• 9 FBT related law administration practice statements

    The following FBT related law administration practice statements have been withdrawn:

    9.1 FBT related ATO interpretive decisions

    The following FBT related ATO Interpretive Decisions have issued:

    9.2 Cases

    • Hancox and Commissioner of Taxation [2013] FCA 735

    Besanko J handed down a decision on 29 July 2013 in favour of the Commissioner and dismissed the applicant’s appeal.

    The taxpayer was an electrician based in Port Hedland, Western Australia on a fly-in fly-out basis. During the 2009/10 income year, he stayed at a work camp in or near Port Hedland for 16 weeks and temporary accommodation in Port Hedland for 36 weeks.

    He received an allowance whilst he lived in the temporary accommodation in lieu of providing him with food and board.

    The employer treated the allowance as a living-away-from-home allowance and showed a reportable fringe benefits amount on the taxpayer’s Payment Summary.

    In his 2009/10 income tax return, the taxpayer treated the allowance as a travel allowance and claimed a deduction for work-related travel expenses that exceeded the amount of the allowance returned.

    The Commissioner's position was that the taxpayer received a living-away-from-home allowance pursuant to subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986. As the living-away-from-home allowance was a fringe benefit and non-assessable non-exempt income, no deduction was available for work-related travel expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

    The taxpayer’s position was that the expenses for which the allowance was paid were deductible expenses and therefore the allowance could not be a living-away-from-home allowance. In support of this position the taxpayer referred to the decision in The Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223 (RTA).

    In considering the taxpayer’s position his Honour considered the following cases:

    • Lunney v Commissioner of Taxation of the Commonwealth of Australia; Hayley v Commissioner of Taxation of the Commonwealth of Australia (1958) 100 CLR 478;
    • Federal Commissioner of Taxation v Charlton (1984) 71 FLR 107;
    • Commissioner of Taxation v Cooper (1991) 29 FCR 177; and
    • Commissioner of Taxation of the Commonwealth of Australia v Payne (2000) 202 CLR 93.

    After considering these cases, his Honour said the following two factors that distinguished the situation in RTA from that being considered:

    • in RTA the employees were required to live in camp, whereas in the case being considered ‘the applicant chose to live in South Australia and to travel (and stay) in Port Hedland for the purpose of his employment;
    • the additional expenses in RTA were relatively modest additional costs of food beyond the cost of living in [the employee’s own home and perhaps other expenses caused to them by camping. By contrast, the additional expenses in the case being considered were the cost of accommodation, food and sustenance.

    His Honour on the basis of the cases considered concluded the expenses incurred in relation to accommodation, food and sustenance were not incurred in the course of gaining or producing assessable income.

    • AAT Case [2013] AATA 471, Re Fox and FCT

    The taxpayer was a truck driver who worked a roster of 5 days on 2 days off, 5 nights on 3 nights off. Using his own vehicle, he drove from his home in Adelaide to where he worked in Port Augusta. While he was in Port Augusta, he received an allowance and stayed in a motel. For the 2009-10 tax year, the taxpayer claimed a deduction for travel expenses using the rates in Taxation Determination TD 2009/15.

    The AAT found the travel expenses in dispute were not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they were private and domestic in nature and not incurred for the purposes of earning assessable income. The taxpayer elected to live in Adelaide where his home was and not in Port Augusta where his income earning activities were carried out. It also found the taxpayer did not receive a bona fide travel allowance within the meaning of ‘travel allowance’ in subsection 900-30(3) of the ITAA 1997.

    • AAT Case [2013] AATA 566

    The AAT has found that a scheme was implemented by a taxpayer differently from the scheme described in a private ruling and that therefore the Commissioner was no longer bound by it and was authorised to issue the taxpayer with FBT assessments for the relevant years.

    The Tribunal found that, based on the totality of the facts and evidence before it, the taxpayer implemented the scheme differently to the scheme set out in the private ruling (and in the private ruling application). As a result, the Commissioner was not bound by it and was authorised to issue the FBT assessments. Accordingly, the Tribunal affirmed the Commissioner's decision.

    The Hunger Project Australia v Commissioner of Taxation [2013] FCA 693

    The matter was heard on 5 April 2013.

    Perram J handed down a decision on 17 July 2013 that was unfavourable to the Commissioner and allowed the applicant’s appeal.

    The question in this case is whether the applicant is a 'public benevolent institution' within the meaning of s 57A (1) of the FBTA Act. If it is, then the provision of a benefit to one of its employees will be an exempt benefit for the purposes of the legislation and not brought to tax.
    The applicant is part of a worldwide collaboration of organisations operating under the name 'The Hunger Project' whose principal aim is the relief of hunger. It is not in dispute that the applicant's purposes are charitable. Although there is some dispute about this, the applicant is principally a fund raising entity and it is other members of The Hunger Project in the developing world which perform the charitable activities directed at the relief of hunger. It is the quality of the applicant as a fund raiser rather than as a direct performer of charitable works which give rise to the two principal issues in the case which are:
    (i) to what extent does the applicant directly perform charitable activities; and
    (ii) can an organisation which carries out charitable activities indirectly as a fund raiser qualify as a 'public benevolent institution' within the meaning of s 57A(1) of the FBTA Act.
    His Honour concluded that although the taxpayer did not pursue 'the end of relieving hunger in any substantive way beyond fund raising', this conclusion was not determinative. His Honour did not accept the Commissioner’s contention 'that the [taxpayer] cannot be a public benevolent institution unless it engages directly in charitable activities itself.'

    Update: The ATO has lodged an appeal with the Full Federal Court.

    • AAT Case [2013] AATA 336, Re Cancer and Bowel Research Association Incorporated as trustee for Cancer and Bowel Research Trust and FCT

    Deputy President D G Jarvis (Administrative Appeals Tribunal) handed down a decision on 24 May 2013 that was, in part, unfavourable to the Commissioner.

    The issues arising from reviews undertaken by the ATO included whether the applicant as trustee of the Trust was entitled to be endorsed as:

    (1) a DGR as at 16 February 2012 and if the revocation was to take effect from 1 July 2000
    (2) exempt from income tax, FBT and GST as at 16 February 2012, and
    (3) a health promotion charity on or after 4 October 2010.

    This was a factually complex case.

    Update: The ATO advised that an appeal has been lodged with the Full Federal Court.

      Last modified: 03 Feb 2014QC 38409