ATO appeals court ruling that saw Virgin Australia receive a $900,000 rebate

The ‘primary workplace’ for Virgin Australia’s pilots and cabin crew is at the centre of a court battle over a $900,000 tax rebate.

Virgin Australia is embroiled in a dispute with the ATO over the ‘primary place of employment’ for pilots and cabin crew. Picture: David Clark

Virgin Australia has argued that an aircraft rather than an airport is the primary workplace of pilots and cabin crew in a court battle over a $900,000 tax rebate.

The Australian Taxation Office is appealing a Federal Court ruling made by Justice John Griffiths this year that found Virgin was entitled to a rebate on its fringe benefits tax bill between 2013 and 2016.

The tax in dispute related to the “fringe benefit” of carparking for staff at airports while they operated flights throughout their shifts.

Justice Griffiths ruled the carparking spaces were not taxable fringe benefits, because they were not in the vicinity of the employees’ primary place of work for over four hours a day.

Under his interpretation of the law, an aircraft was the flight and cabin crews’ primary workplace because of the amount of time spent in the air and the importance of their work there as opposed to on the ground.

The ATO was given leave to appeal the ruling, and on Monday the Full Court of the Federal Court heard arguments from each side of the case.

Barrister Brendan Sullivan SC for the ATO, argued Justice Griffiths had erred in his interpretation of the tax law, and the difference between “at which” and “from which”.

He said in the case of Virgin flight and cabin crew their primary workplace was the premises “from which” they reported to work, and received directions in relation to their duties.

“The words “from which” would embrace all of the work done by the employee at other places after signing on for work at the starting point,” said Mr Sullivan.

In contrast, aircraft were “a transient and temporary” workplace, with the crews frequently working on more than one aircraft in the course of a shift, the ATO argued.

“No employee would ask for a letter to be sent to their aircraft,” said Mr Sullivan’s junior counsel, Chris Peadon.

Bradley Jones for Virgin suggested the ATO’s argument was fanciful in suggesting an airport terminal held greater importance in the workday of a pilot or flight attendant, than an aircraft.

“That is where they sign on for the day and perform important pre-flight duties,” said Mr Jones.

“Not even the most foolhardy passenger would argue that those tasks were more important than flying and landing the aircraft.”

He went on to liken the Tax Office’s submissions to George Orwell’s dystopian social science fiction novel 1984 where an inversion of language applied.

“(In that novel), war was peace, freedom was slavery and ignorance was learning,” said Mr Jones.

“An airport terminal is not where crews spend all of their time, it’s the place where they perform ancillary duties before their most important task of flying and landing aircraft.”

The Full Court of Justice John Logan, Justice Thomas Thawley and Justice Kylie Downes reserved their decision until a date to be set.

A finding in favour of the ATO would be a heavy blow for Virgin, which has faced a series of setbacks since emerging from administration a year ago.

In addition to Covid-related border closures and lockdowns restricting domestic travel, the airline has been confronted with new competition in the form of Rex and a fierce airfare war.

Virgin also went to battle with Qantas over the appointment of a former Jetstar Japan chief executive Nick Rohrlach.

After a costly lawsuit over his commencement date, Mr Rohrlach was finally allowed to take up his job as Velocity frequent flyer CEO in September, ten months after he accepted the role.