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FBT minutes, November 2012

^[H1]QC: 26828 Content revised: No Abstract revised: No

Abstract:

Minutes of the NTLG Fringe Benefits Tax Sub-committee meeting held 8 November 2012.

Meeting details

Venue:	Institute of Public Accountants Level 6, 555 Lonsdale Street, Melbourne
Date:	8 November 2012
Start:	10am	Finish:	3pm
Chair:	Lee Beaver
Contact and Secretariat:	Annette Wiggins	Contact phone:	(02) 9374 1889

^[H2]Attendees

Lee Beaver (Chairperson)

ATO

Stephanie Caredes

Lance Cunningham

TTI

IPA

James Deliyannis

NTAA

Vlad Dugandzic

Paul Ellis

ATO

ICAA

David Fox

CTA

Tony Greco

Paul Hockridge

IPA

CPA Aust

Asja Jaksic

Greg Kent

FCAI

TTI

Paul Kruspe

Chris Leggett

ATO

Treasury

Elizabeth Lucas

TTI

Paul Mather

NZICA

Ilana Millar

Andre Moore

Steve Mulcahy

Andy Nguyen

Raylee O'Neill

Tony Poulakis

Glenn Smith

David Sofra

ATO

Treasury

ATO

Treasury

ATO

CPA Aust

^[H3]Apologies

Elizma Bolt	ICAA
Frank Klasic	LCA
Judy Sullivan	LCA
Rod Walker	ATO
Annette Wiggins	ATO

^[H4]Professional bodies represented at the NTLG FBT sub-committee

CPA Australia	CPA Aust
Corporate Tax Association	CTA
The Federal Chamber of Automotive Industries	FCAI
Institute of Chartered Accountants in Australia	ICAA
Institute of Public Accountants	IPA
Law Council of Australia	LCA
National Tax and Accountants Association	NTAA
New Zealand Institute of Chartered Accountants	NZICA
Taxpayers' Australia	TA
The Tax Institute	TTI

^[H5]Agenda items

Disclaimer

National Tax Liaison Group (NTLG) FBT Sub-committee agendas, minutes and related papers are not binding on the ATO or any of the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

1.1 Opening of meeting including any changes to the agenda

The chair opened the meeting and welcomed the members.

The chair welcomed Paul Kruspe, Assistant Commissioner, Tax Practitioner and Lodgment Strategy (TPALS) Risk & Strategy Lodgment, and Vlad Dugandzic, Director, TPALS, who attended the meeting for agenda item 6.

Apologies were received from Elizma Bolt, Frank Klasic, Judy Sullivan, Rod Walker and Annette Wiggins.

1.2 Confirmation of minutes of the 9 August 2012 meeting

The minutes of the meeting held on 9 August 2012 were accepted.

1.3 Item carried over from previous meetings

1.3.1 Action item /61 Process for additions to remote/non remote list

At the16 February, 10 May and 9 August 2012 meetings members discussed and provided feedback on the review of additional locations not included on the current remote/non remote list on ato.gov.au.

At the meeting the chair thanked members for their contributions and stated that the ATO has considered the queries raised and has updated the remote/non remote list where appropriate. The ATO has also included a list of places for which it was unable to determine the status due to a lack of information provided or available on the internet. Copies of the updated remote/non remote list were distributed at the meeting.

It is anticipated that the updated list will be published on ato.gov.au shortly.

Action item complete.

1.3.2 Action item 090812/62 and 090812/63 FBT return lodgment deferral arrangements

At the 9 August 2012 meeting members provided feedback to the ATO on their experiences with the FBT return lodgment deferral arrangements introduced for 2012 FBT year.

Members expressed their willingness to work further with the ATO on fine-tuning the FBT return lodgment process given their collective experiences of this year's process.

Members indicated that for FBT lodgment issues, it was important that the ATO was contacting/liaising with the correct person/partner that specialised in FBT in the firm.

It was agreed that the secretariat would forward to the ATO TPALS contact the names, position and contact details of those members of the sub-committee who would be the preferable contact within the firms for the ATO to contact in relation to FBT lodgment matters

Subsequent to the meeting, the secretariat forwarded the contact names, position and contact details of those members of the sub-committee who would be the preferable contact within the firms for the ATO to contact in relation to FBT lodgment matters.

The ATO provided an update to members at this meeting. Refer agenda item 6.

Action item complete.

1.3.3 Action item 110512/58 Living-away-from-home declarations in advance

At the 12 May 2011 meeting, the ATO undertook to ensure that the position stated at the meeting and recorded in the minutes, being that an employer could not rely on a living-away-from-home (LAFH) declaration that was provided by an employee where the declaration purports to set out facts about future years, would be included in the next update of the Fringe benefits tax: a guide for employers.

At subsequent meetings the ATO continued to monitor and provide updates where appropriate on the progress of this action item given the Government's announcements to amend the law in this relation to LAFH allowances and benefits.

From the 16 February 2012 meeting, this item has been recorded and monitored in the Register of aged open action items from previous meetings, which is located on the final page of the NTLG FBT Sub-committee agenda and minutes.

This item has now been taken off the Register of aged open action items as a consequence of the recent legislative changes to LAFH allowances and benefits.

The ATO advised members at the meeting that following the recent changes to LAFH allowances and benefits, chapter 11 of the Fringe benefits tax: a guide for employers is being rewritten and will include this issue.

Action item complete.

1.3.4 Action item 260209/31 Electronic lodgment of FBT returns

This item has been recorded and monitored in the Register of aged open action items from previous meetings, which is located on the final page of the NTLG FBT Sub-committee agenda and minutes since 26 February 2009.

At the 26 February 2009 meeting members asked the ATO to consider when corporates would be able to lodge FBT returns electronically. The ATO undertook to advise members when the range of forms, that will be available on the new portal deployment, were decided.

The ATO subsequently reported that it is compiling a log of Tax Agent Portal improvements and/or suggestions, which have been received from ATO forum members and tax practitioners.

This consultation process aims to identify and confirm potential enhancements and develop a priority list for future functionality. The timetable for portal improvements is subject to priority and costing of business specifications.

The electronic lodgment of FBT returns is being considered in this consultation process.

The ATO has monitored and provided updates when there has been progress to report on the lodgment of FBT returns via the business portal.

Meeting discussion:

Given the time that has passed since this item was first raised, the chair asked members to consider the ongoing priority of this matter.

Due to systems priorities and difficulties, the ATO has not been able to provide the option of electronic lodgment via the Business Portal.

Self-preparers are able to electronically lodge FBT returns by using appropriate Standard Business Reporting (SBR) software. The SBR website www.sbr.gov.au presently states that products from two software developers, GovReports and LodgeIT , can be used to lodge FBT returns.

The ATO understands that other software developers are in the process of including the option to lodge FBT returns via SBR in future software releases.

Following the discussion, the CTA, having originally raised this matter at the forum, agreed to review the priority and/or ongoing interest in this issue with their members and provide an update at the next meeting.

Action item	FBT260209/31
Description	CTA to provide feedback at next meeting in relation to whether this aged action item can in fact be closed.

4 TRs/TDs, class rulings, LAPS and ATO IDS issued since the previous meeting

1.3.5 FBT related taxation rulings, taxation determinations and class rulings

The ATO advised that the following FBT related taxation determination and class rulings have issued since the last meeting:

¦ Taxation Determination TD 2012/D8: Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit, for the period from 1 April 2013 to 31 March 2014.

The draft issued on 28 September 2012. The period for comments closed on 26 October 2012.

The final taxation determination will apply for the period commencing 1 April 2013 through to 31 March 2014.

As a transitional measure, for the period from the commencement of new section 31G (1 October 2012) to the end of the 2012-13 FBT year, the rates specified in Taxation Determination TD 2012/5 will be accepted for all employees as reasonable amounts under paragraph 31G(1)(b) of the FBTAA for food and drink expenses incurred by an employee receiving a LAFHA fringe benefit.

Meeting discussion

The ATO advised members that 6 submissions had been received in relation to TD 2012/D8, including a joint submission from the professional bodies.

The issues raised in the submissions will be considered during the preparation of the final taxation determination.

¦ Class Ruling CR 2012/67: Fringe benefits tax: employer clients of Instinctive Corporate Wellness who enter into Service Agreements in respect of the Chiropractic and Counselling Services Program.

¦ Class Ruling CR 2012/84: Fringe benefits tax: employer contributions to the Australian Construction Industry Redundancy Trust (ACIRT).

¦ Class Ruling CR 2012/86: Fringe benefits tax: employer clients of Baptist financial Services Australia who are subject to the provisions of section 57, section 57A or section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) and who make use of the BFS Visa prepaid PayCard facility.

1.3.6 FBT related taxation rulings and taxation determinations on the public rulings program

The following FBT draft ruling is listed on the Public Rulings Program as at 18 October 2012.

¦ Fringe benefits tax: otherwise deductible rule and non-commercial losses.

Draft has been prepared and will be considered by the Public Rulings Panel on 29 November.

Planned issue date remains 23 January 2013.

1.3.7 FBT related ATO interpretive decisions

The following FBT related ATO Interpretive Decisions have issued:

¦ ATOID 2012/68 Employee Share Scheme: unlisted options to acquire shares in a company not acquired at a discount.

Issues of concern arising from the ATO position set out in ATOID 2012/68 have been submitted by members for discussion; refer agenda item 12.

¦ ATOID 2012/85 Taxable value of in-house residual expense payment fringe benefits - effect of a reduced premium under the Private Health Insurance Incentives Act 2007

¦ ATOID 2012/86 Taxable value of in-house residual expense payment fringe benefits - effect of a rebate under the Private Health Insurance Incentives Act 2007

¦ ATOID 2012/88 Expense payment fringe benefit: recipients contribution

1.3.8 FBT related law administration practice statements

No FBT related law administration practice statements have issued since the last meeting.

5 News from the ATO

1.3.9 Legislation and regulation

¦ Fringe Benefits Tax: Reform of Living-away-from-home benefits

Tax Laws Amendment (2012 Measures No. 4) Act 2012 received Royal Assent on 28 September 2012.

The revised Explanatory Memorandum for Tax Laws Amendment (2012 Measures No.4) Bill 2012 provides background to these significant changes.

Schedule 1 to this Bill amends the FBTAA to limit the concessional tax treatment of living-away-from-home (LAFH) allowances and benefits to those provided to employees (other than those working on a 'fly-in fly-out' or 'drive-in drive-out' basis) for a maximum period of 12 months who:

¦ maintain a home in Australia (at which they usually reside) for their immediate use and enjoyment at all times while living away from that home for their work; and

¦ have provided their employer with a declaration about living-away-from-home.

Special rules apply to employees who are working on a fly-in fly-out or drive-in drive-out basis. Certain conditions must be satisfied to be one of these employees, and to receive the concessional tax treatment, the employee must provide their employer with a declaration about living-away-from-home. These employees do not have to maintain a home in Australia and the 12-month limit on concessional tax treatment does not apply.

Date of effect: The reforms apply from 1 October 2012.

Transitional rules apply to permanent residents who have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees are not required to maintain a home in Australia for their immediate use and enjoyment at all times for the concessional treatment to apply and the concession is not limited to a maximum period of 12 months until the earlier of 1 July 2014 or the date a new employment contract is entered into, or the existing contract is varied in a material way.

Transitional rules also apply to temporary residents who maintain a home in Australia for their immediate use and enjoyment at all times, and have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees will have until the earlier of 1 July 2014 or the date a new employment contract is entered into or the existing contract is varied in a material way before the concessional treatment is limited to a maximum period of 12 months.

¦ Mid-Year Economic and Fiscal Outlook 2012-13

On 22 October 2012, the Treasurer, Wayne Swan, released the Mid-Year Economic and Fiscal Outlook 2012-13.

Appendix A: Policy decisions taken since the 2012-13 Budget states that:

The Government will remove the concessional fringe benefits tax (FBT) treatment for in-house fringe benefits if they are accessed by way of a salary sacrifice arrangement. This measure will apply from 22 October 2012 for salary sacrifice arrangements entered into from its announcement on 22 October 2012, and from 1 April 2014 for salary sacrifice arrangements entered into prior to its announcement on 22 October 2012. This measure is estimated to have a gain to revenue of $445.0 million, and an increase in GST payments to the States and Territories of $85.0 million, over the forward estimates period.

In-house fringe benefits arise when employees receive goods or services from their employer or an associate of their employer that are identical or similar to those provided to customers by the employer or an associate of the employer in the ordinary course of business. Under the existing FBT concession, the taxable value of in-house fringe benefits is 75 per cent of either the lowest price at which an identical benefit is sold to the public or under an arm's length transaction, depending on the nature of the benefit, reduced by a further $1,000.

The existing FBT concession was introduced before the widespread use of salary sacrifice arrangements. This measure will return the use of this FBT concession to its original intent. Under this measure, the taxable value of in-house fringe benefits provided through a salary sacrifice arrangement will be either the lowest price at which an identical benefit is sold to the public or under an arm's length transaction, depending on the nature of the benefit.

¦ Australian Charities and Not-for-profits Commission Bill 2012

Introduced on 23 August 2012, the Bill charges the Australian Charities and Not-for-profits Commission (ACNC) with registering not-for-profit entities (initially charities) and maintaining a register, provides for the powers of the ACNC Commissioner in relation to the regulation of registered entities and sets out the obligations and responsibilities of registered entities.

This Bill was passed on 1 November 2012 and awaits Royal Assent.

¦ Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012

Introduced with the Australian Charities and Not-for-profits Commission Bill 2012 on 23 August 2012.

This Bill includes amendments to the FBTAA.

This Bill was also passed, with amendments, on 1 November 2012 and awaits Royal Assent.

¦ Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012

Also introduced on 23 August 2012; the Bill amends taxation legislation to: restate the 'in Australia' special conditions for income tax exempt entities, ensuring that they generally must be operated principally in Australia and for the broad benefit of the Australian community; standardise the other special conditions entities must meet to be income tax exempt; standardise the term 'not-for-profit'; and codify the 'in Australia' special conditions for deductible gift recipients ensuring that they must generally operate solely in Australia, and pursue their purposes solely in Australia (with some exceptions, such as overseas aid funds and some environmental organisations).

This Bill includes amendments to the FBTAA.

This Bill has not been passed and is before the House of Representatives.

¦ Treasury Discussion Paper - Income Tax treatment of non-cash benefits (ongoing)

At the 11 August 2011 meeting, Treasury indicated that the proposed discussion paper on the treatment of non-cash benefits, being those benefits not otherwise considered under the FTBAA, was being developed for the purposes of consultation. It was further noted at the meeting of 11 August 2011 that this paper will make references to FBT issues following concerns raised at this form as a result of changes to section 23AG.

Meeting discussion

The delay in the issue of the proposed discussion paper is an 'ongoing' concern for the members.

Treasury is aware of the concerns of the members given the delay in issuing the discussion paper on the treatment of non-cash benefits.

Treasury again stated that it is currently reviewing a number of priorities inclusive of the priority issues raised by tax practitioners which includes the treatment of 'non-cash benefits'.

Treasury has agreed to again advise members at the next meeting as to the outcome and/or progress of those deliberations.

1.3.10 Cases

There were no FBT decisions handed down during this period.

1.3.11 Cases in the public domain where a decision has not been handed down

The ATO stated there were no new cases for this period.

In relation to the three cases that were before the Administrative Appeals Tribunal, as reported at the last meeting:

¦ Dispute arising form a Private ruling - whether the provision of accommodation to a Master of a college is an exempt benefit pursuant to subsection 47(5) of the FBTAA has been withdrawn by the applicant.

¦ FBT self assessments - whether an annual travel pass for employees is an in-house residual benefit? Ongoing.

¦ Amended and deemed assessments - whether airport car parks are 'commercial parking station' for the purposes of the FBTAA. A lead case has now been identified. Ongoing.

1.3.12 FBT Products

New/updated web products

Fringe benefits tax - exempt motor vehicles - this information explains when the use of certain motor vehicles is exempt from FBT and lists vehicles that may qualify for the exemption.

The lists of relevant motor vehicles manufactured in quarters 1 and 2 of 2012 have been approved and will soon be published on ato.gov.au. Subsequent to the meeting, the website was updated to include this information on 14 November 2012.

Changes to the tax treatment of living-away-from-home allowances and benefits - fact sheet is available on ato.gov.au

Declarations - updated on ato.gov.au following the legislative changes to living-away-from-home allowances and benefits.

1.3.13 Not-for-profit sector tax concession working group - update

As advised previously, on 12 February 2012 the Minister for Social Inclusion Mark Butler and the then Assistant Treasurer Mark Arbib announced the membership and terms of reference of the Not-for-Profit Sector Tax Concession working group that will consider ideas for better delivering the support currently provided through tax concessions to the not-for-profit (NFP) sector.

These include concessions for income tax, fringe benefits tax and goods and services tax (GST), and also deductible gift recipient (DGR) status.

The working group is considering ideas that arose at the Tax Forum and is being supported by a secretariat, technical and legal advice from within Treasury.

NTLG FBT Sub-committee members may raise issues relating to the working group directly with Elizabeth Lucas if required.

Elizabeth provided an update to sub-committee members on the progress of the working group since the last meeting of this forum.

The update included background to the discussion paper issued on 2 November 2012 by the Not-for-profit Tax Concessions Working Group;

http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2012/Tax-concessions-for-the-not-for-profit-sector

The Working Group is seeking feedback on how tax concessions for the NFP sector could be made fairer, simpler and more effective.

Submissions close 10.00am 17 December 2012 . There will also be targeted consultation with interested stakeholders.

The FBT issues and ideas are discussed at chapter 3 of the discussion paper. Members were encouraged to consider the ideas that are set out in the discussion paper, noting there are numerous focus questions relating to FBT.

6 FBT return lodgment deferral arrangements

Issue

This item is a continuation of the discussions with the members relating to the FBT lodgement deferral arrangements introduced for 2011-12 FBT year (carried forward item agenda item 3.2).

The ATO undertook to provide an update at this meeting following the questions and concerns raised by the members at the previous meeting (9 August 2012), particularly regarding qualifying requirements/assessment/timely feedback?

The 2012-13 FBT lodgment program has also now been released.

Background

At the 9 August 2012 meeting, the ATO undertook to consider further the feedback provided by members at that meeting and provide an update to the members at this meeting.

The ATO also advised at the 9 August 2012 meeting that data concerning 2011-12 FBT year lodgments was being ascertained and individual firms will be contacted by the ATO to discuss performance outcomes against the benchmark requirements, for example achievement or otherwise of the 85% or more on time lodgment performance by the due date of 25 June 2012.

Subsequent to that meeting the secretariat forwarded the contact names, position and contact details of those members of the sub-committee who would be the preferable contact within the firms for the ATO to contact in relation to FBT lodgment matters.

Paul Kruspe, Assistant Commissioner TPALS Risk & Strategy Lodgment, represented the ATO at the meeting for this item.

Meeting discussion

Following on from the issues and concerns raised by members at the last meeting, the ATO had agreed to consider those matters further.

There was a lengthy discussion at this meeting where those concerns were acknowledged.

ATO response

Overall, the current status of on-time lodgment for agents with FBT clients is extremely encouraging with those agents with the concession averaging 73% on time lodgment.

The current focus is on:

¦ Providing an automatic four week lodgment deferral concession to all tax agents who have 25 or more FBT clients attached to their registered agent number (RAN) at 28 May 2013.

¦ The ATO will communicate the eligibility criteria for the FBT lodgment concession in Tax Agent Broadcast's and Lodgment Program information on the ATO website will be updated. Contact Centre scripting will be updated to reflect the concession and the criteria.

¦ The ATO will contact tax agents at the end of May 2013 who have 25 or more FBT clients attached to their RAN to inform them they are eligible for the lodgment concession.

¦ The ATO will contact tax agents who received the lodgment concession in the 2011-12 FBT year who will not be eligible for the same concession in the 2012-13 year as they now have less than 25 clients.

¦ Future year eligibility for this concession will be reliant on the tax agent achieving 85% or greater on time lodgment and lodging electronically.

¦ The ATO will remind them to take up the offer of using the Bulk Client Deletion Service to assist them to update their FBT client list

¦ The ATO will be consulting with agents to understand the reasons for paper lodgments and particular issues with meeting the 85% performance benchmark.

Key Findings 2011-2012 FBT Lodgment Concession

The analysis carried out for 2011-12 shows:

¦ 549 tax agents were eligible for the lodgment concession.

¦ 8% (43) of these tax agents lodged 85% or more on time of their FBT client base, this equates to 73% of lodgments received by 25 June.

¦ 39% (214) lodged between 60-85% on time.

¦ It is anticipated that by removing former clients, there will be an increased number of tax agents that achieve the 85% performance requirement.

¦ Tax agents who have used the Bulk Client Deletion Service provided positive feedback - 'it was easy to use' and 'saved time'.

¦ The bulk deletion offer due to close on 31 October 2012, has been extended to 15th December 2012.

7 Living-away-from-home - 'Maintaining a home in Australia' (TA)

Issue

Under the amendments to the living-away-from-home provisions, concessional FBT treatment is available for the first 12 months where an employee in receipt of a Living-away-from-home allowance (LAFHA) 'maintains a home in Australia' (section 31 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)).

'Maintaining a home in Australia' is defined in section 31C.

We seek clarification as to whether an employee is considered to be 'maintaining a home in Australia' in the following circumstances:

¦ Issue 1: Adult children living in family home

An employee residing in the family home pays an amount for board and lodging to their parents as a form of rent.

The employee is in receipt of a LAFHA for times that they are required to live away from their home.

For the purposes of the requirement under section 31C, is the amounts paid for boarding and lodging sufficient in demonstrating that there is a 'license or right to occupy a dwelling' and hence, an 'ownership interest' in the home?

If an employee is not considered to have a licence or right to occupy a dwelling, would an agreement (whether formal or verbal) between the employee and their parents for arm's length rent to be sufficient to change this outcome?

Would such an arrangement be acceptable if entered into immediately before the LAFH allowance is provided?

¦ Issue 2: Sub-letting or renting a part of the employee's home once living-away-from-home arrangements commenced

An employee is the sole owner or tenant of a home.

As a result of entering in a LAFH arrangement, the employee decides to rent/sub-let a part of their home (eg. a room with access to general living areas) in order to keep the home maintained.

The employee's access to the property at all times is not impinged.

For the purposes of the requirements under section 31C, is the employee 'maintaining a home' for their immediate use and enjoyment in these circumstances?

Background

An employee is considered to be 'maintaining a home in Australia' under section 31C if the following requirements are satisfied:

¦ the employee, or their spouse, has an 'ownership interest' in a 'unit of accommodation' (which they usually reside) in Australia

¦ that place continues to be available for the employee's immediate use and enjoyment during the period that the duties of employment require the employee to live away from it, and

¦ it is reasonable to expect that the employee will resume living at that place when that period ends.

¦ According to the revised Explanatory Memorandum (EM), the terms:

¦ 'unit of accommodation' is defined under subsection 136(1) and typically includes a house, flat, home unit, caravan or accommodation in living quarters.

¦ 'ownership interest' takes on the meaning under section 118-130 of the Income Tax Assessment Act 1997 (ITAA 1997).

This includes both a legal or equitable interest and a licence or right to occupy a dwelling. Therefore, owning or renting a home by an employee or their spouse would typically constitute an ownership interest.

The predecessor to the term 'ownership interest' and more specifically, 'right to occupy' is found under section 160ZZQ(1AB).

It states:

160ZZQ(1AB) [Right to occupy before legal ownership]

If, under the contract mentioned in subsection (1AA) or another contract entered into in relation to it, the person to whom the legal ownership is to pass has a right or license to occupy the land or dwelling before legal ownership passes, then that subsection has effect in relation to that person as if the legal ownership began when the license or right was first exercisable.

The intended effect is that the main residence exemption for CGT purposes is extended to the point in time that an individual has a right to occupy the property as opposed to when they become the legal owner of the dwelling.

The revised EM at paragraph 1.35 - 1.37 also expresses the following situations where an employee may or may not be maintaining a home in Australia:

1.35 Adult children living in the family home generally do not have an ownership interest in the home. Therefore, an employee living with their parents does not have an ownership interest in the home and therefore is not maintaining a home as required.

1.36 For the employee to maintain a home for their immediate use and enjoyment at all times, the home cannot be rented out or sub-let while they are living away from it. That is, the employee must incur the ongoing costs of maintaining the residence such as mortgage or rental payments and rates. The employee must be able to return to the home at any time and take up immediate occupancy. [Schedule 1, Part 1, item 1, subparagraph 31C(a)(ii)]

1.37 If an individual has a boarder or tenant staying with them in their normal residence, the employee can still be considered to be maintaining the home for their own use and enjoyment. However, the boarder's stay must not impinge on the availability of the residence for the individual's immediate and reasonable use and enjoyment. Likewise, if an employee has a house-sitter in their home while they are living away from it, they will be maintaining the home when the house-sitter is either required to vacate the residence or their stay does not impinge on the employee's use and enjoyment of it whenever the employee returns home, for example, during temporary visits.

Industry view/ suggested treatment

¦ Issue 1: Adult children living in family home

Paragraph 1.35 of the revised EM states that adult children living in the family home would generally not have an ownership interest in the home and therefore, would not be maintaining a home in Australia for the purposes of the amended LAFHA rules.

This statement does not clarify the common situation of adult children making a contribution to their parents for board and lodging and whether this is sufficient for there to be a licence or right to occupy a dwelling.

In context of whether rental income is assessable, IT 2167 considers that payment of an amount by family members for 'board and lodging' would not be assessable.

Whilst this ruling does not discuss the issue of whether there is a 'license or right to occupy', the inferences from comments made in the ruling are useful.

In particular, paragraph 17 states:

Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise.

It should follow that as such an arrangement is domestic in nature, it may be inferred that this is not sufficient for there to be a license or right to occupy a dwelling for the purposes of the adult child having a 'right to occupy' and hence, an 'ownership interest' under section 118-130 ITAA97.

However, would the outcome change if the employee and their parents enter into an arm's length arrangement to pay an amount for board and lodging?

Would such an arrangement need to be formalised?

IT 2167 at paragraphs 9 and 12-14 states the following:

Arms length letting of an identified part of a residence, e.g. a bedroom, with access to general living areas

9. This heading typifies a situation which is commonly encountered. A variety of arrangements may occur in situations of this nature. The rent payable may cover variable or running costs such as electricity, heating, etc. or the arrangements may require the tenant to pay, in addition to rent, a separate amount towards variable or running costs. The heading would also cover situations where board and lodging is provided.

….

12. The approach to be followed in cases arising under this heading has been framed on the basis that the rent charged by the owner represents a normal commercial rent. If the amount charged is significantly less than the normal commercial rate, enquiries would be justified to ascertain the reason for the lower charge. The basis of apportionment in cases of this nature will be determined on the facts of each case having regard to the reason for the lower charge.

Letting of property to relatives

13. Where property is let to relatives the essential question for decision is whether the arrangements are consistent with normal commercial practices in this area. If they are, the owner of the property would be treated no differently for income tax purpose from any other owner in a comparable arms length situation.

14. If property is let to relatives at less than commercial rent other considerations arise. Unless the arrangements are comparable to those in FCT v Groser referred to earlier, the rent would represent assessable income. It would not necessarily follow, however, that losses and outgoings in relation to the property would be wholly deductible. The ultimate resolution of the matter would depend upon the purposes of the taxpayer in acquiring the property and in letting out to relatives.

It would appear that if a normal commercial rent is paid for board and lodging (ie. for a room and access to general living areas) and such an arrangement is formalised, there is reasonable argument that there is a 'right to occupy' a 'unit of accommodation'.

The unit of accommodation in this case would be 'accommodation in living quarters' (ie. the family home).

Clarification is sought on whether an employee is considered to have a 'right to occupy' where an amount is paid for board and lodging as outlined under 'issues' above.

¦ Issue 2: Sub-letting or renting a part of the employee's home once living away from home arrangements commenced

It is clear under paragraph 1.36 of the revised EM that an employee cannot fully rent or sub-let the entire property and still be considered to have immediate use and enjoyment at all times for the purposes of maintaining a home.

As a practical consideration, an employee may choose to sub-let or rent a part of their home (eg. a room with access to general living areas) once they are living-away-from-home to a tenant for upkeep of their premises. The employee should not be impinged on access to the property at all times in this case.

Broadly put, paragraph 1.37 of the revised EM allows for a tenant, boarder or house-sitter to reside in the property as long as such a person's stay does not impinge on the availability of the residence for the individual's immediate and reasonable use and enjoyment.

The revised EM is unclear on whether an employee who chooses to rent or sub-let a part of their home would be considered to be maintaining a home in these circumstances.

Paragraph 1.36 of the revised EM seems to suggest that the immediate use and enjoyment may not be maintained as the employee is not fully incurring 'the ongoing costs of maintaining the residence such as mortgage or rental payments and rates'. This, however, appears to contradict paragraph 1.37 of the revised EM.

Interpreted in this manner, an employee who jointly rents or owns a property with a housemate is still considered to be maintaining the home for their own use and enjoyment under paragraph 1.37 of the revised EM. That outcome is unclear, however, where the employee is the sole owner or tenant and chooses to rent/sub-let a part of their property.

Clarification is sought on whether an employee is considered to have immediate use and enjoyment at all times for the purposes of maintaining a home in such circumstances.

Priority

High priority.

Technical references

Refer background above.

Has previous advice been sought from the ATO?

Not to our knowledge.

Has this issue been discussed at any other consultative forum?

Not to our knowledge.

Meeting discussion

It was agreed that it would be helpful, for the purposes of the discussions concerning the reforms to living-away-from-home allowances and benefits, that there was a shared understanding of the different explanatory memoranda that accompanied the passage of Tax Laws Amendment (2012 Measures No. 4) Bill 2012.

The original EM accompanied and provided an explanation of the content of the introduced version (first reading) of the Bill.

The supplementary EM accompanied and explained the amendments proposed by the government to the Bill noting that the amendment replaced schedule 1 to the Bill to ensure that the taxation treatment of living-away-from-home allowances and benefits remained in the FBT system.

The revised EM accompanied and explained the amended version (third reading) of the Bill. This supersedes the other explanatory memoranda.

The revised EM included some further detail, for example paragraphs 1.6 to 1.14 which set out the 'context of amendments'. Other than these insertions and the resulting paragraph renumbering, in general terms the supplementary and revised explanatory memoranda contain the same background information.

Accordingly, and given the context of the original EM, the ATO advised that guidance relating to the intent of these reforms is available only from the revised EM.

Treasury also advised that the revised EM takes into account feedback received during consultation following the introduction of the Bill and therefore the original EM should not be referred to.

ATO response

¦ Issue 1: Adult children living in family home

Section 31C of the FBTAA requires that an employee maintains a home in Australia. An employee " …satisfies this section if the place in Australia where the employee usually resides when in Australia is a unit of accommodation in which the employee or the employee's spouse has an ownership interest (within the meaning of the Income Tax Assessment Act 1997) …"

Relevantly, section 118-130 of the ITAA 97 states:

118-130(1) You have an ownership interest in land or a dwelling if:

(a) for land - you have a legal or equitable interest in it or a right to occupy it; or

(b) for a dwelling that is not a flat or home unit - you have a legal or equitable interest in the land on which it is erected, or a licence or right to occupy it; or

(i) a legal or equitable interest in a stratum unit in it; or

(ii) a licence or right to occupy it; or

(iii) a share in a company that owns a legal or equitable interest in the land on which the flat or home unit is erected and that gives you to a right to occupy it."

The ATO noted that the revised EM at paragraph 1.35 states:

Adult children living in the family home generally do not have an ownership interest in the home. Therefore, an employee living with their parents does not have an ownership interest in the home and therefore is not maintaining a home as required.

The ATO agreed with the TA submission that such arrangements are generally domestic in nature and such arrangements would not suffice to show an adult child has in fact an 'ownership interest'.

Further, amounts paid and received for board and lodging are not deductible or assessable, but are simply in the nature of a domestic arrangement (for example refer IT 2167 paragraph 17; Payment by family members of an amount for "board and lodging").

The payment of board by an adult child is not considered to result in any licence or right to occupy the family home.

On the other hand, arrangements can be entered into that are 'commercial' in nature when renting a property to a relative, such as an adult child. However such rental arrangements or subletting would need to be consistent with normal commercial practices. It would therefore be expected that there is a proper rental agreement with a commercial rent and allocation of utility costs etc (again for example refer to the discussion in IT 2167).

¦ Issue 2: Sub-let part of the home once LAFH arrangements have commenced

Paragraph 31C(a)(ii) requires that the place in Australia where the employee usually resides when in Australia "continues to be available for the employee's immediate use and enjoyment during the period that the duties of that employment require the employee to live away from it."

The ATO stated that the revised EM at paragraphs 1.36 and 1.37 provides some background to the intended policy position following consultation and feedback received after the Bill was originally introduced.

Paragraph 1.36 of the revised EM indicates for an 'employee to maintain a home for their immediate use and enjoyment at all times, the home cannot be rented or sub-let while they live away from it. That is, the employee must incur the ongoing costs of maintaining the residence such as mortgage or rental payments and rates.'

This does not mean, nor is there an intention, that where an employee decides to rent or sublet a part of their home, whether that is before or after the employee commences to live away from home, they can no longer access the living-away-from-home concessions.

Simply, where an employee does rent or sublet a part of their home, for example as discussed at paragraph 1.37 of the revised EM, the home must continue to be available for the employee's immediate use and enjoyment. Such arrangements must not impinge on the availability of the residence for the employee's immediate and reasonable use and enjoyment.

Provided the employee continues to have occupancy rights and the rental or sublet does not restrict the employee's use and enjoyment of the property, it would be accepted that the home is available for the employee's immediate use and enjoyment.

8 Living-away-from-home - transitional provisions (TTI)

Issue

Does an employee who was living-away-from-home prior to 7.30pm AEST, 8 May 2012 breach the transitional provisions if they simply remain in the temporary location to finalise the employment duties which necessitated their original relocation?

Background

A question has arisen in relation to the application of the transitional provisions associated with the new living-away-from-home provisions, effective 1 October 2012.

In one particular situation, an employer previously (prior to 8 May 2012) seconded an employee to a new location as part of their employment duties, requiring the employee to live away from their usual place of residence. The purpose of the secondment was to complete a project, projected to take 18 months. The employee's contract stipulated that the project was expected to take 18 months. That 18 month timeframe is due to expire next month, with the project still 4 months away from finalisation.

The employer and employee are both operating on the basis that the employee will continue in the temporary location until the project is completed. It is not considered necessary to update any contractual arrangements nor inform payroll of any changes to pay/benefit arrangements until the project is completed and the employee returns to their usual place of residence (and employment location).

For the purposes of this example, assume that the employer would not be entitled to an FBT exemption for living-away-from-home benefits if the transitional provisions do not apply.

Will an FBT exemption apply under the transitional provisions once the 18 month period has expired?

Industry view/suggested treatment

We consider that, where an employee's living-away-from-home arrangement continues without any further action by employer or employee; this should not constitute a material variation or renewal of the eligible employment arrangement.

An 'eligible employment arrangement' is defined as an arrangement under which the employer commits to provide the employee with an allowance or benefit for the employee's accommodation, food or drink while the duties of that employment require the employee to live away from his or her normal residence.

For example, a continuation of an existing employment arrangement typically occurs where a secondment relates to the completion of a set project which takes longer than was originally forecast. The employment arrangement simply continues until the project is complete.

The original Explanatory Memorandum (EM) to the Bill stated that "an extension of time of an existing contract" would constitute a material variation. It is unclear whether the above scenario would constitute an extension of a contract.

By way of comparison, where an employer formally extends the employee's secondment period, through issuing a new contract or by letter confirming ongoing arrangements, then our view is that would constitute a material variation or renewal of an eligible employment arrangement.

Technical references

Tax Laws Amendment (2012 Measures No. 4) Act (2012)

Part 3-Application and transitional provisions

Tax Laws Amendment (2012 Measures No. 4) Bill 2012;

Original explanatory memorandum

1.81 Any material variation to an existing employment arrangement triggers the commencement of the new arrangements. For example, an extension of time of an existing contract, change in the salary of an employee or change in the working hours of the employee would trigger the commencement of the new provisions. Changes such as an employee changing their name on the contract (for example, they get married and change their last name) or fixing a typo in a contract would not be considered a material change in a contract, and the employee could still be covered by the transitional arrangements.

Revised explanatory memorandum

1.67 For the purposes of the transitional rules, an annual salary review is not a material variation to an employment arrangement. Changes to an employment arrangement to reflect other annual adjustments, such as the food component of a LAFHA, do not constitute a material variation. In the case of promotions, it will be a matter of fact depending on the circumstances in each case. For example, if an employee is promoted and the underlying terms of their employment arrangement do not change, there has not been a material variation in the employment arrangement. However, if there are fundamental differences to the employment arrangement arising from the promotion, the employment arrangement has been the subject of a material variation.

Impact on clients

An FBT liability could arise where not expected.

Priority

High priority.

Has previous advice been sought from the ATO?

Not to our knowledge.

Has this issue been discussed at any other consultative forum?

Not to our knowledge.

ATO response

As advised in the response to agenda item 7, given the context in which the original EM had been written, reference to statements on policy within that particular EM should not be made in determining the policy intent of these reforms as finally passed.

Paragraphs 27(1)(b) and 27(2)(b) of Tax Laws Amendment (2012 Measures No. 4) Act 2012 both require for the transitional rules to apply that the "employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed."

Subsection 27(3) defines an 'eligible employment arrangement' as follows;

eligible employment arrangement means an arrangement under which;

(a) the employer or

(b) an associate of the employer;

commits to provide the employee with an allowance or benefit for the employee's accommodation, food or drink while the duties of that employment require the employee to live away from his or her normal residence."

The ATO noted that paragraph 1.67 of the revised EM states that an annual salary review is not a material variation. Also, changes to an employment arrangement to reflect other annual adjustments, such as the food component of a LAFHA, do not constitute a material variation.

The revised EM also provides some guidance in relation to changes that occur on promotion. In the case of promotions, it will be a matter of fact depending on the circumstances in each case as to whether there has been a material variation or a renewal of an employment arrangement. For example, if an employee is promoted and the underlying terms of their employment arrangement do not change, there has not been a material variation (nor the ATO noted would this constitute a renewal) of the employment arrangement.

The ATO agreed with TTI that where an employee's living-away-from-home arrangement continues or is extended given understandings or expectations that were in place without any further action by employer or employee there is no material variation or renewal of the eligible employment arrangement. On the basis of the facts put forward by TTI, the employee was seconded for the time it was expected to take to complete the project. While it was "expected to take 18 months", the project was some 4 months away from completion notwithstanding the employee had been living-away-from-home for almost 18 months. The fact remains there was no change or update made to the contractual arrangement and accordingly the transitional rules will apply.

The ATO also agreed with TTI that where an employer formally extends the employee's secondment period, through issuing a new contract or by letter confirming an extension to a current arrangement, that would constitute a material variation or renewal of an eligible employment arrangement.

9 Living-away-from-home - 'material variation' (ICAA)

Issue

Does a salary review involving an alteration of an employee's living-away-from-home allowance ('LAFHA') composition constitute a 'material variation', where there is no overall change to the total LAFHA provided?

Background

As a result of the 2012 Budget, a number of FBT changes were announced including an amendment to the law in relation to LAFHA.

Section 27 of the Transitional Provisions to the Fringe Benefits Tax Assessment Act 1986 ('FBTAA') provides that an employee will be subject to the transitional LAFHA rules if the employee is a permanent resident and his/her employment was covered by an eligible employment contract that was neither varied in a material way nor renewed at any time between 7:30pm EST on 8 May 2012 and 11:59 EST 30 September 2012.

The FBTAA does not define what constitutes a material variation and the various Explanatory Memoranda provides limited guidance to its meaning.

We would like the ATO to confirm its position in relation to the following scenario in respect of the application of the transitional LAFHA rules.

Scenario: Mike is a permanent resident. Mike is under an employment contract that provides him with a $500 weekly LAFHA. His employment contract is silent on the breakdown of this amount between food and accommodation. On July 1 2012, and as part of Mike's annual salary review, Mike's employment contract is altered to stipulate that the total LAFHA of $500 represents $300 as accommodation, with the remaining amount of $200 relating to food. No other changes occur. Does this alteration trigger a material variation for the purposes of qualifying under the transitional LAFHA rules?

Industry view/suggested treatment

As noted above, the various explanatory memoranda provide limited guidance to the meaning of material variation. Paragraph 1.67 of the revised Explanatory Memorandum (EM) to Tax Laws Amendment (2012 Measures No. 4) Bill 2012 states that salary reviews and changes to an employment arrangement to reflect annual adjustment (such as an annual adjustment to the food component or an annual salary review) do not constitute a material variation. Further, where an employee receives a promotion, that promotion will not be materially varied if it there are no fundamental differences in the employee's employment contact.

Other changes such as a change in name or fixing a typo would also not constitute a material variation as detailed in the original EM to Tax Laws Amendment (2012 Measures No. 4) Bill 2012.

The original EM at paragraph 1.81 however states that an extension of time of an existing contract, a change in salary (other than from an annual salary review as discussed above) or a change to working hours would result in a material variation.

In the absence of further guidance and with reference to the above scenario, it is our view that an alteration of the composition of Mike's total LAFHA (e.g. the allocation of food and accommodation components within his LAFHA) does not result in a material variation as this is akin to reflecting an annual adjustment of the food component (as discussed in the revised EM). In addition, there has been no overall change to the amount received by Mike as a LAFHA as the alteration merely now specifies the breakdown, that is he continues to receive the same total LAFHA of $500.

As such, we submit that the specification of the composition of Mike's LAFHA as part of an annual salary review does not result in a material variation to Mike's employment contract and therefore he qualifies for the transitional LAFHA rules.

Technical references

Fringe Benefits Tax Assessment Act 1986 (Cth)

Original Explanatory Memorandum, Tax Laws Amendment (2012 Measures No. 4) Bill 2012

Revised Explanatory Memorandum, Tax Laws Amendment (2012 Measures No. 4) Bill 2012

Priority

Medium. This is a significant issue for affected employers and employees.

ATO response

As advised in the response to agenda item 7, given the context in which the original EM had been written, reference to statements on policy within the original EM should not be made in determining the policy intent of these reforms as finally passed.

The full extract from paragraph 1.67 of the revised EM is as follows;

The facts put forward by the ICAA are that, as part of an employee's annual salary review, the employee's employment contract is altered to stipulate that the total LAFHA of $500 represents $300 as accommodation, with the remaining amount of $200 relating to food. There were no other changes to the employment contract.

The ATO agreed that a recalculation of the composition of the employee's LAFHA as part of the annual salary review does not result in a material variation of an employment contract and therefore there is an 'eligible employment contract' that qualifies for the transitional LAFHA rules.

10 Living-away-from-home - declarations for drive-in drive-out employees (TTI)

Issue

In order to claim an exemption under section 47(5) for living-away-from-home accommodation benefits, employers with drive-in-drive-out employees should be able to similarly obtain an exclusion from obtaining living-away-from-home declarations as is available in relation for fly-in-fly-out employees under section 47(5)(d)(i).

Background

An exclusion from obtaining a living-away-from-home declaration has existed for employers under section 47(5)(d)(i). Presumably, this exclusion exists due to the practical difficulties of obtaining living-away-from-home declarations from remote area employees, together with the nature of fly-in-fly-out arrangements (that is, the unlikelihood of any mischief in relation to the living-away-from-home status).

The Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits And Substantiation) Bill 1987, which introduced the declaration concession in relation to fly-in-fly-out employees, did not elaborate on why the concession was provided, other than to state that the requirements of section 47(7) must be met.

Will the ATO consider introducing an administrative concession to eliminate the need for employers to obtain a living-away-from-home declaration from drive-in-drive-out employees to exempt accommodation benefits under section 47(5)(d)(iii), where the usual place of employment is in a remote area?

Industry view

Given there is little doubt that employees in drive-in-drive-out arrangements to remote areas are living-away-from-home, combined with the practical difficulty of obtaining declarations from these employees, we consider the ATO should introduce an administrative concession to remove the declaration requirement for employers. This could be achieved practically by the Commissioner discretion under the definition of 'declaration date' in sub-section 136(1).

This is an immediate problem for employers.

Although legislative amendment is requested, it is acknowledged that this is unlikely to occur in a timeframe that would rectify the current year obligations of the employers.

Technical references

Subsection 47(5)

Subsection 47(7)

Section 31E

Section 31F

Sub-section 136(1) 'declaration date'

Impact on clients

Obtaining declarations from employees who typically work in remote areas is administratively difficult.

Priority

Medium priority.

Has previous advice been sought from the ATO?

Not to our knowledge

Has this issue been discussed at any other ATO consultative forum?

Not to our knowledge

Meeting discussion

There was general agreement with the position stated by the ATO at the meeting and an acknowledgment that the law does not permit the ATO to provide an 'administrative' fix to the issue identified.

It was also agreed that a legislative amendment would be required to achieve the outcome requested. It was also accepted that there was no intention, at the policy level, to extend the current 'concessions' relating to declarations for fly-in fly-out employees to drive-in drive out employees. In this regard, the matter would need to be raised with the Government/Treasury by way of an appropriate formal submission from the professional bodies.

ATO response

The ATO advised members that the although there is similar treatment of fly-in fly-out and drive-in drive-out employees under the recent reforms to the living-away-from-home provisions, the reforms did not extend to replicating the conditions for exempting living-away-from-home accommodation under subsection 47(5) to drive-in drive-out employees (which is the subject of the submission) that currently applies to some fly-in fly-out employees.

As noted in TTI submission, it is only where employees are provided with transport (being a residual benefit) that is exempt under subsection 47(7) that the requirement to provide a declaration under subsection 47(5) is not required. For other employees, including fly-in fly-out employees who are reimbursed air travel costs (expense payment fringe benefits) or drive-in drive-out employees, a declaration under new subparagraphs 47(5)(d)(ii) or (iii) will be required.

Subparagraph 47(5)(d)(i) was not amended. Subparagraph 47(5)(d)(i) states that if subsection 47(7) applies in relation to the provision of transport for the employee in connection with travel in the period when a lease or licence subsisted and the other conditions in subsection 47(5) are met, the benefit relating to the subsistence of the lease or licence in respect to the unit of accommodation will be an exempt benefit.

However, new subparagraphs 47(5)(d)(ii) and (iii), which set out the requirements to obtain a declaration, were specifically inserted and previous subparagraph 47(5)(d)(ii) was repealed. The fact that these paragraphs were inserted under the recent reforms indicates that there was no intention to extend the concessions afforded to some fly-in fly-out arrangements to drive-in drive-out employees.

The ATO also acknowledged the request by TTI to consider introducing an administrative concession to eliminate the need for employers to obtain declarations from drive-in drive-out employees for the purposes of subsection 47(5)(iii).

TTI suggested this could be achieved by the Commissioner using the discretion under the definition of 'declaration date' in subsection 136(1). The term 'declaration date is defined as;

in relation to an employer in relation to a year of tax, means the date of lodgement of the return of the fringe benefits taxable amount of the employer of the year of tax, or such a later date as the Commissioner allows

The ATO advised that it is not considered that a change to the date that a declaration is required would actually remove the requirement to ever lodge a declaration nor that the discretion provided in the definition of 'declaration date' in fact provides any general concession for an employer not to obtain a declaration. Further, given the explanation provided above, the Commissioner cannot ignore the specific requirements set out in subsection 47(5).

11 Living-away-from-home - Provision of utilities and other expenses incurred associated with accommodation provided under a living-away-from-home (LAFH) arrangement (TTI)

Issue

Does the payment of utility costs and other expenses associated with accommodation form part of the cost of the accommodation, such that they might then be exempt from FBT under the LAFH provisions?

Background

In accordance with the new rules regarding the tax treatment of LAFH benefits applicable as of 1 October 2012, where an employee is provided with an accommodation component of a LAFH allowance, he or she is required to substantiate expenditure on accommodation in order for that portion of the allowance to be exempt from FBT (assuming other conditions for exemption are also met).

Alternatively, the employer may pay directly or reimburse accommodation costs, obtaining documentary evidence of the expenses where these were initially incurred by the employee. These will also be exempt from FBT (on the assumption that other conditions for exemption under the LAFH rules are also met).

Industry view/ suggested treatment

TTI takes the view that the provision of utilities, such as electricity, water and gas, are an essential part of the provision of accommodation. Therefore, these costs form part of the cost of providing accommodation.

In some cases, the cost of utilities cannot be dissected from the remaining cost or value of the accommodation - such as in the case of a serviced apartment, or campsite style accommodation.

For other types of LAFH accommodation, however, the utilities may be billed separately.

In our view, utility costs are essential costs incurred in providing accommodation and should therefore be treated as part of the cost of accommodation, as in respect of accommodation, and as part of the cost of providing a lease or license for accommodation to an employee.

Therefore, evidence of serviced apartment costs and utility bills should both be accepted as evidence of expenditure on accommodation, to justify the FBT exempt nature of the associated LAFH accommodation allowance or other LAFH accommodation benefit.

In addition, typically when renting accommodation, a tenant must also pay a bond, gardening/maintenance fee or final fee for repairs to a landlord. Similar to utility costs, TTI is also of the view that these types of expenses should also be regarded as evidence of expenditure on accommodation and therefore should also be used to justify the FBT exempt nature of the associated LAFH accommodation allowance or other LAFH accommodation benefit.

Technical references

Section 21 - Exempt accommodation expense payment benefits

Section 30 - Living-away-from-home allowance benefits

Section 31 - Taxable value of living-away-from-home allowance fringe benefits

Section 31A - Taxable value fly-in fly-out and drive-in drive-out employees

Section 31G - Substantiating related expenses

Section 47 - Exempt residual fringe benefits

Subsection 136(1) 'accommodation component'

Impact on clients

Significant impact on a wide range of organisations providing LAFH allowances and benefits, as can impact their FBT liability.

Priority

Medium

The issue is of particular relevance to the new requirement as 1 October 2012, to substantiate expenditure on accommodation for the relevant component of a LAFH allowance to be exempt from FBT. So clarification of this issue is required as soon as possible to avoid confusion.

Has previous advice been sought from the ATO?

Not to our knowledge

Has this issue been discussed at any other ATO consultative forum?

Not to our knowledge

Meeting discussion

The ATO agreed that, as put forward in TTI submission, there are a myriad of different arrangements that exist in relation to the provision of accommodation to employees. That extends to arrangements where the cost of the utilities cannot be dissected from the cost or value of the accommodation - such as in the case of a serviced apartment or campsite style accommodation.

In other arrangements, however, the utilities may be billed separately.

Given the varied arrangements, it was agreed that the outcome would depend on the actual facts with an acknowledgment that there is no 'one answer' that will cover different factual arrangements. However, where utility costs cannot be dissected or determined separately from the lease or licence in respect of the unit of accommodation, there would not be a separate benefit.

ATO response

The ATO did not agree with TTI contention that the provision of utilities, such as electricity, water and gas, are an essential part of the provision of accommodation and therefore, these costs form part of the cost of providing accommodation. TTI contention would mean, for example, that evidence of expenditure on an electricity bill should be accepted as evidence of expenditure incurred by an employee for the accommodation of eligible family members during the period to which a living-away-from-home allowance fringe benefit relates (new subsection 31G).

The ATO discussed generally the scenarios put forward in TTI submission and acknowledged different arrangements exist in relation to the provision of accommodation to employees. That extends to arrangements where the cost of the utilities cannot be dissected from the cost or value of the accommodation - such as in the case of a serviced apartment or campsite style accommodation. In other arrangements, however, the utilities may be billed separately. The provision of utilities may be by way of expense payments or residual benefits.

The provision of the lease or licence in respect of a unit of accommodation may be a residual benefit that will be an exempt benefit by virtue of subsection 47(5) of the FBTAA.

If the benefit was not an exempt benefit, the taxable value of the lease or licence in respect of a unit of accommodation might be calculated under either section 49 or 51 of the FBTAA.

That is, if the residual benefit was a taxable benefit, the taxable value would be determined by the market value of the right of occupancy. Where the right of occupancy includes the provision of electricity the market value of the right of occupancy could be expected to reflect the value of the electricity. In such a situation, a separate benefit will not arise in relation to, for example, the provision of electricity.

This outcome will not be altered by the fact that the residual benefit in respect of the lease or licence of a unit of accommodation is an exempt benefit. That is the provision of electricity will not be a separate benefit where the supply of electricity is part (that is not separable or capable of being dissected) of the residual benefit that comes within subsection 47(5).

However, the ATO noted that where the electricity is provided separately it will not be capable of being treated as 'a lease or licence in respect of a unit of accommodation' (paragraph 47(5)(a)).

In providing this response the ATO also noted that the provision of electricity in relation to a lease or licence of accommodation is distinguished from the provision of electricity in relation to a housing benefit. This is due to the fact that section 59 specifically provides a reduction for residential fuel, which includes by definition electricity, when provided in connection with the provision of a housing benefit.

The ATO in general discussion, also mentioned the treatment under the FBTAA of certain separate benefits that may also be provided where a unit of accommodation has been made available for the use of an employee when living away from their usual place of residence. That is section 58D; exempt benefits - connection or reconnection of certain utilities (telephone service, gas or electricity) as a result of relocation and section 58E; exempt benefits - leasing of household goods while living away from home.

The ATO also referred to ATOID 2004/276; Exempt benefits: remote area housing and residential fuel and ATOID 2005/158; Exempt benefits: remote area housing and water, as further background to some of the possible outcomes in different factual circumstances.

ATOID 2004/276 determined that 'No. The remote area housing benefit and free electricity are two separate benefits. Only the remote area housing benefit is exempt under section 58ZC.'

However, in ATOID 2005/158 where an employee was provided with a remote area housing benefit that included the provision of water under the residential tenancy agreement, it was concluded that the water was a part of the exempt remote area housing benefit.

In the reasons for decision in ATOID 2005/158 it was stated that 'where water is provided to an employee in accordance with a residential tenancy agreement between the employer and the employee, the water will form a part of the 'housing right' that is granted under the same agreement.'

In ATOID 2004/276 it is made clear that through subsection 59(1) that 'residential fuel' (defined in subsection 136(1) to mean any form of fuel (including electricity) for use for domestic purposes) is to be treated as a separate benefit.

12 ATOID 2012/68 - treatment of unlisted options to acquire shares in a company not acquired at a discount; FBT consequences

1.3.14 (IPA)

Issue

The ATO recently issued ATO ID 2012/68 regarding the tax treatment of unlisted employee share scheme (ESS) options that were not acquired at a discount for ESS purposes and therefore no amount is assessable under the ESS rules. The ATO has taken the view in the ATO ID that, in these circumstances, the options are not excluded from being a "fringe benefit" under paragraph (h) of the definition of 'fringe benefit' in subsection 136(1) of the Fringe Benefits Assessment Act 1986 (FBTAA).

ATO ID 2012/68 does not discuss the taxable value of the options for FBT purposes but an edited version of a private ruling (no. 1012087085258) deals with a similar situation and it concludes that under section 43 of the FBTAA the taxable value of the options is their notional value at the time they were provided. The private ruling refers to TD 93/231, which indicates that for the purposes of section 43 of the FBTAA the notional value of property can be the market value of the property as determined by a qualified valuer.

The facts in the edited version are that the employer had obtained a valuation from a qualified valuer for statutory accounting reporting purposes and the ATO indicates that the FBT liability will be based on this valuation rather than the ESS valuation.

There are two unsatisfactory tax outcomes from this interpretation of the law.

The employer could unexpectedly be subject to FBT on the issue of the nil value options, and

There could be double taxation because on disposal of the options or shares resulting from the exercise of the options, the employee could be subject to CGT on the same value that was subject to FBT.

However we consider there is an alternative analysis that results in the valuation of the benefit for FBT purposes can be the same as for ESS purposes i.e. both nil.

Technical Analysis

Where an employer provides an employee with ESS options at a discount to their market value, the options are potentially subject to tax under either the ESS provisions of the income tax law or as a fringe benefit under the FBT law. To ensure there is no double tax of this benefit, the definition of "fringe benefit" in the FBT law excludes the acquisition of an ESS interest that to which subdivisions 83A-B or 83A-C of the Income Tax Assessment Act 1997 (ITAA 1997) applies.

Section 83A-20 ITAA 1997 provides that subdivision 83A-B applies to an ESS interest where it is provided at a discount. Subdivision 83A-C also requires the ESS interest to be issued at a discount by the operation of section 83A-105(1)(a)ITAA 1997.

Although the term 'discount' is not defined within the ESS rules, the Explanatory Memorandum to ESS legislation states the 'discount' is equal to the market value of the ESS options less any amount paid by the employee.

The note to section 83A-20 indicates that the regulations made for the purposes of section 83A-315 may be relevant in working out whether the ESS interest is acquired as a discount. Section 82A-315 says where Division 83A uses the term "market value" you are to use the amount specified in the Regulations. It also gives an example where in determining whether there is a discount given in relation to the ESS interest, use the amount as per the Regulations.

Where the options are unlisted, the market value of the options for ESS purposes can be determined at the time of acquisition by applying Regulation 83A-315.05 to 83A-315.09 of the Income Tax Assessment Regulations 1997 (ITAR).

Where the options have been valued for ESS purposes under Regulations 83A-315.05 to 83A-315.09 at nil value there will be no discount for ESS purposes and therefore the subsection (h) exclusion from the "fringe benefit" definition in subsection 136(1) would not apply.

The question then is, what is the taxable value of the options as a fringe benefit?

The provision of share options by the employer to its employees would generally be an external property fringe benefit and the taxable value of which would be the notional value of the options (sec 43(c) FBTAA).

The 'notional' value is defined in subsection 136(1) as "…the amount that the person (the employee) could reasonably be expected to have been required to pay to obtain the property (the options) … from the provider (the employer) under an arm's length transaction".

The private ruling edited version no. 1012087085258 indicates that the notional value should be seen as a value that has been obtained from an external valuer. The valuations of unlisted options under Regulations 83A-315.5 to 83A-315.09 ITAR can result in a lower valuation than other valuation methods, particularly where the value of the underlying shares is volatile.

The problem with this analysis is that where the valuation by the external valuer is more than the value for ESS purposes there is the possibility that the value assessed as a fringe benefit to the employer could also be assessed as a capital gain to the employee.

Example

X Ltd provides employee share options to one of its employees, Mr G. The ESS valuation under regulations 83A-315.05 to 83A-315.09 result in a nil discount for ESS purposes. However X Ltd is also required to obtain a valuation of the options for statutory reporting purposes, this value is $100. If this was also the notional value for FBT purposes, the X Ltd would be on the provision of $100 fringe benefit. If Mr G subsequently sells the options for $100 he would have a capital gain of $100 (Mr G's CGT cost base for the options would be nil as the market value substitution rule would not apply because of see section 112-20(1)(a)). This shows that the same $100 benefit is taxed twice once as a fringe benefit and again as a capital gain.

Alternative View

The alternative analysis that does not result in this double taxation is that the notional value of the options for FBT purposes is the same as the valuation for ESS purposes. This is based on the definition of "notional value" in subsection 136(1), which refers to the amount that the employee could reasonably be expected to pay for the property "under an arm's length transaction". Most employers and employees would be dealing with each other at arms length in relation to their employment arrangements and therefore the 'nil' amount paid under the transaction could be said to be the amount that could be expected to be paid under an arms length transaction.
We refer to Granby Pty Ltd v FC of T 95 ATC 4240 in support of this analysis.

Prospective Application and/or change to the law

If the Tax office comes to the view that the application of the law in the edited version of Private Ruling 1012087085258, we suggest Treasury be approached to consider a change to the law to value nil discount options the same way for ESS and FBT. In addition or alternatively the Tax Offices a Practice Statement that says it will only apply the law as it now sees it on a prospective basis. In this regard we refer to PS LA 2011/27 (Matters the Commissioner considers when determining whether the ATO view of the law should only be applied prospectively). PS LA 2011/27 indicates that one of the circumstances that would justify prospective application of an ATO view is where there is an established industry practice that has been supported by a view outlined in an ATO publication and that ATO view is subsequently altered in another ATO publication. We consider that is the case here.

Prior to the issue of ATO ID 2012/68 the only ATO publication that we have found on the ATO website that specifically refers to this topic is "Fringe benefits tax - a guide for employers", which includes statement under the heading "1.7 What is not subject to FBT", which says

"Employee share schemes

Benefits arising to employees from the acquisition of shares, or rights to acquire shares, are not fringe benefits if the share acquisition scheme conforms to the necessary income tax requirements. This exemption extends to relatives of employees."

It could be seen that the statement that the benefits are not fringe benefits "if the share acquisition scheme conforms to the necessary income tax requirements" could include options with a nil discount for ESS purposes. As the valuation of the discount for ESS purposes has been done in accord with the ESS provisions in the ITAA 1997 and its Regulations it could be seen as "conforming to the necessary income tax requirements" and therefore could be inferred as supporting the industry practice of treating options with nil discount for ESS purposes as also not being a fringe benefit.

Background

Over recent years the issue of nil value options has been a common method of incentivising key employees, particularly in the resources industry, where cash reserves are limited and there is a large amount of volatility in the value of the underlying shares. Until this issue has been highlighted by the issue of ATO ID 2012/68, these options were seen as a good non cash mechanism for these types of employers without creating a tax liability for the employees on a benefit that has real possibility of being worthless unless the company performs as is hoped.

There has been a general industry view that there would be no FBT on the issue of the options and the applicable taxing provisions would be the CGT provisions when the employee sold either the options or the resulting shares after excising the options.

This view has been based on the assumption that the exclusion of ESS interests from the definition of fringe benefit was designed to ensure there was no double taxation for ESS interests so that if the ESS interest are being dealt with under the Income tax system there would be not FBT liability. This appears to be the policy intent of the paragraph (h) exclusion of ESS interest in the definition of "fringe benefit" in subsection 136(1).

Industry view/suggested treatment

We consider that if the ATO confirms its view on this issue is in accord with the view expressed in the edited version of Private Ruling 1012087085258, it not only results in unnecessarily complicated compliance costs and unnecessary confusion for both taxpayers and the ATO but also potential double taxation and would go against the policy intent of the paragraph (h) exclusion of ESS interest in the definition of "fringe benefit" in subsection 136(1).

We suggest the ATO accept the ESS valuation of the options as being the value for FBT purposes.

Alternatively if the ATO does not accept our suggestion Treasury be approached to change the law to allow the same valuation for both ESS and FBT for Nil value options and the ATO issues a practice statement stating they will only apply the law on a prospective basis from the date of issue of the PSLA.

Technical references

TD 93/231;

ATO ID 2012/68;

Fringe Benefits Tax Assessment Act 1986

¦ Section 43

Income Tax Assessment Act 1997

¦ Subdivision 83A-B

¦ Subdivision 83A-C

¦ Section 83A-20

¦ Section 83A-105

¦ Section 83A-315

Income Tax Assessment Regulations 1997

¦ Regulations 83-315.05 to 83A-315.09

Granby Pty Ltd v FC of T 95 ATC 4240.

Impact on clients

If there is to be an FBT liability for the employers, based on a valuation for Accounts reporting purposes, this will cause financial hardship to many of the employers and may cause some of them to restrict or cease their businesses. In these cases it may also be difficult for the Tax Office to collect the FBT.

Priority

High. The effect of this issue could be widespread, particularly in the Resources industry and in many cases could cause real financial hardship to the employers concerned.

Has previous advice been sought from the ATO?

This matter has been discussed with the ATO following the release of ATOID 2012/68

Has this issue been discussed at any other ATO consultative forum?

Meeting discussion

Members agreed that the view expressed by the ATO in ATOID 2012/68 correctly applies Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997) - Employee Share Schemes, to the facts set out in ATOID 2012/68.

However, and with reference to further detail set out in an 'edited version' of a private binding ruling, members were concerned that as the options acquired by the employee are not excluded from being fringe benefits under paragraph (h) of the definition in subsection 136(1) it is possible that the employer could be subject to FBT.

Whilst agreeing that the interaction between the ITAA 97 and the FBTAA was correctly applied in ATOID 2012/68, there was a concern that there is an unintended outcome that FBT may apply notwithstanding the options had a 'nil' value under the ESS provisions.

Members were also concerned with the compliance burden this position creates for employers, particularly if an independent valuer was required to be engaged.

ATO response

It was agreed at the meeting that ATOID 2012/68 correctly applies Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997) - Employee Share Schemes, to the facts set out therein.

A consequence is, as stated in ATOID 2012/68 that;

As the options were not acquired by the employee at a discount, it follows that neither Subdivisions 83A-B nor 83A-C of the ITAA 1997 can apply. Thus the options acquired by the employee are not excluded from being fringe benefits under paragraph (h) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA.

As put forward in the submissions on this matter, as the options in this case are not excluded from the definition of 'fringe benefit', the issue that arises is how to value the benefit for the purposes of the FBTAA and whether the employer will have an FBT liability.

ATOID 2012/68 does not provide guidance on how the benefit that arises might subsequently be valued for FBT purposes. However, it was accepted that the edited version of a private binding ruling referred to in the submissions indicated that values determined by an independent expert's report represented the 'notional values' and hence the taxable values of the options, being 'property', for FBT purposes.

However, although a fact in that particular case, the ATO stated that there is no requirement under the FBTAA to in fact obtain an independent expert valuation. It was also noted that it may not be possible to simply say that in all cases such benefits would have a nil value for FBT purposes (as shown in that case).

Given the complexity of the issues raised, the ATO advised it was not in a position to provide a considered view on the FBT position. The ATO acknowledged the possible economic double taxation that could arise where the employer maybe subject to FBT and the employee could also be subject to capital gains tax.

The ATO will further consider the numerous suggestions put forward by members in the submissions including whether it would be possible to accept the ESS valuation (using the statutory valuation tables) of the options as being the taxable value for FBT purposes.

The ATO will provide an update on its review of the FBT valuation issue to members at the next scheduled meeting of the forum (14 February 2012)

The ATO also noted references in TTI submission that the Board of Taxation undertook a review into elements of the taxation of employee share scheme arrangements and handed a report to the Assistant Treasurer in February 2010.

The Government, on 23 April 2010 issued a media release;

Release of Board of Tax Review and Government Response on Technical Aspects of Employee Share Schemes Reforms

The following is an extract from the media release;

On the use of set statutory valuation tables, the Board also endorsed not using such tables for listed and unlisted shares, but supported the Government's decision to retain statutory valuation tables for unlisted rights.

"This decision, which gives taxpayers a simpler way to value unlisted options and rights, was endorsed by the Board, although the Board also recommended that the factors underlying the statutory valuation tables be reviewed and updated," said the Assistant Treasurer.

"The Government agrees that the methods underlying these valuations should be made more transparent but notes that the immediate application of the actuarial tables included in the report would increase the levels of tax on these types of interests."

"As such, we're not going to rush into this. We will talk to the affected community over the next twelve months and make any decisions on updating the statutory table in the context of the 2011-12 Budget."

The Government has not made a further announcement at this point in time.

Action item	FBT 081112/64
Description	The ATO will provide an update on its review of the FBT valuation issue to members at the next scheduled meeting of the forum (14 February 2013).

1.3.15 (TTI)

Issue

This issue concerns the opinion expressed by the Commissioner in an edited version of a Private Ruling (Authorisation Number: 1012087085258) and in ATO ID 2012/68 that an award of Options made under an Employee Share Scheme ('ESS') that has a nil value under those rules, may still have a value for the purposes of section 43 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Background

As based on the Commissioner's interpretation, significant FBT liabilities will arise for employers who issue options to employees that have a nil value at grant date under the ESS valuation method provided in the tables in Division 83A of the Income Tax Assessment Regulations 1997 (ITAR 1997).

As the consideration for the acquisition of the option (that is nil) is equal to, or more than, the market value of the option on acquisition, the option is not acquired at a discount.

As the option is not acquired at a discount, neither Subdivisions 83A-B nor 83A-C of the Income Tax Assessment Act (ITAA 1997) can apply. Thus the option acquired by the employee is not excluded under paragraph (h) of the definition of 'fringe benefit" in subsection 136(1) of the FBTAA.

Under the FBTAA the options are considered to be external property benefits and as such their value is governed by section 43 of the FBTAA which dictates that:

(a) Where the provider was the employer and the recipient's property was purchased by the provider under an arm's length transactions at or about the provision time - the cost price to the provider;

(b) Where the provider was not the employer and the employer incurred to the provider under an arm's length transactions in respect of the provision of the property - the amount of the expenditure; or

less any amount of the recipient's contribution.

As neither (a) nor (b) above applies to the options, the value will be the 'notional value' at the provision time.

'Notional value' is defined in subsection 136(1) of the FBTAA as the amount that a person could reasonably be expected to have been required to pay to obtain the property under an arm's length transactions.

TD 93/231 provides the Commissioner's view on what is an acceptable method for determining the notional value for the purposes of section 42 and 43 of the FBTAA.

Paragraph 2 to 3 of TD 93/231 states:

2. To ascertain the 'notional value' of a property fringe benefit the employer must determine the amount the employee would have to pay for a comparable (on the basis of age, type and condition) benefit under an arm's length transaction.

3. The Commissioner will accept a number of ways of obtaining the notional value including:

¦ The price of comparable goods advertised in local paper etc.;

¦ The price paid for comparable goods at a public auction;

¦ The price of comparable goods at a 2nd hand store; or

¦ The market value of the goods determined by a qualified valuer.

Qualified valuers of options typically use option pricing models like Black - Scholes or Binominal modelling. It is recognised that these pricing models usually give rise to a higher value than the tables in Division 83A of ITAR 1997.

The Commissioner's view in the edited version of a Private Ruling (Authorisation Number: 1012087085258) is that a FBT liability arises equal to the value determined by the independent valuer. ATO ID 2012/68 states that the provision of options is not excluded from being a fringe benefit.

Issue

We believe that the Commissioner's application of Division 83A of the ITAA 1997 and section 43 of the FBTAA is not an equitable result for the following reasons:

1. The ESS and FBT provisions are both aimed at taxing non-cash benefits provided to employees. Logically both provisions should work together to tax an option so that the result is consistent between the two taxing provisions. The Commissioner's interpretation leads to an inconsistency between the two provisions where the tables in Division 83A of the ITAR 1997 result in a nil valuation, but the valuation rules applied by the Commissioner for the purposes of section 43 of the FBTAA result in a value greater than zero for the same non-cash benefit.

2. If employee options were to be taxed as outlined by the Commissioner there is potential that the same economic gain will be assessed twice. Once at the company level when the company pays FBT on the provision of the benefit and again when the employee pays capital gains tax at the time when the options or resulting shares are sold.

3. We believe it is unreasonable for the Commissioner to use a different valuation for the FBT provisions given that the Board of Taxation [see Review into elements of the taxation of employee share scheme arrangements - A report to the Assistant Treasure February 2010 - Scope of the review, page 2 point 1.8] was asked to specifically consider the following in relation to valuation of shares and options provided to employees:

¦ whether the existing rules for valuing unlisted rights to acquire shares properly reflect market value;

¦ whether special rules are appropriate or necessary to determine the market value of employee share scheme share and rights (listed and unlisted); and

¦ whether there are suitable alternative mechanisms for determining market value;

In conducting the review, the Board was also specifically asked [see the Review into elements of the taxation of employee share scheme arrangements - A report to the Assistant Treasure February 2010 - Scope of the review, page 2 point 1.9] to:

¦ have regard to the Government's taxation review headed by Dr. Ken Henry; and

¦ seek public submissions and consult widely (including with representatives of the previous Consultative Group).

Following their review, the Board of Taxation recommended the retention of a 'safe harbour' methodology for valuing unlisted rights, i.e. the greater of their intrinsic value or the value derived under the statutory tax valuation tables in Division 83A of the ITAR 1997.

The Board of Taxation came to this conclusion due to the complexity and compliance costs associated with attempting to value an unlisted right in accordance with the ordinary meaning of market value.

Given that the Board of Taxation was specifically asked to consider the valuation of ESS awards and they have unequivocally recommended the retention of the tax valuation tables as a 'safe harbour' valuation technique for the reasons outlined above, this method should be equally available for valuing options provided to an employee as part of their remuneration package for other areas of tax including FBT.

4. We believe that it is within the Commissioner's power to include an alternative acceptable valuation method in the list of possible valuation methods in TD93/231. As this list is currently not exhaustive, it would be relatively easy to include other acceptable methods to arrive at what a reasonable person would be willing to pay for the Options in an arm's length transaction.

5. The opinion expressed by the Commissioner creates an anomaly between the treatment of options provided to an employee and options provide to an independent individual contractor, i.e. FBT will only be payable on the provision of the benefit to the employee and not on the options provided to the independent contractor. This inconsistency seems to be contrary to the intent of the ESS provisions to treat employees and independent contractors the same. As a result, this is not an equitable outcome and therefore needs to be addressed.

6. If the Commissioner's views are correct, it is onerous for an employer to ascertain their FBT liability, given that it is ultimately the employee who chooses the valuation method under Division 83A of ITAA 1997 when completing their tax return. Therefore, even though the option may have a nil value at grant under the statutory tax valuation tables in Division 83A of the ITAR 1997, the employee can choose to value the option under ordinary market value concepts which may cause the option to be issued at a discount and subject to Division 83A of the ITAA 1997. As a result, the employer will need to ascertain how each employee has valued their options to determine the employer's FBT position. It also seems illogical that an employee's choice on the valuation methodology dictates the FBT outcome from the issue of the option.

Conclusion:

We are of the opinion that the valuation of options for Division 83A of the ITAA 1997 and section 43 of the FBTAA should be consistent to ensure that the taxation of options are taxed appropriately between the two provisions. The statutory tax valuation tables in Division 83A of the ITAR 1997 should also be accepted for the purposes of section 43 of the FBTAA on the basis that the Board of Taxation has accepted this as an acceptable valuation methodology.

Industry view/suggested treatment

We ask the Commissioner to consider amending TD 93/231 paragraph 3 to include as a potential valuation method, the market value worked out using the tables in Division 83A of the ITAR 1997 if the awards are made to employees under an ESS scheme.

It would also be helpful to amend ATO ID 2012/68 to refer to this valuation method.

Alternatively we ask Treasury to recommend an amendment to subsection 136(1)(h) of the FBTAA to include a reference to all awards issued to employees under an ESS plan (i.e. including where the value of the award is nil using the tables in Division 83A of the ITAR 1997).

Technical references

Set out above in 'Issue'.

Impact on clients

The Commissioner's view set out in edited version of Private Ruling (Authorisation Number: 1012087085258) has the potential to impose a significant FBT liability on employers. We do not believe this was intended by Parliament when they recently re-wrote the ESS provisions, particularly given the acknowledgment in the re-write of the ESS provisions with respect to the government's support for encouraging the alignment of employer and employee goals by the use of these plans and parliament's direction to the Board of Taxation to review the valuation methods for such awards.

Priority

High.

Has previous advice been sought from the ATO?

Has this issue been discussed at any other ATO consultative forum?

We are not aware of any other consultative forum for this matter.

ATO response

For the ATO response to the issue raised in agenda items 12.2 and 12.3 refer to the response provided to agenda item 12.1.

1.3.16 (ICAA)

Issue

The term 'premium-priced' option refers to options to acquire shares where the exercise price is set at a sufficient premium to the market value of the underlying shares at grant, such that the option is deemed to have a nil value (on grant) under the employee share scheme (ESS) valuation rules. Therefore, as the employee pays nil consideration to acquire the option, the option is not acquired by the employee at a discount and, so, the option is not an "ESS interest" and is not subject to Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997).

The impact of this is that where an employee is granted premium-priced options with a nil taxable value on grant in accordance with regulation 83A-315.02 to 83A-315.09 of the Income Tax Assessment Regulations 1997, a company may not rely on paragraph (h) of subsection 136(1) of the FBTAA (which provides that an ESS interest is not a fringe benefit). Accordingly, the premium-priced options may be subject to FBT when they are granted.

Whilst the value for income tax purposes of the premium-priced options will be nil at the time of grant, the options may nevertheless have a value for FBT purposes.

The taxable value for FBT purposes in this case is determined by reference to the 'arm's length' value of the options.

Background

ATO Interpretive Decision ATOID 2012/68 noted that premium-priced options are taxable fringe benefits, as the FBT exemption for ESS interests cannot be relied upon.

Employers granting premium-priced options, and advisors to employers, require guidance regarding how the value for FBT purposes of premium-priced options on grant should be determined.

This is a complicated issue, particularly as employers are asked to determine the 'arm's length' value of options which cannot be sold (i.e., it is typically a condition of grant that the options are non-transferable/assignable) and are generally subject to vesting/performance conditions representing a risk of forfeiture.

It is noted that the valuation of options for expensing/reporting purposes (under accounting standard AASB 2 Share-based Payment) is typically determined using an option valuation model. However, such models do not generally provide a value that reflects the probability that options may be forfeited where the participant ceases employment before the options 'vest', and may not take account of the lack of tradability of such employee options. In addition, there is no 'market' as such for employee options which are personal to the employee participant and cannot, generally, be assigned or dealt with. As a result, there is very limited existing practice or information on which to base an appropriate 'arm's length' value for a premium-priced employee option.

Industry view/ suggested treatment

The 'arm's length' value of typical employee share options is difficult to determine, particularly for premium-priced options which have a nil taxable value under the ESS rules and which are subject to continued service conditions and performance hurdles (which may not be reflected in the AASB 2 'fair value' determined under an option valuation model).

Whilst regard must be had to the specific characteristics of each grant, where a grant of premium-priced options follows the 'typical' structure outlined above, it is expected that the arm's length value of such options would be very low, if not nil.

Technical references

ATO ID 2012/68

Fringe Benefits Tax Assessment Act 1986

¦ subsection 136(1) - definition 'fringe benefit' paragraph (h)

Income Tax Assessment Act 1997

¦ Division 83A

¦ paragraph 83A-10

¦ Subdivision 83A-B

¦ section 83A-20

¦ Subdivision 83A-C

¦ section 83A-105

¦ section 83A-315

Income Tax Assessment Regulations 1997

¦ regulation 83A-315.01 to 83A-315.09

Impact on clients

Compliance with FBT obligations by employers who have granted premium-priced options to employees.

Priority

Medium. Neither low nor high.

Has previous advice been sought from the ATO?

Not to our knowledge.

Has this issue been discussed at any other ATO consultative forum?

Not to our knowledge.

ATO response

For the ATO response to the issue raised in agenda items 12.2 and 12.3 refer to the response provided to agenda item 12.1.

13 Use and valuation of corporate box (TTI)

Issue

When calculating the taxable value of an entertainment facility leasing (EFLE) benefit, in this case the use of an employer-leased corporate box by an employee, how do you value the benefit?

Background

EFLE benefits often take the form of corporate boxes (or similar facilities), which have a pre-defined attendee capacity. This capacity is determined by the number of seats available in the facility.

Typically, the cost of hiring the facility is separate and distinct from the cost of any associated catering. The facility expense is typically fixed and unrelated to facility usage, meaning that whether the facility is empty, partly utilised, or fully utilised, the expense incurred by the provider is the same. Conversely, the catering expense is typically variable and charged on actual attendee numbers.

The Law

EFLE benefits in the form of corporate boxes typically constitute residual benefits. Catering costs are typically treated as either property or residual benefits. The distinction between the various benefit types is irrelevant for the purposes of the issue being raised.

For the purposes of this matter, section 152B of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), which allows taxpayers to elect a 50/50 split method for entertainment facility leasing expenses, does not apply. Accordingly, an actual calculation of taxable value is to be applied.

Section 50 of the FBTAA provides that:

"Subject to this Part, the taxable value of an external non-period residual fringe benefit in relation to an employer in relation to a year of tax is:

(a) where the provider was the employer or an associate of the employer and the benefit was purchased by the provider under an arm's length transaction--the amount paid or payable by the provider for the benefit; ..."

The definition of "benefit" in section 136 of the FBTAA is as follows:

"benefit" includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a) an arrangement for or in relation to:

(i) the performance of work (including work of a professional nature), whether with or without the provision of property;

(ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;

(b) a contract of insurance; or

The Issue

For the purposes of allocating corporate box leasing costs to attendees, is it correct to proportionately allocate the cost of the facility based on total seating capacity or on actual patronage at each event?

Each approach has the potential to result in very different taxable value outcomes per attendee (employee or associate), despite, in effect, the same benefit being received by the attendee.

Example

An employer decides to entertain a number of important clients in a corporate box at a five day cricket match. The employer hires a ten seat corporate box for this purpose.

It is intended that on each day there will be two employees, no associates of employees, and eight guests who represent clients of the employer.

Having received acceptances from 40 clients (8 clients * 5 days) and having identified 10 employee "hosts" (2 employees * 5 days), the employer arranges for a one off lease of the corporate box for $12,500 (including GST). This fee is non-refundable, even in the event of no play.

No employee will attend more than one day of the cricket match.

Catering, which is available at a cost of $40 per head (including GST), is ordered at a total cost of $2,000. In the event that play is cancelled then catering will not be charged. Further, with 24 hours notice, the employer can reduce the catering order to account for any attendee cancellations.

In the days leading up to the event, a number of cancellations are received. Actual attendee numbers are now expected to be as follows:

¦ Day One: 2 employees, 8 non-employees.

¦ Day Two: 2 employees, 3 non-employees.

¦ Day Three: 2 employees, 3 non-employees.

¦ Day Four: 2 employees, 8 non-employees.

¦ Day Five: 2 employees, 8 non-employees.

The catering order is adjusted to reflect the above.

The Test Match is won on the third day and thus there is no play on days four and five. As a result all attendees are advised not to attend and all catering charges are cancelled.

What is the taxable value of benefits provided on each of the 5 days?

Industry view/suggested treatment

It is our view that, in the above scenario, the value of the benefit provided to each attendee on Days 1, 2 and 3 should be calculated based on a full utilisation of the corporate box.

That is, the per attendee benefit value for Days 1, 2 and 3 should be $290, being 1/10th of the daily Corporate Box lease expense (an attendees proportionate allocation according to the 10 person capacity) plus $40 for the catering (the per head cost per attendee).

Where there is no attendance (Days 4 and 5) the taxable value should be nil because no benefit is provided.

Reasons

Section 50 of the FBTAA provides that:

"Subject to this Part, the taxable value of an external non-period residual fringe benefit in relation to an employer in relation to a year of tax is:

We consider that "the benefit" is, under sub-section 136(1) of the FBTAA , "the provision of, or the use of facilities for, entertainment, recreation or instruction" . The employer therefore paid for 10 benefits (being the corporate box capacity) at $250 each.

Any incremental benefit derived by the corporate box being at less than full utilisation is immaterial and unquantifiable. It is arguable that the lower the attendance, the less entertainment value exists. It is certainly not, in our example for Days 2 and 3, double the value of the ex-catering component of the benefit that would otherwise have been provided.

Support for this view, which can be summarised as the treatment of the costs of acquiring the capacity to provide entertainment that is ultimately not provided, can be found in NTLG FBT Sub-committee minutes - 22 February 2001 (agenda Item 7). The minutes for agenda Item 7 include the following commentary:

The ATO agreed, on the basis of the facts contained in the submission by CPAA, notwithstanding the fact the entity (employer) has paid $1 000 for 10 tickets, an FBT liability can only arise in relation to the actual entertainment provided to the 5 employees, i.e. 5 tickets. It is noted that the employer would need to have sufficient records and evidence to validate the fact that although 10 tickets had been acquired only 5 tickets were provided to employees or their associates.

While the fact pattern in this item is different to agenda Item 7, including the reference to property benefits rather than residual benefits, the cost of acquiring the ten tickets to enable the provision of entertainment is analogous to the cost of acquiring the ten seat corporate box to enable the provision of entertainment.

Consequently, we also consider that the same apportionment principle applied to the tickets should also be applied to the corporate box expense.

Alternate View

An alternate view is that the corporate box lease expense must be allocated based on actual, rather than potential, attendees and, thus, the value of the benefit provided to each attendee on Days 2 and 3 is $540 rather than $290. This seems an unreasonable outcome, being one that inflates the true value of the benefit received by the attendee.

Technical references

Fringe Benefits Assessment Act 1986

¦ section 50

¦ Sub-section 136(1) definition of 'benefit'

Other References

NTLG FBT Sub-committee minutes -

¦ 22 February 2001 (agenda item 7)

¦ 21 June 2001 (agenda item 3.1.2)

Impact on clients

Clients will be able to project their FBT-inclusive entertainment expenditure with certainty. That is, the cost per attendee and, therefore, per employee, will be quantifiable at the time that entertainment events are planned, rather than potentially varying from expected amounts due to factors beyond the employer's control.

Priority

Medium.

Has previous advice been sought from the ATO?

Not to our knowledge, although the ATO has provided guidance on this and similar valuation matters.

Has this issue been discussed at any other ATO consultative forum?

Not to our knowledge

Meeting discussion

Members and the ATO discussed the 'complexities' that may arise in valuing benefits provided to an employee who has attended a corporate box that has been leased or hired by the employer.

It was agreed that the difficulties in determining the value of recreational entertainment benefits provided to an employee at a corporate box was one of the main reasons that the government introduced section 152B; to provide a 50/50 apportionment of the leasing or hiring costs of corporate boxes and other similar hospitality arrangements to determine the amount that would be subject to FBT.

The agenda item is also quite specific and seeks clarification in relation to arrangements where the lease or hire fee is for a specified event, the example being a 5 day cricket match, there is specified seating allocation in the corporate box and the employer has sufficient records or evidence of attendance/use on each day.

The income tax deductibility issues that arise for an entity (employer) as a result of expenditure incurred in leasing or hiring of a corporate box was not discussed in any detail other than it was noted that there are complex interactions between the FBTAA and income tax assessments Acts in this regard.

The tax implications of a particular arrangement involving corporate box expenditure will ultimately depend on the facts and whether an employer has made an election to apply section 152B to value the benefits provided.

ATO response

The ATO advised members section 152B was introduced as part of the Tax Laws Amendment (FBT Cost of Compliance) Act 1995 to reduce the compliance costs associated with determining the value of a benefit provided to an employee who has attended a corporate box for the purposes of 'entertainment'.

Section 152B, broadly, allows an employer to apply a 50/50 split method to the leasing and hiring costs of a corporate box. This means that, where the employer so elects, the 50/50 split will be accepted for the purposes of determining what proportion of the leasing or hiring costs would be subject to FBT. For the purposes of section 152B, the definition of 'entertainment facility leasing expenses' specifically excludes expenses attributable to the provision of food or drink and any part of the expenses attributable to advertising.

This agenda item has been put forward by TTI on the basis that the employer has not elected to value the recreational entertainment benefits under section 152B.

The ATO accepted, on the facts put forward in the submission, that the valuation methodology adopted was reasonable in the circumstances. That is the hiring and leasing expenses were incurred for a single sporting event at a corporate box that had a specified seating capacity. Further the catering expenses (food and drink) were separately incurred and those costs were adjusted to reflect actual attendance and on a 'per head' basis.

An employer, who has sufficient records of persons (employee and clients) attending each day could reasonably calculate the value of the benefits provided to an employee in such circumstances in accordance with subsection 50(a), as set out in TTI's submission.

The income tax deductibility issues that arise for an entity (employer) as a result of expenditure incurred relating to the lease or hiring of a corporate box was not discussed. However the consequences of decisions taken by an employer in valuing such benefits for FBT purposes would have an impact on the income tax deductibility of those expenses, for example under Division 32 - entertainment expenses of the Income Tax Assessment Act 1997 or section 51AEC of the Income Tax Assessment Act 1936. Section 51AEC applies where an entity elects section 152B will apply in the FBTAA to entertainment facility leasing expenses.

14 FBT risk and compliance update (ATO)

The ATO provided the following update on FBT risk and compliance activities:

In accordance with the FBT compliance strategy, "To leverage willing participation and self correction by providing the necessary support and guidance and by being visibly active", the ATO is focusing on the following key FBT risks:

¦ Lapsed lodgement - The ATO is increasing the number of employers contacted that have not lodged FBT returns and will take firmer action, including imposing penalties, against those that choose not to comply. The ATO's Small & Medium Enterprises (SME) business line is working with its Tax Practitioner and Lodgment Strategy (TPALS) business line to develop strategies that will achieve greater coverage. An additional 1,200 employers are planned to be contacted through periodic telephone campaigns. This work is being undertaken throughout the year.

¦ Employee contributions bulk mail out of 1,500 letters issued in October and another 1,500 letters to issue in December 2012. The ATO's intention is to improve the reporting of employee contributions in Income Tax returns.

¦ Revoked entities - The ATO will address the failure of those entities, who have had their FBT status concession endorsement changed to account for the fringe benefits provided to employees.

¦ Car fringe benefits - The ATO is using data matching to identify potential FBT obligations associated with high value motor vehicles and conduct risk reviews and audits on high risk cases.

¦ Rebatable employers - The ATO will contact taxpayers where they have claimed the rebate at label 17 of the FBT return but did not appear to be a rebatable employer. The clearer alert messages at labels 17 and 18 of the 2012 FBT return appear to have reduced this problem. However, new cases are still arising.

¦ Achieving greater FBT visibility in the field - The ATO's SME business line will continue to work with its Employer Obligations (EO) area to ensure FBT risks are addressed during the course of EO field visits and related review activities. SME will actively seek to increase FBT field compliance capability and knowledge across the ATO, and explore opportunities for other areas of the ATO that have a field presence to examine FBT risks in appropriate cases.

¦ LAFHA changes - the ATO will provide support and assist the community to understand the legislative changes that commenced on 1 October 2012.

15 Standing agenda items - governance

1.3.17 Tax Issues Entry System (TIES) register (ATO)

TIES provides an opportunity for members of the community to raise issues about the operation of the current tax and superannuation laws. TIES only deals with 'care and maintenance' issues whereas NTLG sub-committees deal with more substantive issues.

Care and maintenance issues are about making sure the existing law operates in the way it was intended, by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. Care and maintenance issues could involve minor policy changes, though they typically would not have a significant revenue impact. TIES does not deal with interpretative issues as there are existing procedures in place to obtain interpretative advice. So it is not a process for resolving differing opinions about how the law should be interpreted. The TIES website provides examples of the issues that TIES can deal with.

At the18 October 2010 NTLG meeting, the Commissioner stressed to members the importance of using the TIES register and all NTLG sub-committees are to have a standard agenda item to review all issues raised for consideration of inclusion onto the TIES register.

Meeting discussion

As a standing agenda item, members were asked to consider whether any matters raised at the meeting would be appropriate for a consideration as a TIES issue.

It was agreed that there were no TIES issues raised at the meeting.

1.3.18 Priority issues identified at meeting

¦ At the 22 June 2011 NTLG meeting a new agenda item regarding "Top 3" items of significance in the sub-committees was introduced. The purpose of this item is to ensure that Professional Bodies are clear about the issues that are arising within the sub-committees. Professional Bodies are then given the opportunity to identify any gaps. If any "gaps" cannot be addressed within the sub-committee, those items will form agenda topics for future NTLG agendas.

Sub-committees are to include a standard agenda item to discuss the "Top 3" items of significance. There will be a section included within the regular reporting template for the September NTLG meeting as well as for all future NTLG meetings so that the "Top 3" remains as a standing agenda item.

¦ The NTLG Public Ruling Steering Committee (NTLG PRSC) chair has also asked NTLG Sub-committees to discuss the issue of any new potential ruling topics with a view to identifying whether there are potential topics genuinely in need of a public ruling. If the members consider that such an issue is identified at the sub-committee that should be referred to the NTLG PRSC (November 2011).

Meeting discussion

As a standing agenda item, members considered and discussed the 'Top 3' items of significance currently before the sub-committee.

Members agreed that the 'Top 3' issues of significance were;

1. FBT return lodgment deferral arrangements,

2. Section 23AG changes and consequential impacts for FBT treatment of non-cash benefits which do not fall within FBT, and

3. Living-away-from-home allowances and benefits issues following the recent legislative reforms.

No new issues were identified by members that would be genuinely in need of a public ruling.

16 Annual review of forum (ATO)

In accordance with PS CM 2006/6 Committee Management, assurance of the ongoing value of the sub-committee is required.

Based on the information provided in the Operational and Functional Review of the NTLG FBT Sub-committee, which was last conducted in December 2011, the chair's recommendation that the sub-committee continue and the sub-committee be reviewed every two years, had been accepted.

Accordingly, the next review of the sub-committee will be conducted in December 2013.

17 Meeting dates for 2013

The following meeting dates were agreed upon:

Date	Host	Place
14 February 2013	ATO	Sydney
16 May 2013	CPA	Melbourne
8 August 2013	TTI	Sydney
*14 November 2013	IPA	Melbourne

*In view on feedback received from members, it was agreed that the November 2013 meeting be held a week later than it is usually scheduled.

Action item	FBT 081112/65
Description	CPA, TTI & IPA members to arrange room bookings and confirm the details with the secretariat.

18 Close of meeting

The next meeting will be held on Thursday, 14 February 2013 at Hurstville Tax Office, 12 Woniora Road, Hurstville, NSW.

19 NTLG FBT Sub-committee action items and issues log items (standing item)

Summary of action items from 8 November meeting

Action item	FBT260209/31
Description	This item has been recorded and monitored in the Register of aged open action items from previous meetings, which is located on the final page of the NTLG FBT Sub-committee agenda and minutes since 26 February 2009. At the 26 February 2009 meeting members asked the ATO to consider when corporates would be able to lodge FBT returns electronically. The ATO undertook to advise members when the range of forms, that will be available on the new portal deployment, were decided. The ATO subsequently reported that it is compiling a log of Tax Agent Portal improvements and/or suggestions, which have been received from ATO forum members and tax practitioners. This consultation process aims to identify and confirm potential enhancements and develop a priority list for future functionality. The timetable for portal improvements is subject to priority and costing of business specifications. The electronic lodgment of FBT returns is being considered in this consultation process. The ATO has monitored and provided updates when there has been progress to report on the lodgment of FBT returns via the business portal. Refer agenda item 3.4 Electronic lodgment of FBT returns
Response	Following discussion of this item, the CTA, having originally raised this matter at the forum, agreed to review the priority and/or ongoing interest in this issue with their members and provide an update at the next meeting. CTA to provide feedback at next meeting in relation to whether this aged action item can in fact be closed.
Status	Carried over
Action item	FBT081112/64
Description	Members raised concerns with the approach set out in ATOID 2012/68, particularly that there was a possibility that there was an FBT liability as the exclusion from the definition of 'fringe benefit' in sub-section 136(1) paragraph (h) was not satisfied. Refer agenda item 12 ATOID 2012/68 - treatment of unlisted options to acquire shares in a company not acquire at a discount; FBT consequences
Response	Members agreed that the view expressed by the ATO in ATOID 2012/68 correctly applies Division 83A of the Income Tax Assessment Act 1997 - Employee Share Schemes, to the facts set out in ATOID 2012/68. However, and with reference to further detail set out in an 'edited version' of a private binding ruling, members were concerned that as the options acquired by the employee are not excluded from being fringe benefits under paragraph (h) of the definition in subsection 136(1) it is possible that the employer could be subject to FBT. Members were also concerned with the compliance burden this position creates for employers, particularly if an independent valuer was required to be engaged. The ATO will provide an update on its review of the FBT valuation issue to members at the next scheduled meeting of the forum (14 February 2013).
Status	Carried over
Action item	FBT081112/65
Description	Members discussed and agreed to meeting dates and venues for 2013. Refer agenda item 17 Meeting dates for 2013
Response	CPA, TTI & IPA members to arrange room bookings and confirm the details with the secretariat.
Status	Carried over

^[H43]Register of aged open action items from previous meetings

Action item

Issue

Status

Recommend

FBT260209/31

Electronic lodgment of FBT returns

When will corporates be able to lodge FBT returns electronically?

ATO to advise members when the range of forms that will be available on the new portal deployment has been decided.

This item was moved to the current action items for discussion and action at the 8 November 2012 meeting. Refer agenda item 3.4.

FBT110512/58

Living-away-from-home declarations in advance

At the 12 May 2011 meeting, the IPA queried whether an employee can make a single 'living-away-from-home' (LAFH) declaration' that covers the current year and a number of future years?

The ATO will ensure that the position stated at the meeting and recorded in the minutes, being that an employer could not rely on a LAFH declaration that was provided by an employee where the declaration purports to set out facts about future years, will be included in the next update of the Fringe benefits tax: a guide for employers.

At the 11 August 2011 meeting the ATO advised that an update to chapter 11: Living-away-from-home fringe benefits of the Fringe benefits tax: a guide for employers has incorporated responses provided on LAFHA issues raised at previous meetings including the declarations in advance matter.

This item was moved to the current action items for discussion and action at the 8 November 2012 meeting. Refer agenda item 3.3.

At this meeting, the ATO advised members that following the recently passed legislative reforms to LAFH allowances and benefits, chapter 11 of the Fringe benefits tax: a guide for employers is being rewritten and will include this issue.

Action item complete.

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