Private ruling: Self education expenses
Date of advice: 13 November 2017
Published: April 2018
Ruling period: 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a full deduction for your course fees and flights incurred for overseas study? | A1: No | Q2: Are you entitled to a partial deduction for your course fees and flights incurred for overseas study? | A2: Yes | Q3: Are you entitled to a full deduction for your course fees, flights and accommodation incurred for overseas study? | A3: Yes

Relevant facts and circumstances: You have been a helicopter co-pilot for several years. For a number of years you were employed with a company to: ● oversee and assess other pilots ● operate the aircraft in accordance with the aviation regulations and the company’s requirements; ● comply with the operational and safety directives and ● maintain your own current medical certificates, maintenance licence and flying licence and where required revalidate your qualifications. In September 20XX the Civil Aviation Safety Authority (CASA) introduced regulatory licence changes to all flight crew to be in line with International Civil Aviation Organisation (ICAO) standards. Pre September 20XX a pilot’s licence was recognised under the Civil Aviation Regulations 1988 (CAR), but is now transitioning to the new regulations under Part 61 Civil Aviation Safety Rules 1998 (CASR). These changes are also adopting the ICAO’s aircraft type and class ratings system, “simplifying the aircraft endorsement systems for pilots”. Meaning all single engine helicopters are called class rating and all multi-engine helicopters are called a type rating. You held an Air Transport Pilots Licence for helicopters (ATPL)H and a co-pilot instrument rating (IR). Having this type of ATPL authorised you to fly single and multi-engine helicopters on and off shore. You typically fly helicopters that are medium sized, twin engines, hold several passengers. CASA are allowing flight crew to transition to these new regulations by August 20XX. In order to maintain your licence as a co-pilot IR you are now required to hold a full Command IR(H) to exercise your privileges. As these ratings have been separated into two categories and to maintain your licence and current employment at the time, you undertook training overseas on your own time and cost. As part of your job description your employer required you to be a fully qualified instructor with multiple endorsements and any training requirements was your responsibility to maintain. At the time these new regulations were being introduced there was no fully functional flight simulator centre in Australia where you could undertake the necessary training by an approved testing officer/examiner. You enrolled overseas to undertake a full-time course to gain a full IR(H) and type rating, to fly helicopters within the same calibre as to what you are accustomed too. You incurred a cost for the course and the accommodation was included. You ended the course after a number of weeks and you were reimbursed partial costs. You incurred the costs of your return flights from Australia to overseas. To complete the full IR(H), you continued the study and enrolled with another facility overseas. You also incurred the cost of the second course, accommodation and return flights from Australia. You completed the two courses successfully and as a full Command IR(H) you can still continue to operate as a single co-pilot and fly single or multi-engine aircrafts on land and offshore.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 8-1 | Income Tax Assessment Act 1936 - Section 82A

Reasons for decision: Summary: You are entitled to a full deduction for the course fees and accommodation you have incurred in relation to your overseas study. You are only entitled to a partial deduction for your airfares as there was a break in your travel for private purposes and an apportionment will need to be applied. | Detailed Reasoning - Detailed reasoning: 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. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are deductible. Self-education expenses are an allowable deduction 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; (1961) 8 AITR 406). 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. In your case, as part of your job description you were expected to keep your skills, training and knowledge to the standard of the company and this meant maintaining all your own learning and development at your cost to keep your co-pilot’s IR up-to-date. You undertook these courses overseas to ensure your current licence conforms to the new regulations that became introduced under the Part 61 CASR, so you can stay employed. We accept this study abroad has maintained your specific skills and knowledge that you use in your particular profession. Therefore, a deduction will be partially allowable for the self-education expenses you have incurred in relation to your overseas study, to the following extent: | Detailed Reasoning - Course fees: TR 98/9 provides that course and tuition fees incurred in attending an educational institution where there is a necessary and relevant connection with the earning of assessable income is allowable under section 8-1 of the ITAA 1997. Where a taxpayer incurs enrolment expenses to undertake a work related course of study, the fact that the taxpayer subsequently cancels their enrolment does not alter the fact that a relevant connection exists between the expense and the income-earning activities at the time the expense was incurred. In your case, you incurred two separate course fees relating to the study. You only completed four weeks of the first course and you received a partial reimbursement. You terminated the course early due to the centre not satisfying the training as per the schedule. The course costs incurred had a relevant connection with your employer at the time. We conclude that even though you cancelled in the midst of a training schedule your explanation satisfies the requirements of section 8-1 of the ITAA 1997 and consequently the expense is deductible. | Detailed Reasoning - Airfares and accommodation: Taxation Ruling TR 98/9 provides that airfares incurred on overseas study tours or sabbatical, on work related conferences or seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution. However, your travel to your first destination is allowed as a partial deduction. You will only be allowed the full cost of your airfares where you travel directly to and/or from your destination ( Case 4321 19 ATR 3465). If you break your travel for private purposes, a portion of your expenses will be private in nature and not deductible. In your case, you travelled from Australia to overseas. On arrival into your first destination you stayed with friends for a number of days. You have provided a reason that the onward flight was expensive and you waited for a cheaper flight. You incurred a cost and we accept this and will allow this portion. You commenced the course but terminated the course early due to the centre not satisfying the training schedule. Your accommodation cost was included in the course fee. You did not depart this destination when you terminated the course as you had pre-paid and pre-booked your return flights in advance. The cost to change the flights was expensive. You stayed on and this training centre allowed you to stay at their accommodation facility at your own cost. You have said for this period, a number of days were private in nature and remaining days were work related. We conclude the costs incurred on your return trip back to Australia is private in nature and therefore the cost will need to be apportioned accordingly and a partial deduction is allowable under section 8-1 of the ITAA 1997. You undertook a second course and incurred a cost for your flights and accommodation. This cost had a relevant connection to your employer at the time. We conclude the second course and the costs you incurred for flights and accommodation satisfies the requirements of section 8-1 of the ITAA 1997 and consequently the expense is fully deductible.