Case N94

Judges: JR Harrowell Ch

BR Pape M

Court:
No. 1 Board of Review

Judgment date: 6 November 1981.

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B.R. Pape (Member)

In this reference the issue which falls to be decided is whether expenditure of $855 incurred by the taxpayer during the year ended 30 June 1979 in seeking employment is an allowable deduction pursuant to sec. 51(1) of the Act. At the beginning of the hearing it was admitted by the Commissioner's representative that the quantum of the taxpayer's claim was not in issue.

2. During the year ended 30 June 1979, the taxpayer who held a Bachelors degree in Economics was employed as a marketing planner with a public company in Adelaide. For the period March 1978 to November 1978, the taxpayer had been granted study leave by his employer to undertake a postgraduate degree in Business Management. The conditions applicable to the grant of this study leave were that the taxpayer would receive a salary equivalent to one half of this normal salary and that he would carry out some duties which worked out at about one day per month.

3. He successfully completed the postgraduate degree course and resumed duties with his employer. However because of a downturn in the market in which his employer carried on business the taxpayer's employment was terminated on 7 February 1979.

4. Thereupon the taxpayer made application to the Professional Employment Office (P.E.O.) of the Commonwealth Employment Service (C.E.S.) to receive unemployment benefits whilst he was looking for a new position. During the period 26 February 1979 until 25 June 1979, the taxpayer received unemployment benefits of $874.

5. In pursuit of a suitable position, which was commensurate with his qualifications, the taxpayer attended many interviews in Sydney (three visits), Melbourne and Brisbane. He eventually found a position in Sydney which he took up on 15 October 1979. Whilst he was searching for employment the P.E.O. interviewed the taxpayer approximately six weeks after he made his application for unemployment benefits. He told the Board that ``the discussion was basically about myself, my education, the sort of subjects I did in my degrees, the sort of work I had done previously and the sort of work I would like to do in the future''.

6. Arising out of this interview, the P.E.O. invited the taxpayer to attend three interviews for positions. He attended interviews for two of the positions for which he thought he would be suitable. All of these positions were located in Adelaide.

7. Notwithstanding the assistance of the P.E.O., the taxpayer contacted numerous organizations in search of employment. The majority of these organizations were located in either Brisbane, Sydney or Melbourne.

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ATC 511

The taxpayer claims that the following items of expenditure which were incurred by him in seeking employment are allowable deductions pursuant to sec. 51(1) of the Act:

      . air travel         $533

      . accommodation       150

      . sundries            172

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                           $855

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8. It was submitted by the taxpayer that the above expenditure is an allowable deduction pursuant to sec. 51(1) of the Act because it was a condition of his receipt of unemployment benefits that he take reasonable steps to obtain work. Such benefits were included in the taxpayer's assessable income. Insofar as is relevant sec. 51(1) of the Act provides:

``All... outgoings to the extent to which they are incurred in gaining or producing the assessable income..., shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature,...''

9. It was not contended by the taxpayer that he was entitled to a deduction for these outgoings on the grounds that it related to his future assessable income as the expenditure would have been incurred ``at a point too soon to be properly regarded as incurred in gaining assessable income'' (see
F.C. of T. v. Maddalena 71 ATC 4161 ). His submission was that the expenditure was incurred in gaining or producing his current assessable income, being his receipt of unemployment benefits. The taxpayer further submitted that because he was required to satisfy the ``work test'' as provided by sec. 107(1)(c) of the Social Services Act 1947 in order to receive unemployment benefit any expenditure incurred by him in satisfying this requirement was incurred in gaining the unemployment benefit (assessable income). Section 107(1) of the Social Services Act 1947 provides as follows:

``Subject to this Part, a person (not being a person in receipt of a pension under Part III or IV or a service pension under the Repatriation Act 1920) is qualified to receive an unemployment benefit in respect of a period (in this section referred to as the `relevant period') if, and only if -

• (a) the person had attained the age of 16 years before the commencement of the relevant period and, being a man, had not attained the age of 65 years, or, being a woman, had not attained the age of 60 years, before the end of the relevant period;
• (b) the person resided in Australia throughout the relevant period and on the date on which he lodged his claim for the benefit and -
  • (i) had resided in Australia for a period of not less than 12 months immediately preceding that date; or
  • (ii) satisfies the Director-General that he is likely to remain permanently in Australia; and
• (c) the person satisfies the Director-General that -
  • (i) throughout the relevant period he was unemployed and was capable of undertaking, and was willing to undertake, paid work that, in the opinion of the Director-General, was suitable to be undertaken by the person; and
  • (ii) he had taken, during the relevant period, reasonable steps to obtain such work.''

10. On the other hand the Commissioner's representative submitted that the expenditure failed to satisfy the provisions of sec. 51(1) of the Act. He submitted that the expenditure was not incurred with a view to satisfying the ``work test'' as prescribed by sec. 107(1)(c) of the Social Services Act 1947. It was contended that the taxpayer incurred the expenditure in order that he might gain employment and the essential character of the expenditure here in question was an outgoing incurred to obtain work.

11. The issue which falls to be decided in this reference was the subject of a decision of this Board (as then constituted) in Case L63
79 ATC 496 . In that reference the Board said at p. 499:

``The outgoings on newspapers and travelling here in issue were not incurred in gaining or producing the unemployment benefits; albeit that a failure to incur any such payments might be some evidence of a failure to take

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ATC 512

reasonable steps to obtain suitable work and thus might have led to an inquiry and to the formation by the Director-General (on that and other evidence) of the opinion which is referred to in sec. 107(c) [sic] of the Social Services Act .''

I am in agreement with what the Board said in the above quotation from para. 7 of its decision. A failure to incur the payments claimed by the taxpayer is, in my view not determinative of the issue of whether or not the taxpayer would have become ineligible to receive unemployment benefits. Such a decision was within the discretionary power of the Director-General of Social Security as exercised by him in accordance with the provisions of sec. 107(1)(c) of the Social Services Act 1947. The expenditure in my view did not have a direct effect upon the receipt of assessable income. He received the benefit because he was unemployed not because he spent money in searching for employment, albeit that the continuation of benefits may have been withdrawn if he did not satisfy the Director-General of Social Security of the matters prescribed in para. (c) sec. 107(1) of the Social Services Act 1947. Thus I am of the opinion that the expenditure incurred by the taxpayer in seeking employment was not an outgoing incurred in gaining the unemployment benefit. Moreover I am of the opinion that the expenditure was incurred at a point too soon to be properly regarded as gaining or producing the taxpayer's future assessable income.

12. Accordingly I would uphold the Commissioner's decision in respect of the objection and confirm the assessment.

Claim disallowed