Private ruling: Work related expenses - self-education expenses
Date of advice: 2 December 2020
Published: February 2021
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Are the expenses incurred to obtain a private pilot's licence deductible as a self-education expense? | A1: No.

Relevant facts and circumstances: You were employed as a machine operator and station hand from XXXX to XXXX. Your duties included operating machinery, bore and water point checking, cattle mustering and monitoring, service and maintenance of farm infrastructure. You undertook a course to obtain your private pilot's licence. The duration of this course was from XXXX to XXXX and you were not employed during this time. On completion of this course you obtained new employment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: 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 your 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 Income tax: deductibility of self - education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction. Paragraphs 13 and 14 of TR 98/9 provide that self-education expenses will satisfy the requirements of section 8-1 of the ITAA 1997 if: • a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge; or • 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. Therefore, provided if there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for self-education expenses. In your case, you have completed a course to obtain a private pilot's licence whilst you were not employed. The self-education expenses incurred in undertaking the course do not have the relevant connection with the earning of your assessable income. As such, the expenses are not deductible under section 8-1 of the ITAA 1997. If you had continued to be employed, the expenses incurred to undertake a self-education course must be relevant to the activities by which you are currently producing income. As per paragraph 13 of TR 98/9: "If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction." In your situation, the cost of the course would still not be deductible as the course was not undertaken to maintain or increase the skill or specific knowledge required in your current position. The course enabled you to obtain new employment and open up a new income-earning activity. Paragraph 15 of TR 98/9, outlines that self-education expenses will not be deductible if the study is intended to: • enable you to get employment; • enable you 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 a taxpayer is not yet engaged. The expense is considered to be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (FC of T v. Maddalena 71 ATC 4161; 2 ATR 541). In your case you have undertaken a course to attain your private pilot's licence whilst you were not employed. The course you undertook was designed to provide you with new skills for a change in career opportunities, that is, to open up a new income-earning activity. In the case of Assefa v FC of T [2009] AATA 2 (Assefa's case ), it was considered whether studying a course of education in order to advance to a higher classification of nursing was opening up a new income earning capacity. The taxpayer in this case was employed as an assistant in nursing and a care service employee while studying a Bachelor of Nursing degree. The Administrative Appeals Tribunal held in Assefa's case that no deduction was allowable for the self-education expenses. It was determined that there was a significant difference between the position of enrolled nurse and registered nurse on one hand, and personal care assistant/nursing assistant on the other. The taxpayer was not considered to be incurring the expenditure in gaining or producing her assessable income but was studying towards their initial qualification as a registered nurse. Your case can be compared to Assefa's case in that although the knowledge gained from the course of education may be of assistance to you in your current occupation; this is merely incidental to the main purpose for undertaking the course, which is becoming a fully licenced pilot. Where a course of study is undertaken to attain and utilise skills or qualifications to open up another source of income earning potential from the qualification, a deduction is not allowable. The purpose of the self-education expenses is considered to be incurred to earn income at some future point in time when the qualification has been obtained. We consider that undertaking the course to attain your private pilot's licence has allowed you to you obtain new employment and open up a new income earning activity in the industry.