Flight training and the tax office

[PiperCameron]

Back in the good ol' days it was possible to claim all of ones flight training, ratings and endorsements as a business expense, although I believe the introduction of a tax of some kind (Fringe Benefits Tax?) killed some or all of those "perks" - along with large business lunches, golf days and various other activities folks of that era enjoyed.

What's the state of play these days? Is it possible for a lowly PPL to claim any flying training and not cop a significant tax penally without actually being employed as a commercial pilot??

[KRviator]

Back in the good ol' days it was possible to claim all of ones flight training, ratings and endorsements as a business expense, although I believe the introduction of a tax of some kind (Fringe Benefits Tax?) killed some or all of those "perks" - along with large business lunches, golf days and various other activities folks of that era enjoyed.

What's the state of play these days? Is it possible for a lowly PPL to claim any flying training and not cop a significant tax penally without actually being employed as a commercial pilot??Probably...But you'd need a damn good accountant to demonstrate it directly relates to you earning an income. So a schoolteacher is out. Garbo? Probably not. Greeter at Bunnings? Not a snowballs chance.

Farmer? Shearer? Even Doctor if you're a specialist and doing a lot of intrastate travel then there's probably a good argument to be made if it relates to you earning a crust - and that's the key phrase... It has to be directly related to you earning an income.

[markis10]

It has to be directly related to you earning an income.

And the related income needs to be in the same year as the expense.

[OZBUSDRIVER]

Can work if you are an apprentice LAME. Did this with my son when he was in the game.

[mikewil]

And the related income needs to be in the same year as the expense.

Does it though?

If you can depreciate the cost of an aeroplane over say 10 years, surely you can do the same thing with the qualification that you intend to use over x number of years...

[kbca]

I have some good info on this but cant post URLs until I get to 8 posts.

[kbca]

"If you can depreciate the cost of an aeroplane over say 10 years, surely you can do the same thing with the qualification that you intend to use over x number of years..."

The Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) is very specific about what a depreciation asset is. This doesn’t fit.

Search for s40-30 ITAA 1997 for a specific list.

[kbca]

If you are deducting the cost of flight training then you probably need to fit it into Section 8-1 ITAA 1997.

The outgoing needs to have a nexus with gaining or producing assessable income or carrying on a business and can’t be capital. s8-1 is quite brief so you need to rely on case law for your argument.

I recall some sort of precedent for AME/LAME claiming a deduction but couldn’t turn it up in a quick search.

This private binding ruling provides some guidance on what the ATO position might be - should be a requirement of the role or be likely to lead to increase in income. Seach for PBR number 1051866566920

Alternatively here is some interesting case law on aviation expenses and carrying on a business: search for HART v FC of T[2002] FCA 1559

As with anything tax related, in the event of an audit or review, the taxpayer is required to substantiate their claim and support their position. Penalties of 25% to 75% of the tax difference + interest apply if your position is less than reasonably arguable. If you are considering putting through substantial claim, then you should probably get advice and get it in writing so that you can sue the author (really their PI insurer) if the advice is wrong and it all goes pear shaped.

[tail wheel]

If you can depreciate the cost of an aeroplane over say 10 years, surely you can do the same thing with the qualification that you intend to use over x number of years...

I like your thinking - but the cost of flying training is an expense and deductible for tax purposes only in the year it is incurred. Also, it is only deductible if you earn income from flying or it is essential to gaining your income.

An aeroplane is an asset and may be depreciated over the life of the asset but only if it is essential to achieve your income.

Understand the difference between an expense and an asset. An expense is a wife/girl friend, drinking habit or a vacation in Bali. An asset is bricks and mortar, something you park in your garage, or an aircraft if it contributes to your income. (To confuse you, if the aeroplane does not contribute to your income, it becomes an expense!) :}

[Squawk7700]

An example of what you’re up to would help.

Eg, your an earthworks consultant and you are flying to you’re customers to quote jobs and do the jobs.

You also need to price that the flying is important to the job role being performed, like so you really NEED to fly to the customer.

[tail wheel]

Another trap for young players - under the previous 1988 Civil Aviation Regulations CASA decided if you were required to operate an aircraft in the course of your business you must hold at least an Aerial Work AOC.

An example was a photographer (from FNQ from memory) who was prosecuted for using his aircraft to take aerial photographs of properties and then selling the photos, with a private pilot license and no Aerial Work AOC.

I'm not sure whether the current Regulations have excluded the possibility of this bureaucratic insanity recurring.

[compressor stall]

Tailly, It's been a while but I remember that aerial photography was something that was specifically mentioned in the regs for that, hence the prosecution. I was looking at that as a way of getting some cash during my early CPL days.

That was different to owning say and earthworks business and flying yourself (and other employees) around which of course didn't trigger Airwork or charter

[megan]

under the previous 1988 Civil Aviation Regulations CASA decided if you were required to operate an aircraft in the course of your business you must hold at least an Aerial Work AOCWorked for a private operator with a fleet of ten aircraft who had its own check and training system, including intrument rating check rides/renewals, and had no Aerial Work AOC, or indeed an AOC of any kind.

[tail wheel]

That was different to owning say and earthworks business and flying yourself (and other employees) around which of course didn't trigger Airwork or charter

I also recall either an action or at least an investigation by CASA of a rural Vet in Queensland who would fly himself to clients properties in the course of practicing his profession. Forty years ago I think, but the investigation by CASA involved a number of factors, whether he carried his tools of trade and determining whether the Vet was charging for the use of his aircraft and whether it was cost recovery or included a profit margin - all of which you will note, seriously impact air safety!! :mad:

Worked for a private operator with a fleet of ten aircraft who had its own check and training system, including intrument rating check rides/renewals, and had no Aerial Work AOC, or indeed an AOC of any kind.

I could believe that. Whether an operator got investigated or prosecuted - or got help and cooperation - seemed to depend upon the collective IQ of the local CASA office; whether one had ever questioned the local FOI or DFOM; or whether they were listed on a white board in a certain CASA office in Canberra. In the 1980s and 1990s CASA went through a series of vexations, unnecessary and ludicrous prosecutions of pilots, engineers and aviation operators for no demonstrated gain in air safety and in the process gutting remote area commercial flying operations and putting good people out of work.

Some CASA offices managed their responsibilities in an admirable manner, for example the Darwin Office, whilst other CASA offices were maliciously damaging almost every operator in their region.

[Squawk7700]

But yet a YouTuber deriving income from flying his/her aircraft does not need an AOC.

[Clare Prop]

As I understand it, if you have a CPL and are deriving an income from flying, then things like training, upgrades, renewals, headsets, charts etc are tax deductible (Headset would be depreciated)

If you have a CPL but derive your income from elsewhere then it is not tax deductible.

People can run into complications from Workers Comp when flying for work.

But why not make an appointment with a tax accountant and get an expert opinion?

[nomess]

What happens these days if someone got a job, but they couldn’t start until they got a IFR rating? The company would provide a letter head confirming employment but lack of the rating. It would be self funded from the applicant.

I assume you might be able to get this across the line? I know people did this back in the 90s

[Clare Prop]

A clear nexus must be present between the "expense" and the taxpayer's income earned from their current place of employment.

The Commissioner will allow for a deduction for self-education if the current employment by which the employee undertakes is based on that of a skill or specific knowledge that self-education will either maintain or improve. For example, a hospitality management course undertaken by a restaurant manager will be deductable as it improves their direct skills and expertise in carrying out their profession.
If it is likely that the self-education will lead to an increase in income within their current income-earning activity, a deduction will be allowed. If an individual has an agreement with their employer that if they undertake a self-education course and they will receive a promotion upon completion, then the conditions for a deduction will be satisfied.
One of the more crucial distinctions is that a deduction will be denied if the self-education undertaken is designed to get employment, gain new employment, or opens up a new income-earning activity. As discussed in respect to Khan’s case, even if the course of study relates to the two points above, if the individual is unemployed at any time, then the deduction may be denied.

Self-education expenses | RSM Australia (https://www.rsm.global/australia/insights/tax-insights/self-education-expenses#:~:text=%22Self-education%20expenses%20are%20deductible%20under%20section%20 8-1%20where,in%20itself%20for%20self-education%20expenses%20to%20be%20deductible.%22)

[Duck Pilot]

Some CASA offices managed their responsibilities in an admirable manner, for example the Darwin Office, whilst other CASA offices were maliciously damaging almost every operator in their region.

Thanks for the compliment! 🤗