Case R47 (Public hearing: Bennett v. F.C. of T.)

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 22 May 1984.

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K.P. Brady (Chairman). J.E. Stewart and D.J. Trowse (Members)

The question for decision in this case is whether expenses incurred by the taxpayer, a school teacher, in travelling overseas during the year of income ended 30 June 1980, are an allowable deduction under the provisions of sec. 51(1) of the Income Tax Assessment Act. Details of the taxpayer's claim that were made in her return of income may be set out as follows:

                                                  $
      Air Fares                                 1,675
      Euro Rail Fare                               75
      Food and Accommodation                      845
      Sundry Fares and Admission Charges
        to places of interest                     176
                                               ------
      Total Expenses:                          $2,771
                                               ------
                                               ------
      Claimed 25% of $2,771       =              $693
                                               ------
    

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ATC 381

2. Despite submissions to the contrary by the taxpayer's representative, it is not relevant for present purposes, in our opinion, that the Commissioner incorrectly disallowed an amount of $695 in lieu of the amount of $693 in raising the taxpayer's assessment for the 1980 year. In the events that happened, the Commissioner subsequently amended that assessment to allow a deduction of $2 (thus giving rise to a credit of 66 cents being issued to the taxpayer) and the reduced assessment, which correctly reflected the disallowance of the taxpayer's claim as made, was properly before the Board having regard to the provisions of the Act, in particular to sec. 191.

3. However, in the taxpayer's letter of objection, the above claim appeared to be amended to include the abovementioned amount of $176 expended in relation to fares and admission charges as a cost attributable to the purchase of teaching aids in the nature of slides and brochures. In the circumstances, it would seem that the taxpayer's claims overall could be regarded as, perhaps, amounting to $825, i.e. 25% of ($2,771 less $176) = $649, plus $176.

4. For present purposes the following material facts, adduced at the hearing of the reference before us, may be summarised as follows:

• - The taxpayer resumed teaching in 1974 and has been employed as a part-time teacher with a State education authority since that time.
• - For several years after 1974 the taxpayer taught English and French languages; however, in or about 1976 she was asked by her headmaster to concentrate on teaching the French language and to turn her mind to upgrading the school's French department (which she now controls).
• - As a part-time teacher and not being employed on a permanent basis, the taxpayer was, and is, not eligible for promotion and has not in fact received promotion since resuming teaching in 1974; the level of her income, subject to cost of living adjustments, has remained constant since about 1976.
• - The taxpayer's decision (made in 1979) to visit France was a personal one and was arrived at in the knowledge, as we understand the evidence, that she was to be asked by her headmaster (without any undertaking being given concerning an improvement to her temporary status as a teacher or to her level of income) to take control of the French department, which event did in fact occur; the specific reason for her wanting to visit France was said to be associated with a desire to carry out research and to procure teaching materials there (which we were given to understand were unobtainable in Australia) which would enable her to write a course in the French language for students, particularly for those students in their 10th and 11th school years who were undertaking studies in the school's French department.
• - The taxpayer was not under any obligation of a contractual kind to travel overseas in connection with teaching or with any other departmental matter.
• - Neither the taxpayer's headmaster nor any other teacher nor any official of the employer department requested the taxpayer to undertake the trip to France or to undertake any assignment or to visit a particular place during the trip.
• - The taxpayer planned her own itinerary and, in so far as her visit to France was concerned, chose to visit well known places as well as places not so well known. It was said that her main purpose in visiting well known places in France, e.g. Paris and the Eiffel Tower, was to provide her with an authentic background that would enable her to speak with conviction to her students in the light of her personal knowledge and experience. Visits to lesser known areas were intended to provide her with a broader general knowledge and understanding of France, which, again, would be passed on to her students. Her itinerary was also planned with a view to procuring brochures, postcards, pamphlets and such like, and to photograph both well known points of interest and lesser known, or less frequently observed, things, such as road signs, in towns, etc.
• - In the events that happened, the taxpayer did not need to, and did not in fact, seek special leave of absence (with or without pay) from her employer for the purposes of undertaking the trip, nor did she seek reimbursement for expenses incurred in connection with it.

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  ATC 382

• - The taxpayer's absence from Australia extended from late in December 1979 through January 1980, until about the end of the school holidays.
• - The taxpayer (who was not accompanied by her husband or family) spent the first 10 days of her trip holidaying in Burma and arrived in France on about 7 January 1980, where she remained until about 27 January 1980.
• - In France, the taxpayer's activities (said to be partly recreational and partly professional) included visits to the Eiffel Tower, Notre Dame, the Louvre and other well known tourist attractions in Paris, visits to various famous historical castles in the Loire Valley, and tours of places such as Nice, Marseilles, Versailles, Avignon, Arles and Quiberon.
• - During the trip the taxpayer took paragraphs and some 500 slides of scenes, people, buildings, etc. which enabled her on her return to Australia to prepare a number of independent study topics that concerned places of cultural and historical interest and of the French way of life; some 70 slides were duplicated and were said to be in the possession of the school and available for use by other teachers.
• - The taxpayer gave us to understand that, in her opinion (which we accept without reservation), the main benefits derived by her from the trip included a widening of her general knowledge and an increase in her teaching skills (to use her words) ``... both linguistically and as a competent person to answer questions and to think of questions in the first place to ask the children...''; the more tangible benefits included the slides, etc. referred to earlier; indirect benefits were said to include an enhancement of her own prestige as a person and as a teacher, as well as that of the school.
• - As a separate but related matter, the Commissioner allowed the taxpayer's claim for a deduction of $123, which was 60% of the estimated cost of $205 for the 500 slides, brochures, etc. purchased during the trip.

5. In our understanding, the taxpayer's representative sought to justify the allowance of the claims on the following bases:

• (a) The amount of $693, or the amounts of $649 and $176, whether regarded separately or together, are only a small proportion of the total expenses incurred and represent, therefore, a reasonable claim for expenses which, on the evidence, enabled the taxpayer to become a better teacher.
• (b) The Commissioner has allowed similar claims made by other teachers and other employees which suggests, either, that the present disallowance is wrong in principle, or that, in the interests of fairness and consistency as between taxpayers, the present claims should be allowed.
• (c) The Commissioner has allowed claims for overseas expenses by self-employed persons and, in fairness, similar claims by employees should likewise be allowed.
• (d) Support for the allowance of the taxpayer's claims is to be found in a publicity brochure, issued several years ago by an accountancy body, which included the following statement:

``Tax Deduction of Expenses

• An income tax deduction is allowed for educational expenses (including travel, meals and accommodation) incurred for the purpose of maintaining and developing professional skills.''

• (e) In claiming only 25% of the total expenses incurred in visiting France, the taxpayer effectively took into account the private portion of the expenditure - with the consequence that the Commissioner was in error in disallowing the claims on the basis that they were outgoings of a private nature.
• (f) As an alternative, that the amount of $693 or, in the further alternative, the amount of $176, should be regarded as part of the cost of procuring brochures, etc. that should give rise (by inference) to a deduction, either under the depreciation provisions of the Act or, because of the smallness of the amount(s) involved, under the provisions of sec. 51(1).

6. Despite the best efforts of the taxpayer's representative to persuade us otherwise, we do not think that the material facts in the case differ in any significant way from those found in the many other cases concerned with claims by school teachers, where the Boards of Review have disallowed the taxpayers' claims because of the need (as the Boards have seen it) to apply the principles concerned with the application of

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ATC 383

sec. 51(1) which emerge from the many judgments handed down by the Courts in relation to that section. As already indicated, we accept the taxpayer's word that she became a better teacher because of the trip. However, that attribute, arising as we assume it did as a direct benefit of the trip, could not of itself characterise the expenses incurred in connection with the trip as outgoings incurred by the taxpayer in the course of gaining her assessable income as a teacher (sec. 51(1), first limb, as explained in
Amalgamated Zinc (de Bavay's) Ltd. v. F.C. of T. (1935) 3 A.T.D. 288 at p. 293; (1935) 54 C.L.R. 295 at p. 303).

7. We reject as fundamentally unsound and, in any event, as irrelevant for present purposes, the various submissions that appear to be based upon the propositions that the quantum of an outgoing is a material factor to be considered and that the Commissioner (or the Board in his stead) is bound by his actions in other cases, whether in relation to employees or to self-employed persons, or by statements made by professional bodies. Clearly, in the light of the relevent authorities, the amount of an outgoing is not to be regarded as a material factor to be taken into account when considering deductibility for the purposes of sec. 51(1). Likewise, it is also apparent that it is the function of the Board in arriving at its decision in each case, to have regard only to the evidence adduced in the particular case before it and to the principles of law as determined by the Courts, that are seen as having application to that evidence. However, it might be mentioned in passing as being of some general interest, that the circumstances of the present case do not warrant a consideration of the second limb of sec. 51(1) as the taxpayer was an employee in the relevant period and did not carry on a ``business'', as defined in sec. 6 of the Act, as a self-employed person.

8. We reject also as unsound the proposition that the Commissioner (and the Board in his stead) is bound by the taxpayer's opinion as to the nature of the expenses incurred. For present purposes, the tests of deductibility that enable the characterisation of the expenditure as being deductible or not are to be found only in the first limb of sec. 51(1) of the Act and in the clauses of that subsection that preclude deductibility where expenses are found to be ``losses or outgoings of capital, or of a capital, private or domestic nature''. However, as explained earlier, the Board, in applying those tests, is bound to have regard to the principles of law that have emerged from the decisions of the Courts. Unfortunately for the taxpayer, the application of those principles to the evidence before us leaves us with no option, in our opinion, other than to disallow the claims made. (See the reasons for decision of this Board (as then constituted) in Case N4,
81 ATC 32 and the Court decisions referred to in those reasons that were relied upon for the decision reached to disallow the claims there made by a part-time teacher of the French language.)

9. The evidence does not support the proposition that any part of the amount of $693 (including the amount of $176 referred to above) should be regarded as part of the purchase price of teaching aids in the nature of slides and brochures, etc. The outgoings included in the amount of $693 clearly related to the cost of fares, admission charges, and food and accommodation and, as such, were essentially different in nature from those concerned with the purchases mentioned. Finally, in this matter, we would add that, having regard to the inadequacy of the taxpayer's grounds of objection and the evidence before us, we could not, in any event, sustain any argument that might otherwise be advanced to the effect that the depreciation provisions of the Act should apply.

10. For the above reasons, we would uphold the Commissioner's decision on the objection and confirm the assessment in issue.

Claim disallowed