Edited version of private ruling

Authorisation Number: 1011471025043

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Fringe Benefits Tax

Question 1

Will the employee be living away from home for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 2

If the answer to question 1 is yes, is the employer entitled to reduce the taxable value of the food component of the living-away-from-home allowance to nil?

Answer

As the answer to question 1 is no, not applicable.

Question 3

If the answer to question 1 is yes, will the accommodation expense payment benefit be an exempt benefit in accordance with section 21 of the FBTAA?

Answer

As the answer to question 1 is no, not applicable.

Question 4

If the answer to question 1 is yes, is the employer entitled to reduce the taxable value of an education expense payment benefit pursuant to section 65A of the FBTAA?

Answer

As the answer to question 1 is no, not applicable.

This ruling applies for the following period/s:

1 April 2010 - 31 March 2011

1 April 2011 - 31 March 2012

1 April 2012 - 31 March 2013

The scheme commences on:

1 December 2005

Relevant facts and circumstances

The employee is a citizen of the country of origin.

The employee came to Australia to act in a specific role.

Prior to travelling to Australia the employee was employed by the employer in various different localities.

The employee travelled in Australia in year X on a 457 visa.

The employee's 457 visa was subsequently extended.

At around the time of the visa extension the employee commenced in a new role for the employer.

The employer is now considering a further extension until year Y.

Prior to relocating to travelling to Australia, the employee was residing in a property in the country of origin which they own.

The employee has retained this property; it is currently tenanted.

The employee's extended family resides in the country of origin.

The employee and their family travel to the country of origin at least twice per year.

The employee is presently residing in rental accommodation with their family.

The employer provides an accommodation expense payment of a set figure per month.

The employer provides a living-away-from-home allowance comprised of a food component paid monthly in accordance with the Commissioner's estimate for total reasonable food costs reduced by the statutory amounts.

The employer provides an education expense payment benefit, reimbursing school tuition costs for their children.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986, section 21.

Fringe Benefits Tax Assessment Act 1986, subsection 30(1)

Fringe Benefits Tax Assessment Act 1986, section 65A.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Introduction

The FBTAA provides for concessional treatment of certain benefits if they are provided to an employee who is living away from their usual place of residence. Such benefits include three benefits reimbursement of children's educational costs (section 65A of the FBTAA), provision of residential accommodation (as an expense payment pursuant to section 21 of the FBTAA) and an allowance in respect of food costs (in the form of a living-away-from home allowance pursuant to section 30(1) of the FBTAA).

Is the employee living away from their usual place of residence?

The Commissioner's view of the circumstances in which an employee will be considered to be living away from their usual place of residence is contained in Miscellaneous Taxation Ruling MT 2030 Fringe Benefits Tax: living-away-from-home allowance.

Temporary Arrangements

As a general principle, an employee may be regarded as living away from their usual place of residence if they would have continued to live at the former place but for having to work temporarily in a different locality. MT 2030 places a great degree of emphasis upon impermanence, citing examples of temporary and fixed duration appointments as being those arrangements in which an employee is most likely to be living away from home. MT 2030 uses phrases such as 'finite duration' and 'an appointment of fixed duration'. Paragraphs 14, 20 and 22 of MT 2030 are authority for the principle that, in order to be considered to be living away from home the employee's presence in the different locality must not be permanent but must be temporary in nature.

Taxation Ruling TR 2008/9: Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997 contains the Commissioner's view of what constitutes a temporary absence. TR 2008/9 states that there are two elements to a temporary absence; fulfilment of a passing purpose and transience.

The concept of transience is illustrated in paragraph 162 of TR 2008/9 by way of a quote from Re Houchar v Director-General of Social Security (1984) 5 ALN No 308.

For an absence to be temporary, not only must it be intended not to last indefinitely but the time for which it is intended to last must not be of great length

And the concept of passing purpose is illustrated in paragraph 159 by way of a quote from Hafza v. Director-General of Social Security (Hafza) (1985) 60 ALR 674.

...I think that the adjective 'temporary' was used to denote an absence that was, both in intention and in fact, limited to the fulfilment of a passing purpose.

The effect of this reasoning is that if an employee stays in a place after the passing purpose for which they originally went has been fulfilled then their stay in that place will no longer be considered to be temporary. Secondly even if an employee is in a place to fulfil a passing purpose the stay will not be considered temporary if it lasts for a great length of time.

Is the employee's arrangement temporary?

Fulfilment of a passing purpose.

The employee came to Australia in year X for a three year period to act in a specified position for the employer.

In year W the employee entered into another contract with the employer to extend the period in Australia until a future date. The employee also changed position around this time.

The employer is now contemplating a third contract to retain he employee's services in Australia until year Y.

The employee's passing purpose for coming to Australia was contained in the original contract. That contract has now expired and the duties fulfilled. The employee is now remaining here for a new purpose. The employee therefore can no longer be properly considered to be residing temporarily away from their usual place of residence and is therefore not living away from home for the purposes of the FBTAA.

The only possible limitation on the employee remaining Australia is their current 457 visa. However as they have already been granted one extension of this visa and the employer is contemplating another their employment in Australia is clearly not absolutely limited to any particular visa period. There is no impediment to the employee being granted another visa or other permission to remain in Australia beyond year Y. Therefore the visa's end date cannot be seen as a definitive date in which their employment in Australia will terminate. Therefore the arrangement can not be properly described as temporary and on that basis

Length of absence

The other aspect of a temporary absence is the length of that absence. When the length of an arrangement, even if a passing purpose is present and has not yet been fulfilled, will no longer be considered temporary depends on the facts of each case. In the present case the employee has already been absent from the country of origin and working for in Australia for in excess of five years with the employer proposing that they should remain for at least another two years.

The length of this assignment, by its length alone is no longer considered to be temporary in nature.

Intention to return

MT 2030 makes it clear that an integral component of living-away-from home for the purposes of the FBTAA is an intention to return to the place of origin. As observed by Wilcox J in Hazfa (at 680)

As a general concept residence includes two elements: physical presence in a particular place and the intention to treat that place as a home; at least for the time being, not necessarily forever.

It also needs to be noted that it is not enough to have an intention to return to the country of origin 'one day'. Wilcox J (at 685) when discussing the concept of the intent to return in Hafza stated that the intent needs to be one to return to the place of origin at the earliest opportunity.

Intent is a transient state of mind and a person's intent to do one thing or another can change from moment to moment. As intent is a state of mind it is difficult to truly 'prove' and an individual's intent can only be inferred from the surrounding facts and circumstances. In this case the question to ask would be whether or not the employee's actions were consistent with their expressed mental attitude of wanting to return to the country of origin at the earliest possible opportunity.

The employee travelled to Australia on a contract that ensured they would be returned to a job in the country of origin once that contract was completed. The employee did not enforce this contract but remained in Australia. They then entered into another contract with similar terms but again chose not the enforce them.

These actions are not consistent with the state of mind of a person wishing to return to the country of origin at the earliest opportunity. While the employee may have an intention to return to the country of origin at some point in the future, the intention to return, as discussed as a requirement for living away from home in MT 2030 is an intention to return at the earliest opportunity.

Occupations with necessity to accept regular transfers

Paragraph 25 of MT 2030 states:

…certain occupations have a career structure which brings with it the necessity to accept regular transfers from one location to another… Employees in these situations will generally not be treated as living away from home when they move on transfer to live in proximity to the current work place.

The employee's circumstances and the effect of the words of MT 2030 mean that in this case the employee is not living away from home.

Question 2

As the answer to question 1 is no, question 2 is not applicable.

Question 3

As the answer to question 1 is no, question 3 is not applicable.

Question 4

As the answer to question 1 is no, question 4 is not applicable.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).