Edited version of private ruling

Authorisation Number: 1011485361430

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Education expenses

Question 1

Are the expenses you incur in obtaining a Private Pilot Licence (PPL) and a Commercial Pilot Licence (CPL) deductible as self-education expenses while you are performing general employee duties?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts

You have been employed by an organisation for several years.

For some years you worked in another section of the organisation which involved being a crew member on an aircraft.

Recently you have been performing general duties which do not include aircraft duties. Your career goal is to pilot aircraft within the organisation.

You approached the aircraft section of the organisation and they cannot offer you any employment unless you obtain a Commercial Pilot Licence (CPL). Once you have this licence they can employ you on ground planning and co-pilot duties while they train you on their specific aircraft.

Later you commenced a self funded pilot training course with a flying school. You will obtain a PPL and will then study the CPL course.

You receive no training, financial assistance or guarantee of employment as a pilot from your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

Similarly, 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, a deduction is allowable. 

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment.  Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161).

Taxation Ruling TR 95/13 addresses the expenses of police officers including self-education expenses. TR 95/13 specifically considered two case decisions that dealt with claims for air training expenses for police officers.  

In Case 48/93 93 ATC 520 a deduction was allowed for a police officer undertaking air training. The taxpayer was a detective constable with the Criminal Investigation Branch (CIB) of the police force and commenced a commercial helicopter pilot licence course in August 1989. In December 1990 she obtained a position as an Air Observer with the Police Air Wing but returned to the CIB when her career opportunities in the Air Wing diminished. She obtained her licence in February 1991 and claimed a deduction in the 1990 income year for the cost of the course. Evidence was given that the training had given the officer a very good appreciation of helicopter use and navigation, which would make the police officer a very valuable asset. It was held that the officer had increased their efficiency in their present duties and had enhanced the promotion prospects in their present position.

By contrast in Case V7 88 ATC 142 (Case V7), a police constable undertook air training as they aspired to enter the police Air Wing. However in this case the studies had only a small influence on the officer's current duties. It was held that the outgoings were directed to obtaining employment in a new and totally different position from the one they currently occupied. On this basis a deduction was denied as the expenses were incurred in getting, not doing work, as an employee and came at a point too soon in time to be regarded as incurred in gaining assessable income.

A distinction can be made between your circumstances and those in Case 48/93. Although you had some experience of a general nature on your employer's aircraft prior to the PPL course, the applicant in Case 48/93 commenced a commercial helicopter pilot licence course in August 1989, took up a position in the Police Air Wing as an Air Observer in December 1990, obtained her pilot licence in February 1991 and continued her duties as an Air Observer until September 1991.

Your circumstances are considered to be comparable to those in Case V7 as we consider there is insufficient nexus between flying lessons in order to obtain a pilot's licence and your current general employment duties. Qualifications as a pilot are not necessary in your current duties. The flying training does not enable you to maintain or improve your existing skills or knowledge as an employee on general duties. Completely new skills and knowledge will be acquired. Your flying training is directed toward future employment in as a pilot.

You are not entitled to a deduction for the expenses incurred in obtaining a PPL or a CPL.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).