travel expenses
travel expenses
The Ato has issued a Decision Impact Statement basically accepting the Full Federal Court’s unfavorable decision to the ATO, and agreeing to apply it to similar factual situations.
Brief Summary
Between May 2011 and September 2012, John Holland Group employees worked on the Midwest Project at Geralton, WA.
The employer paid for their employees to be flown from Perth to Geraldton, near where the Midwest Project was located, and back again on a rostered basis. Most employees lived in Perth.
The Fly-in Fly-out (FIFO) arrangements for the Midwest Project involved the following:
- Employees traveled at their own expense to Perth airport. Perth airport was designated by John Holland as the ‘point of hire’.
- At the end of their rostered-on Period (usually two or four weeks), they would be transported back to Geraldton airport and would catch a flight back to Perth, at the cost of the employer.
- They would make their way home from Perth airport at their own expense for one week of rest and recreation at home.
- The employees were remunerated at an applicable hourly rate for travelling time on the flight from Perth airport to Geraldton, and the return flight, which occurred during rostered-on work time.
- Employees, travelling on the employer’s time, were bound to comply with all employer directives and policies, and disciplinary action could result if an employee breached any such requirement during a flight.
Decision of the Full Federal Court
The Full Court found that the employees’ arrival at Perth airport from their homes was not travel in the employees’ derivation of income, and any expenditure incurred by the employees from their homes to Perth airport would not have been deductible.
However, the employees were relevantly at work from arrival at Perth airport and were deriving income from that point.
Therefore, they would be entitled to a deduction for the cost of air travel from Perth airport to Geraldton and return.
The Full Court also found that there is no reason why Perth airport should not be a point at which the employees duties and remuneration for performance of those duties both commenced and ceased, as provided by the contract of employment.
ATO’s View
The decision of the Full Court clarifies the law regarding the deductibility of travel expenses.
As concluded by the Full Court, the case under consideration in Lunney* was of ‘ordinary people’ paying fares ‘to enable them to go day by day to their regular place of employment or business and back to their homes’; it was not about the specific demands occasioned by employment that required, as part of the employment, travel to a remote place.
(*) Lunney v. C of T, (1958) 100 CLR 478
In contrast, the travel in the John Holland case occurred during working time while the employees were rostered-on, and paid. This travel did not include the private travel between each employee’s home and Perth airport.
The ATO stated that where similar factual situations to the John Holland case arise, the decision of the Court would obviously apply.
Ref: ATO Decision Impact Statement- JOhn Holland Group Pty Ltd v. C of T
Comments are closed.