YDXM and Commissioner of Taxation (Taxation)

[2022] AATA 2382

YDXM and Commissioner of Taxation (Taxation) [2022] AATA 2382 (27 July 2022)

Division:TAXATION AND COMMERCIAL DIVISION

File Numbers:         2020/8301

2020/8302

Re:YDXM

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member Dr M Evans-Bonner

Date:27 July 2022

Place:Perth

The Reviewable Decisions in applications 2020/8301 and 2020/8302 are affirmed.

................[Sgd]........................................................

Senior Member Dr M Evans-Bonner

CATCHWORDS

INCOME TAX – whether allowable deduction – self-education expenses for tertiary tuition fees in the income years ended 2018 and 2019 – whether self-education expenses incurred in gaining or producing assessable income – whether self-education improved the Applicant’s skills necessary to perform his role – whether self-education could have led to an increase in income – Applicant sought to claim the cost of units studied in Juris Doctor law degree as a tax deduction – there is not a sufficient enough connection between the Applicant’s expenses incurred in the completion of the units of study and his income earning activities – Reviewable Decisions affirmed  

LEGISLATION

Defence Force Discipline Act 1982 (Cth)

Income Tax Assessment Act 1936 (Cth) s 82A(1)

Income Tax Assessment Act 1997 (Cth) s 8-1, 8-1(1)

Taxation Administration Act 1953 (Cth) s 14ZZK

CASES

Commissioner of Taxation v Studdert (1991) 33 FCR 75

Federal Commissioner of Taxation v Hatchett (1971) 125 CLR 494

Federal Commissioner of Taxation v Finn (1961) 106 CLR 60

Federal Commissioner of Taxation v Smith (1978) 19 ALR 493

Re Amin and Federal Commissioner of Taxation [2017] AATA 1042

SECONDARY MATERIALS

Taxation Ruling 98/9 – Income Tax: deductibility of self-education expenses incurred by an employee or a person in business

REASONS FOR DECISION

Senior Member Dr M Evans-Bonner

27 July 2022

THE APPLICATION

1. The Applicant has made an application to the Tribunal seeking review of an objection decision made by the Deputy Commissioner of Taxation dated 21 October 2020 (Reviewable Decision).

2. The Reviewable Decision was a decision to disallow tax deductions claimed by the Applicant pursuant to s 8-1(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for work-related self-education expenses in the amounts of $6,594 for the income year ending 30 June 2018, and $14,834 for the income year ending 30 June 2019.

3. The Applicant was studying a Juris Doctor degree which he has now completed. The Juris Doctor degree is a post-graduate law degree undertaken at a Masters level. The work-related self-education expenses he claimed were for units he completed as part of that degree.

4. The Applicant joined the Australian Army in 2008 and has been employed as a General Services Officer (GSO) since 2012. He is not a legal officer in the Army and has no intention of becoming one. He was promoted from the rank of Captain to Major with effect from January 2022.

   THE CLAIMED SELF-EDUCATION EXPENSES

5. The units claimed for the 2018 income year were “Australian Legal Systems” and “Legal Analysis and Problem Solving”. The total cost of these units was $6,444. When asked at the hearing about the remaining $150 he claimed, the Applicant was unsure and assumed this amount was for textbooks. 

6. The units claimed for the 2019 income year were “Contract Law” and “Dispute Resolution”. The total cost of these units was also $6,444. The Applicant transferred to a different university and completed “Foundations of Australian Law” and “Statutory Interpretation”. The total cost of these units was $8,640. Although the total cost of these four units was $15,084, the Applicant claimed $14,834, being $250 less than that sum. At the hearing he stated that he thought there was something in the legislation whereby the first $250 was not claimable (which counsel for the Respondent suggested may have been a reference to s 82A(1) of the Income Tax Assessment Act 1936 (Cth)).

7. To the Applicant’s credit, he did not make a claim for reimbursement for these units from the Defence Assisted Study Scheme (DASS), even though his application was supported by his supervisor. The DASS is available to defence force members to assist them to pay for educational expenses. The Applicant explained at the hearing that this was because he had already been awarded an undergraduate degree from the Australian Defence Force Academy that he did not have to pay for. He did not want to make an application for reimbursement from the DASS because there were limited funds in the scheme. He felt that it would be unfair to draw upon those funds when other defence force members who did not have an undergraduate degree may wish to make an application for their studies to be funded.   

   LEGAL FRAMEWORK

8. The deductions were claimed pursuant to s 8-1(1) of the ITAA 1997 which provides, in part, that: “You can deduct from your assessable income any loss or outgoing to the extent that: (a) it is incurred in gaining or producing your assessable income …”.

9. Taxation Ruling 98/9 – Income Tax: deductibility of self-education expenses incurred by an employee or a person in business (Tax Ruling) is a tax ruling that provides guidance regarding the circumstances in which self-education expenses are allowable. Paragraphs [12]-[16] provide the following overview:

   12.Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer’s current income-earning activities.

   13.If a taxpayer’s income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

   14.If the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.

   15.The fact that the study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment) is not a sufficient basis in itself for self-education expenses to be deductible. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

   16.In practice, the above principles do not always operate on a mutually exclusive basis. It is always necessary to have regard to the words of section 8-1 and apply them to the facts.

10. Further, para [17] of the Tax Ruling explains:

    An expense is deductible under section 8-1 when it has the essential character of an income-producing expense. The essential character is to be determined by an objective analysis of all the surrounding circumstances.

11. The Tax Ruling sets out the types of expenses that are available, subject to the general tests under s 8-1 of the ITAA 1997 being met. They include “course or tuition fees of attending an educational institution” (para [23(a)]).

12. Paragraph [42] of the Tax Ruling explains if that if the connection between the self-education expense and a person’s income-earning activity is too general, the deduction will generally not be allowed:

    If a course of study is too general in terms of the taxpayer’s current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances ...

    ISSUES

13. The overall issue for determination is whether the Applicant has met the burden, pursuant to s 14ZZK of the Taxation Administration Act 1953 (Cth) (TAA), of proving that the assessments for the 2018 and 2019 financial years are excessive or incorrect.

14. This involves a consideration of whether there was a sufficient connection between the Applicant’s expenses incurred in completing the units for obtaining his Juris Doctor degree and his income earning activity as a GSO in the Australian Army.

15. Specifically, there will be such a connection, and consequently the Applicant will be able to claim the self-education expenses as a deduction, if the answer to either of the following questions is “yes”:

    (a)Did the self-education undertaken by the Applicant improve his skills or knowledge necessary to perform his role as a GSO (Tax Ruling, para [13]); or

    (b)Could the self-education undertaken by the Applicant have led to an increase in income for the Applicant in his role as a GSO (Tax Ruling, para [14])?

16. Although it is mentioned in para [13] of the Tax Ruling, the Applicant did not argue that the self-education was essential for him to maintain his income earning activities as a GSO, nor did that issue arise on the evidence before me. 

    OVERVIEW OF THE SUBMISSIONS

17. The Applicant submitted that his self-education expenses are allowable deductions under s 8-1 of the ITAA 1997 that were incurred in gaining or producing his income. This was because, the Applicant submitted, his studies improved his skills necessary to perform his role as a GSO. Further, he submitted that his studies led to his being promoted from Captain to Major which resulted in an increase in income.

18. The Commissioner’s position is that the units completed, and the course of study (a Juris Doctor degree), are too general for there to be a sufficient connection between the self-education expenses and the Applicant’s role as a GSO. That is, there is not a direct enough connection between the Applicant’s self-education expenses and the gaining or producing of his income.

19. Additionally, the Commissioner submitted that whilst tertiary study in general may have been a factor that was viewed favourably by the Army’s Promotions Advisory Committee (PAC), it was not sufficiently connected to the Applicant’s promotion, and consequently increase in income. This was because there was no specific requirement for tertiary studies to be promoted, let alone a Juris Doctor degree.  

20. Put differently, the Commissioner submitted that the Applicant has not met the burden of proving that the objection decision was excessive or incorrect (s 14ZZK of the TAA). This was because the evidence does not demonstrate the requisite connection between the Applicant’s income earning activities and self-education expenses.

    IMPROVEMENT IN SKILLS OR KNOWLEDGE NECESSARY TO PERFORM ROLE

21. I now turn to the first question for determination identified above. That is, did the self-education undertaken by the Applicant improve his skills or knowledge necessary to perform his role as a GSO?

22. A letter dated 26 July 2021 from Major K in the Applicant’s chain of command which encloses a job statement from the Applicant’s Performance Appraisal Report refers to the statement being “deliberately broad” due to the “breadth of capabilities which [the Applicant] manages” (ST21.1/494). The job statement, which has some parts redacted for security reasons, nevertheless provides an overview of what the role of a GSO involves. The overview suggests that the role is a broad and varied leadership role.

23. For example, the job statement refers to the Applicant “commanding a highly trained and specialised [redacted] team” and that the Applicant’s “main effort is the command, leadership and management of your force element, executing [redacted] across a broad spectrum of capabilities”. The role is described as requiring the Applicant to work in situations involving “a good deal of strategic risk, demanding significant versatility, agility and adaptability” and that he was “required to plan, brief and be prepared”. It refers to the Applicant providing leadership in “operations [which] involve a variety of national, coalition, military and non-military organisations and capabilities” and to “lead a workplace culture” consistent with Army values (ST21.1/495).   

24. The job statement continues to list responsibilities within the Applicant’s role that are relevant to his study, with the caveat that “several responsibilities cannot be included or elaborated on for security reasons” (ST21.1/495). These were described as follows:

    a.    Managing capabilities which interact with and support law enforcement activities

    b.    Supporting the development of several capabilities which require changes to policy which directly interacts with various pieces of domestic legislation

    c.     Deploying into ADF [Australian Defence Force] theatres in circumstances which require a greater understanding of the laws of armed conflict and other international law norms (including several treaties)

    d.    Dealing with conflict in the workplace and with external stakeholders utilising alternative dispute resolution mechanisms

    e.    Assisting in drafting submissions which propose exemptions to legislation

    f.   Assisting in complex procurement processes, including assisting in tender evaluation

    g.    Dealing with matters under the Defence Force Discipline Act 1982 (Cth), including assisting in investigations and acting a Prosecuting Officer or Defending Officer if required

25. A subsequent letter from the Applicant’s superior officer, Major M, the legal officer of the Applicant’s posted unit, dated 13 September 2021 (A6), is supportive of the Applicant’s claim and sought to confirm the connection between the Applicant’s legal studies and his role as a GSO. The letter notes that military discipline is fundamental to the defence force, and that the Applicant had been appointed to conduct three “fact finds” (which I discuss further below) and successfully prosecuted a charge of theft between 28 August 2020 and 14 September 2020, with the Applicant’s legal studies recommending him for the appointment. Major M confirmed that the Applicant’s legal studies would assist him to undertake the tasks identified by Major K and would make him “more competitive in his field”.  

26. However, having the support or encouragement of an employer is not, alone, enough to warrant the deduction of self-education expenses. As Menzies J observed in Federal Commissioner of Taxation v Hatchett (1971) 125 CLR 494 (Hatchett), at 499:

    Enlightened employers often encourage employees to improve their bodies and their minds, and assist them to do so. Such encouragement is not, of itself, enough to warrant the deduction of outgoings for these purposes. The test to be applied is a more stringent one, namely were the outgoings incurred in gaining assessable income?

27. In an email to the Commissioner dated 30 September 2020 (T15/161-162), the Applicant gave examples of tasks he performs as a GSO relevant to his legal studies. These included involvement in the tender evaluation process, involvement in proceedings under the Defence Force Discipline Act 1982 (Cth) (DFDA), making submissions to the Defence Force Remuneration Tribunal, financial delegation and an understanding of procurement, an understanding of domestic law to inform decision-making, an understanding of international law relevant to armed conflict, an understanding of the DFDA to advise and provide advice to subordinates and to conduct investigations and enquiries at the behest of his supervisors. However, during cross-examination it was evident that these duties were infrequent and did not comprise a substantial or consistent part of the Applicant’s role as a GSO. For example, between 2012 and 2022, the Applicant had been a prosecuting and defending officer in defence force disciplinary proceedings on “a handful” of occasions which resolved prior to proceedings (because investigations led to an early plea or the matter did not proceed) before a subordinate summary authority. He has only appeared before a subordinate summary authority on one occasion in 2020 as the prosecuting officer on a theft matter for approximately a two-week period. The Applicant also agreed that “the majority of the time” defence members without legal qualifications are appointed to those positions (transcript/40-41). He had also been involved in “fact-finding” investigations concerning disciplinary allegations but estimated that he had only been involved in four of these for less than 10 days in total over the last three financial years (transcript/43).  

28. Additionally, some of the tasks could be better described as policy-based or commercial, rather than legal. For example, in 2020 the Applicant was involved in a tender process that lasted two to three weeks. His evidence was that his role was to assist in the evaluation of it, but not to draft contractual terms or to directly deal with legal disputes (which would be the role of a legal officer). Consequently, the Applicant’s circumstances are different from those of the applicant in Re Amin and Federal Commissioner of Taxation [2017] 106 ATR 218, a case which the Applicant sought to rely on. Mr Amin was a vendor-relationship manager who performed tender-related tasks daily including contractual negotiations, mediation of contractual disputes and dispute resolution and was therefore able to claim deductions for course fees in respect of a post-graduate law degree. A further example is that the Applicant’s submissions to the Defence Force Remuneration Tribunal were of a commercial nature because they concerned how much various officers should be paid. Another example is that his procurement role involved procuring supplies for the defence force in a manner that was responsible for the use of taxpayer funds and that provided value for money for the defence force (transcript/46).

29. The Applicant also agreed that every member of the defence force needs to understand the legal parameters in which the defence force operates, what can be done on the battlefield during wartime and the disciplinary structure of the defence force (transcript/48-49). The Applicant stated that “in the overwhelming majority of cases a legal officer would be available both prior to an operation and during an operation, but I can state with the utmost confidence that there will be a number of situations where one won't be available” (transcript/49). This statement indicates the general nature of the knowledge required for the GSO role, whereas advising on any legal issues would most likely fall within the role of a legal officer.  

30. The evidence before me suggests that the GSO role is a general one and that the benefit of the Applicant completing units in the Juris Doctor law degree, and indeed the degree itself, is a general one. This generality is also reflected in the Applicant’s DASS application form dated 29 October 2018 which the Applicant did not progress. In that form, the Applicant described the general application that the Juris Doctor degree would have to his current or likely future employment (T15.1):

    The Juris Doctor is a post-graduate law degree that is becoming a popular generalist degree for leaders across many industries. Based on how fundamental the law is to the ADF (both domestically and abroad), and its influence on Defence Policy, the discipline of law has relevance to Commanders and Staff Officers alike. The degree will provide me with a new skill-set with which to solve problems for the ADF, and a legal perspective with which to apply to policy work (that I can reasonably expect to conduct in the future). Finally, similarly to teaching the Laws of Armed Conflict to recruits and cadets, the study of law will support my decision making when in positions of command or authority.

31. Hatchett concerned a teacher who claimed deductions for a Teacher’s Higher Certificate and for the university fees for subjects in the Faculty of Arts. Menzies J found that there was a sufficient connection between the taxpayer’s employment as a teacher and his Teacher’s Higher Certificate because it would allow him to earn more as a teacher in the future, plus it immediately entitled him to be paid a higher rate for doing the same work. However, Menzies J, applying Federal Commissioner of Taxation v Finn (1961) 106 CLR 60 (Finn), found that the taxpayer could not claim a deduction for his arts subjects. Menzies J observed, at 499:

    I am not able to find any connection between the payment of fees and the assessable income of the tax-payer beyond the circumstance, which I take to be self-evident, that a teacher who has pursued university studies is likely to be a better teacher than if he had not done so and is therefore more likely to obtain promotion within the department. In my opinion this general consideration is not enough to make the fees deductible; there must be a perceived connexion between the outgoing and assessable income.

1. In my view, similar reasoning can be applied to the Applicant’s situation. Unlike the role that, for example, a legal officer may have, the evidence concerning the Applicant’s GSO role illustrates that it is not particular enough to demonstrate that the Juris Doctor degree has improved the Applicant’s skills to the level of sufficiency required. Although the Applicant’s self-education may have resulted in a general improvement to his skills and knowledge, there is an insufficient connection between the tasks he performs in his GSO role and his self-education.

2. Additionally, the infrequency within which the legal tasks are performed further adds to a finding that any connection between the tasks performed in his GSO role and his self-education lack sufficient materiality. It therefore cannot be concluded that “the sums in question were outgoings incurred in gaining or producing assessable income” of the Applicant (Hatchett at 496).

3. For completeness, I note the Applicant’s submission that Hatchett “has been refined significantly over time” (transcript/24). The Applicant cited the case of Federal Commissioner of Taxation v Smith (1978) 19 ALR 493 (Smith), a decision of Waddell J in the Supreme Court of New South Wales, in support of this submission. The Applicant suggested, if I understood his submission correctly, that the taxpayer in Hatchett failing his arts degree subjects was determinative in his not being able to claim the fees for those subjects. He relied on the following passage, at 498-499, where Waddell J made the following observations about Hatchett:

   In my opinion this decision does not establish that educational expenses of the kind here in question must, in order to be deductible, relate to a course of study which had as its necessary consequence an increase in salary. What Hatchett’s case decides, I think, is that educational expenses which have the necessary consequence of an increase in salary are deductible and that educational expenses paid in respect of a course which, if successfully completed, makes the taxpayer likely to do a better job and therefore more likely to obtain promotion, but which the taxpayer had no real prospect of completing, are not deductible.

4. With respect, I do not think that anything in Smith detracts from Hatchett. The passage above concerns the link between the self-education for which the deduction is claimed and the prospects of an increase in salary through promotion. Even though there is reference to the taxpayer being “likely to do a better job”, that reference is made in the context of promotion, with the entire phrase reading “likely to do a better job and therefore more likely to obtain promotion”. Waddell J is observing here that there does not have to be an automatic increase in income due to the study for it to be deductable. Instead, it is sufficient for the study, if it is completed, to lead to an increase in income. Waddell J is suggesting here that if the study is not completed, it is unlikely to be deductible. However, I note that in Commissioner of Taxation v Studdert (1991) 33 FCR 75 (Studdert), Hill J disagreed with that point. After a discussion of Hatchett, Hill J stated, at 83:

   It is obvious on the facts of Hatchett that the university course had no more relevance to Mr Hatchett’s position as a primary teacher than a law degree would have had. Second, his Honour appears to have placed weight on Mr Hatchett’s unsuccessful academic career in reaching his conclusion. Perhaps it is a matter of degree, but the mere fact that a taxpayer has been unsuccessful would not to me, with respect, seem to be a matter which would deny deductibility. It is true that in the passages quoted by Menzies J some emphasis was placed on the fact that the qualification of the degree would not have any effect on Mr Hatchett’s assessable income. Given the facts, that factual conclusion was no doubt correct. However, it does not follow from that that a deduction was not allowable.  

5. In Smith, the taxpayer was a clerk at the Taxation Office. He wanted to become an assessor but was denied entry into a departmental assessing school because he was not studying an approved course at a tertiary level. If he was not studying a tertiary course, he had “virtually no chance” of being accepted into the school (at 494). He was able to gain acceptance by enrolling in the Faculty of Commerce. Continuing with these studies was necessary to progress through the further grades of promotion. Waddell J observed that to complete the course of training, the taxpayer would have to complete more general subjects in law and arts. However, the completion of those general subjects was part of the degree and therefore necessary to complete the qualification. Completion of the qualification was necessary for further promotion and salary increases. In summary, I do not think that Smith widens the scope of the connection between the tasks a taxpayer performs in their role and what they can claim by way of self-education. It is not authority for the proposition that a general improvement of skills is enough to claim the deduction. There must still be a sufficient connection between the self-education and the tasks that the taxpayer performs.

6. The Applicant also sought to rely on Studdert as a further example of how Hatchett had been refined in subsequent cases and which, he submitted, was now reflected in the Tax Ruling. Studdert was an unsuccessful appeal by the Commissioner from a decision of this Tribunal. The Tribunal found that the taxpayer, a flight engineer for Qantas on Boeing 747 passenger transport aeroplanes, could claim the cost of flying lessons because they improved his capacity as a flight engineer. Hill J, at 76, explained the role of a flight engineer:

   Such planes [Boeing 747 passenger planes] carry a flight engineer to supervise and regulate the delivery of power to the aeroplane from the jet engines. To carry out this function the flight engineer sits directly behind the first officer, who in turn sits next to the captain with direct access to four levers which control the thrust of the four jet engines of the aeroplane. The major instruments and controls are directly accessible by the captain and first officer.

7. The Tribunal found that the flying lessons were deductible because “his flying lessons improved his proficiency as a flight engineer” (at 77). The Tribunal reasoned, at 76:

   I accept the applicant’s evidence on this point. Having regard to the close consultation needed between the officers and engineer in bringing these complex machines with their passengers in safety from one place to another, and the desirability of the engineer understanding not only the mechanism of power delivery, but also the intricacies of take-off and landing of these aeroplanes, it seems to me to be a matter of commonsense that the engineer understands not only his own duties as to delivery of power, but also the interrelated combination of factors relating to the duties of the pilot which lead to the successful take-off and landing of the flying machines of Australia’s international carrier.

8. The Applicant also argued that his situation was analogous to Studdert. He argued that like the taxpayer in Studdert improving his skills as a flight engineer through undertaking flying lessons, the expenses he incurred in completing his Juris Doctor units have improved his skills in his role as a GSO. He reasoned that it would be different if, for example, he was completing a Graduate Diploma in Legal Practice, which is designed to equip students to become legal practitioners. In short, the Applicant argued that less of a connection is required between the claimed study and the employment role than the Commissioner submitted was required. In support of this submission, the Applicant referred to the following example given in the Tax Ruling at para [41]:

   Barry, a trainee accountant, is studying commerce part-time at university. He is allowed a deduction for the costs associated with the course because the course enables Barry to maintain or increase the specific knowledge required in his current position and to carry out his duties more effectively.

9. I do not accept this submission and I make two observations to illustrate why. Firstly, the facts of Studdert show a more “relevant and incidental” connection (Studdert at 86) between the flying lessons and the taxpayer’s role as a flight engineer than in the Applicant’s circumstances. It was “unchallenged that the flying lessons improved Mr Studdert’s proficiency as a flight engineer” (at 81). His role was directly related to flying because it involved him sitting behind the first officer during flights to supervise and regulate the power to the aeroplane from the jet engines. The Applicant, on the other hand, is in a leadership and policy-based position in the Australian Army. He infrequently performs some tasks that may be enhanced by a general knowledge of the law, but his core role is not legal in nature. Whilst Juris Doctor studies may enhance his skills in a general sense, that is not enough to establish a relevant and incidental connection with the gaining or producing of the Applicant’s assessable income.

10. Secondly, I observe that the Tax Ruling is a policy document that is meant to provide guidance to taxpayers and decision-makers when interpreting the relevant statutory provisions. The examples are simple illustrations and are not meant to be definitive precedents for cases with similar or analogous facts. The circumstances of each individual taxpayer, their employment and their self-education are far more nuanced than these simple examples suggest. Each case requires consideration on its own merits, and such a simple example is not of itself sufficient to act as a precedent for subsequent cases. As Dixon CJ stated in Finn at 64, “in the end the decision often will depend on the facts of the given case.” On the facts of the Applicant’s case, I find that his Juris Doctor subjects do not have the necessary relevant and incidental connection to the gaining or producing of his income as a GSO.

    INCREASE IN INCOME

11. As noted above, the Applicant was promoted with effect from January 2022. The evidence indicates that tertiary studies were a relevant factor in the Applicant’s promotion. The comments of the PAC (A3) indicate that there were many factors that impressed the Committee and led to the Applicant’s promotion including his:

    … intellect, excellent technical knowledge with special operations, capacity to build relationships and work ethic. Your experience on operations enabled a broader development and organisation awareness which improved your presentation. Furthermore, the board acknowledges your current Tertiary studies …

12. Indeed, in written submissions, the Applicant conceded that, “my recent application for promotion is unlikely to have rested purely on my tertiary studies (although my study was one of few things noted within the PAC Board’s commentary)” (ST20.2/491). He also conceded that there were many factors that contributed to his promotion (ST20.2/488-489):

    There are several reasons why I chose law instead of another post graduate degree: … It is viewed favourably by Army’s career management agency and will likely make me more competitive for promotion and for competitive roles. Tertiary study is used to calculate a GSO’s performance (against their peers) for the purpose of promotion. My university results were taken into a Promotion Advisory Committee (PAC) in March this year [2021] and although many factors contribute to a promotion, the PAC Board stated that it acknowledged my tertiary study. I was deemed suitable to promote at the end of 2021. This will lead to an increase in my earning capacity and is also likely to lead to more competitive roles in the future.

13. The Applicant also conceded in his evidence at the hearing that there was no requirement for him to have a Juris Doctor degree to be promoted, that to his knowledge the other persons promoted did not have Juris Doctor degrees, and that the absence of such a degree would not prevent him from being promoted in the future, including to the most senior ranks of the Army (transcript/51).  

14. I therefore find that whilst the Applicant’s tertiary studies were viewed favourably, but were not required as part of his promotion application, they were one of many factors considered by the PAC. His Juris Doctor studies cannot be regarded as having led to the increase in his income. It cannot be said that the Applicant “spent money to earn more” (Hatchett, at 498). In other words, I am not reasonably satisfied that there was a “real connection” (Smith) between the Juris Doctor units, and ultimately the degree itself, to the Applicant’s increased income via his promotion.

    CONCLUSION

15. For the reasons outlined above, and based on the evidence before me, there is an insufficient connection between the Applicant’s expenses incurred in completing the units for obtaining his Juris Doctor degree and his income earning activity as a GSO in the Australian Army. I am therefore unable to answer “yes” to either of the issues for determination outlined at para [15] above.

16. In other words, the Applicant has not met the burden, pursuant to s 14ZZK of the TAA, of proving that the assessments for the 2018 and 2019 financial years are excessive or incorrect.

    DECISION

17. The Reviewable Decisions in applications 2020/8301 and 2020/8302 are affirmed.

I certify that the preceding 48 (forty-eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner

..................[Sgd]..................................................

Associate

Dated: 27 July 2022

Date of hearing:	23 March 2022
Representative for the Applicant:	Self-represented
Representative for the Respondent:	Ms R Young, instructed by Ms D Wong of the Australian Taxation Office