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ATO Interpretative Decision

ATO ID 2005/314

Income Tax

Assessable income: Offshore oil and gas rig workers and hardlying allowance
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a hardlying allowance paid to the taxpayer, an offshore oil and gas rig worker, assessable income under paragraph 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. A hardlying allowance paid to the taxpayer, an offshore oil and gas rig worker, is assessable income under paragraph 26(e) of the ITAA 1936.

Facts

The taxpayer is employed as an offshore oil and gas rig worker on a self-propelled rig.

Under a workplace agreement the taxpayer is paid a hardlying allowance.

The hardlying allowance is paid by the employer having regard to the accommodation and recreation facilities and all other conditions associated with living on board a self-propelled drilling vessel.

On the taxpayer's fortnightly payslip, the payment of the hardlying allowance is shown as 'hardlying' or 'hardlying allowance'.

The allowance is not expressed to be paid as a living-away-from-home allowance (LAFHA).

Reasons for Decision

Paragraph 26(e) of the ITAA 1936 provides that the assessable income of a taxpayer includes the value of allowances paid in respect of employment. However the value of an allowance will not be included in the assessable income of a taxpayer if the allowance is a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

If the hardlying allowance paid is properly characterised as a LAFHA benefit under section 30 of the FBTAA and a fringe benefit under subsection 136(1) of the FBTAA, then the hardlying allowance will not be included in the taxpayer's assessable income.

Subsection 30(1) of the FBTAA requires that a whole or part of the allowance be in the nature of compensation for additional expenses, refer Atwood Oceanics Australia Pty Ltd v. Federal Commissioner of Taxation 89 ATC 4808; (1989) 20 ATR 742. The hardlying allowance is not of this nature and subsection 30(1) of the FBTAA is not satisfied.

Subsection 30(2) of the FBTAA, at paragraph 30(2)(d), requires that 'the allowance is expressed to be paid as a living-away-from-home allowance'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. defines 'express' as:

8. clearly indicated; distinctly stated (rather than implied); definite; explicit; plain.

Under the workplace agreement and on the payslip, the allowance is shown as 'hardlying allowance' or 'hardlying'.

Accordingly, the allowance is not expressed to be paid as a LAFHA and paragraph 30(2)(d) and subsection 30(2) of the FBTAA are not satisfied.

Note: in Best v. Federal Commissioner of Taxation [2005] AATA 560; 2005 ATC 2184; (2005) 59 ATR 1151 and Crane v. Federal Commissioner of Taxation [2005] AATA 872; 2005 ATC 2312; (2005) 60 ATR 1170, it was held, by differently constituted Administrative Appeals Tribunals, that a hardlying allowance paid to a taxpayer was not a LAFHA benefit under section 30 of the FBTAA and was not income derived by the taxpayer by way of the provision of a fringe benefit.

Therefore, the hardlying allowance paid to the taxpayer, an offshore oil and gas rig worker, is assessable income of the taxpayer under paragraph 26(e) of the ITAA 1936.

Date of decision:  15 September 2005

Year of income:  Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1936
   paragraph 26(e)

Fringe Benefits Tax Assessment Act 1986
   section 30
   subsection 30(1)
   subsection 30(2)
   paragraph 30(2)(d)
   subsection 123(1)

Case References:
Atwood Oceanics Australia Pty Ltd v. Federal Commissioner of Taxation
   89 ATC 4808
   (1989) 20 ATR 742

Best v. Federal Commissioner of Taxation
   [2005] AATA 560
   (2001) 59 ATR 1151
   2005 ATC 2184

Crane v. Federal Commissioner of Taxation
   [2005] AATA 872
   2005 ATC 2312
   (2005) 60 ATR 1170

Related ATO Interpretative Decisions
ATO ID 2002/232
ATO ID 2004/706

Keywords
Employee allowances
Income
Living away from home allowances
Salary & wages income

Business Line:  Small Business/Individual Taxpayers

Date of publication:  18 November 2005

ISSN: 1445-2782

history
  Date: Version:
You are here 15 September 2005 Original statement
  13 June 2014 Updated statement
  20 June 2014 Updated statement
  12 September 2014 Updated statement
  22 September 2017 Archived

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