Edited version of private advice

Authorisation Number: 1051866566920

Date of advice: 20 July 2021

Ruling

Subject: Work related expenses - self-education

Question 1

Are you entitled to a deduction for self-education expenses to gain a private pilot licence?

Answer

No.

This ruling applies for the following period periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work full time as an Engagement Officer with a government agency in a remote area of Australia.

Your employment commenced recently and is ongoing.

Your duties include visiting remote townships & Indigenous communities across a large geographical area and gathering community intelligence from these communities.

You are responsible for undertaking these duties across a very large region of Australia.

You are required to travel to remote and isolated Indigenous communities across a broad geographical area in your role.

You believe by completing the course you will be able to quickly undertake essential travel to these areas in circumstances where travel by road is not available. This includes the capability to undertake travel during the wet season where travel by road is problematic.

You commenced a private pilot licence course in 20XX and hoping to complete in 20XX.

This course is based on an approved syllabus prescribed by the Australian Government, Civil Aviation Safety Authority (CASA).

The course compromises of both practical (aircraft based) and theory (classroom based) components.

Costs incurred by you will include the purchase of relevant textbooks, car expenses for travel to the place of education and fees to the training provider.

The pilot training course you are undertaking pertains to the same type of aircraft commonly chartered by government agencies and other organisations.

You are not receiving Austudy, ABSTUDY, Youth Allowance or receiving a taxable bonded scholarship to study.

You are not using the Higher Education Loan Program (HELP) to pay the course fees.

The costs of the course are being paid by you and will not be reimbursed.

Approximately $X,XXX in costs have been incurred to date to undertake this course for this financial year.

The costs to undertake the self-education course may also include the mandatory minimum certifications required by the Civil Aviation Safety Authority to be granted a Private Pilot Licence. This may include costs to undertake the relevant Aviation Medical Certificate and Aviation Security Identification Card.

Your employer supports your decision to undertake the course but has not provided any allowances or other financial assistance to you.

It is not a requirement of your employment to hold a private pilot licence.

You have undertaken this course on your own initiative and believe that it will create increased community engagement and increase your community knowledge, improving your work performance which in turn may make you more attractive for promotion in a more senior role with your employer.

Your employer is required to consider the mode of travel to these remote communities. The exact mode of travel required for a circumstance is dependent upon the situation presented for each instance of travel.

Government agencies both state and federal, utilise chartered aircraft to travel to remote communities across Australia. These costs are paid by Government through an invoicing system.

A range of organisations use charter aircraft that are operated by employees, if that employee has completed relevant training.

Should you complete the pilot licence training course, subject to consideration of circumstances by your employer, aircraft will be sourced from an established and local aviation company.

The aviation company offers two types of hire options, which are known in the aviation industry as 'wet hire' (aircraft and crew) and 'dry hire' (aircraft only). The wet hire option includes costs for the aircraft hire and pilot, whereas dry hire option covers costs only for the aircraft hire. The aviation company maintains relevant and appropriate public liability insurance to cover aircraft operations.

Your employer has acknowledged that should you complete the pilot licence training course this may benefit the organisation by providing additional capability and options to undertake a range of engagement travel to remote communities into the future.

Relevant legislative provisions

Income Tax Assessment Act 1997section 8-1

Reasons for decision

It is not a requirement in your role as an Engagement Officer to hold a private pilot licence, nor would a pilot licence objectively lead to, or is likely to lead to an increase income. Therefore, a deduction for self-education is not available for expenses under section 8-1 of the ITAA 1997 because it is considered there is insufficient nexus between the expenses and your current income-earning activities with your employer.

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

A number of significant court decisions have determined that, for an expense to satisfy the tests outlined in section 8-1 of the ITAA 1997:

• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words of an income-producing expenses (Lunney v FC of T (1958) 100 CLR 478);
• there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v FC of T (1949) 78 CLR 47)
• it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344; FC of T v Hatchett 71 ATC 4184 (Hatchett's case).

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 income from his or her current income earning activities in the future, a deduction is allowable.

In your case, your current duties include gathering intelligence from Indigenous communities and facilitate productive working relationships across government, service providers, Indigenous leaders and communities at the local level. It is not a condition of your current duties as an Engagement Officer with your employer to hold a pilot licence. Rather, it would be convenient and may benefit your employer by providing additional capability to engage in travel to remote communities and the benefits are largely personal and private in nature.

Accordingly, all expenses incurred are considered to be more related to development of personal capacity which is considered to be private in nature. The course does not have sufficient direct nexus to your income earning activities and the expenses incurred are therefore not tax deductible.