Deductable education expenses for students on Centrelink

I posted on Tuesday that there has been a grant of special leave to appeal in the case of Commissioner of Taxation v Anstis [2009] FCAFC 154. For reference when the appeal hearing arrives I thought I would set out the finding in that case in some better detail.

The question that was being considered was whether a person who is being paid Youth Allowance can claim their study related expenses as deductions under the Income Tax Assessment Act 1997 (Cth) ("ITAA").

The answer, contrary to the Tax department's long held policy, is yes.

The Court found that expenses are deductable because they are incurred for "the purpose of gaining or producing assessable income". They reached that decision because, in order to gain the benefit of Austudy, you:

1. are required to be enrolled in a certain amount of study (3/4 full load, I think); and
2. have to perform that study to an acceptable level (i.e. centrelink retains a discretion to revoke your centrelink if you are failing etc).

From the judgment, it looks like quite a few deductions would be possible for periods in which you are receiving youth allowance.

The relevant deductions in questions in the case were as follows:

$59   - Travel expenses other than to university (it seems unlikely that travel to university is covered)
$75   - Supplies for children during teaching rounds (she was studying a DipEd)
$80   - Student Administration Fee
$692 - Depreciation – computer
$264 - Textbooks and stationery
    Sub Total $1,170

Less $250 reduction pursuant to s 82A(1)

    Total Deduction $920

These were all allowed.

They refused, for procedural reasons, to deal with a ground of appeal stating that the depreciation of the computer is not a competent deduction under s 40-25 of the ITAA (at [25]). And they said that "no inference should be drawn" from their decision that they support that deduction. But s 40-25 seems to rest on deductibility of costs for "the purpose of gaining or producing assessable income" which is the same issue determined in the balance of the appeal.

If this decision withstands the High Court appeal, many other expenses will be deductable too. For example, though they did not say as much, they did imply that bank charges incurred on an account into which the Youth Allowance was paid would be deductable.

I am fond of this case for two reasons. First, I wish that I had had the patience to push this issue when I was at University. Secondly, the case is being argued by Melbourne solicitor, and father-of-the-respondent, Michael Anstis - I like to imagine that his daughter asked him for advice on her taxes one night at the dinner table and a few years later he is up before the High Court defending the opinion he gave.

Qld Industrial Court distinguishes Kirk

The recent High Court decision of Kirk v Industrial Relations Commission concerned, inter alia, the requisite particularity for a valid charge under NSW OH&S legislation. Recently, in the case of N.K. Collins Industries Pty Ltd v Peter Vincent Twigg (Unreported, Hall P, 27 April 2010, C/2009/56), the Industrial Court of Queensland refused to apply the Kirk decision in relation to a charge under the Queensland Work Safety Legislation.

Norton Rose has the scoop.
The decision can be found here.

The Court found the particular offence charged to be significantly different to that in Kirk. Indeed, the Court in Kirk said that (at [16]) "The scheme of [the NSW] legislation stood apart from other legislation of this type in Australia."  In any event its an interesting development for those interested in the formulation of charges under such legislation and a pretty bold move by the Industrial Court given the controversy surrounding Kirk.

[HT - David Cormack for the pointer]

April Special Leave Rundown

A much more manageable load of special leave grants this month. Here are the cases that received special leave on Friday:

R v Dickson [2008] VSCA 271

This case comes out of a quite complex history of amended charges and reshuffling of co-conspirators for a charge of conspiracy to steal – cigarettes by posing as a customs official. It is interesting because it raises the requirements for a fair trial in the face of such procedural difficulties. The case has been “Referred to an enlarged Court” (apparently the new terminology for referring the question of leave to the Full Court). Read the Charterblog post on the implications of this case to the Victorian Charter of Rights.

Commissioner of Taxation v Anstis [2009] FCAFC 154 

Leave was granted to appeal against the federal Court’s decision which found that certain education expenses can be deductions for the purposes of income tax when a student is on Centrelink’s Youth Allowance (or Austudy) Payments. I wish this had been around when I was at Uni. There will probably be legislative change to fix this little loophole but in the mean time I will post a more specific summary of the finding of the Full Court for future reference.

[Update 30/4/10: expanded summary now available here.]

Port of Portland Pty Ltd v State of Victoria [2009] VSCA 282

The case concerns the enforceability of a contract made by the Victorian Government (NB: rather than the Parliament) promising to effect legislation that would exempt the Port of Portland from certain Land Tax. This could be a very welcome contemporary addition to the jurisprudence on contracts which are void or unenforceable for attempting to abrogate the supremacy of Parliament. Leave to appeal was granted.

Telstra Super Pty Ltd v Finch [2009] VSCA 318 

This case has been referred to the Full Court for determination. It concerns the grounds on which a court will set aside a determination of a Trustee. In this case the determination related to the rejection by the Trustee of a Superannuation Fund for payment to a member of a TPI benefit.

Chen v Marcolongo [2009] NSWCA 326

There are two appeals concerning setting aside conveyances of Property. One concerned breach of fiduciary duties in an agency relationship. However the special leave application appears to relate to the issue of setting aside a Conveyance of Property which was executed with an intention to defraud creditors pursuant to the Conveyancing Act 1919 (NSW). In particular the case concerns the necessary fraudulent mental state required for the purposes of that Act.

Notable case for which special leave was refused:

St Alder v Waverley Local Council [2010] NSWCA 22. This case was highly publicised. It related to a number of homeless people who had, for some time (two to eight years), set up residence in the Bondi Pavilion in Bondi Park. When the Council told them to get out, those who had been living there argued that a license or lease had been created informally, or that they were estopped from so denying (interestingly they also argued that the council somehow owed them fiduciary duties).

MIA:

At one point the leave application in International Litigation Funding Partners v Brookfield Multiplex Ltd [2009] FCAFC 182 was listed in this month’s business list. This case was controversial when it found that a class action which is funded through litigation funding may be a Managed Investment Scheme, and would thereby be subject to regulation by the Corporations Act 2001 (Cth). However the case was pulled from the list at some point and was never called on. It may be that the case has only been postponed for next month, but if it has been settled I would be very interested to know. Does anyone out there have any information on the status (that is not confidential)?

[Update 20/5/10: further discussion on ILFP v Brookfield here.]

New HCA Judgments

Two new decisions were handed down today. We'll have the summaries up soon but for now:

Tabet v Gett [2010] HCA 12

This was a medical negligence case concerning the appropriate test and measure for damages in relation to 'loss of a chance'. Loss of a Chance is a vexed area of law on which the High Court's recent practice of unanimity would have been a welcome relief. Alas, whilst all of the Judge's agreed that the appeal should be dismissed. There are three substantive judgments and two separate concurring judgments.
 
Health World Ltd v Shin-Sun Australia Pty Ltd [2010] HCA 13
 
This case related to the narrow, but important, issue of 'standing' under the Trade Marks Act 1995 (Cth). Specifically, the Court considers the meaning of 'person aggrieved' under that Act. The Court all agreed (with Crennan J agreeing but writing her own reasons) that the appeal should be allowed.

[UPDATE 2/6/10: lamp post summary is now here.]

Totani - First day of hearing

Today, argument has begun in Totani on the validity of control orders under South Australia's infamous 'Bikie Legislation'. But papers have been reporting that there is already argument surfacing as to the validity of other provisions of the legislation.

[UPDATE 22/4/10: Transcript now available for both days here and here.]

Is this a first? - Dupas v The Queen

The transcript has not yet hit Austlii [**], but papers are reporting that the appeal in Dupas v The Queen has been dismissed. Special leave was granted back in February in relation to the question of whether pre-trial publicity ought to lead to a permanent stay of the prosecution. But despite allowing special leave, they have dismissed the appeal... unanimously... without calling on the respondent for argument. 

Obviously, they just wanted an opportunity to write a judgment on the issue. Clearly they thought that the national importance of the case outweighed the certain failure of the appeal (two primary relevant considerations in a grant of special leave).

I would be interested if anyone knows any other case that has been allowed special leave and then dismissed so summarily.

[**UPDATE 16/04/10: Transcript now available on Austlii.]

[**UPDATE 16/06/10: Reasons have been delivered - see here.]

New HCA Judgment

One new judgment was published today. We'll have the summary up soon but for now:

Lehman Brothers Holdings Inc v City of Swan & Ors [2010] HCA 11

I posted a few weeks ago that the High Court had made orders allowing the appeal in this case. Today they have published their reasons for doing so. The question for the Court was essentially whether a Deed of Company Arrangement can compromise debts and claims of the subject company in such a manner that it also compromises claims of the creditors against third parties. The High Court has found (French CJ, Gummow, Hayne and Kiefel JJ (Heydon J dissenting)) that it cannot, as a DoCA cannot force creditors without their consent to release third parties from claims.

[UPDATE 17/6/10: lamp post summary is now here.]

High Court salary

A good article on the wage of High Court judges vis a vis other professions is over at Crikey. It summarises some findings of the paper by CoreEcon blogger Andrew Leigh and Oxford Economist Tony Atkinson.

My favourite quote from the Crikey article:
"If you listen carefully, you can hear the tabloids winding up their outrage engines on those overpaid and out-of-touch judges and bureaucrats."

(The outrage of the comments thread suggests he's right.)

Berenguel v MIC

Berenguel v Minister for Immigration and Citizenship [2010] HCA 8 (5 March 2010)

Summary

Majority: French CJ, Gummow and Crennan JJ (Unanimous).

Decision: Appeal allowed.

The appellant lodged an application for an Australian permanent residency visa. At the time of lodgement, the appellant had booked, but had not sat for a language test. The relevant regulations required the Minister to be satisfied of the appellant obtaining a particular grade on the language test. That requirement was under a heading entitled ‘Criteria to be satisfied at time of application’. The High Court found, notwithstanding the heading of that provision, that given the wording of that part and the operation of the Act, the regulations were not intended to prevent the Minister receiving test results subsequent to lodgement of the application. Certiorari ordered quashing the decision of the Minister.

Facts

The appellant was a Brazilian national who had been studying in Australia for several years on a student visa. He wanted to stay in Australia and so sought to obtain a skilled residence visa.

Division 885.213 of the Migration Regulations 1994 (Cth) required, under the heading ‘Criteria to be satisfied at time of application’, that the Minister be satisfied that the applicant has achieved a score of at least 'vocational English' in an International English Language Testing System (IELTS) test conducted 'not more than 2 years before the day on which the application was lodged'.

On 26 February 2008, four months prior to the expiration of his student visa, the appellant booked an IELTS test. However the earliest date for a test was not until 10 May 2008, one month prior to the expiration of his student visa.

Prior to the test, on 21 April 2008, the appellant lodged a formal application to the Minister for residence. On his application form he checked the box which said “You have booked an English language test – provide details”.

The appellant subsequently achieved (and exceeded) the necessary IELTS test score by achieving a grade of “competent English”.

The Minister refused the application for residence on the ground that the appellant had “not provided an IELTS test result [for a] test conducted not more than 2 years before the day on which the application was lodged”, because the test result had not been obtained at the “time of the application” (as required by the heading in Div 885.213).

The appellant sought certiorari of that decision in the High Court’s original jurisdiction.

Decision

The Court found that theoperation of the Regulations and the Migration Act 1958 (Cth) did not prevent the appellant from satisfying the language requirement by sitting the exam subsequent to the lodgement of the application for residency.

The Court had regard to s 55 of the Act which stated:

(1)  Until the Minister has made a decision whether to grant or refuse to grant a visa, the applicant may give the Minister any additional relevant information and the Minister must have regard to that information in making the decision.
(2) Subsection (1) does not mean that the Minister is required to delay making a decision because the applicant might give, or has told the Minister that the applicant intends to give, further information.

The Court found that, although the section was part of a group headed ‘Criteria to be satisfied at time of application’, “the text of Pt 885 does not support any general conclusion that the criteria in Pt 885 speak exclusively to satisfaction at the time of application”: (at [25], emphasis added).

Their Honours concluded (at [26]):

Moreover, in this case, the construction for which the Minister contends leads to such plain unfairness and absurdity that it is not to be preferred. The alternative construction for which the [appellant] contends does not compromise the purpose of the Migration Regulations. There is nothing to prevent relevant information being submitted to the Minister after lodgement of the application. Indeed, s 55 of the Act expressly provides for that to be done and requires the Minister to have regard to such information. The Act specifically provides that the Minister may have regard to up-to-date information and, where the purpose of the relevant criterion is to ensure that the standard of English language competency is recently ascertained, a construction which would deprive him of the most recent information seems to be antithetical to that purpose.

Comment

This is yet another case in which the French CJ High Court has found in favour of an argument that allows substance to prevail over form. The High Court appears to have considered, as indeed many readers may, that the rejection of the Appellant’s application was the result of bureaucracy in the extreme. However in order to remedy this injustice, the High Court was required to underplay the importance of the heading which was no doubt relevant for the purposes of interpretation of the regulation (see [15]). As I have said on other occasions, this Court does not appear to be afraid to dispense with a strict application of the black letter law in order to reach a more sensible outcome (touch wood).

Where's Snedden?

I posted yesterday about the High Court decision in Republic of Croatia v Snedden where the High Court ordered extradition of 'Captain Dragan' for war crimes. Now, apparently, the AFP cant find him.

[HT - Patrick Leader-Elliott for the pointer]

European Bank Limited v Robb Evans

European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6

Summary

Majority: French CJ, Gummow, Hayne, Heydon and Kiefel JJ (unanimous).

Decision: Appeal allowed.

Money had been paid into court pursuant to an undertaking as to damages. On release of that money the plaintiff claimed damages pursuant to the undertaking in the amount of income that the plaintiff would have earned on the foreign exchange market, had it had the benefit of the money. The High Court found that the plaintiff was entitled to such damages. It said that the test for damages pursuant to an ordinary undertaking is as follows:

1. What is the loss that is alleged?
2. Did that loss flow directly from the order which was the subject of the undertaking?; and
3. Could the loss sustained have been foreseen at the time of that order? (Foreseeability in this sense means that a loss of the kind actually sustained could have been foreseen at the time.)

Facts

The appellant (“EBL”) was a company that speculated in foreign currency trading. EBL had obtained a judgment against the respondent in the Supreme Court ordering him to pay in the amount of almost $US9m. The respondent indicated that he intended to appeal the decision and so was ordered to pay the judgment debt into court subject to providing an undertaking as to damages. The respondent exhausted his appeals in relation to the judgment when he was denied leave to appeal to the High Court in 2005. Accordingly, the money was paid out of Court to EBL.

EBL claimed that, had it had access to the funds, it would have exchanged the US$ currency into EU€ and thereby received income from the judgment debt in excess of the interest earned by the prothonotory of the Court. EBL therefore sought compensation from the respondent, pursuant to the undertaking, for the income that it would have earned had the order to pay money into court not been made.

Rule 7(2) of the Supreme Court Rules 1970 (NSW) defines what is meant by a usual undertaking as to damages, it says:

The 'usual undertaking as to damages', if given to the Court in connection with any interlocutory order or undertaking, is an undertaking to the Court to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, affected by the operation of the interlocutory order or undertaking or of any interlocutory continuation, with or without variation, of the order or undertaking.

Decision

The Court found that the income that would have been realised by EBL by converting the US$ into EU€ came within the ambit of the undertaking as to damages.

Their Honours rejected the respondent’s argument that the proper test for determining the damages for the purposes of an undertaking was the same as that for determining damages for breach of contract. They said that the test for remoteness in Hadley v Baxendale (that the defendant is liable for damages that naturally arise from the breach or those that are in the contemplation of the parties when making the contract) was only relevant by analogy (at [14]) to determination of the appropriate damages under an undertaking as to damages.

The Court also rejected the reasoning of Basten JA in the Court of Appeal, where his Honour concluded that the damages sought were too remote because the consequential loss was “extrinsic” to the reason why EBL was kept from its money. Basten JA had found that changes in the exchange rate can not be seen as intrinsic to the purpose of the undertaking.

The Court said (at [17]) that Given that the order giving rise to the undertaking is essentially of equitable origins, a court is required to “do equity” and so must make an order for damages that it considers “just”. Therefore, the “assessment of compensation [for the purposes of an undertaking] cannot be constrained by a rigid formulation.”

The test espoused by the High Court was that, in determining the appropriate damages under an undertaking, a court should (at [16]), “look to the purpose which the undertaking as to damages is to serve and ... identify the causal connection or standard of causal connection which is most appropriate to that purpose”. In that context the court must determine (at [29]):

1. What is the loss that is alleged?
2. Did that loss flow directly from the order which was the subject of the undertaking?; and
3. Could the loss sustained have been foreseen at the time of that order? (Foreseeability in this sense means that "a loss of the kind actually sustained could have been foreseen" at the time.)

The Court found that the losses caused by EBL’s inability to exchange the US$ into EU€ satisfied that test and so were damages compensable pursuant to the undertaking.

Comment

There is little doubt in the correctness of the need to be cautious when applying contractual principles to other obligations in law. This is not a situation where the parties have bargained for an agreed relationship, an aspect of which is the acceptance of liability if the agreement is breached. This is the Court imposing on a successful litigant a period of surrender of funds which are rightfully theirs. The considerations are doubtlessly different.

However there is a policy problem with providing such a loosely defined test for damages. The Court referred to the “obvious proposition that … an undertaking is not lightly to be given”. But a failure to strictly define the scope of the undertaking undermines a party’s ability to determine whether it ought to give such an undertaking. And importantly for lawyers, it undermines a lawyer’s ability to advise their client of the risks associated with giving such an undertaking.

Query whether a lawyer will need to explore necessarily unpredictable future contingencies, such as exchange rates and share prices, before advising their client on the risks of giving an undertaking to a court.

Lehman Brothers v City of Swan

Lehman Brothers Holdings Inc v City of Swan & Ors [2010] HCATrans 82

[UPDATE 14/4/10: The reasons are now published.]

Lehman Brothers were a major player in providing the financial products that led to the Subprime Mortgage Crisis. Among those hardest hit by the Crisis were Australian local councils. In dealing with the claims against Lehman Brothers a Deed of Company Arrangement was approved by a majority of creditors, which provided for the Councils to take less than 10 cents in the dollar. However many of those voting in favour of the DOCA were reportedly overseas Lehman interests and the Councils have claimed that the DOCA was unfair to their interests.

The High Court has found in favour of the Councils and has confirmed an order that the DOCA be set aside. As with Republic of Croatia v Snedden that I posted about yesterday they have reserved their reasons but the transcript shows the following orders:

FRENCH CJ: These appeals from the Full Court of the Federal Court of Australia were heard on 9 and 10 February 2010 by a Court constituted by Justices Gummow, Hayne, Heydon, Kiefel and myself. The Court would dismiss the appeals. The orders of the Court are:

In matter No S1 of 2010:

Appeal dismissed.

The appellant pay the costs of the first, second and third respondents.

In matter No S362 of 2009:

Appeal dismissed.

The appellant pay the costs of the first, second and third respondents.
I publish those orders.

The reasons for the Court’s orders will be delivered at a later date.