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Ruling

Subject: Fringe benefits tax - remote area housing

Question

Are housing benefits provided in remote area locations to employees by the employer, exempt pursuant to section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer: Yes.

This ruling applies for the following periods:

Year ending 31 March 2011

Year ending 31 March 2012

Year ending 31 March 2013

Year ending 31 March 2014

Year ending 31 March 2015

Year ending 31 March 2016

The scheme commences on:

The scheme commenced before April 1, 2010.

Relevant facts and circumstances

Employer A owns residences in country areas.

Employer A provides housing fringe benefits to its current employees in these country areas.

Employer A withholds an industrial award allowance from the wages of current employee occupants of the respective properties in these country areas as rent for occupying the properties.

It is customary in Employer A's industry to provide free or subsidised housing to its employees in remote locations.

The accommodation is provided under arm's length arrangements.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 25

Fringe Benefits Tax Assessment Act 1986 Section 58ZC

Fringe Benefits Tax Assessment Act 1986 Section 136

Fringe Benefits Tax Assessment Act 1986 Section 140

Fringe Benefits Tax Assessment Act 1986 Section 142

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies, the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

Reasons for decision

Detailed reasoning

Housing benefits

Section 25 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) states a housing benefit will arise in relation to a year of tax where a 'housing right', is granted by one person (the provider) to another person (the recipient), during all or part of that year.

Subsection 136(1) of the FBTAA defines a 'housing right' as a lease or licence granted to a person to occupy or use a unit of accommodation as that person's usual place of residence at that particular time. A 'unit of accommodation' is also defined in subsection 136(1) of the FBTAA to include either a house, a flat or a home unit or, alternatively, the provision of accommodation in any of those places.

Remote area housing

Section 142(2E) sets out the common conditions required in relation to remote area housing. Both paragraph 142(2E)(a) and subparagraph 142(2E)(b)(iii) of the FBTAA similarly require that it be customary for employers in the industry, of which the employer is a part, to provide housing assistance to their current employees.

Subsection 142(3) of the FBTAA sets out what is meant by 'housing assistance'.

Paragraph 142(3)(a) states:

the provision of residential accommodation without charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned

Remote area housing benefits

However, a housing benefit provided to an employee may be exempted under subsection 58ZC(1) of the FBTAA as a 'remote area housing benefit' provided the conditions of subsection 58ZC(2) of the FBTAA are met in full.

There are four conditions which must be satisfied under subsection 58ZC(2) of the FBTAA and these are as follows:

(a) The unit of accommodation for the whole of the tenancy period must not be at a location in or adjacent to an 'eligible urban area'.

(b) The employee must be a current employee of the employer for the whole tenancy period and the employee's usual place of employment must not be at a location in or adjacent to an eligible urban area during that period.

(c) .............

(d) It must be necessary for the employer to provide free or subsidised accommodation to employees for any of the following reasons:

(i) the nature of the employer's business is such that employees are likely to move frequently from one residential location to another;

(ii) there is no sufficient suitable residential accommodation otherwise available in the area in which the employee is employed; or

(iii) it is customary in the employer's industry to provide free or subsidised housing to employees.

(e) The arrangement under which the accommodation is provided must not be a non-arm's length arrangement nor be provided under an arrangement for the purpose of enabling the employer to obtain the benefit of the application of the section.

Eligible urban area

The concept of what is an 'eligible urban area' is necessary for determining whether an area is a remote area. Section 140 of the FBTAA sets out the criteria for what is an 'eligible urban area'.

Paragraph 140(1)(a) of the FBTAA provides that an 'eligible urban area' is a reference to an area that is an urban centre with a census population of not less than 14,000 (or 28,000 for an urban centre located in Zone A or B for income tax purposes).

Paragraph 140(1)(b) of the FBTAA, relates to housing benefits provided to most employees, and defines a location that is adjacent to an eligible urban area to be either:

(i) situated less than 40 kilometres, by the shortest practical surface route, from a centre point of an eligible urban area with a census population of less than 130,000; or

(ii) situated less than 100 kilometres, by the shortest practical surface route, from the centre point of an eligible urban area with a census population of at least 130,000.

The distances are to be measured by determining the shortest practical surface route available at 24 June 1986.

Subsection140(1A) of the FBTAA provides that an 'eligible urban area' for employees described in subsections 140(1B), 140(1C), 140(1CA) and 140(1D) of the FBTAA, is a reference to an area less than 100 kilometres from a town, by the shortest practical surface route, with a census population of 130,000 or more (figures based on the 1981 Census).

Consequently, in relation to Employer A's employees, a location will be in a remote area (and not adjacent to or in an eligible urban area), for the purposes of subsection 140(1A) of the FBTAA, where it is at least 100 kilometres from a town with a census population of 130,000 or more.

How the law applies to the current circumstances

Housing Benefits

Housing rights are being provided to employees as a result of Employer A providing employees with the right to occupy, as their usual place of residence, housing owned by Employer A.

Consequently, such housing rights will also give rise to housing benefits being provided to those employees under section 25 of the FBTAA.

Remote area housing

It is accepted that it is customary for employers in Employer A's industry to provide housing assistance to their current employees where those employees are working in remote locations.

Remote area not adjacent to an eligible urban area.

Attachment 2 to Practice Statement Law Administration PS LA 2000/6 Fringe benefits tax: what is considered to be remote for the purposes of the remote area housing benefit (PS LA 2000/6) lists the relevant eligible urban area.

Attachment 2 to PS LA 2000/6 lists Town X as a remote area for the purpose of the FBTAA. Neither Town Y nor Town Z are listed as remote or non-remote areas. The list of remote and non-remote locations detailed in PS LA 2000/6 were measured by determining the shortest practical surface route available at 24 June 1986.

The applicant used information from the internet to confirm that Town Y and Town Z are further in distance from the relevant eligible urban area than Town X.

2005, The Australian Motoring Atlas, 2^nd edn, Explore Australia Publishing Pty Ltd, Victoria, confirms that Town Y and Town Z are further in distance from the relevant eligible urban area than Town X.

None of the towns are geographically outside a 100 km distance from the relevant eligible urban area, however Town X has been listed as a remote area in PS LA 2000/6 measured by determining the shortest practical surface route available at 24 June 1986.

Town Y and Town Z are clearly further in geographical distance from the relevant eligible urban area than Town X. In addition, the most practical route to travel from Town Z to the relevant eligible urban area would likely be via Town X. Therefore, it is accepted that both Town Y and Town Z are remote locations, by the shortest practical surface routes available at 24 June 1986, for the purpose of paragraph 58ZC(2)(a) of the FBTAA.

Remote area housing benefits

The application of the circumstances of this case to the four required conditions listed above for remote area housing benefits to exist results in the following:

(a) The housing accommodation provided to the relevant employees is located in Town X, Town Y or Town Z respectively which are accepted as not being in or adjacent to an eligible urban area as defined. This condition has been satisfied.

(b) The housing accommodation will be provided only to current employees who work in Town X, Town Y or Town Z respectively which are accepted as not being in or adjacent to an eligible urban area as defined. This condition has been satisfied.

(c) ...............

(d) It is necessary for Employer A to provide the accommodation to the relevant employees because it is customary in Employer A's industry to provide free or subsidised housing to its employees in remote locations. This condition has been satisfied.

(e) It is accepted that the accommodation in this case is not being provided under non-arm's length arrangements nor for the purpose of enabling Employer A to obtain the benefit of the application of the section. This condition has been satisfied.

Accordingly, the provision of Employer A owned accommodation to its relevant employees in Town X, Town Y and Town Z respectively will be exempt benefits under subsection 58ZC(1) of the FBTAA as all the requirements of subsection 58ZC(2) of the FBTAA have been met.

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