The taxpayers have appealed to the Full Federal Court against the decision in John Holland Group Pty Ltd & Anor v FCT [2014] FCA 1332. The Federal Court had dismissed the taxpayers’ appeal. The issue was whether John Holland was entitled to reduce, by the “otherwise deductible rule”, the FBT payable on the value of return flights by its employees flying from Perth to Geraldton and back for a rail upgrade construction project undertaken by the company. The Federal Court held that the flights would not have been deductible under s 8-1 had the cost been incurred by the employees directly. It followed that John Holland was not entitled to reduce its FBT liability on the flights by the “otherwise deductible rule”.

[LTN 3, 7/1/15]

FJM Note on case

My note about this decision last month was as follows. The case appears to be about whether the employer has to pay FBT on the cost of transporting its workers to and from their place of work under the ‘fly-in fly-out’ arrangements. This is determined under the ‘otherwise deductible’ rule (viz: whether the expense would have been deductible to the employee, had it been born by the employee). I think this case may well be appealed, not only because of its importance to the taxpayer and the industry, but also because there are exceptions to the general position set down in the Lunney v FCT (1958) 100 CLR 478. One of these is a doctor on call who can deduct the cost of travelling from work because it was held that he or she was already at work as they were driving to the hospital. The court recognised that the employees were employed on this ‘fly-in fly-out’ basis, and were paid whilst on these flights (to and from their place of work). This might have to be put to a Full Federal Court bench to be reconsidered.