Federal Commissioner of Taxation v Anstis

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: French CJ,Gummow,Kiefel,Bell JJ
• Judgment Date: 11 November 2010
• Neutral Citation: [2010] HCA 40,2010-1111 HCA B
• Date: 11 November 2010
• Docket Number: M64/2010

[2010] HCA 40

HIGH COURT OF AUSTRALIA

French CJ, Gummow, Heydon, Kiefel And Bell JJ

M64/2010

Commissioner Of Taxation

Appellant

and

Symone Anstis

Respondents

Representation

S J Gageler SC, Solicitor-General of the Commonwealth with S H Steward SC and L A Hespe for the appellant (instructed by Gadens Lawyers)

M L Anstis for the respondent (instructed by Michael Anstis)

Income Tax Assessment Act 1997 (Cth), ss 6–5(1), 8–1, 51–1, 51–10, 51–35.

Commissioner of Taxation v Anstis

Income tax — Assessable income — Respondent received periodic payments of youth allowance under Social Security Act 1991 (Cth) — Whether receipts income according to ordinary concepts.

Income tax — Allowable deductions — Respondent incurred certain expenses in undertaking university study — Respondent required to undertake full-time study to establish and retain entitlement to youth allowance — Whether expenses incurred in gaining or producing assessable income — Whether expenses of a private nature.

Words and phrases — ‘incurred in gaining or producing’, ‘ordinary income’, ‘private or domestic nature’.

ORDER

Appeal dismissed with costs.

1 French CJ, Gummow, Kiefel And Bell JJ. The central issue in this appeal is whether certain expenses incurred by a student undertaking university studies may be deducted under s 8–1 of the Income Tax Assessment Act 1997 (Cth) (‘the 1997 Act’) from the assessable income of that student as a recipient of a ‘youth allowance’ payment. Provision for that payment is made by Pt 2.11 (ss 540–567F) of the Social Security Act 1991 (‘the Social Security Act’) 1.

2 During the relevant period, the respondent (Ms Anstis) was enrolled as a full-time student undertaking a teaching degree at the Australian Catholic University. In her tax return for the year ended 30 June 2006, the respondent returned $14,946 as wages earned as a part-time sales assistant, and $3,622 received by way of youth allowance payments. She claimed as an allowable deduction an amount of $920 for ‘expenses of self-education’, which was reduced from $1,170 by operation of s 82A(1) of the Income Tax Assessment Act 1936 (Cth) (‘the 1936 Act’). The self-education expenses comprised the depreciation in value of a computer ($692), textbooks and stationery ($264), a ‘student administration fee’ ($80), supplies for children during the respondent's teaching rounds ($75) and travel expenses other than to university ($59).

3 The Commissioner of Taxation (‘the Commissioner’) maintains that such expenses are not deductible by the recipient of a youth allowance under s 8–1 of the 1997 Act. The Commissioner disallowed the deduction of $920, and later disallowed an objection by the respondent against the amended assessment issued to her. The respondent unsuccessfully sought review of the Commissioner's decision in the Administrative Appeals Tribunal. However, her application to the Federal Court (Ryan J) to ‘appeal’ against the decision of the Tribunal was successful 2. Thereafter, the Full Court (Finn, Sundberg and Edmonds JJ) dismissed an appeal by the Commissioner against the decision of Ryan J 3.

4 The resolution of the Commissioner's appeal to this Court turns upon three questions. The first is whether youth allowance is assessable income under the 1997 Act. The second is whether the respondent's self-education expenses were

incurred ‘in gaining or producing’ her assessable income. And the third is whether, if the expenses were so incurred, they were nonetheless to be disallowed as being of a ‘private’ nature. For the following reasons, the income was assessable, the expenses claimed were deductible and not of a ‘private’ nature, and the appeal should be dismissed with costs.

The social security legislation

5 Sections 540–540C of the Social Security Act dealt with qualification for payments of youth allowance. The parties do not dispute that the respondent was qualified to receive youth allowance. In the respondent's circumstances, the relevant qualification criteria were contained in s 540 and required her, throughout the relevant period, to: (i) satisfy ‘the activity test’ in s 541; (ii) be of ‘youth allowance age’ as defined in ss 543–543B; and (iii) be an ‘Australian resident’ as defined in s 7(2). It appears that the respondent, presumably because of her status as a full-time student, was not required to enter into a ‘Youth Allowance Activity Agreement’ under s 544A and so the remaining requirement, in s 540(c), may be put to one side.

6 Section 541(1) provided that a person could satisfy ‘the activity test’ in one of four ways. In the present case, the respondent could satisfy the activity test if she satisfied the Secretary to the relevant Department that she was ‘undertaking full-time study’. Section 541B(1) relevantly provided as follows:

‘For the purposes of this Act, a person is undertaking full-time study if:

(a) the person:

• (i) is enrolled in a course of education at an educational institution;

… and

(b) the person:

• (i) is undertaking in the particular study period (such as, for example, a semester) for which he or she is enrolled for the course; or

• (ii) intends to undertake in the next study period for which he or she intends to enrol for the course;

  …

• (iii) … at least three-quarters of the normal amount of full-time study in respect of the course for that period …

… and

(c) the course in question is an approved course of education or study (see subsection (5)); and

(d) in the Secretary's opinion, the person is making satisfactory progress towards completing the course.’

7 In forming an opinion under par (d) of s 541B(1), the Secretary was to have regard to the guidelines set by the Minister by legislative instrument (ss 541B(3A)-(3B)). Those guidelines provided that, in the respondent's case, satisfactory progress generally meant completion of the course within the standard minimum length of the course plus an additional period for completion of one uncompleted subject or unit that was part of the course 4.

8 Part 3, Div 2 of the Social Security (Administration) Act 1999 (Cth) (‘the Administration Act’) deals with the determination by the Secretary of claims made under s 11 of that Act for a ‘social security payment’. Section 3(2) of the Administration Act provides that, unless the contrary intention appears, expressions used in the Social Security Act bear the same meaning when used in the Administration Act. Thus a ‘social security payment’, as defined in s 23(1) of the Social Security Act, includes a ‘social security benefit’, which in turn includes youth allowance.

9 Section 37(1) of the Administration Act provides that the Secretary must determine that a claim be granted if satisfied that the claimant is qualified for the payment and the payment is payable. Youth allowance becomes payable to a qualified person on his or her ‘start day’ (s 41(1)). This, if the person is qualified for the payment on the day on which they make a claim for the payment, is the day of the claim (Sched 2, Pt 2, cl 3(1)). It follows that youth allowance became payable to the respondent once she was qualified under Pt 2.11 of the Social Security Act and had made a claim for the payment.

10 Section 43(1) of the Administration Act stipulates that a ‘social security periodic payment’ is to be paid in arrears, and by instalments relating to such periods, not exceeding 14 days, as the Secretary determines. Those periodic

payments are defined to include a social security benefit such as youth allowance (Sched 1, cl 1(1)). The instalments are to be paid at such times as the Secretary determines (s 43(2)).

11 The rate of youth allowance payable to the respondent was determined in accordance with a formula set out in s 1067G of the Social Security Act (s 556(1)). In essence, s 1067G provides for a basic rate of allowance (Module B) which may be subject to certain additions or reductions, depending upon the means and circumstances of the recipient and, in some cases, the recipient's parents or partner. The additions include amounts supplementary to the basic rate such as a pharmaceutical allowance (Module C) or remote area allowance (Module K). Further, an amount of ‘rent assistance’ may be added to the person's basic rate under Pt 3.7 of the Social Security Act ‘to help cover the cost of rent’ (s 1070A).

12 The rate of youth allowance payable was liable to reduction for a period if the respondent committed an ‘activity test breach’ by failing to satisfy the activity test without reasonable excuse (ss 550A(a) and 556(2)). If she committed three or more breaches within a period of two years, the payment would not have been payable to the respondent for a period (ss 550 and 550B). It follows that the respondent would have been liable to a period of reduction or non-payment of youth allowance if she was no longer undertaking full-time study without reasonable excuse. Section 80(1) of the Administration Act also provided that, if satisfied that a person is not or was not qualified for their payment or that their payment is not or was not payable, the Secretary ‘is to determine that the payment is to be cancelled or suspended’. Thus it appears that during the relevant time it was also possible for, if not required of, the Secretary to cancel or suspend the respondent's youth allowance payment if she was not qualified for it due to her ceasing to undertake full-time study or make satisfactory progress in her course 5. In any event, a sufficient failure, or number of failures, to satisfy the activity test would have resulted in either a period of reduction or non-payment under the provisions outlined above, or a cancellation or suspension of payment under s 80(1).

Assessable income under the 1997 Act

13 It is desirable first to refer to the relevant provisions of the 1997 Act. Section 4–15(1) provides that taxable...