Fly-in-fly-out arrangement held to be otherwise deductible

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Fly-in-fly-out arrangement held to be otherwise deductible

Tax insights

The Full Federal Court (FFC) has allowed the John Holland group’s appeal against a fringe benefits tax (FBT) liability for costs incurred in flying employees between Perth and Geraldton to work on the Midwest rail project. The flights are residual fringe benefits, but as a result of the FFC holding that the otherwise deductible rule applied to the Midwest project’s fly-in fly-out arrangement, the value of those fringe benefits is reduced to nil: John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82.

The FFC’s decision is expected to have widespread implications for the resource and infrastructure sectors. Certain “fly-in fly-out” arrangements to remote areas, such as a number of projects in the Pilbara region are specifically exempt from fringe benefits tax. Less remote destinations, such as Geraldton do not fall within that exemption.

Companies that have paid FBT in connection with fly-in fly-out arrangements may be able to seek a refund.

Fly-in-fly-out arrangement held to be otherwise deductible
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