Claiming type ratings for tax purposes.
 

Can anyone help with some advice please?

Two pilots finish up at a GA job to start their first airline gig and both have a start date and are required to turn up with their shiny new type rating signature in their log book on day one.

Pilot one has enough leave accrued with his GA job and uses this leave when he resigns to do the endorsement so technically he is still employed while doing the endorsement.

Pilot two has no annual leave when he resigns. He leaves the GA company and is technically "unemployed" for the few weeks it takes for the endorsement to be completed before starting the new job.

My advice so far is that pilot one can claim his endorsement for tax purposes and pilot two cannot because he's technically not employed in the industry.

Can anybody assist please?
Cheers.

Thanks Slam. That's the advice I'm getting from the tax professionals, pilot one can while pilot two cannot. Interested in others experiences.

I'm no tax lawer, but in my view, if it is appropriate for pilot 1 then the question is really about pilot 2's employment status.

If he has resigned, left and had his holiday's paid out then he is effectively in the same position as pilot 1. However if he is taking leave and his resignation is effective at the end of his leave then he is not in the same position.

If his previous employer is nice, they'd make his resignation efficient on same date as pilot 1 and simply show his leave as a termination entitlement.

Good luck.

And you come to a pilot forum for a second opinion??? :ugh:

All this aside, haven't the Gov't capped self education expenses for the 15/16 FY at $2500? Won't get much aviation related training/education for that.

DW,

I think SL is hinting that NEITHER can claim it.

The key word is CURRENT employment...

Not a tax person, but by reading the ATO advice, I think it's pretty clear how they view the matter.

Tax
 

As mentioned see an aviation background tax specialist as the law is a matter of interpretation. It seems odd that with the pollies trying to make us ' the clever country' anything which improves your income / employability down the track is not deductible now if you are paying tax. As this is a self assessment system we live in , put in what you want in your return and beg forgiveness later if you can make a tenuous link to the expenses. Of course a new employer would be helpful if they employed you subject to successful completion of the rating but from the day you started the course ...even if you were only paid a notional rate which they clawed back later . But the ato hates contrived structures so likely to fail avoidance rules ? Of course I agree that there is a capped self education expenses... Unless you can get VET fee help for some of it ( enter new part 142 training providers !) good luck!

The Aussie Bob method would be to make the claim and see if you get away with it. The Tax Office doesn't seem to challenge a heap of stuff. Odds are you will get away with it.

I can see some cringe ... but this is a pilots forum and I am a pilot. You are getting what you pay for.

Oh and by the way, the last person who took the Aussie Bob approach on a different tax issue involving a whole heap of gst was challenged by the tax office. The net result was just a request for the gst back, zero penalty and all done over the phone.

Have you searched the ATO Private Binding Rulings database ?

Often the outcome to the answer is how the question is posed, and what you did before you asked to the question to get he answer you want.

For example, I am a CPL holder with an instrument rating which requires a number of instrument approaches, takeoff and and landings day and night, and and annual renewal test by a CASA delegate for me to fly passengers. CASA regulations stipulate that the renewal must be in either an aircraft, or an approved simulator, synthetic trainer and specifies the time intervals these are required.

Can I request a Private Binding Ruling on an instrument rating renewal to regain my recency requirements for takeoffs, landings, approaches and my instrument rating in accordance with the new part 61.

You will be able to show the ATO records where you completed day/night takeoffs and landings, instrument 2D/3D approach proficiency, and the instrument rating renewal.

You will have to keep records consistent with the Private Binding Ruling.

slam_click

Wrong question.

Where does the ATO or CASA say you cannot do an instrument rating renewal in a 737 simulator if you are not type rated ?

I think you're all looking at it from the wrong way.

Say you have a confirmed job offer from an airline with a start date. A condition of this job is that before the start date you undertake, at your own expense, an A320 type rating.

This is related to your current employment - ie, the new job. It's not speculative- you're not doing it to enable you to get new employment. You've already got the new employment and it is an absolute requirement if your employer directs you specifically to undertake that training. Therefore, yes, it should be tax deductible.

A friend had advice from the AFAP lawyer, SL, admittedly some years ago, that his 320 rating which was a condition of his employment with JQ was legit. His first accountant disagreed, the 2nd accountant agreed it was legit and claimed it (both were aviation savvy).
He was never audited and it's been more than 5 years so I guess we'll never know on that one.

Been in the same boat myself, wished I had claimed it. I knew of another pilot that did and got a hefty refund. My humble no foundation opinion advice would be, in the worst case you get audited you then pay the money back that you would have had you not claimed, so whats to lose?

Talk to the AFAP.
They assisted a lot of us (hundreds) in claiming the endorsement as a tax deduction.
If I remember corectly the date of appointment/offer of employment versus when the training commenced was vital.

It seems different industries are treated differently by the tax office.

Kids fresh out of high school have no trouble claiming personal training (fitness) courses or learn how to drive an excavator courses on tax.

The fitness trainer courses used to cost upwards of 8k before you were able to put it on vet fee help. The 2 month long excavator operators courses cost about the same.

I did a one day forklift course which had nothing to do with my current employment and the school told me to make sure I put it on my tax return. I told them I don't plan on using it for work but they replied it's a training course that will improve your job prospects in the future so it's absolutely fine. They have been in the business for thirty years and never heard of anyone being told they can't claim it.

Delta, the problem is you not only have to pay the money back, the fine can be up to 100%

A bit of commonsense is needed here. Believe me, there is absolutely no way that you could pass an honest instrument rating in a Level 5 B737 FFS unless you had previously passed a type rating course on the aircraft and preferably had time on type. The latter not essential but you would be wasting $3000 plus even if you found an qualified IRE outside of an airline.

I've had the tax office call me twice in the last 20 years to query deductions I had claimed.

I found them very helpful on both occasions. They told me if you have receipts and you think it's a legitimate expense then claim it. If there is a problem they will ask you for more details and then they will decide to let it go or not. They really aren't out to prosecute Joe average for claiming a PA 31 rating.

What they are after are people who repeatedly make claims for largish sums without receipts or reasons for making the expenditure in the first place.

This is the crux of the matter. Why would you frig around seeing consultants and paying out even more money for what should be a simple thing. If the claiming error is genuine there is no penalty. Why are Aussies so scared of these institutions?

Just claim it and see what happens.

Centaurus,

He's insinuating you call a type rating an instrument renewal to claim it if you couldn't claim the type rating.

Lateral thinking.

My wife works for our small business. We have plenty of expenses, but not much income. Plenty of tax deductions that my airline salary tax covers :)

Or changed bases, took annual leave, drove around Australia for a holiday and claimed accomodation, fuel and food as moving expenses. :)

I wouldn't have done that? Surely not! Well no. But I know plenty that have!

Start your own consultancy company,
Employ yourself, then target your company at an aviation business... No surprise, you probably won't get the gig! Make the company more attractive by getting all employees type rated on certain aircraft.
After 6 months, the company goes broke and all employees have long since moved on!
In the meantime, expenses such as employee Christmas parties, long lunches, travel costs etc are also claimable.

Bad business ideas are not a felony.

The problem with asking for tax advice is that if you happen to get a very clear answer (Slam-Click's link above) but claim anyway then you go from a good bloke who's made a genuine mistake to someone who has intentionally defrauded the ATO.

The answer to the OP's question is very clear, NO, neither of the hypothetical pilots may claim the endorsement. If you wish to go down the road of claiming anyway then it would be a lot better if you never asked the question and were therefore genuinely mistaken about the rules.

I don' think that ignorance as an excuse will "fly".

If you claim something you are not entitled to, and you are discovered, not only will you have to pay it back, you will pay interest (currently 9.75% compounding) on that amount , plus any penalty that the ATO decides to apply.

As much as I dislike the way the Government spends my taxes, it is preferable to worrying about getting the letter in the mailbox requiring a substantial amount of money sometime down the track.

It is simply cheaper, and less stressful, in the long term to ask for a ruling and take it from there.

I was going to disagree with AerocatS2A's reply

But for the original question I think he is correct.

However if the said pilot had a letter of appointment with the new company before commencing the training then he would be able to claim the expense.

The exact number of Virgin Blue pilots escapes me but it was not far off 500 pilots that were able to claim back the 737 endorsement costs.

As I mentioned the AFAP have all the details and funded the test case.

Previous posters advice of claiming the tax deduction without doing any homework and using the excuse of having made made a "genuine mistake" when they get audited is just simply insane.

The ATO have no snse of humour nor would the self assesment system work at all if it was up to the ATO to determine every claim and not have an effective penalty system in place.

The self assesment system works because of the threat of substantial fines and penalties if a mistake is made by the taxpayer.
Excuses of innocence, genuine mistake or deliberate act will be treated the same.

Talk to the AFAP to get the facts.

I was also very clear to suggest to obtain an ATO Private Binding Ruling.

If you have a ruling before the event, and follow that, there is no fraud.

4. From July 1, 2014, self-education will have a $2,000 cap
The 2013 Federal Government Budget set a cap of $2,000 on self-education expenses claims, which will come into effect from July 1, 2014. This means individual taxpayers may only claim up to $2,000 on any fees paid from the 2014/15 financial year onwards. At the moment the amount is uncapped, so if you’re after a qualification where the course fees are more than $2,000, now is the time to enrol and pay.

Seems the horse has bolted already.