Non-remote fly-in fly-out win

Employers who provide accommodation for fly-in fly-out workforces at “remote” work locations generally get a specific fringe benefits tax (FBT) exemption for providing that accommodation and for the cost of transporting employees from their usual homes and back again at the beginning and end of each rostered work period.

For fly-in fly-out to a “non-remote” work location, the Full Federal Court has now held in John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82 that FBT was not owed on the flights provided by the employer. The court said that had the employees instead paid for the flights, they would have been entitled to tax deductions as a cost incurred by them in the course of deriving assessable remuneration. Therefore the employer could reduce the FBT to nil under what is known as the ‘otherwise deductible’ rule. The decision overturns the lower court’s finding.

However, the same outcome will not arise for all “non-remote” fly-in fly-out arrangements. Critical to the decision was that employees were on paid work time during the flights, and it was a genuine work requirement of the employer to undertake those flights. At no time during the flights were employees travelling to work (which would be personal travel) – they were already on work. Wage earners were paid for each hour of flying time. Salary earners working on the project were generally paid a bonus because of the work location. The flights were from Perth to Geraldton to work on a rail project near the town lasting 17 months. Each successive project was at a different location necessitating that Perth be used as the long-term base for employees. It was not practical to base employees in Geraldton, nor for daily commute.

Employer accommodation costs in Geraldton were not considered in the case. The aggregated time some employees spent at the Geraldton work location was up to approximately 12 months. It is worth remembering that the Road and Traffic Authority of NSW (1993) case held that temporary accommodation over that duration was still deductible as business travel expenditure for employees who drove home each weekend. Given how restrictive the alternative living-away-from-home FBT exemption for accommodation has become in some employee scenarios (eg some employees who work the same days in consecutive weeks), the question of when accommodation expenditure is deductible for an employee (and therefore also FBT exempt) may also be fertile ground for broader re-examination.

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Authors

Nick Heggart

Director, Head of Energy & Resources

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Graham Warren

Special Counsel

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