Private ruling: Self-education expenses
Date of advice: 29 June 2015
Published: June 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for the costs incurred to obtain a Private Pilot's Licence and undertake more advanced training? | A1: Yes

Relevant facts and circumstances: Your position description states you must have extensive aviation knowledge including a pilot's licence or be currently working towards pilot qualifications. You have commenced your training to obtain a Private Pilot's Licence and intend to undertake more advanced training. In your performance review report your manager stated Since undertaking pilot training, [your] ability to interact with customers has improved. With continued training [you] will be on track to take on a leading role in the organisation. Training needs identified: Continued flight training is encouraged You are currently not undertaking your employment role at full capacity as when you provide advice involving actual flight planning and in-flight procedures another qualified person must review the advice. Nor are you able to legally use the software being developed in-flight. Obtaining your pilot's licence will allow you to overcome these restrictions. Additionally, it will allow you to apply for the General Manager's position, at higher pay scale, as this position requires the incumbent to hold a pilot's licence or be working towards pilot qualifications. You are not undertaking the studies to become a pilot and would cease them if you left your current employment.

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

Reasons for decision: Summary: The cost of the training courses will be incurred in connection with your current employment and is therefore deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Detailed reasoning: Self-education expenses will satisfy the requirement of section 8-1 of the ITAA 1997 if they have a relevant connection to your current income earning activities. Taxation Ruling TR 98/9 defines the circumstances under which self-education expenses are allowable as a deduction. TR 98/9 provides in paragraphs 13 and 14 that expenses of self-education will satisfy the requirement of section 8-1: 13. 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. 14. 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. Paragraph 15 explains that: 15. No deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in 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. TR 98/9 further states that the above principles do not always operate on a mutually exclusive basis and it is always necessary to have regard to the words of section 8-1 of the ITAA 1997 and apply them to the facts. An expense is deductible under section 8-1 of the ITAA 1997 when it has the essential character of an income-producing expense. The essential character is to be determined by an objective analysis of all the surrounding circumstances. In accordance with the two positive tests above, what needs to be fully considered is whether completing the course to become pilot and undertake more advanced training: • will contribute to the maintenance or enhancement of the skills and knowledge required in your employment as a technical manager; or • will lead to an increase in salary from your employment. In your case: • the courses will increase your skills and knowledge to enable you to fully carry out your duties as a technical manager • you envisage that there will be an increase in your income within your current organisation as a result of the courses being completed, and • the training courses are a progression of your current knowledge. The cost of the training courses will be incurred in connection with your current employment and is therefore deductible under section 8-1 of the ITAA 1997.