Training Bond tax deductable?

[Calldepartures]

Hi,

I recently paid out the balance of a training bond (Qlink). My accountant has advised me that he may have to seek an ATO private ruling to determine if this is tax deductable. Has anybody had any experience with this one way or another? Any evidence of previous rulings would be appreciated.

Thanks.

[Capt Claret]

Accountants are similar to pilots and lawyers, ask the same question of any ten of them, and you'll get 10 different opinions.

If it were me, I'd keep asking until I got an answer I was happy with! ;)

[Paragraph377]

Calldepartures, I paid one out years ago in NZ, and there definitely was a tax deductible component mate. Now I know that was NZ and not AUS, but both countries utilise the Westminster system hence some similar processes, although not exactly the same. I would recommend a check of your ATO site for some well hidden information or talk to some colleagues of yours who may have good accountants who are very familiar with aviation tax rules and claims processes.
Cheers

[Kelly Slater]

You should have arranged for as much of the bond as possible to be paid from any entitlements such as annual leave. The bond paid is money paid in order to earn income. Claim it on tax. Don't ask for an independent ruling, if they come back with a no, then it is game over. If you make the claim and are audited some time in the future then at worst, you can argue that you thought the claim was justifiable and therefore not be charged a penalty, only any payment that the ATO thinks should have been paid in the first place. The chance of being audited is negligible and the claim is totally justifiable, more justifiable than half the claims made by various professions. If your accountant won't make the claim, find one that will.
I have done exactly this in the past and my claim was never disputed by the ATO. Once again, the last thing that you should do, ever and for any tax query, is get an independent ruling from the ATO.

[mightyauster]

Unfortunately, this is not going to be helped by our dear mate Swanny decreeing in the May budget, a cap of $2500 for self education expenses :D. It remains to be seen if the new gubmint rescinds this...

[404 Titan]

Kelly Slater

That is some of the worst tax advice I have ever seen. If you honestly think the ATO will accept as an innocent mistake such a large tax deduction then you are seriously delusional.

Calldepartures

Now to whether paying off a bond is tax deductable, I would say, being an accountant in my former life, no. The ATO may have ruled otherwise in the past and I stand to be corrected if this is the case or there may be some sought of Salary Sacrifice that is approved by the ATO.

In general though, there is no difference in you paying for your flying training or your future employer paying for it and you paying them back over a period of time, i.e. a bond. They’re both generally not tax deductable because:
1. You couldn’t have worked as a pilot before obtaining the qualification (Assuming the training is to get a CPL), and
2. You probably didn’t earn income as a pilot in the tax year most of the cost was incurred.
So in general your accountant is doing the right thing and getting a private ruling. It will be you the ATO comes after, not your accountant if it is later found the deduction wasn’t allowed and I can assure you for such a large amount of money they will set penalties.

[Snakecharma]

Wouldn't it depend on why he had to pay the training bond?

I assume that you would only pay out a training bond to Qlink if you resigned. I assume (though an assumption could make an ass of u and me) that the resignation was so that the pilot could go to another employer.

If the new job pays more (assuming it is a flying job) then it would be a deduction wouldn't it?

Also a private binding ruling is the way to go if your accountant is unsure. Don't take the first knock back by the ATO, appeal a negative decision and make sure that your accountant frames the argument in line with the appropriate tax legislation.

[Kelly Slater]

404, I speak from personal experience. If you can show that your claim was reasonable, all be it wrong, the ATO will not charge you a penalty. I have had penalties overturned by stating my reasonable expectation for the claim. As far as personal rulings go, I have had a few. All were reasonable, one would have meant that the ATO would have received more tax from me and all were denied. I have a personal ruling stating that I cannot claim a refund for transport to the airport. I argued that I could not carry all of my equipment on public transport. The ATO ruled that it was personal equipment, that is my nav bag was a personal item and not considered in the same way as a Tradesman's tools are. How many people do you know claiming transport costs, I know plenty. My advice is sound. Don't ask for a personal ruling. Make any claim that you believe is justifiable.

[TexanPilot]

If you can't claim endorsement costs then how come Jetstar and Virgin pilots are salary sacrificing their training costs? Wouldn't it be the same as paying for it yourself and claiming it on tax?

[Kelly Slater]

Virgin Pilots have always claimed their endorsement costs. Originally, you had to be endorsed before you were employed. Pilots claimed these costs after employment, clearly in breach of the ATO guidelines regarding self education but none to my knowledge have ever come unstuck. Make the claim.

[ad-astra]

Kelly your 'knowledge' on the subject of Virgin Pilots and their tax deductions and specifically whether they are within ATO guidlines 'clearly' leaves a great deal to be desired.

My only advice to the original poster is to get advice from a professional


NOT PPRUNE!

[Kelly Slater]

I have no need to defend myself. I withdraw from the conversation.

[ANCPER]

Your accountant is wrong, if it was paid for training while employed it is tax deductible.

From my accountant, the ATO can go back 2 yrs and if they find irregularities they can then go back another 2 yrs, if fraud they can go back as far as they like. Now if you are outside the 2/4 yrs and find a deduction that is incorrect their is nothing they can do as it's self assessment and not fraud. From personal experience unless it's outrageous it's unlikely to involve penalties.

What those overseas need to understand is that if you haven't lodged a tax return then the countdown for that tax yr hasn't commenced, this is courtesy of a dispute between the ATO and Packer back in the late 90s, and it's the date of your return being submitted.

[404 Titan]

I think some may have misunderstood what I said. Endorsement costs would generally be allowed if you are working as a pilot and the endorsement is a requirement of your employer. Normally the endorsement requirement for Jetstar or Virgin wouldn’t be allowed because you aren’t in the employment of these airlines until the endorsement is completed successfully but it would appear the ATO is allowing it.

All costs in obtaining a CPL though including ATPL subjects if done during your training for a CPL are not tax deductable. The reason for this is that it isn’t possible to work as a pilot before the issue of a CPL. If you are bonded to an airline that paid for your flying training to CPL and you have to pay them back out of your salary then in most circumstances it wouldn’t be tax deductable. If though you are bonded for an endorsement then it would generally be deductable if you were in the employment of said airline before the training started.

[ad-astra]

I cannot speak for Jetstar but the issue of training cost deductibility for VB pilots was resolved with the help of the AFAP and a test case they funded and some very good advice from some very expensive lawyers.

The circumstances and wording of the offer of employment was instrumental in us being legally allowed to claim training as a tax deduction.

What appears to be true and hearsay will get you into a lot of trouble with the ATO.

Believing that because 1000 VB/VA pilots have dishonestly self assessed and more importantly got away with it and that it is OK to submit a dishonest Tax Return yourself based on hearsay is naive.

Get the professional advice.

[Hailstop3]

Ad-astra,

Can you please elaborate on the wording etc that helped or point me in that direction? I may be in this same boat (paying out a bond because of leaving the company early) and this would make things much easier if I had some more info. Would it be worth speaking to someone at the AFAP for more info? I have asked my accountant and he flat out said no without looking up anything, I had to push him this year to claim back allowances which i was certainly entitled to. Maybe time for a new accountant.

[morno]

So what if a 'Letter of Offer' says that you have employment with a company, on the condition that you obtain an endorsement on the aircraft type prior to employment?

I've read the ruling, and I consider that my 'current income-earning activities' is as a Commercial Pilot.

morno

[ad-astra]

marcuste747

I think the best option would be to contact the a AFAP in Melbourne and ask for one of the industrial officers.
If your not a member I'm not sure how in depth they will go but they are there to provide assistance to pilots and a bit of background info costs nothing.
The devil is in the detail as always and it was the wording of the offer of employment document and the timing of ones resignation/appointment that made all the difference to the ATO.
The horse may have already bolted for your circumstance but it's certainly worth looking into.
Good luck.

[Hailstop3]

Thanks Ad Astra. If it comes to it I'll report back with how I go.

[neville_nobody]

Endorsements are only claimable if you are on the payroll somewhere else. You have to be employed at the time you do the training. You cannot resign a job then do your endorsement then claim it.

How many people do you know claiming transport costs, I know plenty. My advice is sound. Don't ask for a personal ruling. Make any claim that you believe is justifiable

The ATO are very much like CASA; you ask 5 different people the same question and they will adamantly argue that their opinion is the only correct answer. If you lose in court you have to pay the tax PLUS the interest!!! So just make sure that you have the coin for the
accountants+ lawyers+tax+interest before getting too exotic in your tax claims.