Teachers’ appeal allowed

Press, 12 November 1985, Page 8

Teachers’ appeal allowed

Wellington reporter Studentship payments to trainee teachers are exempt from income tax, according to a Court of Appeal decision.

An appeal by a Welling-ton-based teacher, Malcolm Marshall Reid, against a High Court decision in favour of the Commissioner of Inland Revenue was allowed by the Court of Appeal. The Court comprised Mr Justice Richardson, Mr Justice Somers, and Mr Justice Thorp. The appellant was represented by Mr D. H. Simcock with Mr A. W. Sheppard, and the Commissioner of Inland Revenue by Mr P. J. E. Jenkin.

In answer to the question 1

posed, the Court unanimously held that the Commissioner had acted incorrectly in including studentship payments in the assessable income of Mr Reid for the income year ended March 31,1982, and that the assessment made by the Commissioner should be amended by excluding those sums and deductions made. The appellant received studentship payments totalling $5719 from the Wellington Education Board during 1981-82, from which P.A.Y.E. of $770 was deducted by the education authorities on the assumption that the payments were assessable income not exempt from income tax. This was

the Teacher Trainee Association. Mr Reid’s was a test case affecting some 450 teacher trainees who objected to assessments of income tax made on payments described as “student teacher allowance” received by them during their training. In the High Court, Mr Justice Quilliam had held that Mr Reid’s studentship payment fell outside the exemption provision of the Income Tax Act, 1976. Section 61 (37) includes among the categories of income exempt from income tax: “Income derived by any person from any maintenance or allowance provided for or paid to him in respect of his attendance at an

educational institution in terms of a scholarship or bursary.” Mr Justice Richardson held that trainee teachers were student teachers furthering their education. “They are selected on merit and have to complete the courses to the required standards,” he said. As it was a professional course, they learned practice skills. They had to make satisfactory progress in their studies, and were subject to controls over their conduct. “These are ordinary incidents of higher education,” his Honour said. Giving undertakings of further service to the education providing the

teacher training, and later employing the teacher, could not convert the character of the relationship between student and education authority into one of employment and services. His Honour said that if the relationship was not one of employer-employee, the teacher trainee could not be assessed for tax under Section 64 (2) (1): “Income derived from any other source whatsoever.”

The sums in question were regular periodical payments made to Mr Reid to defray his expenses while attending Teachers’ College full-time as a trainee teacher. They were not payments for employment and they were not gifts.