• Relocation - sale or acquisition of dwelling

    Legislative reference: section 58CExternal Link of the FBTAA.

    It is not unusual for employers to bear the cost of various relocation expenses, be it for new employees or for existing employees who are required to change their job location.

    Where these relocation expenses are incidental to the sale and/or purchase of a home by the employee, the expenses may be exempt benefits.

    Costs incidental to the sale and/or purchase of a house are stamp duty, advertising, legal fees, agent commission, discharge of a mortgage, expenses of borrowing, or any similar capital expenses.

    The exemption applies to the home that is sold only if all of the following apply:

    • the sale is made solely because the employee changed their usual place of residence in order to carry out employment-related duties
    • the house was owned when you notified the employee of the change to the new locality
    • the house was the employee's usual place of residence
    • the sale contract was made within two years of commencing duty at the new locality.

    The exemption applies to the home that is purchased only if all of the following apply:

    • the employee owned a home at the former locality
    • the purchase was made solely because of the relocation to another job locality
    • the new home was occupied as the employee's usual place of residence
    • the contract to purchase was made within four years of commencing duty at the new location.

    Costs associated with the connection or reconnection of gas, electricity and telephone services to the new home are also exempt.

    Several other requirements must be satisfied for the exemption to apply, namely:

    • the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
    • where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure
    • in the case of telephone connections, the employee must have had a telephone connected at the former residence.

    From 1 April 2004, costs incidental to the purchase of a new dwelling by an employee relocating for employment purposes are FBT exempt, providing the employee sells, or proposes to sell, their old dwelling within two years after the day of commencing their new employment position – that is, the employee is no longer required to sell their old dwelling before the employer can access this exemption.

    If the employee doesn't sell their old dwelling within two years after the day of commencing their new employment position, the benefit will become FBT liable in the year of tax in which the two-year period expires.

    Example

    Frances was required to relocate from Geelong to Ballarat in order to perform her duties as a police officer, commencing in Ballarat on 1 January 2011.

    She purchases a new house in Ballarat on 12 February 2011. On 16 February 2011, her employer pays the conveyancing costs associated with the purchase of the new house.

    Frances fails to sell her home in Geelong by 2 January 2013. The conveyancing costs paid by her employer are exempt at the time they are provided – however, because Frances did not sell her dwelling within two years after the day of commencing her new employment position, the benefit provided on the 16 February 2011 will now become FBT liable in the 2012–13 FBT year.

    End of example
      Last modified: 08 Jan 2014QC 17820