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The Federal Court has dismissed the taxpayer's appeal from the decision of the AAT in Hancox and FCT [2012] AATA 836.

The taxpayer was an electrician by occupation. He was employed by Downer EDI as a leading hand maintenance electrician at or near Port Hedland. The applicant’s usual place of residence was in South Australia. He paid his airfares from Adelaide to Perth and Downer EDI paid for his travel from Perth to Port Hedland.

The taxpayer incurred losses and outgoings for accommodation and food and sustenance while staying in temporary accommodation in Port Hedland. Downer EDI paid him $500 per week whilst he lived in temporary accommodation in Port Hedland in lieu of providing him with food and board. It paid him a total of $18,000 for the 2009/2010 income year.

The taxpayer's PAYG payment summary for the 2009/2010 tax year showed an allowance of $38 and reportable fringe benefits of $6,197. During the 2009/2010 tax year, he was reimbursed for travel of $3,261.70. The reimbursement of $3,261.70 was included in the taxpayer’s reportable fringe benefits of $6,197. In his 2009/2010 taxation return the taxpayer included an allowance of $18,038, and a deduction for work related travel expenses of $36,124 referable to travel between Adelaide and Perth.

The issue was whether the expenses of $36,124 were "deductible expenses" for the purposes of s 30(1) of the Fringe Benefits Tax Assessment Act 1986. The taxpayer argued that they were deductible (under s 8-1 ITAA 1997) and that therefore the amount of $18,000 was not a fringe benefit to which s 30(1) applied but, rather, formed part of his assessable income. The taxpayer's arguments in this regard were rejected by the AAT and, on appeal, by the Federal Court.

Besanko J said at para 54:

"In my opinion, the expenses of $36,124 were not incurred in gaining or producing the applicant’s assessable income and were not deductible expenses within s 8-1(1)(a) of the ITAA 1997. It is not necessary for me to consider whether the expenses were of a private nature within s 8-1(2)(b)...As the expenses were not within s 8-1(1)(a), they were not 'deductible expenses' within s 30(1) of the FBTAA. The allowance of $18,000 fell within s 30(1) and the Tribunal did not err in so concluding."

The taxpayer's challenge to the imposition of a 50% penalty for recklessness was also dismissed.

Hancox v FCT [2013] FCA 735 (Federal Court, Besanko J, 29 July 2013).


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