Companies that have paid fringe benefit taxes as part of flying workers to remote locations may be able to recoup those costs, even retrospectively, following a landmark decision in the Federal Court.
Companies that have paid fringe benefit taxes as part of flying workers to remote locations may be able to recoup those costs, even retrospectively, following a landmark decision in the Federal Court.
Today, the Federal Court allowed construction contractor John Holland’s appeal against the imposition of FBT costs associated with flying workers to Geraldton to work on its Mid West rail project.
While many remote fly-in, fly-out destinations, such as Karratha and Port Hedland, are specifically cited as exempt from FBT, Geraldton and several other towns are not.
It’s understood John Holland’s FBT costs were nearly the same as those to fly its Perth employees to and from Geraldton.
Today’s Federal Court decision, which can still be appealed by the Australian Taxation Office, is expected to have widespread implications for other companies that send FIFO workers to remote locations not covered under the initial FBT exemption legislation, such as Darwin and Gladstone, according to accounting firm EY tax partner Tanya Ross Jones.
“This is the only case (John Holland) going through the courts, but actually it affects a lot of other projects, not just in Western Australia," Ms Ross Jones said.
"Some of the obvious ones are big projects in Darwin, in Gladstone. There’d be some in the South West in WA that wouldn’t qualify.”
Ms Ross Jones said the original decision as to which towns qualified for FBT exemption and which did not (in relation to flying workers in and out) dated back to legislation enacted in 1986, and would require a change in legislation to amend the list.
However, she said today’s Federal Court decision meant companies that had paid FBT in relation to FIFO workers' flights could now appeal to the ATO for payments made even as far back as three and four years.
“Regardless of where in Australia the locations are that are affected, if (companies) have historically paid FBT on these sorts of flights it’s just a fantastic decision to give them the support to be able to reconsider that and potentially look at seeking refunds from the tax office,” Ms Ross Jones said.
“If they’ve paid FBT in prior years, this effectively represents a change in the law that would give them the basis to go back to the tax office and say 'you’ve incorrectly charged us tax'.”
EY employment taxes partner Paul Ellis said a key aspect of the John Holland case was that the employees in question were rostered on from the beginning of their travels.
“This is a fantastic win for taxpayers, especially in the mining, oil and gas and construction industry where it will be a real boost in the currently challenging times,” he said.
While EY did not represent John Holland on this case, Mr Ellis and Ms Ross Jones said the decision vindicated EY’s position that it had previously put forward to the ATO on behalf of other clients.
EY is now advising clients with FIFO workers to immediately review how they might be affected by the decision so they can protect potential refund claims.
“If there is an appeal it’s highly unlikely that the tax office is going to immediately process refunds, but if you’re a company that is affected in that scenario you probably still want to make some sort of claim," Ms Ross Jones said.
"If it is something that drags on for a few years, you don’t want the clock to run out by the time it’s resolved."
Comment has been sought from John Holland.
