Bechtel Australia Pty Ltd v Commissioner of Taxation

Bechtel Australia Pty Ltd, a major player in the Australian construction industry, contested a decision by the Commissioner of Taxation regarding the deductibility of travel expenses for its 'fly in, fly out' (FIFO) employees. The dispute centered on whether these travel expenses were deductible under the Fringe Benefits Tax Assessment Act 1986 (Cth) and the Income Tax Assessment Act 1997 (Cth). The crux of the matter was whether the travel expenses incurred to and from work, before and after the employees began and finished their duties, constituted travel in the course of employment. This, in turn, hinged on whether these expenses met the 'otherwise deductible' test under section 52(1) of the FBTAA.

The legal issues before the court were whether the travel expenses, if incurred by the employees, would have been allowable deductions under the Income Tax Assessment Act 1997 (Cth), and whether these expenses satisfied the 'otherwise deductible' test as per section 52(1) of the FBTAA. The court had to examine the reasoning from previous cases such as Lunney v Federal Commissioner of Taxation (2001) 202 CLR 93 and Commissioner of Taxation v Payne (2001) 202 CLR 93, which established that travel expenses from home to work and back again are generally not deductible as they are considered living expenses, not business expenses.

The court found that the travel expenses incurred by Bechtel's FIFO employees were not deductible as they were akin to living expenses rather than business expenses. This conclusion was drawn by applying the reasoning from Lunney and Payne, which held that travel expenses incurred before or after performing work duties do not connect sufficiently to the gaining or producing of assessable income. The court also highlighted that being under a code of conduct during travel did not convert such travel into employment-related travel. Ultimately, the appeal was dismissed, and Bechtel was ordered to pay the Commissioner's costs.