Training Guarantee Ruling

TGR 93/1

Training guarantee: meaning of the term 'employment related skills' as it relates to an 'eligible training program'

• Please note that the PDF version is the authorised consolidated version of this ruling and amending notices.
  This document has been Withdrawn.
  View the Withdrawal notice for this document.

FOI status:

may be releasedFOI number: I 1013863

What this Ruling is about

1. This Ruling examines two issues relevant to the definition of 'employment related skill'. They are:

(a)

the meaning of the phrase 'used or that may be used'; and

(b)

the connection required between the skill and employment or business activities.

2. For training to be recognised under the Training Guarantee (Administration) Act 1990 (the TGAA) it must be in the form of an 'eligible training program'. One of the requirements of an eligible training program is that the sole or principal object is to develop, maintain or improve the employment related skills of employees or other persons [paragraph 27(1)(b)].

3. Section 4 defines 'employment related skill'. Unless the contrary intention appears 'employment related skill':

'includes a skill used, or that may be used, by a person in the course of:

(a)

holding any office or appointment, performing any functions or duties, engaging in any work, or doing anything, that results in the person's being an employee; and

(b)

any business, occupation, profession or trade carried out by the person otherwise than as an 'employee' (emphasis added).

Ruling

(a) The phrase 'used or that may be used'

4. The phrase 'used or that may be used' in the definition of 'employment related skill' in section 4 of the TGAA means there must be a reasonable expectation of the pursued skill being used, either immediately or in the foreseeable future.

(b) The connection required between the skill and employment or business activities

5. The skill must be imparted for the purpose of it being used in employment, or in a business, occupation, profession or trade. It is the purpose for which a skill is being learned that is the critical factor.

6. Any skill which is being acquired for use in a recreational or hobby pursuit, will not be an employment related skill.

7. Similarly a skill which is being acquired for use in an unpaid or volunteer capacity is usually not an employment related skill. The exception is where a person carries out an occupation on a volunteer or unpaid basis. In these situations whether a person is carrying out an occupation will depend on the particular facts of each case.

General

8. Employers are required to self assess their obligations under the legislation. Whether there is a reasonable expectation of the skill being used in an employment, or in a business, occupation, profession or trade is a matter for each employer to determine. Factors for consideration could include:

*

the intentions of the employer and the person being trained;

*

the purpose for which the program was designed;

*

the intentions of, and the clientele targeted by, the training provider;

*

the background, skills, and present work duties of the person being trained;

*

the nature of the employer's current or planned future business activity;

*

industry trends as related to the employer's business;

*

likely labour market demands;

*

the likelihood of the skills being used in the course of being an employee, or working in a business, occupation, profession or trade, rather than for recreational, hobby, artistic or cultural endeavours.

Date of effect

9. This Ruling sets out the current practice of the Australian Taxation Office and is not concerned with a change in interpretation. Consequently, it applies (subject to any limitations imposed by statute) for the financial years commencing both before and after the date on which it is issued.

Explanations

(a) The phrase 'used or that may be used'

10. Subsection 15AA(1) of the Acts Interpretation Act 1901 (the AIA) states that:

'in the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object'.

11. An Act must be construed as a whole. No specific part can be considered in isolation from its context, and if there is more than one possible interpretation, a court will prefer that which reflects the intention of the legislation; Cooper Brookes (Wollongong) Pty Ltd v. F C of T (1981)147 CLR 297; 81 ATC 4292; (1981) 11 ATR 949.

12. Subsection 15AB of the AIA provides that consideration may be given to extrinsic material (which includes Explanatory Memoranda) that could assist in ascertaining the meaning of a provision where there is a perceived need for assistance. One such circumstance is where 'the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or unreasonable' [AIA subparagraph 15AB(1)(b)(ii)].

13. The Explanatory Memorandum (EM) circulated at the time the legislation was presented to Parliament states that:

'the concept of employment related draws its meaning in part from subclause 3(1) Objects...'.(EM page 21)

14. Therefore we consider that the phrase 'used or that may be used' should be interpreted to promote the purpose or objects underlying the TGAA. Subsection 3(1) of the TGAA provides that:

'The principal objects of this Act are to increase, and improve the quality of, the employment related skills of the Australian workforce so that it works more productively, flexibly and safely, thereby increasing the efficiency and international competitiveness of Australian industry'.

We consider that the phrase 'used or that may be used' in the definition of 'employment related skill' in section 4 of the TGAA means there must be a reasonable expectation of the pursued skill being used, either immediately or in the foreseeable future.

15. The broad interpretation of 'used or that may be used' (ie, it is enough that there is a remote possibility a skill will be used in the future) is not considered to be within the spirit, and express objects, of the TGAA. Such an interpretation could lead to a situation where an acquired skill is not used, nor ever likely to be used, productively in the Australian workforce by the person being trained. (See examples at paragraphs 25 and 27).

16. We consider the term 'used or that may be used' must be construed to exclude situations where the prospects of using the skill (in an employment, or in a business, occupation, profession or trade) is remote or unlikely.

(b) The connection required between the skill and employment or business activities

17. The views expressed in paragraphs 10 to 13 relating to the AIA, also apply when considering the connection required between the skills being pursued and an employment or business activity.

18. The range of persons who may receive training is very broad, and may include persons who are not presently employed, prospective or potential employees, owner-managers, partners, directors, and subcontractors. However in every case the purpose for learning a particular skill must be to use it in the course of an employment, or a business, occupation, profession or trade.

19. The word 'skill' is defined in wide terms in section 4 of the TGAA. It has the standard dictionary meaning (namely: practiced ability, expertness and facility), and it also includes competence and knowledge.

20. The definition of 'employment related skill' in section 4 contains the two situations where a skill is employment related:

*

paragraph (a) refers to a skill used by a person in the course of working as an employee; and

*

paragraph (b) refers to a skill used by a person other than an employee in any business, occupation, profession or trade.

21. The word 'employee' is defined in the TGAA as a person who receives, or is entitled to receive, salary or wages. Salary or wages is also defined, and the circulatory nature of the definitions mean that only a person who receives or is entitled to receive salary or wages is an employee for the purposes of the TGAA. A person who acts in a volunteer or unpaid capacity is not an employee.

22. Further, except in rare circumstances, the performing of functions in an unpaid or volunteer capacity does not amount to carrying on a business, occupation, profession or trade as required under paragraph (b) of the definition. (See examples at paragraphs 30, 36 to 39)

23. In Customs & Excise Comrs v. Lord Fisher [1981] 2 All ER 147 Gibson J, at 157, discussed the meaning of similar words to business, occupation, profession or trade:

'The primary meaning of all these words [within the Finance Act 1972 s 2 (2)(b)] "business, trade, profession and vocation" is an occupation by which a person earns a living. It is clear that all ordinary businesses, trades, professions and vocations can be carried on with differences from this standard and norm in regularity or seriousness of application, in the pursuit or disregard of profit or earnings, and in the use or neglect of ordinary commercial principles of organisation.'

Examples

(a) the phrase 'used or that may be used'

Are the following skills 'employment related skills' ?

24. A general medical practice employs several doctors. It arranges for one doctor to undertake a course in specialist obstetrics care.

Yes.

It can be expected that the skills may be used in the doctor's employment or future business activity.

25. The same medical practice pays for another of its doctors to undertake a welding course.

No.

While welding is a skill in itself, in this instance (unless exceptional circumstances exist) it is not an employment related skill 'used or that may be used' by the doctor being trained.

26. A bank sends an employee to a first aid certificate course, to give the employee the skills to carry out the bank's first aid duties. The employer is also aware that the employee is a volunteer St John's Ambulance Officer at weekend netball games.

Yes.

While the skills may also be used in the volunteer capacity, there is a clear expectation that the skills may be used in the paid employment.

27. A motor vehicle repairer arranges for a valued employee (a mechanic) to learn to fly aeroplanes. The employee has a personal wish to learn to fly, but has no realistic employment prospects in the aviation industry in the foreseeable future.

No.

The use of the pursued skill in an employment or business activity is both uncertain and remote.

28. A footwear company undergoing substantial restructuring, arranges to have its redundant employees retrained in skills to equip them for future jobs to which they would be suited.

Yes.

There is a reasonable expectation that the skills may be used in an employment or business activity.

29. A law firm provides a university scholarship to cover accommodation, fees and books for a person who has just completed high school. Its purpose is to assist the person to study law in the expectation that she may pursue a legal career with them.

Yes.

There is a reasonable expectation that the skills may be used in future employment.

(b) the connection required between the skill and employment or business activities

Are the following skills 'employment related skills' ?

30. A city council trains a newly elected representative (a local furniture retailer who acts in a part-time unpaid capacity) in council protocol, council structures and ratepayer representation procedures.

No.

The skills relate to the councillor's honorary capacity, and not to an employment or other business activities.

31. The same council sends a member of its finance sub-committee (which is made up of unpaid, part-time, elected representatives) to a training course in financial management. The member runs her own pharmacy business.

Yes.

There is a reasonable prospect that the elected representative may use these skills in her regular job or business activities (apart from the unpaid volunteer role as a councillor).

32. A stevedoring company wishes to count as eligible training expenditure financial support it provides for the sea scouts. The support is given to enable the youths to be taught basic maritime skills as part of the scouting program.

No.

Any maritime skills training the youths receive in their early teen years is too remote from any possible future employment in that field.

33. A secondary school teaches the standard State syllabus - years 7 to 12.

No.

Generally, secondary education is focused on broad learning and life skills. It is not usually for the purpose of being used in an employment or business activity.

34. A secondary school teaches the standard State syllabus - years 7 to 12. Its curriculum provides that all students take part in a three week work experience program during Year 11.

Yes - the work experience period only.

The TGAA contains specific provisions to deem certain work experience to be eligible. Work experience periods which are part of the curriculum for full-time students at or above year 10, and who are under 21 years of age, specifically qualify (section 27A of the TGAA).

35. A secondary school has developed a special alternative curriculum for students in years 10 to 12 who are unlikely to progress to tertiary studies. Subjects include business english, business maths, business communication, driver training, and catering skills. In addition, the students participate in associated work experience two days per week, or one week in every three.

Yes.

In this special circumstance there is a reasonable expectation that the skills may be used in an employment or business activities.

36. A partner in an accounting firm undertakes a one day training course run by the Country Fire Authority in forward burning and ploughing for fire control. The partner lives in a rural settlement and is a volunteer member of the local rural brigade.

No.

The person to which this example relates is an accountant. The skills to which the training relates are restricted to use in a volunteer capacity.

37. An airline company releases one of its flight attendants to attend Army Reserve training for a fortnight.

Yes.

The training is accepted as the maintenance of military skills. The person is engaged in a paid part-time occupation within the Defence Forces.

38. A registered charity trains a part-time volunteer worker in fund raising techniques. The volunteer, a hairdresser, has offered her services to the organisation on a part-time casual basis.

No.

The skills relates to the person's volunteer role, and are not skills intended to be used in an occupation.

39. A school incurs expenditure in having a member of a religious order, who is a maths/science teacher, upgrade his teaching qualifications. The school does not pay a salary to the teacher.

Yes.

The skills are to be used by the person being trained in carrying out his occupation as a teacher, albeit on an unpaid/voluntary basis.

Commissioner of Taxation
12 August 1993

References

BO ALB/TG/TGR2

Subject References:
- business
- councillors
- employment related
- occupation
- profession
- reasonable expectation
- trade
- unpaid
- used or that may be used
- volunteers

Legislative References:
- TGAA 4
- TGAA 27(1)(b)
- AIA 15AA(1)
- AIA 15AB(1)

Case References:
Cooper Brookes (Wollongong) Pty Ltd v FCT
(1981) 147 CLR 297
81 ATC 4292
(1981) 11 ATR 949

Customs & Excise Comrs v Lord Fisher
[1981] 2 All ER 147