Edited version of private ruling

Authorisation Number: 1011542071684

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Ruling

Subject: Living-away-from-home allowance

Is the allowance paid to your employee a living-away-from-home allowance benefit pursuant to subsection 30(1) of the Fringe Benefits Tax Assessment Act (1986) (FBTAA)?

Yes. However, this answer may change if the employee's family moves from the residence in C country.

This ruling applies for the following period

1 April 2010 - 31 March 2011

1 April 2011 - 31 March 2012

1 April 2012 - 31 March 2013.

The scheme commenced on

1 July 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Relevant facts

You are paying an allowance to an employee.

The allowance consists of:

· an accommodation component based on the costs for a hotel/short term let furnished flats in the vicinity of your office, and

· a food component based on the amount shown in the relevant Tax Determination less the statutory food amount.

The employee has dual nationality.

The employee has worked in the several countries in the last five years.

During the period they were previously employed in Australia they obtained an Australian permanent resident visa and purchased a property.

The property is currently being rented out.

You have provided a copy of the employee's employment contract. The contract states that start date, but does not have a finalisation date.

The employee owns a property in C country where they resided prior to commencing their employment duties with you.

The employee's family continue to reside in the C country property.

The employee intends to return to C country to visit their family about every four weeks.

The employee's family have no immediate plans to relocate to Australia.

The employee has a bank account and a superannuation fund in both Australia and C country.

The employee has relatives in Australia and C country.

The employee does not belong to any Australian professional bodies or hold club membership. They do however have club memberships in C country and B country.

The employee will initially live in a hotel before moving to short term furnished accommodation.

The employee has confirmed that they have an intention to return to C country at the end of this Australian assignment.

The employee will complete the appropriate living-away-from-home allowance declaration for the relevant Fringe Benefits Tax years.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act (1986) section 31

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

Fringe Benefits Tax Assessment Act (1986) subsection 136(1)

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.

Is the allowance paid to your employee a living-away-from-home allowance benefit pursuant to subsection 30(1) of the FBTAA?

Summary

An allowance constitutes a living-away-from-home allowance benefit under subsection 30(1) of the FBTAA where:

it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for:

· additional non deductible expenses incurred by the employee during a period; or

· additional non deductible expenses and other additional disadvantages to which the employee is subject during a period; and

· the additional expenses and other disadvantages arise because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment.

As both of these conditions are met the allowance paid to your employee will be a living-away-from-home allowance. However, this answer may change if the employee's family moves from the C country residence.

Detailed reasoning

Section 30 of the FBTAA sets out the circumstances in which a payment to an employee will be a living-away-from-home allowance benefit.

Subsection 30(1) states:

Where:

(a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and

(b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:

(i) additional expenses (not being deductible expenses) incurred by the employee during a period; or

(ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period;

by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

In summarising these requirements an allowance will be a living-away-from home-allowance if:

it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for:

· additional non deductible expenses incurred by the employee during a period, or

· additional non deductible expenses and other additional disadvantages to which the employee is subject during a period, and

· the additional expenses and other disadvantages arise because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment.

Is the allowance paid for additional non deductible expenses and other disadvantages?

The allowance will be paid to compensate the employee for additional food expenses and accommodation expenses that arise as a result of the employee working in Australia while their family remains in C country. As the employee would not be able to claim an income tax deduction for these expenses this requirement is satisfied.

Do the additional expenses arise because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment?

In determining whether the additional expenses arise as a result of the employee being required to live away from their usual place of residence it is necessary to identify the usual place of residence.

The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' to mean:

· a place at which the person resides, or

· a place at which the person has sleeping accommodation

· whether on a permanent or temporary basis and whether or not on a shared basis.

In the absence of a legislative reference it is relevant to refer to the ordinary meaning of 'usual'. The Maquarie Dictionary defines 'usual' to mean:

1. habitual or customary: his usual skill.
2. such as is commonly met with or observed in experience; ordinary: the usual January weather.
3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

Guidelines for determining an employee's usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits.

Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states:

As the decisions illustrate, the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e., the place where the employee is living at the time or some other place. A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for his employer at another locality, the employee would have continued to live at the former place. It would be relevant in reaching that view that there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality. This would be relevant even if the employee is living in temporary quarters close to a temporary job site.

Further discussion occurs at paragraphs 19 to 25. Paragraph 20 provides the following general rule:

Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live.

As an example of the application of this general rule paragraph 22 states:

Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence.

However, this is subject to paragraph 21 which states:

Some employees may be unable to establish that they are living away from their usual place of residence because the transitory nature of their lifestyle means that their usual place of residence is wherever they happen to sleep at night. Employees who follow the job, say, from construction site to construction site and have no permanent place of residence would fit into this particular category.

Further examples are provided in paragraph 25 which states:

… certain kinds of occupations have a career structure which brings with it the necessity to accept regular transfers from one location to another, e.g., police officers, school teachers, members of the defence force, bank employees, etc. 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. That will be the case even if the employee owns a home elsewhere in which he or she eventually intends to reside.

These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T 2008 ATC 10-051; (2008) 71 ATR 720. At paragraphs 55 and 56 Deputy President S A Forgie said:

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

In considering the factors referred to by the AAT the following factors indicate the employee's usual place of residence is in C country:

· the employee's family has remained in C country

· the employee is returning once a month to visit the family

· the employee has retained ownership of the property in C country, and

· the employee has a stated intention to return to the property in C country at the end of the current assignment.

However, the employee's employment history shows they have moved several times within the last five years. As set out in paragraph 21 of MT 2030 this regular change of employment is an indicator that the employee may have transitory lifestyle and not be able to establish that they are living away from their usual place of residence.

Guidance for evaluating whether the factors that indicate C country is the employee's usual place of residence outweigh the regular changes in employment is provided by the decisions in Case B47 2 TBRD 201; Case C55 71 ATC 242; Case R99 84 ATC 650 and Case U110 87 ATC 663.

In Case B47 the taxpayer maintained a home in Perth where his wife lived for a period of six years while he worked in a town 130 miles away, staying in hotel accommodation and returning home each weekend and for holidays. The Board of Review found that his home in Perth was more permanent and was his "usual" place of abode. In so doing, Member Nimmo said at p. 204:

The definition of `living-away-from-home allowance' (an expression which itself indicates the kind of allowance the Legislature had in mind when the section was enacted) suggests to me that the section is intended to apply where the Commissioner (and upon a review, the Board of Review) is satisfied that: (a) a taxpayer maintains a home or other place of abode, but because of the distance between it and his place of employment he cannot live in it; (b) the allowance the taxpayer receives by reason of these circumstances is in the nature of compensation to him for the additional expense he thereby incurs.

In Case C55, the taxpayer, his wife and family had lived and worked in an isolated company mining town. The town which suffered from a harsh climate and a very high cost of living was also at such a distance from neighbouring provincial towns that it was not possible to send the children to the schools located in the towns. Faced with the problem of educating his children and remaining at work the taxpayer purchased a house in a provincial town with the necessary educational facilities. The family moved into the house, but the taxpayer continued to live in the rented house that he and his family had previously occupied. The taxpayer joined his family for one weekend in two.

The Board of Review in considering whether the taxpayer had received a living-away-from-home allowance referred to the decisions of the Board of Review in Case B47 and Case C6 3 T.B.R.D before saying at ATC 246:

In the case before us it was plain that the taxpayer wished and intended to return to his home as soon as and as often as should prove possible, whereas in Case C6 the intention of the taxpayer was to abandon his former place of abode as soon as possible, thus rendering more natural a conclusion that he had so abandoned it at a relatively early point of time.

15. On the rather special facts in the case before us, we have concluded that this is a case wherein the taxpayer in the year of income maintained a home which should be regarded as his ``usual place of abode'' but in which, because of the distance between it and his place of employment, he could not live continuously or for long.

In Case R99 the Board of review in considering whether an employee was living away from his usual place of abode said at ATC 657:

In the case of a married man with a family who is temporarily absent from the family home, albeit for a prolonged period, it is relatively easy to conclude that his ``usual'' place of abode is the family home so long as it is his intention to return there.

Case U110 concerned a situation where the taxpayer moved to Sydney for a period of six to nine months to oversee a particular project. During the period he was in Sydney the taxpayer moved his furniture to Sydney and leased his home in Adelaide. In considering the taxpayers usual place of abode Senior Member McMahon said at ATC 666:

There have been two decisions of Boards of Review dealing with this section which were decided in the taxpayer's favour, namely Case C55, 71 ATC 242 and Case R99, 84 ATC 650. In the former case, the taxpayer's family continued to live in the main place of abode (or "home" as the Board referred to it) while the taxpayer, a miner, lived in sparse conditions near his place of work. He came home to his family every second weekend. In the latter case, an electrical mechanic, forced to find employment on the Central Coast, stayed with friends while working in the area. Having left most of his belongings at the home of his parents, where he lived before taking up this employment, he would return there each weekend. It will be seen that such were the ties with the places of abode where the taxpayers' families lived, that they could also be said to be the taxpayers' usual places of abode. The taxpayers usually lived and slept in the places of abode at regular intervals. This cannot be said of the present applicant.

In applying these decisions it can be seen that while the employee's family remain in the C country residence to which the employee regularly returns, the employee will have sufficient ties for the C country property to be regarded as their usual place of residence. Support for this conclusion is provided by paragraph 43 of MT 2030 which states:

… an employee who lives during the working week in the country town where his permanent job is located but who travels perhaps several hundred kilometres to live during weekends with his wife and children in the family home located in another town would be, during the week, living away from home. So, too, would a married public servant based in a capital city who is seconded for six months to carry out a special task interstate in circumstances where his family stays behind in the family home.

Therefore, the employee is considered to be currently living away from their usual place of residence.

Given the usual place of residence is in C country and the employment duties are being performed in Australia it is accepted the employee is required to live away from their usual place of residence in order to perform their duties of employment.

As all the required conditions have been met, the allowance paid to the employee is a living-away-from-home allowance benefit pursuant to subsection 30(1) of the FBTAA.

However, this conclusion may change if the family was to move to Australia to live with the employee. In such a situation, the ownership of a property, the bank account and the superannuation fund are unlikely to be sufficient to outweigh the transitory nature of the employee's lifestyle.

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