to date in any new trend in education''.

15. The first area was that of standards. In the taxpayer's field of mathematics, standards in the equivalent age group to those under his care in Australia were generally as high as our best children as far as the sort of topics they were covering, the neatness of their books and the setting out of their problems were concerned. He was greatly impressed by the results of the ``structured disciplined set-up'', which in China was very effective as far as producing excellent results. The classrooms were ``set up like they used to be 20 years ago''. This the taxpayer said was important to him ``because I have to advise teachers on which approach to take. It is very difficult to argue from a point of view that I saw so-and-so, but when I have actually been in a place and seen the whole education system geared to that, and seen results of it, I get myself into a much better position for forcible and powerful argument. Apart from gearing my teaching a bit more to the conservative way, I am responsible for all the kids who do

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ATC 381

mathematics in the school''. All this helped the taxpayer in making up his mind about the modern individual progression, less competitive type of approach. The obvious irony of course is that the pilgrim who went on the trip seeking, amongst other things, new trends, in fact stepped backwards in time and liked what he saw.

16. The next area was that of remedial teaching. The traditional course in the taxpayer's State has been to take backward children out of their classes, put them in a special group and give them a remedial course. In China the taxpayer found the following technique used:

``... in any class situation they have three or four of these kids who are remedial, kids who are backward in mathematics, and they would pair them off with the best kids in the school.

They would screen these kids in the class, the best ones, and find out which ones amongst them are willing to help these other kids. They try to find ones who have a bit of natural ability for teaching or explaining something. Part of their classroom duty would be to sit in company with this kid - all the desks were in pairs - and encourage the weaker kids. They claim it is a far better way to do it because if you remove kids straight away they feel as if they are different and the other kids refer to them as dummies, and that sort of thing, whereas if they remain in the same group they do not have this sort of social stigma, especially if you are selecting the kid who is quite happy to do this sort of thing.

For example, at my school I used that sort of system in some of my classes, and the teachers are quite happy about it.''

17. The third area was in the application of a feature of education in China that has been already mentioned:

``The main thrust of education in China, which you have probably picked up, is the integration with what they learn in schools and what they are going to do after they leave school, and what other people do in society. They go to the extent of bringing in people from factories, farms, to give a lecture to kids, or teach the kids. There is a piggery at a secondary school, so people come in from the countryside to assist the kids.

You also get kids going off in groups to visit a nearby factory and take part in what is going on, so you get a better idea of what is relevant, what is the relevance of learning in the school. That is the Maoist thought on the whole thing.''

The taxpayer went on to explain what he has done since his return. He organised a visit with his mathematics staff to a Technical College. They visited all departments. All of his staff visited each one of the departments to do with apprentice training, a variety of apprentice-type courses, ``and had discussions with the people there of what they want to see taught in the schools, and why. I have the ultimate responsibility of what goes on in the curricula in the schools, so I tailor my course to meeting the requirements of the kids after they leave school''. From here he went on to speak of attempts to avoid the break between primary and secondary school, and between secondary and tertiary. Closely linked with this was the fourth area mentioned, in which the taxpayer (was taught the elective subject of gliding for 2 or 3 periods per week) explained a ``link'' course which he had initiated between his school and the aviation industry. At a local aerodrome a further education department has set up pilot training and nearby an aviation company manufactures a product associated with the aircraft industry. The taxpayer set up a course in which a handful of selected children from high schools would use part of their school time, less than half a day a week, to go once a week to the local aerodrome where they would be looked after by the further education people and by the aviation company.

``We would go there and see what flight mechanics do, go through all the workshops, do part of the pilots' theory course, visit the... air base to see what is going on there, then down to... to see what air traffic controllers do, and so on. So they got an across-the-board look at what it is like to do each type of occupation in aviation. At the same time these kids embarked on a project of planning and building a small (product). It is not quite complete.''

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ATC 382

The taxpayer said that he did not think that he would have been at all inspired to do this sort of thing had he not seen the relevance of trying to tie in theory and practice in China.

18. The fifth and final area was that of ``work experience''.

``Work experience is also similar to this scheme they have in China. I did not initiate the main thrust. It is a very recent development, but certainly, in my own school, at senior staff meetings, I very strongly argue for it and my school is one of the few that do participate in these programmes - where kids on one day of their week actually go out into the work force. You tee it up with factories, different factories and things in the local area, to allow these kids to go out and really do a day's work there. This is trying to help the kids who are not very good academically and fail to see much relevance in what they are doing. It is a very hard job these days to discipline kids in that regard. You are not allowed to physically touch them and you get into trouble keeping them in at lunch time - they have their own rights and so on - so you have to go to other efforts to demonstrate the relevance of what they are doing.''

Finally, the taxpayer emphasised two aspects of his experience as related to the China tour:

``In my job of training and advising staff, I am influenced by what I saw in China. In my remedial programme, that is entirely an innovation that I was not aware of. We actually screen kids and deliberately pair them off, one with the other, and I have arranged staff visits strongly supporting the work experience and initiated the link course... I say that it has assisted me in my own job, which is part administration. It has assisted me in my administrative role and in my own teaching role along the lines that I have mentioned under oath, the role of teaching teachers as well as students and being responsible for the organisation structure and innovations in my department.

It has also assisted me in my general administrative capacity within the school as far as taking any initiative goes and supporting new trends that are not universal so that they require individual school decisions on whether to proceed or not. I find myself in a far better arguing position on things like work experience, link courses, and so on, having had some exposure to them.''

19. It is trite to observe that the taxpayer's claim to deduct the cost of the trip has to comply with the requirements of the first limb of sec. 51(1) which permit the deduction of ``outgoings to the extent to which they are incurred in gaining or producing the assessable income...'' In the circumstances of this case it must be the taxpayer's assessable income arising as a teacher in the gaining or production of which the cost of the trip must have been incurred. It is not necessary that each item of expenditure in its entirety should have been so incurred for the words of the section permit apportionment in appropriate cases.

20. To the uninitiated it might appear somewhat strange that the cost of travelling to and in China might constitute an expense incurred by the taxpayer in earning his income as a mathematics teacher in an Australian school. However a number of authorities, the first of which was
F.C. of T. v. Finn (1961) 106 C.L.R. 60, make it plain that the first limb of sec. 51(1) requires a wider interpretation than the words at first reading might suggest. It may be observed that that case put to rest the narrow test which the Commissioner had until that time applied, that is to say, a test whether the expenses sought to be deducted were incurred as a condition of the taxpayer's employment.

21. Although Finn's case has been referred to on a number of occasions and was considered in some detail by Helsham J. in
F.C. of T. v. White 75 ATC 4018, it is, we think, necessary again on this occasion to make more than passing reference to it. The taxpayer there was the most senior of three design architects in the Public Works Department of Western Australia. Between his office and that of the principal architect (which position would become vacant within a year) there stood two positions. Some time after he had first joined the Public Service he had spent four years studying and working in Europe and America. Very much later he used accumulated annual leave and furlough

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to provide him with a period of some nine months leave of absence to permit him to go abroad again. The itinerary was carefully planned for architectural inspection and study and he was asked by the principal architect to extend his trip to South America to examine features of architecture there which were regarded as having some significance for Western Australia. The State made a contribution towards the additional cost involved in this extension of his trip. At p. 65 of the report, the Chief Justice said:

``It was admitted on behalf of the Commissioner of Taxation that all the taxpayer's activities abroad were devoted to architecture and its study. He kept a written record of what he did and of the buildings he visited and studied. It is clear that he covered a great deal of architectural ground, that he concentrated upon it for seven days a week throughout his tour and that he made voluminous notes, took numbers of photographs and made many sketches and wrote up reports and records. In short, there can be no question that all his available time was devoted to the advancement of his knowledge of architecture and the development of his architectural equipment, outlook and skill. If the point be whether the money claimed as a deduction were laid out for the improvement of his capacity to do the work for which he is paid, there could be no doubt that the whole expenditure was directed to that purpose.''

22. It was held unanimously by the Court that the expenses of the trip were deductible under the first limb of sec. 51 of the Act. In F.C. of T. v. White (supra), at p. 4021, Helsham J. took the view that the reasons for this decision were twofold, the first being that the trip and the expenses connected with it were simply ``part and parcel'' of the taxpayer's employment. The second ground, as it appeared to him, was ``that expenses incurred by a taxpayer for education that will better equip him as an employee to carry out the duties of his employment and will further his prospects of advancement in that employment and so increase his income, can be outgoings incurred in gaining or producing his income''.

23. To deal with the first aspect which in the view of Helsham J., Finn's case requires to be considered, the nature and ambit of the taxpayer's teaching position have to be examined and the activities of the trip ascertained, and then the relevance of the latter to the former determined. We have earlier explained the actual duties of the taxpayer's position. They include the teaching of mathematics in a classroom, and in connection therewith, the adoption of appropriate teaching techniques. He was also responsible for standards and innovations in the mathematics department and was required to give advice to other teachers.

24. Unlike the taxpayer in Finn's case who had carefully planned his itinerary, the taxpayer here was uncertain until he arrived in China what aspects of that educational system would be examined since the itinerary was determined by the Chinese authorities. It can at once be said that as the trip eventuated it provided nothing, and indeed was never expected to yield anything, which would expand the taxpayer's knowledge of mathematics as such. It was, no doubt, of interest to him to compare the attainments in that subject of the children for whom he was responsible with those of children of a similar age in China, but that is another matter. The ``structured'' nature of school classes in China and the technique of remedial teaching employed there were surely nothing new in Australian schools, for both, if they have not been followed here for many years, were at least familiar here several years ago. The Chinese practice of bringing in people from commerce, industry and farms to lecture school children is a matter of interest but can have hardly any relevance in the Australian situation. The taxpayer's resolve to ensure that the content of the courses for which he was responsible was directed to what children would require after they finished school and his attempts to familiarise children with conditions in working life, were possibly not initiated by his observations abroad but no doubt were strengthened by them. Nevertheless, neither in prospect nor in actuality did the trip have more than an incidental connection with the taxpayer's position in Australia. Certainly, there is a world of difference between the relevance of his trip to his teaching post and

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ATC 384

that of Mr. Finn's tour to his position of senior design architect.

25. The matter is essentially one of degree and, as such, is impossible of precise definition. In our view, however, it is not open to us to conclude that the activities undertaken by the taxpayer on the trip had such a degree of connection with his salaried position that they can be regarded as part and parcel of it (if we may use the phrase employed in White's case).

26. We proceed to consider now the claim in the light of the second ground adverted to by Helsham J. The requirements necessary for the taxpayer's promotion within the teaching service and hence for his earning increased salary have already been set out. The evidence was that the trip to China afforded one way of possible promotion and although strictly it was not admissible, we have paid regard to the letter from the taxpayer's present headmaster which stated that he supported the gaining of wider experience through overseas study tours. Giving the greatest possible weight to all the relevant matters we are nevertheless left in a position in which we cannot regard the China trip as having any more than peripheral significance in better equipping the taxpayer as a teacher and thus furthering his prospects of promotion. We think that the connection between the trip and these matters is certainly no less tenuous than was the connection between the course of study and the improvement in the respondent's position examined in White's case (supra), the cost of which was held to be not deductible. Nor is the degree of relevance any closer than was the university course to the teacher's income producing activities the cost of which was rejected in
Hatchett's case 71 ATC 4184; (1971) 125 C.L.R. 494. We may add that the present facts are quite unlike that part of Hatchett's case in which the respondent was successful. The costs there held to be within sec. 51 were those associated with obtaining a teacher's Higher School Certificate, the mere gaining of which resulted in the payment of increased salary.

27. In short for the reasons mentioned we are of the opinion that the activities undertaken by the taxpayer during the trip in question had insufficient connection with the performance of the duties of his position or with the derivation of increased income from possible future promotion to qualify the cost of deduction under sec. 51 of the Act. We would accordingly uphold the Commissioner's decision on the objection and confirm the assessment.

Claim disallowed