House of Representatives

Tax Laws Amendment (2005 Measures No. 1) Bill 2005

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

Chapter 1 - Fringe benefits tax - improving access for small business

Outline of chapter

1.1 Schedule 1 to this Bill amends the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) to:

·
provide a fringe benefits tax (FBT) exemption to cover the engagement of a relocation consultant to assist in the relocation of an employee;
·
broaden the FBT exemption for eligible work-related items to include personal digital assistants and portable printers designed for use with portable computers; and
·
broaden the FBT exemption for remote area housing to cover employers in industries where employer-provided housing is not customary.

Context of amendments

1.2 Currently certain expenses associated with the relocation of an employee - such as the removal or storage of an employee's household effects as a result of relocation of the employee's employment - may be FBT exempt. Exempt benefits may also arise on the sale or acquisition of a dwelling as a result of relocation, on the connection or reconnection of the telephone service, gas or electricity and for certain benefits in respect of relocation transport. The costs of engaging a relocation consultant to assist with the relocation of employees are not included in these exemptions.

1.3 The existing FBT exemption for work-related items such as laptop computers is extended to include personal digital assistants and portable printers designed for use with portable computers. These amendments will ensure that the taxation laws do not inhibit the uptake of new technology.

1.4 Employer-provided housing in remote areas is presently exempt from FBT if it meets the conditions in subsection 58ZC(2) of the FBTAA 1986. Paragraph 58ZC(2)(c) requires that it be customary for employers in an industry to provide their employees with remote area housing benefits for the FBT exemption to apply.

Summary of new law

1.5 These amendments will ensure that:

·
if a relocation consultant is used to assist with the relocation of an employee, the employer may be eligible to access a FBT exemption for costs associated with the engagement of the relocation consultant;
·
when an employer provides an employee with a personal digital assistant or portable printer in respect of the employee's employment, the employer is eligible for a FBT exemption; and
·
through the removal of the 'customary' rule in paragraph 58C(2)(c), employers in industries where employer-provided remote housing is not customary have access to the remote area housing FBT exemption.

Comparison of key features of new law and current law

New law Current law
Costs associated with the engagement of a relocation consultant where an employee moves residence as part of their employment will be exempt from FBT. Costs associated with the engagement of a relocation consultant where an employee moves residence as part of their employment is not an exempt FBT benefit.
If an employer provides a personal digital assistant or portable printer to an employee in respect of their employment, this benefit will be a work-related item eligible for a FBT exemption. Certain work-related items provided by an employer to an employee are eligible for a FBT exemption. A personal digital assistant and portable printer, however, are not eligible work-related items.
Employer-provided housing in remote areas will be exempt from FBT if it meets specified criteria, regardless of whether it is customary for employers in the industry to provide residential accommodation for their employees without charge. Employer-provided housing in remote areas is exempt from FBT if, during the whole of the tenancy period, it is customary for employers in the industry to provide residential accommodation for their employees without charge.

Detailed explanation of new law

Fringe benefits tax exemption for the engagement of a relocation consultant

1.6 New section 58AA of the FBTAA 1986 will extend the availability to the FBT exemptions for relocated employees to cover costs incurred in the engagement of a relocation consultant if certain criteria are met. A relocation consultant is a person who assists an employee, or his or her family member, 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, a number of conditions must be satisfied.

1.7 The benefit provided must be an expense payment benefit or residual benefit. It is also necessary that this benefit be provided in respect of the employment of an employee. [Schedule 1, item 1, paragraph 58AA(1)(a)]

1.8 This exemption applies to costs incurred for the engagement of a relocation consultant solely for the purposes provided in paragraph 58AA(1)(c). These purposes include when a relocation consultant is engaged to assist with an employee's relocation if:

·
the employee is required to live away from home in order to fulfil his or her 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 the employee ceases to perform the employment duties he or she had previously been relocated for; or
·
in order to fulfil his or her duties of employment, the employee moves from his or her usual place of residence.

[Schedule 1, item 1, paragraph 58AA(1)(c)]

1.9 If an employee is required to relocate from their usual place of residence to be able to fulfil their employment duties and a relocation consultant is engaged to assist a family member (including the employee) move or settle at or near a location where the employee performs the new employment, this expense will be FBT exempt. Further, if the employee is required to return to their usual place of residence:

·
because the employee ceases to perform the duties he or she was originally required to relocate for; or
·
in order to continue to fulfil their employment duties,

and a relocation consultant is engaged to assist a family member of the employee to move or settle at or near a location where the employee performs the new employment duties, this expense will also be exempt from FBT [Schedule 1, item 1, paragraph 58AA(1)(d)]. However, any expenses that a relocation consultant pays on the behalf of the family member (including the employee) in order to relocate will not be exempt from FBT [Schedule 1, item 1, subsection 58AA(2)].

1.10 To be eligible for the FBT exemption for a benefit under new section 58AA a relocation consultant must be engaged [Schedule 1, item 1, paragraph 58AA(1)(b)]. The common services a relocation consultant can provide to assist an employee (or his or her family member) relocate includes, but is not limited to:

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

[Schedule 1, item 1, subsection 58AA(2)]

Example 1.1 Jenny-Lee 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 assist in Jenny-Lee's relocation.The relocation consultant provides:

·
accommodation quotes;
·
transportation quotes;
·
arranges and pays for six months of furniture rental; and
·
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, as well as arranging for, Jenny-Lee's relocation to Kalgoorlie. However, Zig & Co Mining is not eligible for an FBT exemption for an expense, being the six month furniture rental, paid by the relocation consultant on Jenny-Lee's behalf.

1.11 In order to obtain a FBT exemption it is necessary that the benefit be provided under an arm's length arrangement. Also, documentary evidence is required if the benefit is an expense payment benefit. This documentary evidence must be provided to the employer before the declaration date in order for the employer to be able to access the FBT exemption. [Schedule 1, item 1, paragraphs 58AA(1)(e) and (f)]

1.12 Relocation advice provided incidental to the provision of another good or service - for example, by real estate agents - would not qualify for the relocation consultants' exemption (but may qualify under other relocation exemptions already provide in the FBTAA 1986).

Fringe benefits tax exemption for work-related items

1.13 Section 58X of the FBTAA 1986 provides an exemption from FBT for certain work-related items provided by an employer to an employee. An amendment is made to extend the FBT exemption available for electronic diaries or similar items to include 'a personal digital assistant'. A personal digital assistant is a hand held wireless device designed for use as a personal organiser which may or may not have other computing capabilities. [Schedule 1, item 2, paragraph 58X(2)(g)]

1.14 Also, an amendment is made to include 'portable printer' to the list of work-related items for which an employer may be eligible to a FBT exemption. The exemption is provided for a portable printer that is designed for use with a notebook computer, a laptop computer or a similar portable computer. A portable printer is unlike a conventional printer which may be portable yet is not designed specifically to have the purpose of being used with a portable computer. [Schedule 1, item 3, paragraph 58X(2)(i)]

Fringe benefits tax exemption for remote area housing

1.15 Section 58ZC of the FBTAA 1986 provides an exemption from FBT for remote area housing if certain criteria are met. An amendment is made to paragraph 58ZC(2)(c) to omit the requirement for the provision of remote area housing by an employer to be customary in that particular industry. Generally a benefit is considered customary where it is normal or common for employees with that class of job description in that industry to be provided with the same or similar benefits. As a consequence, if all other criteria of section 58ZC are met, the employer will be eligible for a FBT exemption. This amendment will facilitate access to the remote area housing FBT exemption by employers in industries where employer-provided remote area housing is not customary. [Schedule 1, item 4, paragraph 58ZC(2)(c)]

Application and transitional provisions

1.16 These amendments will apply in respect of the FBT year following the FBT year in which this Bill receives Royal Assent and in respect of all later FBT years. [Schedule 1, item 5]


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