Draft Taxation Determination
TD 2003/D8
Fringe Benefits Tax: an employee ('A') buys a residence in a remote area and leases it to his employer ('B'). A agrees to sacrifice an amount of salary and directs B to pay it to him as 'rent'. A continues to occupy the premises 'rent' free. Is B entitled to the remote area housing exemption?
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FOI status:
draft only - for comment| Preamble |
| This document is a draft for industry and professional comment. As such, it represents the preliminary, though considered views of the Australian Taxation Office. This draft may not be relied on by taxpayers and practitioners as it is not a ruling for the purposes of Part IVAAA of the Taxation Administration Act 1953. It is only final Taxation Determinations that represent authoritative statements by the Australian Taxation Office. |
1. No. Paragraph 58ZC(2)(e) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) will operate to deny the exemption.
2. B will not be entitled to the remote area housing exemption, irrespective of whether the purported salary sacrifice arrangement (SSA) is effective or ineffective.[F1]
3. If the purported SSA is ineffective, the amount paid to A is salary and wages income which is deemed to be received by A at the time B deals with it on his behalf or as he directs. As salary or wages, it is excluded from the definition of fringe benefit contained in subsection 136(1) of the FBTAA 1986 and is not eligible for the remote area housing exemption.
4. If the purported SSA is effective, the amount paid to A is a fringe benefit. Provided that the conditions set out in paragraphs 58ZC(2)(a) to subparagraph 58ZC(2)(d)(iii) are met, B would be eligible for the exemption.
5. However, paragraph 58ZC(2)(e) of the FBTAA 1986 provides conditions under which an otherwise allowable exemption will be denied.
6. These conditions arise when the recipient's overall housing right was not granted under an arm's length arrangement or when the overall housing right was granted under an arrangement which was entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the exemption.
7. In circumstances where A purports to sacrifice an amount of salary, the amount sacrificed is then paid to A as rent, and B permits A to occupy the property rent free, it is considered that subparagraph 58ZC(2)(e) will operate to deny the exemption.
Date of effect
8. When the final Determination is issued, it is proposed to apply both before and after its date of issue. However, the Determination will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
Your comments
9. We invite you to comment on this draft Taxation Determination. Please forward your comments to the contact officer by the due date.
| Due date: | 23 July 2003 |
| Contact officer: | Catherine Lovell |
| E-mail address: | catherine.lovell@ato.gov.au |
| Telephone: | (02) 9374 2842 |
| Facsimile: | (02) 9374 2 |
| Address: |
Catherine Lovell Australian Taxation Office 100 Market Street Sydney NSW 2001 |
Commissioner of Taxation
25 June 2003
Footnotes
1 See Taxation Ruling TR 2001/10 which deals with the income tax and fringe benefits tax consequences of SSAs.
Not previously issued in draft form.
References
ATO references:
NO 2003/006670
Related Rulings/Determinations:
TD 2003/D8W
TR 92/20
TR 2001/10
Legislative References:
TAA 1953 Part IVAAA
FBTAA 1986 58ZC(2)(a)
FBTAA 1986 58ZC(2)(d)(iii)
FBTAA 1986 58ZC(2)(e)
FBTAA 1986 136(1)
Other References:
Taxpayer Alert TA 2002/9