Private ruling: Work related deductions
Date of advice: 8 May 2023
Published: 26 June 2023
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for the cost of obtaining a professional qualification? | A1: No

Relevant facts and circumstances: You are employee operating in a specialised industry. You are legally required to frequently travel to remote locations to perform your duties. Currently, you use road transportation and chartered flights for remote locations, which is extremely cost inefficient due to the cost of pilot time while on the ground. This limits your ability to visit multiple locations in a day and reduces your efficiency. To overcome this challenge, you have identified obtaining a private pilot's licence as a key tool to perform your job effectively and generate income. You also contend that obtaining a private pilot's licence is an investment in your career as it expands your skill set and provides you with a competitive advantage over other investment professionals.

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 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 circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. In addition, 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, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist. In your case you are currently employed to provide specific services. These services do not include flying aircraft. This position requires that you travel via car or charter flight to various locations. You travel frequently to remote locations to perform your duties. While a pilot's licence would be beneficial to you and would cut down your travel time and enable you to visit more locations, the qualification does not have the nexus with your current employment. It is not part of your job to have a pilot's licence and you are able to perform your duties without the licence. The qualification is convenient but does not have a direct connection with the duties of your job. The costs associated with obtaining the pilot's licence is not an allowable deduction under Section 8-1 of the ITAA 1997.