In a recent AAT decision a lawyer sought to obtain a deduction for the expenses of converting his New Zealand private pilot’s licence (first obtained in 1982) to an Australian one.  

In order for an expense to be deductible under the general deduction section, there must be sufficient nexus between the outgoing claimed and the gaining assessable income i.e. the outgoing must be what is productive of assessable income or the outgoing must be necessarily incurred in carrying on a business.  

The tribunal held that there was not sufficient connection between the taxpayer’s activities as a lawyer and the activity as a lawyer from which he earned his assessable income. While the costs of studying aviation law may have had a sufficient nexus, the obtaining of a pilot’s licence was held not to be necessary for the lawyer to expand his practice into aviation law. Therefore the expense was not deductible.