VB/J* Pilots :.. Are Endorsements Tax Deductable?
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VB/J* Pilots :.. Are Endorsements Tax Deductable?
Can anyone here tell me if a pilot paying for an endorsement on 737/717/A320 (once accepted into the company), is legally tax deductable in Aus now.There was a great deal of conjecture when VB first introduced the practice of paying for an endorsement.
Anyone have any experience in this matter ? EG tax rulings etc.
THANK YOU ...
Anyone have any experience in this matter ? EG tax rulings etc.
THANK YOU ...
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If an expense doenst directly relate to your current employment then no you cant claim it as a deduction. Thats not to say once you get into the airline they require you to pay for it then sh*t I would claim it...
Ang
Ang
OK, as I understand it, you don’t have a job with DJ or J* until you complete your endorsement. Therefore unless your previous employer required you to have a B737NG endorsement, and you were still working for them during the training, then no it isn’t. I believe this may have already been tested recently with a court case some DJ guys brought against the ATO. They lost.
Bottums Up
OVERCHINA
the following is an excerpt from an AFAP memorandum of 12 May 2004 after the ATO conceded in an individual case. (my bolding below in the quote)
the following is an excerpt from an AFAP memorandum of 12 May 2004 after the ATO conceded in an individual case. (my bolding below in the quote)
Following the settlement, our solicitors have provided a notice that we may publish for the benefit of other pilots whose circumstances are similar to the applicant, as follows:
“The Federation recently instructed its solicitors, Mahonys, on behalf of one of its members to appeal to the Federal Court against a decision of the Commissioner of Taxation to disallow the members objection to an Income Tax Assessment in which the Commissioner refused to allow as a deduction any part of expenses incurred by the member in undertaking a training course to fly Boeing 737-400 aircraft.
The member was an employee of Sunstate Airlines at the time he undertook the course, but resigned that employment to take-up employment with Virgin Blue upon successfully completing the course.
The proceeding in the Federal Court was settled shortly before trial when the Commissioner agreed to allow as a deduction the expenses incurred in undertaking the course.
The Commissioner has stated that in settling the proceeding he in no way concedes that other taxpayers, who may have incurred similar expenses to the expenses incurred by the member, would be entitled to a deduction.
The ability of other members to claim a similar deduction will depend upon their circumstances, which should be discussed with their own taxation advisers. However, it would be appropriate for members to inform their taxation advisers of the settlement of this proceeding when considering their own taxation returns.”
“The Federation recently instructed its solicitors, Mahonys, on behalf of one of its members to appeal to the Federal Court against a decision of the Commissioner of Taxation to disallow the members objection to an Income Tax Assessment in which the Commissioner refused to allow as a deduction any part of expenses incurred by the member in undertaking a training course to fly Boeing 737-400 aircraft.
The member was an employee of Sunstate Airlines at the time he undertook the course, but resigned that employment to take-up employment with Virgin Blue upon successfully completing the course.
The proceeding in the Federal Court was settled shortly before trial when the Commissioner agreed to allow as a deduction the expenses incurred in undertaking the course.
The Commissioner has stated that in settling the proceeding he in no way concedes that other taxpayers, who may have incurred similar expenses to the expenses incurred by the member, would be entitled to a deduction.
The ability of other members to claim a similar deduction will depend upon their circumstances, which should be discussed with their own taxation advisers. However, it would be appropriate for members to inform their taxation advisers of the settlement of this proceeding when considering their own taxation returns.”
404 Titan,
I dont claim to be a bean counter...
However I was wondering ...
If one was to deduct 8 of the sessions as IFR currancy, doing approaches in the SIM ... which is a an existing qualification, the regs dont say you cannot use a B738 SIM for IFR currancy..
And then pay for the last session which is the endorsement check and renewal and not claim that as that is the new qualification, how would you think that would stand ?
Just trying to think outside the box for guys in that situation.
I dont claim to be a bean counter...
However I was wondering ...
If one was to deduct 8 of the sessions as IFR currancy, doing approaches in the SIM ... which is a an existing qualification, the regs dont say you cannot use a B738 SIM for IFR currancy..
And then pay for the last session which is the endorsement check and renewal and not claim that as that is the new qualification, how would you think that would stand ?
Just trying to think outside the box for guys in that situation.
Capt Claret
Interesting that the ATO settled out of court. I would be very interested to know the details and circumstances of the DJ pilot that had this outcome. Maybe in this case the ATO realized that they didn’t have a chance at winning in court and didn’t want a precedence set. Everyone though that is contemplating claiming their B737 or A320 endorsement costs shouldn’t take for granted that it is tax deductible. Seek professional advise from a taxation accountant and/or a lawyer. I would suggest in most cases it isn’t.
swh
I think you will find to claim IF currency in a level D B737 sim or A320 you would have to be endorsed on it. Maybe I am wrong. It has been a while since I have looked at the CAO’s and CAR’s. To be frank it has also been a while since I looked at the taxation act. Maybe things have changed since I left Aus?
Interesting that the ATO settled out of court. I would be very interested to know the details and circumstances of the DJ pilot that had this outcome. Maybe in this case the ATO realized that they didn’t have a chance at winning in court and didn’t want a precedence set. Everyone though that is contemplating claiming their B737 or A320 endorsement costs shouldn’t take for granted that it is tax deductible. Seek professional advise from a taxation accountant and/or a lawyer. I would suggest in most cases it isn’t.
swh
I think you will find to claim IF currency in a level D B737 sim or A320 you would have to be endorsed on it. Maybe I am wrong. It has been a while since I have looked at the CAO’s and CAR’s. To be frank it has also been a while since I looked at the taxation act. Maybe things have changed since I left Aus?
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How pathetic some of these scumbag airline managers are. If they want you to fly their equipment, why they hell should you have to pay (even if you do want the job)?
Does anyone else know of any other industries where you have to fork out such big dollars to get a job?
Does anyone else know of any other industries where you have to fork out such big dollars to get a job?
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I believe that if you take annual leave from your current employer and do the endorsement during that period, then you are technically paying for training and education that furthers your qualifications in the industry with which you are employed, therefore making a tax friendly ruling more likely.
If you resign from your employment, do the course and then take up employment with a carrier, you are technically not employed in the industry at the time of training and therefore the tax office may have some more ammunition to take a hard line.
I am no accountant, just going on my personal experience with the tax office and training about 7 years ago. Times change, and the biggest problem with the ATO is consistency. For one example, I had three separate rulings on one issue - 1st was yes, the 2nd no, and the 3rd was undecided.
Maybe the Feds should look into organising something whereby they force Virgin to employ you while you are training - even giving you a couple of hundred dollar allowance would satisfy the criteria of employment potentially.
If you resign from your employment, do the course and then take up employment with a carrier, you are technically not employed in the industry at the time of training and therefore the tax office may have some more ammunition to take a hard line.
I am no accountant, just going on my personal experience with the tax office and training about 7 years ago. Times change, and the biggest problem with the ATO is consistency. For one example, I had three separate rulings on one issue - 1st was yes, the 2nd no, and the 3rd was undecided.
Maybe the Feds should look into organising something whereby they force Virgin to employ you while you are training - even giving you a couple of hundred dollar allowance would satisfy the criteria of employment potentially.
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2FarCanard..
No. That is not what J* put in their proposal for the QF link contract. All new 717 and 320 pilots to do the same as virgin. Pay for your endorsement. Seems to be backed up by one question J* asks applicants on staffcv.com.... 'are you prepared to obtain an endorsement at your own cost?'
OVERCHINA....
The basic idea at the ATO is that paying for an aircraft endorsement to CHANGE employers is a capital cost (= not deductible).
Getting a 320/717/737/spaceshuttle endorsement with the view of moving up the ladder or improving your ability to doing your CURRENT job with your present employer is considered to fall under 'self-education' costs, and is deductible.
So if your company starts operating a 717, and requires you to pay to transfer to it, that is deductible.
If you resign your chieftain or space shuttle job to join a 737 operator, then your 737 course is not deductible.
The devil is in the detail, but that is the basic view of the ATO
Ang737..
A reminder that if you followed your own advice, the ATO would see a huge blip on their radar screen, would possibly investigate, and if you were found to be wrong, your 737 endorsement might cost you $45,000. The tax due plus twice the tax due as a penalty! Would have been cheaper to cop the $25-$30k.
boocs...
Exactly.
Talk at Jetstar is that they might be moving toward a bond type arrangement for the 717/320.
OVERCHINA....
The basic idea at the ATO is that paying for an aircraft endorsement to CHANGE employers is a capital cost (= not deductible).
Getting a 320/717/737/spaceshuttle endorsement with the view of moving up the ladder or improving your ability to doing your CURRENT job with your present employer is considered to fall under 'self-education' costs, and is deductible.
So if your company starts operating a 717, and requires you to pay to transfer to it, that is deductible.
If you resign your chieftain or space shuttle job to join a 737 operator, then your 737 course is not deductible.
The devil is in the detail, but that is the basic view of the ATO
Ang737..
A reminder that if you followed your own advice, the ATO would see a huge blip on their radar screen, would possibly investigate, and if you were found to be wrong, your 737 endorsement might cost you $45,000. The tax due plus twice the tax due as a penalty! Would have been cheaper to cop the $25-$30k.
boocs...
Exactly.
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Enema Bandit:
Why sure! Every person who has to pay big dollars to go to uni to train to become a doctor, engineer, lawyer etc etc.
Should pilots be any different?
Does anyone else know of any other industries where you have to fork out such big dollars to get a job?
Should pilots be any different?
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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,
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,
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QSK? sort of like we all pay for our flying lessons to get a CPL. My point is why should an employer dictate that you have to go out and spend thousands of dollars of YOUR money to save THEM money?
Also, what does QSK stand for?
Also, what does QSK stand for?
Grandpa Aerotart
Jetstar have changed the way you pay for your endorsement on both the 717 and the A320.
Currently they are paying for the endorsement up front and that cost is deducted from your pay over three years before tax....hence the net cost of the endo is reduced by about 48%.
Not bad I would suggest.
Perhaps a sign of the beginnings of a shift back towards free endos followed by ROSO as demand for experienced pilots outstrips supply....perhaps not. An improvement none the less.
Currently they are paying for the endorsement up front and that cost is deducted from your pay over three years before tax....hence the net cost of the endo is reduced by about 48%.
Not bad I would suggest.
Perhaps a sign of the beginnings of a shift back towards free endos followed by ROSO as demand for experienced pilots outstrips supply....perhaps not. An improvement none the less.
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The ATO states that any flight training/check rides conducted while you are in gainfull employment and that it required to stay so is tax deductable. Any flight training conducted with the idea of going on to something better is not.
I recently had to convert from fixed wing to rotory as a requirerment to stay employed with the company so after chating with the ATO i was able to claim my heli training as a deduction
I recently had to convert from fixed wing to rotory as a requirerment to stay employed with the company so after chating with the ATO i was able to claim my heli training as a deduction