ATO Interpretative Decision
ATO ID 2005/156
Fringe Benefits Tax
Exempt Benefits: remote area housing - non-arm's length arrangementFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Where a housing benefit is provided in a 'remote area' location, to an employee who is also a shareholder of the employer company, will the recipients overall housing right always be granted to the employee under a non-arm's length arrangement for the purposes of subparagraph 58ZC(2)(e)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
No. Even though the employer and employee are not at arm's length, a recipients overall housing right can be granted as part of an arm's length arrangement. As such, the recipients overall housing right was not granted to the employee under a non-arm's length arrangement for the purposes of subparagraph 58ZC(2)(e)(i) of the FBTAA.
Facts
A company provides professional services in a remote area.
The company rents a house in the remote area.
The company makes the house available to an employee at no cost to the employee.
The employee is employed by the company as a manager.
The employee is also a shareholder of the employer company.
The company does not have any other employees who are managers.
The company has always had a written policy of providing free housing to any of its managerial employees working in remote areas.
Reasons for Decision
Section 58ZC of the FBTAA exempts remote area housing benefits from fringe benefits tax. Apart from the question of location, for a housing benefit to qualify as a remote area housing benefit (and therefore be exempt from fringe benefits tax), the conditions set out in subsection 58ZC(2) of the FBTAA must be satisfied. Subparagraph 58ZC(2)(e)(i) of the FBTAA requires that the recipients overall housing right was not granted to the employee under a non-arm's length arrangement.
Within subsection 136(1) of the FBTAA, the expression non-arm's length arrangement is defined to mean an arrangement other than an arm's length arrangement. The term arm's length arrangement is not defined in the FBTAA. However, section 136(1) defines arm's length transaction to mean a transaction where the parties to the transaction are dealing with each other at arm's length in relation to the transaction.
The expression at arm's length is defined in The CCH Macquarie Concise Dictionary of Modern Law, 1988, CCH Australia Ltd/ Macquarie Library Pty Ltd, Sydney as meaning that the parties to a transaction are not connected in such a way as to bring into question the ability of one to act independently of the other.
In Granby Pty Ltd v. FCT (1995) 30 ATR 400; 95 ATC 4240, where the expression dealing with each other at arm's length in section 160ZH of the Income Tax Assessment Act 1936 was in question, Lee J said (at ATR 403; ATC 4243):
The expression "dealing with each other at arm's length" involves an analysis of the manner in which the parties to a transaction conducted themselves in forming that transaction. What is asked is whether the parties behaved in the manner in which parties at arm's length would be expected to behave in conducting their affairs. Of course, it is relevant to that enquiry to determine the nature of the relationship between the parties, for if the parties are not parties at arm's length the inference may be drawn that they did not deal with each other at arm's length.
Even though the employer and the employee are not at arm's length, the employer has a written policy of providing free housing to all of its managerial employees working in remote areas. As such, it is considered that the recipient's overall housing right was granted under an arm's length arrangement. As the recipient's overall housing right was not granted under a non-arm's length arrangement, subparagraph 58ZC(2)(e)(i) of the FBTAA is satisfied.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 13 March 2026 | Business line | Updated Business Line and review date |
| 13 February 2015 | Reason for Decision | Minor punctuation amendments. |
| Reason for Decision | Change from employee's overall housing right to recipient's overall housing right in the last paragraph. |
Year of income: Year ended 31 March 2006
Legislative References:
Fringe Benefits Tax Assessment Act 1986
section 58ZC
subsection 58ZC(2)
subparagraph 58ZC(2)(e)(i)
Case References:
Granby Pty Ltd v. FCT
(1995) 30 ATR 400
95 ATC 4240
Related Public Rulings (including Determinations)
Taxation Determination TD 93/200 (Withdrawn)
Taxation Determination TD 93/201 (Withdrawn)
ATO ID 2001/761
ATO ID 2002/412
Other References:
The CCH Macquarie Concise Dictionary of Modern Law, 1988, CCH Australia Ltd/Macquarie Library Pty Ltd, Sydney
Keywords
FBT exempt housing benefit
FBT remote area housing
FBT unit of accommodation
Fringe benefits
Fringe benefits tax
Housing fringe benefits
Remote housing fringe benefits
Date reviewed: 5 March 2026
ISSN: 1445-2782
| Date: | Version: | |
| 1 June 2005 | Original statement | |
| 13 February 2015 | Updated statement | |
| You are here | 13 March 2026 | Updated statement |