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FIFO flights are ‘work’ – not a fringe benefit: Court

In a case determining whether an engineering company should pay Fringe Benefits Tax (FBT) for its FIFO employees, a recent Federal Court full bench has found that workers flying to and from a project site are officially ‘at work’ from the moment they arrive at the departing airport.

JOHN Holland has won its appeal of a Federal Court ruling which found the company was liable to pay FBT on its expenses to fly employees between Perth and Geraldton to work on a rail project between 2012 and 2013.

The initial finding of the Taxation Commissioner was that the travel expenses incurred by John Holland constituted a fringe benefit of its workers’ employment, and therefore should be eligible for taxation. On the company’s appeal to the Federal Court, Justice Jayne Jagot noted that John Holland’s employees were paid for the time during travel as part of their employment, but still upheld the Taxation Commissioner’s finding.

The ruling was that the flights were another form of journey between home and work, that it was long established that such journeys were not deductable, and that the flights would not be deductible if incurred by each employee.

In overturning Justice Jagot’s decision on 11 June, a Full Bench of the Federal Court consisting of Justice’s John Logan, Richard Edmonds, and Tony Pagone determined that the employees’ travel between Perth Airport and their Geraldton accommodation villages occurred during time when the employees were rostered on and working.

It is all too easy to focus one’s attention just on the remote project site and on the work undertaken there, instead of all of the circumstances which occur in the course of the gaining or producing of assessable income,” Justice Logan explained.

“That is how the respondent led himself into error and how, in turn, the learned primary judge was led into error.”

Justice Edmonds concurred that, while at Perth Airport, employees were travelling ‘on work’ rather than ‘to work’.

“From the time the John Holland employees, both workforce and staff, checked in at Perth Airport they were travelling in the course of their employment, subject to the directions of John Holland and being paid for it,” he said.

“That situation subsisted until they disembarked the plane at Perth Airport at the end of their rostered-on work time. At no time during that period were they travelling to work; they were travelling on work and the cost of doing so under the statutory hypothesis in s 52(1) FBTAA would be an allowable deduction to them under s 81 of the ITAA 1997.”

It was therefore ruled that John Holland should not have been liable for FBT. The Tax Commissioner was ordered to pay the legal costs incurred by the company.

Click here to read the full decision.

Implications for employers

This case sets a new precedent for AREEA members arranging for employees to travel to and from a project site. As confirmed in this Full Federal Court decision, flights arranged by employers to transfer employees to a project site are considered to be for work purposes and not a fringe benefit of their employment.

AREEA’s experienced workplace relations consultants are available to provide advice on the matter outlined in this case or similar employment issues, and can be contacted via your nearest AREEA office.

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