LI 2023/D18 - Explanatory statement
Fringe Benefits Tax Assessment Act 1986
Draft Explanatory StatementGeneral outline of instrument
1. This instrument is made under section 123AA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
2. The instrument specifies records that the Commissioner of Taxation will accept as an alternative to an employee declaration in respect of expense payment fringe benefits, housing fringe benefits or residual fringe benefits where:
- the employer seeks to reduce the taxable value of a benefit in respect of providing temporary accommodation or temporary hire of household goods to an employee and their family members (under section 61C of the FBTAA), and
- the temporary accommodation is required solely because the employee is required to change their usual place of residence in order to perform the duties of their employment.
3. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.Date of effect
4. This instrument commences on 1 April 2024.Effect of this instrument
5. This instrument will reduce compliance costs for employers by allowing them to rely on adequate alternative records (rather than employee declarations) to meet their FBT record keeping obligations.
6. Section 123AA of the FBTAA allows the Commissioner to make a legislative instrument that specifies alternative records that employers can rely on, in lieu of statutory evidentiary documents, for FBT record keeping purposes.
7. The instrument applies for the FBT year ending 31 March 2025, and all subsequent FBT years (paragraph 5(1)(a)). It allows an employer to which the instrument applies to accept adequate alternative records instead of a declaration referred to in subparagraph 61C(3)(b)(ii) of the FBTAA (paragraph 5(1)(b)). The instrument applies to the class of employers specified in subsection 5(2) that is, employers reducing the taxable value of an expense payment fringe benefit, housing fringe benefit or residual fringe benefit described in section 61C of the FBTAA, in certain circumstances.
8. Section 6 sets out what records are adequate alternative records that can be accepted instead of a relevant employee declaration. It stipulates that the alternative records must be written in English and contain, at a minimum, the following information:
- the name of the employee who received the benefit
- the address of the temporary accommodation
- the period during which the temporary accommodation was required
- the date the employee or an associate of the employee commenced sustained reasonable efforts to acquire a unit of accommodation intended to be a long-term place of residence
- if the employee or an associate of the employee did not hold a relevant proprietary interest in the employee's former usual place of residence, either:
- if the employee or associate entered into a contract for the occupation of long-term accommodation, the date the contract was entered into and the date the accommodation became occupied pursuant to the contract, or
- if the employee or associate were unable to locate long-term accommodation within 6 months of the date the efforts described in paragraph 6(1)(d) commenced, confirmation that long-term accommodation could not be located, despite sustained reasonable efforts, within that period, and
- if the employee or an associate of the employee held a relevant proprietary interest in the employee's former usual place of residence, the date the employee or associate entered into a contract for the sale of that interest and either:
- the date the employee commenced occupying long-term accommodation, or
- confirmation that long-term accommodation could not be located, despite sustained reasonable efforts, within 12 months of the date the efforts described in paragraph 6(1)(d) commenced.
9. There is no limit on the number of records that may, in aggregate, meet the minimum information requirements. Further, there is no prescribed type or form of record that the required information must be contained in. If multiple different records collectively contain the minimum information when viewed together, the records will be accepted in aggregate as satisfying the requirements. For example, records can be stored electronically or in paper form, and the required information could be contained in various types of documents such as employment contracts, payroll records, job descriptions, employer and employee correspondence (for example, emails or text messages) and employer policies.
10. Records can only be accepted as an alternative to the declaration if they are obtained and held by the employer by the employer's declaration date. This is the date of lodgment of their FBT return for the relevant FBT year, or such later date as the Commissioner allows. This is because section 123AA of the FBTAA deems the employee to have the declaration at the time that they hold the records, and the underlying declaration is required to be obtained by the declaration date.
Andy is an employee of ABC Co, and resides in a rental property in Sydney, NSW. ABC Co offered Andy a promotion to manage a new warehouse in Perth, WA. Andy accepted the offer and moved to temporary accommodation located near the new warehouse in Perth. ABC Co agreed to reimburse Andy for the temporary accommodation, which constitutes an expense payment fringe benefit. Andy commenced his duties in Perth and began actively seeking and applying for a rental property that would provide him a long-term place of residence in Perth.Andy sends ABC Co an email outlining the dates for which he will initially require temporary accommodation in Perth. Andy continues to update ABC Co on his requirement for temporary accommodation and his progress in applying for long-term accommodation which included the date he commenced actively seeking long-term accommodation. Andy submits a payroll expense reimbursement form for the cost of the temporary accommodation. ABC Co uses this information to reimburse Andy for the temporary accommodation.After 5 months Andy finds suitable long-term accommodation and signs a long-term lease for the provision of accommodation. Andy sends ABC Co a copy of the lease which includes the date the lease contract was entered into and the date Andy will start occupying that accommodation.ABC Co determines that under section 61C of the FBTAA, ABC Co is entitled to reduce the taxable value of the expense payment fringe benefit. Instead of obtaining the declaration from Andy as required by subparagraph 61(3)(b)(iii), ABC Co seeks to rely on section 123AA of the FBTAA.In accordance with this legislative instrument, ABC Co has obtained records containing, in aggregate, the minimum information to be relied upon as an alternative to the declaration. All of the required information was obtained and recorded by ABC Co before the due date for lodgment of ABC Co's FBT return. The relevant records are as follows:
• The dates the temporary accommodation was required • The date the employee began actively searching for long-term accommodation Payroll expense reimbursement form • The date the employee started to occupy the long-term accommodation
Required minimum information
Records held by ABC Co
• The name of the employee who received the benefit
Employer records e.g. payroll records
• The address of the temporary accommodation
Emails sent by Andy
• The date the long-term accommodation lease contract was entered into
Copy of long-term lease contract
• The dates the temporary accommodation was required
• The date the employee began actively searching for long-term accommodation
Payroll expense reimbursement form
• The date the employee started to occupy the long-term accommodation
11. To be advised.Background
12. Section 61C of the FBTAA allows an employer to reduce the taxable value of certain expense payment fringe benefits, housing fringe benefits or residual fringe benefits that are provided in respect of providing temporary accommodation (including the costs of hiring household goods) to an employee and their family members. The reduction is available to the employer where:
- the employer provided an employee with:
- an expense payment, housing or residual fringe benefit in respect of a lease or licence for the temporary accommodation of family members, or
- an expense payment or residual fringe benefit in respect of a lease or licence for household goods for use in the temporary accommodation of family members
- the temporary accommodation is required solely because the employee is required to change their usual place of residence in order to perform the duties of their employment (being the specific employment which required the employee to change their usual place of residence)
- the temporary accommodation is located at or near the employee's new place of employment
- the requirements in paragraph 61C(1)(d) of the FBTAA are met, and
- the fringe benefit is not provided under a non-arm's length arrangement.
15. In accordance with paragraph 61C(3)(b) of the FBTAA, the employer ordinarily also needs to obtain a signed employee declaration in the approved form by the declaration date to reduce the taxable value where the employee has not started to live in a long-term unit of accommodation within 4 months of relocation. This instrument prescribes alternative records the employer can use instead of the employee declaration to reduce the taxable value for the relevant FBT year.Consultation
16. Subsection 17(1) of the Legislation Act 2003 requires that the Commissioner is satisfied that appropriate and reasonably practicable consultation has been undertaken before a determination is made.
17. As part of the consultation process, you are invited to comment on the draft determination and its accompanying draft explanatory statement.
Please forward your comments to the contact officer by the due date.
|Due date:||9 November 2023|
|Contact officer:||Nerida Bell|
|Phone:||07 3347 6949|
Statement of compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.Fringe Benefits Tax Assessment (Adequate Alternative Records Temporary Accommodation Relating to Relocation) Determination 2023
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.Overview of the legislative instrument
The instrument specifies records that the Commissioner of Taxation will accept from an employer, in certain circumstances, as an alternative to an employee providing a declaration for an expense payment fringe benefit, housing fringe benefit or residual fringe benefit in respect of providing temporary accommodation or temporary hire of household goods to an employee and their family members.Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms because it merely provides employers with an option to use acceptable alternative records instead of an employee declaration. Importantly, it will help reduce employers' record keeping compliance costs in relation to the fringe benefits tax law and provide them with certainty regarding their record keeping obligations.Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.
Draft published 12 October 2023
Deputy Commissioner of Taxation