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The Federal Court (Jagot J) has dismissed the taxpayer's appeal against an objection decision relating to the FBT taxable value of flights paid for by the taxpayer and taken by the taxpayer's employees for travel between Perth and Geraldton under certain fly-in fly-out arrangements.

Under the FBTAA 1986, the flights were characterised as “external non-period residual fringe benefits”. Section 52 of the FBTAA 1986 operates so that the taxable value of the residual fringe benefit would be nil where the costs of the flight would be deductible by the employees under s 8-1 of ITAA 1997 had the employees paid for the flights themselves. The issue for decision by the Court, therefore, was whether the costs of the flights would be deductible by the employees (had they paid those costs themselves) in accordance with s 8-1 of the ITAA 1997. The taxpayer argued they would, the Commissioner argued the contrary.

After examining earlier authorities, including Lunney v FCT (1958) 100 CLR 478; [1958] HCA 5, the Court dismissed the appeal, stating at para 34:

"...while Lunney is not exhaustive, the fact that the travel is undertaken on a periodic rather than a daily basis does not seem a relevant distinguishing feature. The important distinguishing features are that in the present case the travel is undertaken at the employer’s direction and the employee is paid for the period of travel. But the character of the outgoing, assuming that the employees had paid for their own flights, remains the same. To the employee the cost of the flights would be incurred because they had chosen to live away from their place of work, the project location. If, as Northrop J said in Genys, the question is the 'essential character' of the outgoing, then, on the hypothesis of payment by each employee, the character of the outgoing is too similar to that in Lunney to reach a different conclusion, particularly when regard is had to the caution of Dixon CJ in that case. While I do not consider the important distinctions in this case to be 'refined and rather insubstantial', as his Honour referred to in Lunney at 486, I also do not consider them sufficient to reach a different conclusion from the view which, as Dixon CJ put it (at 485), 'has always prevailed that expenses of travelling from home to work or business and back again are not deductible'."

John Holland Group Pty Ltd v FCT [2014] FCA 1332 (Federal Court, Jagot J, 10 December 2014).


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