• 20.4 Relocation exemptions

    Living-away-from-home accommodation – expense payments

    Rather than paying a cash living-away-from-home allowance to an employee whose duties of employment require them to live away from their normal residence, you may prefer to reimburse the employee for the accommodation expenses or pay these expenses on behalf of the employee – that is, as with an expense payment fringe benefit.

    In these circumstances, the payment is an exempt benefit where the living-away-from-home accommodation requirements below are met.

    Living-away-from-home accommodation – requirements

    To apply the living-away-from-home accommodation - expense payments and/or residual benefits - exemptions, the following requirements must be met:

    Living-away-from-home accommodation exemption requirements

    If …

    Then …

    The employee works on a fly-in fly-out or drive-in drive-out basis

    • the employee must have residential accommodation at or near their usual place of employment; and
    • the employee must give you a declaration about living away from home

     

    The employee does not work on a fly in fly out or drive in drive out basis and is not eligible for the transitional rules

    • the employee must maintain a home in Australia at which they usually reside and it is available for their use and enjoyment at all times
    • the fringe benefit must relate to the first 12 month period at a particular work location, and
    • the employee must give you a declaration about living away from home.

     

    The declarations provided to you must be in a form approved by the ATO (refer to Declarations).

    Living-away-from-home accommodation - residual benefits

    Where an employee whose duties of employment require them to live away from their normal residence and they are provided with the use of a unit of accommodation, this use is an exempt benefit if the living-away-from-home accommodation requirements above are met.

    Relocation – engagement of relocation consultant

    If a relocation consultant is used to help relocate an employee, or their family members, you may be eligible to access a FBT exemption for costs associated with the engagement of the relocation consultant.

    A relocation consultant is a person who helps an employee, or their family members, move and settle into a new location.

    In order for a benefit, consisting of the engagement of a relocation consultant, to qualify as a FBT exempt benefit, the following conditions must be met:

    • the engagement of the relocation consultant must be an expense payment or residual benefit
    • the engagement of the relocation consultant must be in respect of the employment of your employee
    • the benefit is provided under an arm’s length arrangement
    • if the benefit is an expense payment benefit – documentary evidence is provided to you before the date your employee declarations are due (refer to section 4.1 of Fringe benefits tax record keeping)
    • the engagement of the relocation consultant is required solely for one or more of the following reasons  
      • the employee is required to live away from home in order to fulfil their employment duties
      • the employee returns to their usual place of residence, having previously been relocated from their usual place of residence, in order to fulfil his or her employment
      • the employee, having previously been relocated from their usual place of residence, returns to their usual place of residence because they cease to perform the employment duties he or she had previously been relocated for
      • in order to fulfil their duties of employment, the employee moves from his or her usual place of residence.
       

    Any expenses a relocation consultant pays on behalf of an employee or their family member is not exempt from FBT.

    The common services a relocation consultant can provide to help an employee (or their family member) relocate include:

    • obtaining removalist quotes
    • finding accommodation, including temporary accommodation
    • lease negotiation
    • providing information about transportation to the new location
    • providing information about education and community services at the new location.

    Relocation advice provided incidental to the provision of another good or service – for example, by real estate agents – doesn't qualify for this exemption, but may qualify for other relocation exemptions.

    Example

    Jenny is an employee of Zig & Co Mining in Lightning Ridge. She is required to move from Lightning Ridge to Kalgoorlie in order to perform her duties as a geologist. Her employer engages a relocation consultant to help Jenny relocate.

    The relocation consultant:

    • provides accommodation and transportation quotes
    • arranges and pays for six months of furniture rental
    • provides information about medical facilities at Kalgoorlie.

    Zig & Co Mining is eligible for a FBT exemption for the costs involved in engaging the relocation consultant to provide information about and arranging for Jenny’s relocation to Kalgoorlie – however, Zig & Co Mining is not eligible for an FBT exemption for the six-month furniture rental because this expense was paid by the relocation consultant on Jenny’s behalf.

    End of example

    Relocation – removals and storage of household effects

    Where you meet the costs of removal and storage of household effects of employees (both new and existing) who are required to live away from home because their job location changes, the benefit is exempt.

    The exemption includes the costs of removal, storage, packing, unpacking and insurance of household effects (including pets) kept primarily for the personal use of the employee or family.

    Similarly, the exemption also applies where the employee's usual place of residence changes to another location if the removal takes place, or the storage commences, not more than 12 months after the employee begins employment-related duties at the new location.

    Relocation – sale or acquisition of dwelling

    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 2015.

    She purchases a new house in Ballarat on 12 February 2015. On 16 February 2015, 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 2017. 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 2015 will now become FBT liable in the 2016–17 FBT year.

    End of example

    Relocation – connection or reconnection of certain utilities

    Where an employee is required to live away from home in order to perform employment duties, the costs of connecting or reconnecting gas, electricity and telephone services to the new place of residence may be exempt benefits. Similarly, where there is a change in the employee's usual place of residence, these costs may be exempt benefits.

    Several 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
    • where the employee has permanently relocated, the benefits will be exempt only if the connection or reconnection of services is made within 12 months of the employee starting work at the new location.

    Living-away-from-home – leasing of household goods

    A benefit that consists of leasing household goods used primarily for domestic purposes while an employee is living away from home may be an exempt benefit.

    To qualify for this exemption:

    • 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
    • the employee must be provided with living-away-from-home accommodation that is an exempt expense payment or exempt residual benefit.

    Relocation – transport

    Where an employee is required to live away from home, or is required to relocate their usual place of residence, in order to perform employment-related duties, the costs of providing relocation transport (and any meals and accommodation en route) to the employee (and family members) are exempt benefits. The exemption also applies where the employee is returning to their usual place of residence after working at another location.

    The exemption doesn't apply to a reimbursement of the employee's car expenses where the reimbursement is calculated by reference to the distance travelled by the car – however, a reduction of the taxable value may be available (refer to section 19.4 of Reductions in fringe benefit taxable value).

      Last modified: 05 May 2017QC 17820