LI 2023/D20 - Explanatory statement

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Fringe Benefits Tax Assessment Act 1986

Draft Explanatory Statement

General 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 living-away-from-home allowance (LAFHA) fringe benefits where:

(a)

the employee receives a LAFHA fringe benefit, and

(b)

the employer seeks to reduce the taxable value of the benefit under subsection 31(2) of the FBTAA.

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 paragraph 31F(1)(a) 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 a LAFHA fringe benefit described in section 31 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:

(a)

the name of the employee who received the benefit

(b)

the address of the place in Australia that the employee usually resides when they are in Australia

(c)

confirmation that, in respect of the usual place of residence described at paragraph (b):

(i)

the employee or their spouse has an ownership interest in the home

(ii)

the home continues to be available for the employee's immediate use and enjoyment while their duties of employment require them to live away from it, and

(iii)

it is reasonable to expect that the employee will resume living at that home when their duties of employment no longer require them to live away from it

(d)

dates (inclusive) that the employee's duties of employment required them to live away from the usual place of residence described at paragraph (b), and

(e)

the address of each place the employee actually resided at when their duties of employment required them to live away the usual place of residence described at paragraph (b).

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 further time 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.

Example 1: information kept from multiple sources during the ordinary process of providing the benefit

11. Vanessa is a teacher who agrees to teach at Primary School in Mount Isa for 3 months. This is the first time she has taught at this location.

12. Vanessa rents a home in Mount Isa for 3 months. Her husband and sons continue to live at their family home in Brisbane, while Vanessa undertakes this position.

13. Vanessa's employment contract states that a LAFHA is paid where an employee is living away from their usual place of residence in Australia. Employees have to apply through Primary School's payroll system to have the allowance paid.

14. Vanessa applies to receive a LAFHA. Primary School's payroll system asks her to confirm that she is living away from a home that she or her spouse own or lease, which is available for Vanessa's immediate use and which she intends to resume living at once her duties of employment no longer require her to live away from home. It also asks employees who will be receiving such an allowance to provide the address where they will be living while working for Primary School, and their home address that they will be living away from. Vanessa is required under her employment contract to advise if there are any changes to these addresses.

15. Primary School provides Vanessa with a LAFHA to compensate her for additional expenses and other disadvantages suffered, because the duties of employment require Vanessa to live away from her home in Brisbane.

16. Under subsection 31(2) of the FBTAA, the taxable value of the LAFHA can be reduced by the exempt food and the exempt accommodation components provided that the requirements of subsection 31(1) are met.

17. Instead of obtaining the declaration from Vanessa required under paragraph 31F(1)(a) of the FBTAA, Primary School seeks to rely on section 123AA.

18. Primary School 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/or recorded before the due date of lodgment of the employer's FBT return. The relevant records are as follows:

19. Due to the operation of subsection 123AA(1) of the FBTAA, Primary School is taken to have kept and retained the relevant declaration and accordingly has satisfied the requirements in paragraph 31(1)(c).

Example 2: information kept in different document - LAFHA checklist

20. Mel is an engineer who is an employee of a small business, Construction Co. Mel agrees to work on a construction project within the company in Melbourne for 6 months during the year.

21. During this time, Mel and her partner live in an apartment close to the construction site. They otherwise usually reside at an apartment they rent in Perth. Their Perth apartment remains rented to Mel and her partner while they are working in Melbourne and is available for their use while they are working in Melbourne.

22. Construction Co pays Mel a LAFHA to compensate Mel for the additional food, drink and accommodation expenses Mel incurs because her duties of employment require her to live in Melbourne. Mel completes a LAFHA checklist which is emailed to her manager before starting work in Melbourne.

23. The LAFHA checklist contains details of the project Mel will be working on, including the dates she will be in Melbourne, and asks Mel to:

(a)

confirm her normal home address when she is not working on the project

(b)

confirm that she and/or her partner either own or are renting this home and that it is available for their use during the period they are living away from it

(c)

provide the address/es she will be living at in Melbourne, and

(d)

confirm that she will return to live at her normal home when the construction project has finished.

24. Mel provides a copy of her lease for the apartment in Melbourne which shows her actual accommodation costs. The food and drink component of the LAFHA is less than the Commissioner's reasonable food amount.

25. Mel signs and dates the LAFHA checklist, and a scanned copy is sent to Mel and filed by Construction Co.

26. Instead of obtaining the declaration from Mel required under paragraph 31F(1)(a), Construction Co seeks to rely on section 123AA of the FBTAA.

27. Construction 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/or recorded before the due date of lodgment of Construction Co's FBT return. The relevant records are as follows:

28. Due to the operation of subsection 123AA(1) of the FBTAA, Construction Co is taken to have kept and retained the relevant declaration and accordingly has satisfied the requirements in paragraph 31(1)(c).

Compliance cost assessment

29. To be advised.

Background

30. Section 31 of the FBTAA allows an employer to reduce the taxable value of certain LAFHA fringe benefits provided to employees. The reduction is available where:

(a)

the employee has an ownership interest in a home in Australia where they usually reside when in Australia

(b)

the home is available for their immediate use and enjoyment at all times, and

(c)

the employee gives the employer a declaration that sets out certain information.

31. An ownership interest has the same meaning as in the Income Tax Assessment Act 1997 and includes a legal or equitable interest, and a licence or right to occupy a dwelling.

32. As described in section 30 of the FBTAA, a LAFHA is an allowance paid wholly or partly to compensate an employee for additional expenses and other disadvantages suffered when the employee is required to live away from home in order to perform employment-related duties.

33. The reduction is limited to the amount of the exempt food component and exempt accommodation component.

34. In accordance with paragraph 31(1)(c) 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. 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

35. Subsection 17(1) of the Legislation Act 2003 requires the Commissioner to be satisfied that appropriate and reasonably practicable consultation has been undertaken before a determination is made.

36. 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.

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 Alternate Records – Living-Away-From-Home Allowance – Maintaining an Australian Home) 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 a living-away-from-home allowance fringe benefit where the employee lives away from their Australian home.

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.

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Draft published 12 October 2023

Ben Kelly
Deputy Commissioner of Taxation

LI 2023/D20 - Legislative Instrument

Legislative References:
Acts Interpretation Act 1901
The Act

Fringe Benefits Tax Assessment Act 1986
The Act

Human Rights (Parliamentary Scrutiny) Act 2011
The Act

Legislation Act 2003
The Act