Federal Court of Australia Bechtel Australia Pty Ltd v Commissioner of Taxation [2023] FCA 676 File number: QUD 97 of 2021 Judgment of: LOGAN J Date of judgment: 22 June 2023 Catchwords: TAXATION – Fringe benefits tax – deductibility of travel expenses for 'fly in, fly out' (FIFO) employees – whether travel expenses incurred to and from work, before and after the employee began and finished their duties is travel in the course of employment - whether circumstances satisfy 'otherwise deductible' test Fringe Benefit Tax Assessment Act 1986 (Cth), s 52(1) – whether deduction would have been allowable to employees in respect of travel expense Income Tax Assessment Act 1997 (Cth), s 8-1 – Lunney v Federal Commissioner of Taxation v Payne (2001) 202 CLR 93 applied – where travel expenses, if incurred by employee would not be deductible because travel expenses from home to work and back again are deemed living expenses, not business expenses therefore not deductible – travel expenses incurred as a prerequisite to earning income is not the same as travel expenses incurred in the course of gaining or producing income – John Holland Group Pty Ltd v Commissioner of Taxation (2015) 232 FCR 59 distinguished – that the employee is under a code of conduct during travel to and from work does not convert that travel to travel in the course of employment – Orr v University of Tasmania (1957) 100 CLR 526 applied – appeal to objection decision dismissed Legislation: Fringe Benefits Tax Assessment Act 1986 (Cth) ss 52, 78A, 136, 140 Income Tax Assessment Act 1997 (Cth) s 8-1 Taxation Administration Act 1953 (Cth) ss 14ZL, 14ZY, 14ZZ Cases cited: Commissioner of Taxation v Payne (2001) 202 CLR 93 Fullerton v Commissioner of Taxation (1991) 32 FCR 486 John Holland Group Pty Ltd v Commissioner of Taxation (2015) 232 FCR 59 Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 Orr v University of Tasmania (1957) 100 CLR 526 R v Teachers Appeal Board; Ex parte Bilney (1984) 35 SASR 492 Rose v Telstra Corporation Limited [1998] AIRC 1592 Division: General Division Registry: Queensland National Practice Area: Taxation Number of paragraphs: 79 Date of hearing: 18 and 19 July 2022 Counsel for the Applicant: Mr BJ Sullivan KC with Mr CJ Peadon Solicitor for the Applicant: Judy Sullivan Consulting Counsel for the Respondent: Mr E Wheelahan KC with Ms C Conway Solicitor for the Respondent: McInnes Wilson Lawyers ORDERS QUD 97 of 2021 BETWEEN: BECHTEL AUSTRALIA PTY LTD Applicant AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent order made by: LOGAN J DATE OF ORDER: 22 June 2023 THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The applicant pay the respondent's costs of and incidental to the appeal, to be fixed by a registrar on a lump sum basis if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT LOGAN J: 1 Bechtel Australia Pty Ltd (Bechtel) is a member of the Bechtel group of companies. The ultimate parent company is Bechtel Group, Inc., which is incorporated in the United States. 2 In keeping with the business worldwide of the Bechtel group of companies, Bechtel carried on a business in Australia of providing contracting services in respect of large scale construction projects. Such services included engineering, procurement, construction and project management services and design and build services. 3 One such project entailed the performance of engineering, procurement and construction (EPC) contracts awarded to Bechtel for the Liquefied Natural Gas (LNG) projects on Curtis Island (the Curtis Island Projects, or Projects). The Curtis Island Projects entailed the construction of three large LNG plants and related facilities on Curtis Island. 4 Curtis Island is situated near Gladstone in Central Queensland. There are no bridges to Curtis Island. It is thus accessible only by sea or air. A ferry service operates between Curtis Island and the nearby mainland. 5 The Curtis Island Projects exemplified features typical of many EPC contracts performed by the Bechtel group of companies. One such feature was that performance of the contracts required the gathering at a site (in this instance, Curtis Island) of a large number of employees with specialist skills and experience for a finite period. Another was that the local workforce had insufficient persons with such specialist skills and experience. Yet another was that the terms of the prevailing governmental approval prohibited the relocation to the immediate vicinity of the site (in this instance, Gladstone) of all but a small proportion of the required workforce as did not already reside there. 6 In combination, and in respect of the Curtis Island Projects, these features meant that Bechtel was compelled to recruit its additionally required workforce from beyond the Gladstone area. It met the requirement by both Australia-wide and international recruitment. The exemplified features mentioned also meant that Bechtel was obliged to recruit and employ this non-Gladstone resident, additional workforce, on a "Fly In Fly Out" (FIFO) basis. Related to this, Bechtel was also obliged to construct, maintain and operate temporary accommodation (termed "camp accommodation") on Curtis Island for such employees. It is convenient to refer to this non-Gladstone resident, additional workforce as "FIFO employees". 7 The FIFO employees travelled from their respective home base airports to Gladstone in order to undertake duties at the Curtis Island Projects site during the period in which they were rostered to perform duties there. Within Bechtel, a home base for an employee, be that a town or city in Australia or overseas, was known as a "point of origin" and such roster periods were known as "swings". These employees were required to live during a "swing" on Curtis Island in the temporary accommodation provided at or near the project site by Bechtel. At the end of a "swing" such employees returned to their respective point of origin airports. Employees made their own arrangements in relation to travel to or from their residence to or from that airport. 8 A typical journey for an employee to commence rostered duty at one or the other of the sites on Curtis Island where the Curtis Island Projects were being undertaken involved: (a) a flight or flights from a point of origin airport to Brisbane airport, if not resident in sufficiently close to Brisbane airport so as to commute there by car, bus or rail (or some combination thereof); (b) a flight from Brisbane airport to Gladstone airport; (c) a bus from Gladstone airport to the Gladstone ferry terminal at Gladstone Port; (d) a ferry from the Gladstone ferry terminal to the relevant Curtis Island Project ferry terminal; and (e) a bus from the relevant Curtis Island Projects ferry terminal to the temporary accommodation on the island for the relevant LNG construction project forming part of the Curtis Island Projects. 9 If the FIFO employee were resident overseas, their journey would commence and conclude with transit by some means from their point of origin to their point of origin airport. Bechtel neither arranged nor paid for such transport, in the same way it did not for like transit for an Australian resident FIFO employee. Depending on available flights and destinations, an overseas employee might, for example, have to take an international flight from their point of origin airport to Sydney international airport and then transfer to Sydney domestic airport for a flight to Brisbane airport. 10 During the course of the undertaking of the Curtis Island Projects, some flights directly from Gladstone airport to and from Sydney domestic airport became available. Where available (including available to meet end of swing dates) this eliminated a need for a two staged journey to Sydney either to reach the employee's point of origin airport (if the employee were resident in or within land commuting distance of Sydney domestic airport) or to connect with an international flight leaving Sydney international airport for an employee's point of origin airport overseas. The reverse applied in relation to the journey of an employee from Curtis Island to their point of origin at the end of a rostered swing. 11 The FIFO employees fell into two broad classes: (a) craft employees; and (b) field non-manual employees (FNM). 12 The Curtis Island Projects commenced during the year ended 31 March 2010. Defining the commencement in this way is of present relevance, because years so ending correspond with an "FBT year" as defined by s 136 of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA). And the present case concerns a fringe benefits tax controversy which has arisen between Bechtel and the respondent Commissioner of Taxation arising from the Curtis Island Projects. 13 The controversy has arisen in this way. 14 The appeal is concerned only with travel expenses incurred by Bechtel in respect of air travel respect of FNM FIFO employees who could not be accommodated on the mainland in or near Gladstone. Related to the finite nature of the Curtis Island Projects, these employees were typically engaged by Bechtel for duty at the site for 2 to 3 years. However, for National (ie Australian resident) FIFO employees in particular, retention for such a period was a challenge, given the separation from home and temporary accommodation requirements associated with employment at Curtis Island. 15 In respect of the FNM FIFO employees Bechtel incurred travel expenses to take them: (a) from the high capacity airport nearest to such an employee's point of origin location (referred to within Bechtel as the "point of origin airport") to Gladstone airport to undertake work during the employee's "swing"; and (b) from Gladstone airport back to the point of origin airport at the conclusion of each "swing". 16 These travel expenses were included in deemed assessments of Bechtel to fringe benefits tax (FBT) under the FBTAA for each of the FBT years ended 31 March 2012 to 31 March 2019 (inclusive) as being the taxable value of the residual fringe benefits. Bechtel accepted that these travel expenses were, in terms of the FBTAA, residual fringe benefits but objected to the assessments on the basis that the taxable value thereof should be reduced to nil, because those expenses satisfied the "otherwise deductible" test under s 52(1) of the FBTAA. On this point, the Commissioner disallowed Bechtel's objection. 17 The total amount of fringe benefits tax in dispute is $13,014,296. 18 Working through the "otherwise deductible" test in s 52 of the FBTAA, the controversy effectively becomes whether or not a deduction would have been allowable to the employees in respect of travel expenses under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (the 1997 Act), had they themselves incurred those travel expenses. Such a deduction would only have been allowable if each of the following conditions would have been met: (a) the expenses would have been incurred in gaining or producing assessable income for the purposes of s 8-1(1)(a) of the 1997 Act; and (b) the expenses would not have been of a private or domestic nature for the purposes of s 8-1(2)(b) of the 1997 Act. 19 In essence, Bechtel's position is that, on the evidence, such a deduction would have been allowable, because the circumstances of the present case are not materially distinguishable from those of John Holland Group Pty Ltd v Commissioner of Taxation (2015) 232 FCR 59 (John Holland). In John Holland, the travel expenses incurred by the employer in respect of the movement of fly in and fly out employees to and from a remote worksite to and from a major metropolitan airport were held to meet the "otherwise deductible" test in circumstances where those workers commenced their rostered shift on arrival at the metropolitan airport for subsequent air movement and ceased their rostered duty on arrival by return from the remote worksite at that same airport. The metropolitan airport was the "point of hire" for such employees. 20 For his part, the Commissioner contends that the circumstances of John Holland are distinguishable from those of the present. His submission is that the travel of employees did not occur "during working time for which the employees were rostered-on" (John Holland, at [24] per Edmonds J, with whom I agreed) and was not an income producing activity. 21 The assessments and objection decision covered other expenses, including those incurred in respect of craft employees but none of these is controversial in this case. 22 Read with s 78A of the FBTAA, the effect of s 14ZL of the Taxation Administration Act 1953 (Cth) (TAA) is to assimilate a right of objection in respect of an assessment of fringe benefits tax with like rights to object against assessments concerning liabilities to other Commonwealth taxes. Each such objection is termed a "taxation objection" (s 14ZL(2), TAA) with the resultant decision of the Commissioner being termed an "objection decision" (s 14ZY(2), TAA). The present proceeding arises from Bechtel's exercise of the right conferred on it by s 14ZZ of the TAA to appeal to this Court against the Commissioner's objection decision. 23 Although termed an "appeal" by the TAA, the jurisdiction thereby invoked by Bechtel is an exercise of original jurisdiction with the consequence that the proceeding is best characterised as a statutory appeal. The proceeding is no different in kind to the more frequently encountered appeal against an objection decision in respect of an income tax assessment. It is not in the nature of a judicial review proceeding but rather an exercise of Commonwealth judicial power in order to determine whether, as a matter of fact and law, the assessment concerned is proved to be excessive: s 14ZZO, TAA. 24 Although Bechtel bears the onus of proving the assessment to be excessive, the facts of this case, either as already recited or as further detailed below, are not controversial. They are established by the affidavit evidence upon which Bechtel relied and related documentary evidence. The Commissioner did not take objection to these affidavits. Affidavit evidence in chief was given by: (a) Ms Sarah Adams, who was employed by Bechtel from around November 2009 to January 2019 in a range of roles in Human Resources; (b) Mr Richard Harvey, who was and is an Australian resident, Safety Coordinator employed by Bechtel; (c) Mr Von Frederick Reyes, who was at the time of he undertook work at the Curtis Islands Projects as an employee of Bechtel, a resident of The Philippines; and (d) Ms Charlene Baldock, who commenced employment with Bechtel as its Asia Pacific International Tax Advisor in April 2011 and continued in that role until July 2013 when she assumed her present position with Bechtel as its Asia Pacific International Tax Director. 25 Of these witnesses, only Ms Adams was required for cross-examination. Her oral evidence was honest but, necessarily, not conclusive as to the basis upon which particular payments to employees were made by Bechtel. That basis is revealed by the terms of engagement of employees and related standard conditions or policies incorporated by reference. As will be seen, that qualification is especially necessary to mention in relation to the payment to employees of what is known as "project allowance". 26 Viewed as a whole, the affidavit, oral and documentary evidence establishes that the Bechtel group of companies in general and Bechtel in particular conduct their business pursuant to detailed policies and with a sophistication of execution such that each would, I expect, be envied by the militaries of many advanced countries. So much is there that appearance of military precision that, with respect, I was left to wonder whether that reflected the influence of senior managerial officialdom who had once had the benefit of attendance at a service staff college or at least of management instruction modelled on that offered at such an institution. For example, I doubt it was a coincidence that Bechtel referred to the engagement and deployment of an employee who was to form part of the workforce necessary to perform its large scale projects such as the Curtis Island Projects as "Mobilisation" and to the cessation of the employee's term of employment with that workforce and related processes as "Demobilisation". 27 Ms Adams' evidence offered insight into the sheer scale of workforce requirements for the Curtis Island Projects as they entered their construction phase in 2013. That phase required Bechtel (and a subsidiary) to increase the number of employees working on the Curtis Island Projects substantially, to a point where by December 2013 it (in conjunction with the subsidiary) was employing approximately 10,000 persons. A key aspect of Ms Adams' role was the assignment of FNM employees (be they reallocated, existing Bechtel or Bechtel group employees or newly engaged employees) to the Curtis Island Projects. 28 Ms Adams confirmed that travel from the airport closest to a FNM FIFO employees' point of origin airport to Curtis Island, and the return trip, were organised, paid for and provided by Bechtel. Typically, such air travel was arranged by Bechtel's in-house, Central Services Organisation Transport Department (CSO Transport Department). On arrival at Gladstone airport, employees were taken to the ferry terminal by bus transport organised and paid for by Bechtel. The reverse applied in relation to movement to Gladstone Airport from Curtis Island for departure air travel. Bechtel also paid for the ferry transfers to and from that ferry terminal. The timing, scale and diversity of the travel requirements for the Curtis Island Projects were such that it was necessary for Bechtel to establish and maintain this CSO Transport Department to manage all of the necessary, related flight bookings. Once made, such bookings could only be altered by an employee with managerial approval. 29 Both in its establishment and operation in respect of a large workforce with diverse points of origin, Bechtel's CSO Transport Department offers one example of the sophistication in the conduct of that company's business in particular and, more generally, that of the Bechtel group of companies. 30 Ms Adams offered in affidavit annexed documents detail as to corporate policies and standard conditions of engagement in relation to prevailing terms of engagement and conduct obligations of employees engaged on the Curtis Island Projects. These differed somewhat as between National (ie Australian resident) and International FNM FIFO Employees. National FNM FIFO Employees 31 The terms and conditions of National Employees were regulated by a number of standard form documents: (a) "Recital of Assignment Status, Compensation and Relocation Conditions, Australian National Non Manual Employees, Oil, Gas & Chemicals GBU" (National Assignment Recital). As completed, this specified for the particular employee the nature of the assignment type (long or short term), conditions concerning travel and accommodation, allowances, leave and other matters. The National Assignment Recital was in substantially similar form throughout the period of the Curtis Island Projects; (b) "Australian National Non-Manual Employees, Assignment Compensation and Relocation Conditions, All OG&C Projects" (National Assignment Conditions). This document specified the various assignment terms and conditions that applied to employees working on Bechtel's Oil Gas & Chemicals (OG&C) projects. The Curtis Island Projects fell within this category. (c) "[Project Name] Australian National Non-Manual Employees Australian Assignment Compensation and Relocation Conditions Attachment "A'" (National Attachment A). This set out in tabular format particular aspects and entitlements of the employee's employment on the Curtis Island Projects. National Attachment A was revised from time to time. It is not necessary to detail the revisions. 32 These standard form documents, others which I mention, and also the various corporate policy documents which I mention, also illustrate the degree of sophistication entailed in Bechtel, and more widely within the Bechtel group of companies, in the conduct of personnel management. It is only necessary for the purposes of the present proceeding to highlight particular terms and conditions or policy applications. 33 National Attachment A provided for National FIFO employees to be paid compensation, in addition to that applicable for a base or extended work week or night allowance, in the form of a 5% "Project Allowance" for each of the Curtis Island Projects. In her affidavit evidence, Ms Adams stated that this was paid to FIFO employees in recognition that their roles on the Curtis Island Projects required them to work in a remote location, to live in an Accommodation Camp, and to travel to and from the Projects". This description, with respect, was true in its generality if read in a particular way but the language of the description was not felicitous. Ms Adams acknowledged as much in the course of her oral evidence. She accepted that the project allowance was paid in recognition of the inconvenience of having to work on Curtis Island and not in recognition of any travel to and from Gladstone. 34 The accuracy of that acceptance is revealed by an examination of National Attachment A. One finds there separate provision for, materially, paid travel to and from the Curtis Island Projects but this is applicable only to employees who have an overseas point of origin (Item 4.0 in that document refers). On the other hand, the project allowance recognises that employees will be required to bear the inconvenience of living in temporary accommodation (a "camp") and undertaking rostered work at a location remote from their point of origin. The payment of a project allowance does not mean that National Employees were rostered on for duty from the moment of their arrival at their point of origin airport. 35 The National Attachment A also provided for an Assignment Completion Incentive (ACI) payment. The project allowance and the ACI payment were means by which Bechtel sought to make acceptance of FIFO employment, and continuance of that employment for the full assignment period, attractive to National Employees. 36 All FIFO FNM employees assigned to the Curtis Island Projects were required to acknowledge that they understood and would comply with Bechtel's Policy 411 Drug and Alcohol Policy. All FNM employees were informed of this policy prior to commencing work on the Curtis Island Project. 37 FIFO FNM employees also received a code of conduct for the temporary accommodation, which they were also required to read and sign when they first checked in to that accommodation. Such employees were also provided and expected by Bechtel to comply a written Project Work Rules and Code of Conduct document. These project work rules were applicable not just to National employees but also to International Employees. Each FNM employee, National or International, was required to read and sign a copy of the applicable project work rules prior to first commencing work at Curtis Island. 38 These project work rules were also applicable while employees were on "employer provided air, land and marine transport", which included travelling on flights between Gladstone airport and the relevant airport at the employee's point of origin, and any other flights arranged and paid for by Bechtel. 39 Breaches of these project work rules while travelling could, and did, result in the taking of disciplinary action by Bechtel, up to and including termination, in relation to the employee concerned. 40 Bechtel undertook an induction briefing for all employees prior to their first commencing rostered duties on the Curtis Island Projects. The briefings covered topics such as site rules, safety and regulations, working in Australia, the relevant project work rules and Bechtel's Code of Conduct and other employee policies. Employees were informed at the induction briefings that the Code of Conduct and project work rules applied during the period employees were in the community, at airports and other public or communal areas, whilst travelling on company provided transport or at Bechtel's cost. They were also informed at these induction briefings that any breach of the project work rules or the Code of Conduct could result in disciplinary action, and possible termination. 41 Mr Harvey's evidence helpfully exemplified the position described in respect of a FNM FIFO National Employee working on the Curtis Island Projects. He had personal experience of the operation in practice of the CSO Transport Department in the organisation of his movements and of the policies of Bechtel applicable to his conduct, not only at the site of the Curtis Island Projects but also during travel organised and paid for by Bechtel via the CSO Transport Department. His point of origin airport was Sydney. His deployments to the Curtis Island Projects for his rostered "swings" were on an unaccompanied basis. His wife continued to live in Sydney. During his "swings", he was required to live in the temporary accommodation already mentioned. 42 Mr Harvey also had personal experience of Bechtel's induction procedures and of its policies in relation to employee conduct both at the site of the Curtis Island Projects and while travelling to and from that site via transport organised and paid for by Bechtel via the CSO Transport Department. Further, his duties at the Curtis Islands Projects site included the supervision of adherence to employee conduct policies. International FNM FIFO Employees 43 Strictly speaking, International FNM FIFO Employees (International Employees) assigned to the Curtis Island Projects were employed by Bechtel Global Services, Inc., or Bechtel International Inc. These were foreign companies within the Bechtel group of companies. These international employees were seconded from those overseas entities to Bechtel for the duration of the employees' assignments to the Curtis Island Projects. The terms of the secondment were set out in a document titled the Master Secondment Agreement for the International Assignment of Bechtel Entity Personnel (MSA) dated 19 December 2011. 44 The terms and conditions of such International Employees were governed by a number of standard conditions found in the following documents, a copy of each of which was provided in advance to the employee concerned: (a) "Recital of Long-Term International Assignment Conditions". (b) "International Assignment conditions – Australia – All OG&C Projects". (c) Attachment "A" to the International Assignment Conditions (International Attachment A). International Attachment A is an analogue of National Attachment A, also in tabulated format. Each such attachment was site specific to work in the construction of particular LNG plants at Curtis Island which, collectively, comprised the Curtis Island Projects. (d) A letter entitled the "Tax Protection Policy", which employees were required to sign. 45 Regard to the first page of the Recital of Long-Term International Assignment Conditions discloses that International FIFO FNM employees assigned to the Curtis Island Projects were provided with access to, and were required to comply with the policies set out in, the Manual of Personnel Policies – International Greenbook (Greenbook). Those policies included: (a) A103: Policy Application dated January 2008, which is an introductory policy to all policies contained in the Greenbook; (b) A201: Employment Policy dated July 2012, which is a general policy concerning employment and staffing requirements of international employees, including Visa requirements, medical examinations, drug and alcohol testing, and physicals; (c) B201: Employment Policy dated December 2010, which is explanatory of certain aspects of Policy A201; (d) A301: General Travel and Relocation Policy dated October 2007, which sets out details of the different assignment and living status categories applicable to International Employees, as well as leave and allowances, required documentation and the like; (e) B301: Travel and Relocation Policy dated December 2011, which is explanatory of aspects of Policy A301; (f) A303: Elements of International Living dated January 2011, which outlines the pre-departure and post-arrival orientations and actions that International Employees were required to take to facilitate their assimilation to a new working and living environment. It also sets out details regarding work schedules, and the medical care, housing and recreational facilities available to employees; (g) A401: Conditions of Work dated June 2012, which sets out Bechtel's professional standards and ethics that International Employees were required to follow, as well as the disciplinary action that could ensue if they were in breach. This policy also set out Bechtel's policies with respect to consumption of illegal drugs and alcohol. (h) B102: Ethical Business Conduct This is one and the same as the Code of Conduct applicable to National Employees. 46 Once again, these documents illustrate the sophistication of personnel management within the Bechtel group of companies but it is only necessary to refer to particular conditions and policy applications. 47 As is confirmed by each International Attachment A, International Employees accommodated in the temporary accommodation at Curtis Island were entitled to a like project allowance to National Employees. It was paid to compensate for the like inconveniences of living and undertaking rostered work at that site, remote from their points of origin. Entitlement to payment of the project allowance did not itself mean that International Employees were rostered on for duty from the moment of their arrival at their international point of origin. Separate provision (found again at item 4.0) was made in respect of paid travel time for International Employees from or to international points of origin. 48 As with National Employees, Bechtel's policies concerning behaviour during travel for which it paid and while in temporary accommodation were both applicable to International Employees and likewise enforced. Roster Arrangements 49 Roster and travel arrangements differed as between National and International FIFO FNM employees. National FNM FIFO employee roster and travel arrangements 50 On the Curtis Island Projects, National FNM FIFO employees were rostered on for shifts which commenced at the project location for a number of weeks (generally, 4 weeks) and then rostered for a week of what Bechtel termed "Assignment Leave". This arrangement was referred to within Bechtel as a "4 and 1" roster, involving "4 weeks on" (or a 4 week "swing") at the project location and "1 week off". 51 I have already offered a general summary of applicable travel arrangements. In respect of all National FNM FIFO workers, these were uncontroversially described in detail by Ms Adams. Bechtel's CSO Transport Department organised travel arrangements such that National Employees arrived at the Curtis Island Projects sites on schedule to commence a swing, allowing time to check-in to temporary accommodation. 52 Travel from Curtis Island to an employee's point of origin usually commenced on the last day of a swing. If, for example, the employee was rostered on for an 8-hour shift on that day, the employee worked on ordinary duties at the project site on Curtis Island for the first 4 hours of the shift then returned to pack their belongings at the temporary accommodation, check out of that accommodation, and commence return travel to his or her point of origin via the means already mentioned. Although employees were paid for a full 8-hour shift on this last day of a swing, there was no evidence that the 4-hour half of the rostered day corresponded with the time which elapsed between leaving a work site on Curtis Island to pack up and check out, undertake subsequent travel paid for by Bechtel to a point of origin airport and then to journey to the employee's point of origin. 53 This last day of a swing arrangement applied to both National and International employees. 54 The travel schedule for Assignment Leave (for National and International FIFO FNM employees) and Home Leave (for International FIFO FNM Employees) was automatically generated by the CSO Transport Department, based in Gladstone, with flights booked to the employee's point of origin's airport. 55 It was not possible for employees to have these Bechtel paid travel arrangements altered so to fly to a different location without approval from their relevant Project Manager or Director. Employees seeking such approval had to submit a travel authorisation form to, and to have that travel alternation approved by, a Project Manager or Director or their designate. National FIFO FNM employees were also required to obtain approval if they sought to arrange for the following alternative arrangements for a particular Assignment Leave: (a) a "cents per kilometre" vehicle allowance to drive themselves, subject to preconditions and the approval of the Project Manager. The employee also had to provide an itinerary for the travel, including proposed rest breaks and timing due to Bechtel's Work Health and Safety obligations. The allowance was taxable and subject to PAYG withholding; (b) a "Dependent Alternative", where Bechtel paid for an authorised dependant to travel to and from Gladstone; or (c) … 56 Effective only from 1 January 2015, it was possible for National FIFO FNM employees to be approved to receive cash "in lieu" of flights. If approved, the payment was considered by Bechtel to be taxable and thus subject to PAYG withholding. International FNM FIFO Employee roster and travel arrangements 57 The travel arrangements for International FIFO FNM employees involved international flights between their point of origin airport and either Sydney or Brisbane when taking what was termed within Bechtel "Assignment Leave" and "Home Leave". During each 12-month period, International FIFO FNM employees were entitled to: (a) Assignment Leave after 3, 6 and 9 months; and (b) Home Leave after 12 months. 58 Assignment Leave travel and Home Leave travel for international FIFO FNM employees was also arranged by the CSO Transport Department. 59 International FIFO FNM employees were generally rostered on swings of 3, 6 or 9 months on the Curtis Island Projects, and then rostered to return to their point of origin airport typically for a period of Assignment Leave. 60 The travel arrangements for International FIFO FNM employees were as follows: (a) Each international FIFO FNM employee was determined by Bechtel to have a particular point of origin, most often their hometown or city in the country in which they resided. (b) The employee travelled from the nearest point of origin airport to their particular project location on Curtis Island on transport (flights, buses, ferries) arranged and paid for by Bechtel. (c) The employee stayed in the temporary accommodation on Curtis Island provided by Bechtel, working rostered shifts at the relevant project site there during their swing, then vacating the accommodation and travelling back to their point of origin airport on transport arranged and paid for by Bechtel. 61 As with a National Employee, Bechtel did not arrange or pay for travel by an international employee to or from their particular residence to or from their point of origin airport. 62 International FNM FIFO employees were required to obtain approval if they sought to arrange for the following alternative arrangements for particular Assignment Leave: (a) a "Dependent Alternative", where Bechtel paid for an authorised dependant to travel to and from Gladstone; or (b) Effective only from 1 January 2015, for International FIFO FNM employees to receive cash "in lieu" of flights. If approved the payment was considered by Bechtel to be taxable and subject to PAYG withholding. 63 As already mentioned by reference to International Attachment "A", International FNM FIFO employees were paid in accordance with their terms of employment for travel days. 64 The experience of Mr Reyes, who worked on the Curtis Islands Projects as a FIFO FNM International Employee between 13 August 2012 and 16 July 2016 exemplified the features of employment just described. He had earlier experience of FIFO employment with the Bechtel group of companies when working on a project in Africa. He was then a resident of The Philippines. When not on leave in The Philippines, he was mostly accommodated in the temporary accommodation which Bechtel maintained on Curtis Island, although there was a period when he occupied a one-bedroomed cabin at a caravan park at Gladstone which Bechtel used as overflow accommodation. Employee Demobilisation 65 Ms Adams also described the policies, practices and procedures which the Bechtel group of companies and thus Bechtel followed in relation to workforce "demobilisation" for existing employees assigned to the Curtis Island Projects, and employees finishing their roles at the Curtis Island Projects. This was as follows: (a) The Bechtel group of companies maintained records of: (i) roles that needed to be filled or that were anticipated to be required on current and future projects; and (ii) the skills and experience of employees. Those records were used to ensure that current employees who were soon to be demobilised were offered any available equivalent, alternative roles as required under the applicable regulatory regimes. (b) Where the completion date of the employee's current role and the start date of the new role did not coincide, the Bechtel group of companies commonly facilitated the transfer of the employee from his or her soon-to-end role to the new role. 66 Where no equivalent alternative role was available starting in or around the time of the employee's demobilisation from the current project, depending on the particular circumstances, the Bechtel group of companies sometimes placed the employee on "holding status". "Holding status" was a short-term, unpaid period (usually up to a maximum of 3 months) between assignments. Where there was no equivalent alternative role that the employee was able or willing to fill at the end of their current role or while filling a temporary role or holding status, the employee's employment ceased, and all entitlements were paid. 67 Mr Reyes' experience after he was "demobilised" from the Curtis Island Projects exemplified the position of an employee for whom no equivalent alternative role could be found. His employment with the Bechtel group of companies came to an end. Initially, he found alternative employment but, also exemplifying the practice within the Bechtel group of companies of keeping on its books lists of employees with desirable skills, he has, after migrating to Australia with his family, since taken up employment again within the Bechtel group of companies. Consideration 68 The present case may well exemplify an inadequacy of harmonisation between the concession found in s 47 of the FBTAA in respect of FIFO employees and State and Territory major project approval laws in respect of projects proximate to a provincial urban centre. The State approval was conditioned on a limitation of a locally resident workforce so as not to cause a range of perceived adverse short term impacts on local accommodation and infrastructure. Materially, the concession in the FBTAA is directed to circumstances in which an employee's usual place of employment is at a location in a State or internal Territory but not in, or adjacent to, an eligible urban area (see s 140 of the FBTAA) and where, having regard to the respective locations of the usual place of employment and the employee's usual place of residence, it would be unreasonable to expect the employee to travel between them on a daily basis on work days (s 47(7)(e)). 69 Curtis Island is sufficiently proximate to Gladstone for employees to commute between those two locations via the ferry service but the realities of Bechtel's project approval and of the limitations of the local labour market prevented it from engaging an entirely Gladstone-resident workforce for the Curtis Island Projects. Necessarily, it had to bear the cost of transporting to and from those projects a large number of FIFO employees in order to construct major LNG infrastructure. However, the gap between the coverage of the concession and the realities noted means that whether it is subject to the add-on cost of fringe benefits tax is dependent on whether the circumstances described above satisfy the "otherwise deductible" test in s 52 of the FBTAA. Effectively that means that the outcome is, as it was in John Holland, dictated by the answer to the hypothetical question of whether the travel expenses, if incurred by an employee would or would not be deductible in light of the reasoning of the majority of the High Court in Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 (Lunney) and a more recent case decided by that court, Commissioner of Taxation v Payne (2001) 202 CLR 93 (Payne)? 70 In John Holland, at [5] to [12], Edmonds J offered a succinct analysis of how Lunney and Payne are relevant to the determination of that hypothetical question, which I respectfully adopt: 5 So while the actual facts of this case do not fall for consideration within the stream of jurisprudence that has ebbed and flowed for over 55 years since the decision of the High Court of Australia in Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 (Lunney), those facts as altered by the statutory hypothesis that is the "otherwise deductible rule" in s 52(1) of the FBTAA, certainly do. 6 In Lunney (at 485), the question of income tax law which Dixon CJ took "as settled for the last two generations", and was not prepared to have "ripped up now" by the Court, was that: "[T]he fares paid by ordinary people to enable them to go day by day to their regular place of employment or business and back to their homes are [not] deductible expenses allowable against the assessable income earned by the employment or business." 7 His Honour went on to observe that both in Australia and England the view had always prevailed that expenses of travelling from home to work or business and back again are not deductible; and that an explanation of how this came about in England was given by Denning LJ in the Court of Appeal in Newsom v Robertson [1953] Ch 7 at 15, 16; the explanation being that expenses of travel are incurred in order to enable the taxpayer to live away from his work. They are living expenses, not business expenses. His Lordship put it, thus (at 16): "A distinction must be drawn between living expenses and business expenses. In order to decide into which category to put the cost of travelling, you must look to see what is the base from which the trade, profession, or occupation is carried on. In the case of a tradesman, the base of his trading operation is his shop. In the case of a barrister, it is his chambers. Once he gets to his chambers the cost of travelling to the various courts is incurred wholly and exclusively for the purposes of his profession. But it is different with the cost of travelling from his home to his chambers and back. That is incurred because he lives at a distance from his base. It is incurred for the purposes of his living there and not for the purposes of his profession, or at any rate not wholly or exclusively; and this is so, whether he has a choice in the matter or not. It is a living expense as distinct from a business expense." 8 Dixon CJ in Lunney adopted the reasoning with "misgivings about the conclusion", at least "if the matter were to be worked out all over again on bare reason" (at 486), and McTiernan J dissented. The other members of the Court (Williams, Kitto and Taylor JJ) accepted the reasoning without expressing any reservation (at 500). Their Honours, by reference to earlier decisions of the Court in Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47 and in Charles Moore & Company (WA) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344 concluded (at 499) that "to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing such income". 9 The relevant facts in Lunney were what might, these days, be colloquially described as "vanilla". The fares in question were bus fares incurred by Mr Lunney in travelling from near his residence at Narraweena, a residential suburb of Sydney, to Wynyard station and return, Monday to Friday. The distance between his residence and the point where he boarded or alighted from the bus and the distance between the office of the company, where he reported, both at the commencement and at the completion of each day's work, and Wynyard station, he covered on foot. The only other relevant fact that appears from the stated case is what appears at para 2, namely: "He was required to report at the office of the company at No. 11 Darling Harbour, both at the commencement and completion of each day's work. From the said office he travelled at the expense of the company to various parts of the Port of Sydney to carry out his work." The relevance of this fact to the case at hand will become apparent below. 10 Over 40 years later, the High Court of Australia again had occasion to consider the question of the deductibility of travel expenses in the less "vanilla" factual context of a taxpayer who was employed as a pilot by an airline operating out of Sydney and who lived on a property in New South Wales where he conducted a deer farming business; he claimed the expenses he incurred in frequently travelling between his farm and Sydney Airport as allowable deductions under s 51(1) of the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936"). In upholding the Commissioner's appeal from a Full Court of this Court, the majority (Gleeson CJ, Kirby and Hayne JJ) in Federal Commissioner of Taxation v Payne (2001) 202 CLR 93 after referring to the approach of the plurality in Lunney referred to in 8 above said, at [14] and [15]: "[14] When, as here, the travel is between two places of unrelated income derivation, the expense cannot be said to be incurred 'in the course of' deriving income from either activity. As the majority of the Full Court recognised in this case [Payne (1999) 90 FCR 435 at 445 [41]]: 'The expenditure was incurred before [the taxpayer] began to perform his duties as a pilot, or after he had fulfilled those duties. Similarly, in relation to the deer farming business. The expenditure was, as the majority of the Full Court rightly said, 'not incurred in the course of his employment as a pilot, nor in the course of his deer farming business' [Payne (1999) 90 FCR 435 at 445 [41]]. The taxpayer's travel occurred in the intervals between the two income-producing activities. The travel did not occur while the taxpayer was engaged in either activity. To adopt and adapt the language used in Ronpibon, neither the taxpayer's employment as a pilot nor the conduct of his business farming deer occasioned the outgoings for travel expenses. These outgoings were occasioned by the need to be in a position where the taxpayer could set about the tasks by which assessable income would be derived. In this respect they were no different from expenses incurred in travelling from home to work. [15] … The conclusion that the travel occurred in the intervals between the two income-producing activities, when the taxpayer was not engaged in either of them, denies the requisite connection between any part of the outgoing and the gaining or producing of assessable income." 11 In dissent, Gummow and Gaudron JJ were not prepared to conclude (see [51]) that the "principle" to be derived from the holding in Lunney was determinative of an outcome that travel expenses are insufficiently connected with income derivation to attract a deduction under the first limb of s 51(1), at least where what is involved is the expenses of movement between two or more places of work or business activity; nor where the taxpayer also resides at one of those places. 12 While the factual context of the case at hand is very different from that in Payne, this case raises the same issue: that is, whether the "principle" to be derived from the holding in Lunney is determinative of an answer that the hypothetical expenses in question in this case are not deductible, as the primary judge concluded. 71 Although the distance of travel from an employee's residence or "point of origin" is so great as to require the adoption of air travel in order readily to commute, the position which obtains is nonetheless that the expenditure on travel is a prerequisite to the earning of the employee's income, not expenditure incurred in or in the course of gaining or producing such income. The earning of the employee's income (including the project allowance) occurred at Curtis Island. Unlike in John Holland, none of the employees were rostered on to duty as soon as they arrived at their point of origin airport. The travel between there and Curtis Island was not travel between two places of employment. Had it been, the expense of such travel would, as in John Holland, have met the "otherwise deductible" test. 72 So far as that test is concerned, it is nothing to the point that Bechtel's code of conduct extended to FIFO employees during their company funded travel to or from their point of origin airport. There is no necessary antipathy between the conduct of employees which occurs otherwise than in the course of their gaining or producing assessable income and the ability of their employer lawfully to impose disciplinary sanctions up to and including termination of employment in respect of that conduct: Orr v University of Tasmania (1957) 100 CLR 526; R v Teachers Appeal Board; Ex parte Bilney (1984) 35 SASR 492; Rose v Telstra Corporation Limited [1998] AIRC 1592 (Ross V-P, as his Honour then was). The latter case is something of a root authority in relation to the ability of an employer lawfully to impose disciplinary sanctions in respect of the out of hours conduct of employees. It stands for the proposition that, for such imposition to be lawful, the conduct must be such that, viewed objectively, it is likely to cause serious damage to the relationship between the employer and employee; or the conduct damages the employer's interests; or the conduct is incompatible with the employee's duty as an employee. It is by no means impossible to see how Bechtel's code of conduct and policies, in their application to employer funded travel, might meet this test. However, it is not necessary for the purposes of the present case to determine the extent to which Bechtel's code of conduct and other policies, in their application to employer funded travel, were lawful, only to recognise that the purported extension of them to such travel did not convert that travel to travel in the course of employment. 73 There is a passage at the conclusion of the separate judgement of Pagone J in John Holland (with whom I also agreed) which, read in isolation and uncritically, might be thought to support Bechtel's case. His Honour stated, at [64], "The employees in this case are required to travel as part of their employment to a remote location" (emphasis added). The words emphasised highlight a critical difference between the circumstances of John Holland and the present. When the employees in John Holland flew from Perth Airport to the airport closest to their remote work site in Western Australia, and unlike the present case, they had commenced their rostered hours of duty. Their travel was in the course of their employment. 74 The receipt by the employees of a project allowance would not render their travel to and from Curtis Island travel in the course of their employment or the expense of that travel, if incurred by them, expenditure in gaining or producing assessable income. That allowance is derived by the performance of their rostered duty at Curtis Island. Neither does the fact that Bechtel, as a matter of policy, chose not to require employees on the last day of a swing to work all of the rostered hours for that day render the return journey, or any part thereof, travel in the course of employment. The position is no different to an indulgent employer releasing employees from duty early prior to a public holiday or for some other reason. If incurred by the employee, the return journey expense to his or her residence would still be one incurred after the cessation of an income derivation activity. 75 The conclusion reached in Lunney, as with those in other cases (notably child care) where, but for the incurring of the expenditure, the derivation of income in a particular employment would not have been possible has not escaped judicial criticism. A decade before the High Court divided in Payne, Pincus J, when a judge of this Court, in Fullerton v Commissioner of Taxation (1991) 32 FCR 486, dealt with a claim by an employee for relocation expenses incurred in circumstances where the employee was forced to change his residence from one Queensland country town to another in order to maintain his employment. His Honour stated, at 488: The question is one involving a claim for a deduction of part of what might be regarded as, prima facie, private expenses. There is, perhaps, a tendency to restrict deductibility in the relevant area along lines which may not be able to be defended in strict logic. A taxpayer may be able to relate a substantial proportion of his or her living expenses, with varying degrees of plausibility, to the earning of income. It may well be true of a person engaged in hard manual labour that he or she needs to ingest more food to do the work than does a clerk: cf Commissioner of Taxation (Cth) v Maddalena (1971) 45 ALJR 426. The expenses a city white-collar worker incurs in buying clothing are likely to be greater than those he or she would incur if working from home: cf Mallalieu v Drummond (Inspector of Taxes) [1981] 1 WLR 908. Even expenses on recreation may well be, in part, related to the necessity of keeping fit, mentally and physically, for remunerative work. It may be that the courts have, to some extent, bowed to the necessity of a degree of arbitrariness about the lines drawn, so that the administration of the tax laws shall not become impractically difficult: see for example Bowers (Surveyor of Taxes) v Harding [1891] 1 QB 560 at 564, per Pollock B and Handley v Commissioner of Taxation (Cth) (1981) 148 CLR 182 at 198. Section 51 of the Tax Act permits apportionment of expenses; it does not require that the deduction claimed shall have been incurred wholly or exclusively in earning income. But to require estimation of the proportion of each taxpayer's living expenses which should properly be attributed to the purpose of earning income may seem to place a burden on those responsible for making the tax system work. While one may question the orthodoxy, as a matter of statutory construction, of reading s 51 down because of perceived administrative difficulties, it seems hard to rationalise the cases in this area in any other way. The general rule that the costs of daily travel between one's home and one's work are not deductible is an example: it is hard to see why the costs of a journey to work should give rise to no deduction whatever if the place from which one is travelling happens to be one's home rather than another place of work. The rule in Lunney v Commissioner of Taxation (Cth) (1958) 100 CLR 478 may appear to have a reasonable operation in some circumstances, but often has not. Suppose a person makes a living by getting casual employment here and there. The cost of travelling about looking for such work, as well as the cost of travelling from home to perform it, may be quite a significant proportion of the sum earned. At the other end of the scale, the refusal of a deduction for the travelling expenses of a taxpayer who chooses to live in some haven remote from work and to travel by an expensive means may seem more defensible, at least according to some ideas of justice. In the result, Pincus J considered that he was bound by Lunney to conclude that the expenditure was not deductible. 76 I consider that I am bound by Lunney to hold that, in the circumstances of the present case, the travel expenses, had they been incurred by the employees, would not have been deductible. The expenses would, if incurred by the employees, be pre-requisites to the gaining or producing of assessable income, not incurred in the course of gaining or producing assessable income. On the authorities, that is the discrimen. Also on the authorities, it matters not to its characterisation whether the expense is, as in Lunney, an intra-urban bus fare or, as in the present case, a logistically complicated combination of international or interstate (or both) air fares, a bus fare and a ferry fare. John Holland demonstrates how, if it so chose, Bechtel might, by a change in place of rostered start time, have made such expenses meet the "otherwise deductible" test in s 52 of the FBTAA. But that was not the employment model it chose for its FIFO FNM workforce at the Curtis Island Projects. 77 The result might seem anomalous, especially given what may be a gap in the FIFO concession in the FBTAA, having regard to the realities of undertaking a major infrastructure project near a provincial centre. However, it is the constitutional duty of the judiciary to give meaning and effect to the text of legislation. The correction of any perceived anomalies and gaps in that legislation is a matter for the parliament. 78 As it is, Bechtel has not proved that the expenses meet the statutory test. That result is contrary to my initial impression but a more detailed analysis of the facts and the authorities compels that conclusion. I record my indebtedness to counsel who appeared for each of the parties in this case for their considerable assistance in provoking that analysis. 79 The appeal must therefore be dismissed, with costs. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan. Associate: Dated: 22 June 2023