Edited version of private ruling

Authorisation Number: 1011573481149

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Ruling

Subject: Fringe benefits tax

Issue 1

Question 1

Are benefits provided to a former Class A employee who was required to live at the residential college exempt under subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 2

Can the taxable value of meals provided to the former Class A employee required to live at the residential college be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit?

Answer

No

Question 3

Can the taxable value of a proposed living-away-from-home allowance (LAFHA) to be provided to the former Class A employee required to live at the residential college be reduced by the exempt accommodation and food components of the allowance paid?

Answer

No

Question 4

Does the allowance paid by the employer to the former Class A employee need to be a cash payment or is it sufficient for the amount of the predetermined allowance to be disclosed in the staff member's employment contract and therefore to be directly applied by the employer on behalf of the staff member to meet the accommodation and food expenses incurred?

Answer

Decline to rule.

This ruling applies for the following period:

Year ended 31 March 2010

The scheme commences on:

1 April 2009

Issue 2

Question 1

Are meals provided to the Class A employee required to live at the residential college exempt under section 41 of the FBTAA?

Answer

No

Question 2

Can the benefits provided to the Class A employee be treated as exempt benefits given they are provided to an employee of a religious institution principally in respect of duties that are directly related to the practice, study, teaching or propagation of religious beliefs?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2010

Year ended 31 March 2011

The scheme commences on:

1 April 2009

Issue 3

Question 1

Are benefits provided to the Class B employee required to live at the residential college exempt under subsection 47(5) of the FBTAA?

Answer

No

Question 2

Can the taxable value of meals provided to the Class B employee required to live at the residential college be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit?

Answer

No

Question 3

Are meals provided to the Class B employee required to live at residential college exempt under section 41 of the FBTAA?

Answer

No

Question 4

Can the taxable value of a proposed LAFHA to be provided to the Class B employee required to live at the residential college be reduced by the exempt accommodation and food components of the allowance paid?

Answer

No

Question 5

Does the allowance paid by the employer to the Class B employee need to be a cash payment or is it sufficient for the amount of the predetermined allowance to be disclosed in the staff member's employment contract and therefore to be directly applied by the employer on behalf of the staff member to meet the accommodation and food expenses incurred?

Answer

Decline to rule

This ruling applies for the following periods:

Year ended 31 March 2010

Year ended 31 March 2011

The scheme commences on:

1 April 2009

Issue 4

Question 1

Are benefits provided to Class C employees required to live on campus at the residential college exempt under subsection 47(5) of the FBTAA?

Answer

No

Question 2

Can the taxable value of meals provided to the Class C employees required to live at residential college be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit?

Answer

No

Question 3

Are meals provided to the Class C employees required to live on campus at the residential college exempt property benefits under section 41 of the FBTAA?

Answer

No

Question 4

Can the taxable value of a proposed LAFHA to be provided to the Class C employees required to live on campus at the residential college be reduced by the exempt accommodation and food components of the allowance paid?

Answer

No

Question 5

Does the allowance paid by the employer to the Class C employees need to be a cash payment or is it sufficient for the amount of the predetermined allowance to be disclosed in the staff member's employment contract and therefore to be directly applied by the employer on behalf of the staff member to meet the accommodation and food expenses incurred?

Answer

Decline to rule

This ruling applies for the following periods:

Year ended 31 March 2010

Year ended 31 March 2011

The scheme commences on:

1 April 2009

Issue 5

Question 1

Are benefits provided to the Class D employees required to live on campus at the residential college exempt under subsection 47(5) of the FBTAA?

Answer

No

Question 2

Can the taxable value of meals provided to the Class D employees required to live on campus at the residential college be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit?

Answer

No

Question 3

Are meals provided to the Class D employees required to live on campus at the residential college exempt property benefits under section 41 of the FBTAA?

Answer

No

Question 4

Can the taxable value of a proposed LAFHA to be provided to the Class D employees required to live on campus at the residential college be reduced by the exempt accommodation and food components of the allowance paid?

Answer

No

Question 5

Does the allowance paid by the employer to the Class D employees need to be a cash payment or is it sufficient for the amount of the predetermined allowance to be disclosed in the staff member's employment contract and therefore to be directly applied by the employer on behalf of the staff member to meet the accommodation and food expenses incurred?

Answer

Decline to rule

This ruling applies for the following periods:

Year ended 31 March 2010

Year ended 31 March 2011

The scheme commences on:

1 April 2009

Relevant facts and circumstances

The employer is a residential college that pursues certain goals founded upon religious principles.

There are various classes of employees who receive either full board and accommodation or full board and accommodation at a reduced rate.

Many of the employees have another place of residence.

Many of the employees are studying at university.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 47(5),

Fringe Benefits Tax Assessment Act 1986 Section 30,

Fringe Benefits Tax Assessment Act 1986 Section 31,

Fringe Benefits Tax Assessment Act 1986 Section 35,

Fringe Benefits Tax Assessment Act 1986 Section 37,

Fringe Benefits Tax Assessment Act 1986 Section 40,

Fringe Benefits Tax Assessment Act 1986 Section 41 and

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

Reasons for decision

All references made in these reasons for decision are to the FBTAA unless otherwise stated.

Issue 1 Question 1

Summary

The accommodation provided to the former employee is not an exempt residual benefit under section 47(5). The former employee was not living away from the usual place of residence.

Detailed reasoning

Residual benefits in the form of accommodation may be exempt under subsection 47(5).

In order to determine if the provision of the accommodation by the employer to the employee is exempt under this subsection there are several issues which must be considered.

1. Where is the employee's usual place of residence?

2. Is the employee required to live away from his or her usual place of residence in order to perform the duties of their employment?

3. Is that the sole reason that the accommodation is provided?

4. Was a declaration provided to the employer as set out in subparagraph 47(5)(d)(ii)?

Where is the employee's usual place of residence?

Place of residence is defined in subsection 136(1).

The issue of what is meant by the term usual place of residence is addressed in paragraphs 11 to 25 of Miscellaneous Taxation Ruling MT 2030. Paragraph 14 of MT 2030 states:

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.

Paragraphs 15 to 18 of MT 2030 provide a brief description of the decisions from some cases which illustrate this point. It is then concluded at paragraph 19 of MT2030 that: 'an underlying theme of the cases is the general presumption that the employee's usual place of residence will be close to where he or she is permanently employed'.

Whether an employee is living away from the employee's usual place of residence depends on all of the facts of the particular case and is not solely dependant on whether the person is merely living away from the employee's 'point of origin'.

There are a number of facts that indicate that the former employee did not undertake a position of limited duration but that the former employee was permanently employed by the employer.

Since the former employee resided close to the place of permanent employment, the residential college is considered to be their usual place of residence during that time.

Therefore since the former employee did not live away from the usual place of residence the provision of accommodation will not be exempt under subsection 47(5).

Issue 1 Question 2

Summary

The taxable value of board fringe benefits provided to the former employee cannot be reduced to nil by applying the 'otherwise deductible rule'.

Detailed reasoning

Under section 37 the taxable value of board fringe benefits may be reduced in accordance with the 'otherwise deductible rule'.

This means that the taxable value of the board benefits may be reduced by the amount which the employee would have been entitled to claim as an income tax deduction in their personal tax return if the meals had not been provided by the employer.

Would the former employee have been entitled to a deduction for meals?

The costs incurred by employees in obtaining meals are ordinarily private in nature. There are some circumstances when an employee is living away from his or her usual place of residence that the cost of meals may be deductible. However, we have already established that the former employee was not living away from the usual place of residence.

The meals were private in nature and were provided in conjunction with accommodation which itself is a private expense. Consequently, the former employee would not have been entitled to a deduction for the meals.

The taxable value of the board fringe benefits cannot be reduced to nil in accordance with section 37.

Issue 1 Question 3

Summary

The taxable value of a proposed allowance to be provided to the former employee cannot be reduced by the exempt accommodation and food components of the allowance paid because it is not a LAFHA fringe benefit.

Detailed reasoning

Apart from benefits provided to offshore oil and gas workers, the taxable value of a LAFHA fringe benefit is calculated in accordance with paragraph 31(a). Where there is a fringe benefit that is a LAFHA under subsection 30(1), the taxable value may be reduced by:

· any exempt accommodation component; and

· any exempt food component.

An allowance will be a LAFHA benefit under subsection 30(1) where all the conditions are satisfied.

If an allowance was to be paid to the former employee it would not be a LAFHA benefit in accordance with section 30 because the former employee was not living away from the usual place of residence.

Since the allowance is not a LAFHA benefit the taxable value would not calculated in accordance with paragraph 31(a).

Issue 1 Question 4

Summary

The Commissioner declines to rule on this question.

Detailed reasoning

A private ruling is a written expression of the Commissioner's opinion about the way in which a relevant provision applies or would apply to a taxpayer in relation to a scheme (section 359-5 of Schedule 1 to the Taxation Administration Act 1953).

A private ruling may deal with anything involved in the application of a relevant provision, including issues relating to liability, administration, procedure and collection, and ultimate conclusions of fact.

Since this question is not about the application of a relevant provision, the Commissioner declines to rule.

Issue 2 Question 1

Summary

The meals provided to the employee are not exempt under section 41 as they are not property benefits but rather are board benefits under section 35.

Detailed reasoning

For the exemption in section 41 to apply the type of benefit provided must be a property benefit under section 40. However if the benefit is classified as a different benefit under a previous division then it will not be a property benefit.

The first category of benefit that the provision of meals could fall within is board benefits under section 35 in Division 9.

Each meal provided to the employee will be a board benefit if it is a board meal.

A board meal is defined in subsection 136(1).

The meals provided to the employee satisfy the definition of board meals.

Since the provision of meals to the employee falls within board benefits, they cannot be property benefits under section 40 and consequently cannot be exempt property benefits under section 41.

Issue 2 Question 2

Summary

The benefits provided to the employee cannot be treated as exempt benefits because the employer is not a religious institution.

Detailed reasoning

The exemption available for benefits provided to religious practitioners under section 57 only applies where the employer of the employee is a religious institution.

Religious institution is not defined in the FBTAA. Taxation Ruling TR 92/17 discusses the issue of what is a religious institution for the purposes of the FBTAA and the ITAA. The employer is not considered to be a religious institution.

Since the employer of the employee is not a religious institution any benefits provided to the employee will not be exempt benefits under section 57.

Issue 3 Question 1

Summary

The accommodation provided to the employee is not an exempt benefit under subsection 47(5).

Detailed reasoning

As explained in the reasons for decision for question one in issue one, in order to determine if the provision of the accommodation to the employee is exempt under subsection 47(5) there are several issues which must be considered.

Place of residence is defined in subsection 136(1) and the issue of what is meant by the term usual place of residence is addressed in paragraphs 11 to 25 of MT 2030.

Given the length of the employee's stay in the residential college it is arguable that it is the usual place of residence. However even if we accept that the employee's usual place of residence is elsewhere, the accommodation at the residential college has not been provided for the sole reason that the employee is required to live away from the usual place of residence in order to perform employment duties.

At paragraph 14 in MT 2030 it states:

…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.

The employee has not changed residence in order to work for the employer. The employee was already living at the residential college for several years prior to employment. The employee may be currently receiving accommodation at the college because of employment but was already residing away from what may be the usual place of residence in order to study at university.

Therefore the accommodation provided to them will not be an exempt residual benefit in accordance with 47(5).

Issue 3 Question 2

Summary

The taxable value of meals provided to the employee cannot be reduced to nil by applying the 'otherwise deductible rule'.

Detailed reasoning

Under section 37 the taxable value of board fringe benefits may be reduced in accordance with the 'otherwise deductible rule'.

This means that the taxable value of the board benefits may be reduced by the amount which the employee would have been entitled to claim as an income tax deduction in their personal tax return if the meals had not been provided by the employer.

Would the employee be entitled to a deduction for meals whilst living at the residential college?

The cost incurred by an employee for meals is ordinarily a private expense. There may be some exceptions, for example where an employee is travelling in course of their employment or in some limited situations where they are living away from home.

As noted in the reasons for decision for question one we have not made a conclusion about the employee's usual place of residence. However, Taxation Determination TD 96/7 provides some guidance in relation to meals and accommodation provided to employees who work at remote construction sites, where the accommodation is not the usual place of residence of the employee.

The employee is not travelling in the course of employment. If the employee is living away from the usual place of residence, it is clearly not for a relatively short period. Therefore the employee would not be entitled to claim a deduction for any meal expenses whilst living at the residential.

Consequently, the taxable value of board benefits provided to them cannot be reduced by the otherwise deductible rule.

Issue 3 Question 3

Summary

The meals provided to the employee are not exempt under section 41 because they are not property benefits but rather are board benefits under section 35.

Detailed reasoning

See the reasons for decision for question 1 under issue 2 for detailed reasoning.

Issue 3 Question 4

Summary

The taxable value of a proposed LAFHA to be provided to the employee cannot be reduced by the exempt accommodation and food components of the allowance paid because it is not a LAFHA fringe benefit.

Detailed reasoning

Apart from benefits provided to offshore oil and gas workers, the taxable value of a LAFHA is calculated in accordance with paragraph 31(a). Where there is a fringe benefit that is a LAFHA under subsection 30(1), the taxable value may be reduced by:

· any exempt accommodation component; and

· any exempt food component.

As noted in the reasons for decision for question one, we have not made a conclusion about the employee's usual place of residence. If, however, we were to accept that the employee's parents' home was their usual place of residence, we need to consider the nature of the proposed allowance.

In order to be a LAFHA, under paragraph 30(1)(b) it must be concluded that whole or 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…

As noted in the reasons for decision to question one the employee may be currently living at the residential college because of employment, but the employee was already residing away from what may be the usual place of residence in order to study at university.

If the employee was paid an allowance, the allowance may be to compensate for additional expenses however the employee would not be incurring those additional expenses as a result of being required to live away from the usual place in order to undertake employment duties. Those expenses would have been incurred regardless because the employee would be living away from the usual place of residence in order to study at university.

Since the allowance is not a LAFHA benefit the taxable value would not calculated in accordance with paragraph 31(a).

Issue 3 Question 5

Summary

The Commissioner declines to rule on this question.

Detailed reasoning

See the reasons for decision for question 5 under issue 1 for detailed reasoning.

Issue 4 Question 1

Summary

The accommodation provided to the class of employees is not an exempt benefit under subsection 47(5).

Detailed reasoning

As explained in the reasons for decision for question one in issue one, in order to determine if the provision of the accommodation to the employee is exempt under subsection 47(5) there are several issues which must be considered.

Place of residence is defined in subsection 136(1) and the issue of what is meant by the term usual place of residence is addressed in paragraphs 11 to 25 of MT 2030.

The class of employees are students who been living at the residential college for at least two years prior to their appointment. They mainly return to their other place of residence during university breaks.

Given the length of their stay in the residential college it is arguable that it is his or her usual place of residence. However even If we accept that each employee has another residence that is their usual place of residence, there is still the requirement that the accommodation has been provided for the sole reason that they are required to live away from their usual place of residence in order to perform the duties of their employment.

At paragraph 14 in MT 2030 it states:

…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.

The employees have not changed residence in order to work for the employer. They were already living at the residential college for at least two years prior to their appointment. They were residing away from what may be their usual place of residence because they were studying at university.

Consequently, the employer is not providing them with accommodation solely because they have been required to live away from their usual place of residence in order to perform their duties.

Therefore the accommodation provided to them will not be an exempt residual benefit in accordance with 47(5).

Issue 4 Question 2

Summary

The taxable value of meals provided to the class of employees cannot be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit.

Detailed reasoning

Issue 4 Question 3

Summary

The meals provided to the employees are not exempt benefits under section 41 because they are not property benefits but rather are board benefits under section 35.

Detailed reasoning

See the reasons for decision for question 1 under issue 2 for detailed reasoning.

Issue 4 Question 4

Summary

The taxable value of the proposed allowance to be provided to the class of employees cannot be reduced by the exempt accommodation and food components because the allowance is not a LAFHA benefit.

Detailed reasoning

See the reasons for decision for question 4 under issue 3 for detailed reasoning.

Issue 4 Question 5

Summary

The Commissioner declines to rule on this question.

Detailed reasoning

See the reasons for decision for question 4 under issue 1 for detailed reasoning.

Issue 5 Question 1

Summary

The accommodation provided to the class of employees is not an exempt benefit under subsection 47(5).

Detailed reasoning

See reasons for decision for question 1 under issue 4 for detailed reasoning.

Issue 5 Question 2

Summary

The taxable value of meals provided to the class of employees cannot be reduced to nil by applying the 'otherwise deductible rule' to the taxable value of the board fringe benefit.

Detailed reasoning

See the reasons for decision for question 2 under issue 3 for detailed reasoning.

Issue 5 Question 3

Summary

The meals provided to the class of employees are not exempt benefits under section 41 because they are not property benefits but rather are board benefits under section 35.

Detailed reasoning

See the reasons for decision for question 1 under issue 2 for detailed reasoning.

Issue 5 Question 4

Summary

The taxable value of the proposed allowance to be provided to the class of employees cannot be reduced by the exempt accommodation and food components because the allowance is not a LAFHA benefit.

Detailed reasoning

See the reasons for decision for question 4 under issue 3 for detailed reasoning.

Issue 5 Question 5

Summary

The Commissioner declines to rule on this question.

Detailed reasoning

See the reasons for decision for question 4 under issue 1 for detailed reasoning.

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