Edited version of private advice

Authorisation Number: 1052320677467

Date of advice: 24 October 2024

Ruling

Subject: Work related deductions

Question

Are the Self Education expenses of $XXX,XXX in XX lessons deductible under section 8-1 of the Income Tax Assessment Act 1997?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You worked as a pilot for XXX.

You were a XX pilot of a XX aircraft before the training.

You ceased your employment on XX XXX 20XX, to complete the training as it was a full-time course.

You were not receiving Austudy, ABSTUDY or Youth Allowance to study.

You were not in receipt of a taxable bonded scholarship while training.

You were not receiving an allowance or reimbursement while training.

The courses included the following training:

•                     XX instrument rating.

•                     Night Visual Flight Rules.

•                     Night Vision Imaging Systems.

The course commenced on XX XXX 20XX.

You successfully completed the course on XX XXX 20XX.

The qualification you obtained from the training means you can now fly more advanced aircraft. This training was critical for the work you are now doing.

Although you have been a pilot since 20XX, it is only through this training that you have the skills to do your current job.

You are now employed full-time as a pilot flying XX aircraft for XX clients. You started the new employment on XX XXX 20XX.

You paid $XXX, XXX for the XX aircraft course on X XX XX.

The only expense external to the course was accommodation.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 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.

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual discusses circumstances in which self-education expenses are allowable. 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 (paragraph 22 of TR 2024/3). 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 their current income earning activities in the future', a deduction is allowable.

However, as stated in paragraph 23 of TR 2024/3, no deduction is allowable for self-education expenses if the study will enable you to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in your current employment). This includes studies relating to a particular profession, occupation or field of employment in which you are not yet engaged. These expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income.

To be able to claim a deduction, the expenses must relate to your income earning activities at the time of incurring the expense (paragraph 72 of TR 2024/3). In determining whether a deduction is allowable for self-education expenses there would need to be an examination of how the courses are connected to your income earning activities at the time the expenses were incurred.

In your case, at the time of engaging in the XX aircraft course you were not employed. While you had previously worked as a pilot for XX aircraft, you only became qualified to pilot XX aircraft, once you had completed the course. Therefore, expenses associated with the course are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income.

You were not undertaking income-earning activities to derive assessable income related to the courses at the time you incurred the expenses. These expenses are not deductible under section 8-1 of the ITAA 1997 in the 20YY income year.