Folks,
This whole situation is about much more than the taxation law. It is about an unconscionable shift of financial and social responsibility away from those employers who seek to avoid future accountability.
In the world of the accountants who increasingly run aviation businesses, there is unlikely to be any reversion to the employer paying endorsement costs unless the aircraft/job are so relatively unattractive that no sensible potential employee would be prepared to make the investment.
In the traditional cost model, the employer bore the training cost. As a consequence, they claimed a tax deduction for the "business expense" but generally carried the post-tax cost as an overhead which reduced profit.
In the new cost model introduced in Oz by Virgin and adopted by Jetstar, the cost of training is borne by the workforce and doesn't even enter the accounts for the business. In short, it allows you to report an increase in profit and makes that business look better financially than its traditional competitors and, if considering a public float, excites the potential shareholders.
The downside for potential employees who now bear the not insubstantial cost of training is that they also bear all of the financial risk without any prospect of compensating increases in remuneration. What was a legitimate business expense to the employer now becomes a personal expense that may or may not be tax-deductible for the individual and may well require substantial borrowings not previously envisaged.
Furthermore, paying for an endorsement does not necessarily mean that the individual will meet the standard. Although historically the standards of training service providers have slumped (because there is no profit in being known as the trainer who won't guarantee the outcome!), it remains a remote possibility that an individual may pay and either not get the endorsement or get stung for further training. Unfortunately, a much more common outcome is the failure to secure employment despite having invested in an endorsement.
For those who do gain employment, how many employers are offering financial incentives that reward the employee for taking the financial risk?
Did Virgin (and now Jetstar) offer salaries that were higher than the rates paid by traditional cost model employers? No, quite the opposite!
Do the so-called "retention bonus" payments balance the equation? No, because such "bonuses" are taxable in the hands of the employee and no employer could justify almost doubling the accounting cost by paying the tax element on behalf of the employee - it not only looks bad to the shareholders, it is not a deductible business expense and probably also creates a fringe benefit tax liability.
Those of us who rely on aviation to make a living are caught up in a financial paradigm shift about which we can do little in the absence of any concerted strength in our bargaining power. The situation will not reverse until such time as the pool of pilots willing to make potentially life-time debillitating investment decisions dries up. I have no doubt that it will, because the risk-reward pay-off in being a pilot will attract only the most dedicated enthusiasts and there will not be sufficient of them to meet the future market needs.
In the mean time, perhaps the AFAP and other pilot representative bodies should dedicate some time to lobbying for political recognition of the anti-social aspects of this shift in cost models and a subsequent change to the relevant tax law regarding the cost to the employee. Perhaps they also need to resist more strongly and seek remuneration elements that directly address the costs to the employee of qualifying for employment.
More importantly, perhaps the regulator should be paying much, much closer attention to the standards being set within these new cost model businesses. If the regulator remembers that it actually serves the Australian public (and NOT the industry!!), then it might remember that its role is to safeguard the long term safety standards against the short term financial goals of various entrepreneurial businesses.
Safety standards do eventually suffer from cost-cutting in initial and recurrent training, albeit very insidiously. Safety standards also suffer in a much less predictable way when employees are suffering financial and related social stress induced directly by their employer.
Stay Alive,