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Edited version of private ruling
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Ruling
Subject: Fringe benefits tax
Question 1
Are housing benefits provided to employees exempt benefits under section 58ZC of the Fringe Benefits Tax Assessment Act 1986?
Answer
Yes
This ruling applies for the following periods:
Year ended 31 March 2011
Year ended 31 March 2012
Year ended 31 March 2013
Year ended 31 March 2014
The scheme commences on:
1 April 2010
Relevant facts and circumstances
The employer is a Charitable Institution and is located in Australia.
The employer offers housing benefits to the certain employees.
Employee A
It is a requirement, and it is customary within the industry, to designate a residence for employees in this position to occupy during their appointment.
Employee A is a current employee and the residence is provided free of charge.
Other employees
Other employees are provided with accommodation free of charge at locations that are more than 100 kilometres from an eligible urban area for the purposes of subsection 140(1A).
These employees are required to live in the accommodation as part of their employment. They are current employees.
The usual place of employment is at the same location as the accommodation that is provided to them.
The residences are unfurnished.
The accommodation is the usual place of residence for all of the above mentioned employees.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 58ZC and
Fringe Benefits Tax Assessment Act 1986 Section 140.
Reasons for decision
All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.
Summary
The provision of accommodation to the employees is an exempt benefit in accordance with section 58ZC as it is a remote area housing benefit.
Detailed reasoning
Under section 58ZC a housing benefit that is a remote area housing benefit will be an exempt benefit.
Subsection 58ZC(2) sets out what constitutes a remote area housing benefit and requires that all of the following conditions be met.
'Housing benefit' is defined in subsection 136(1) as meaning a benefit referred to in section 25. Under section 25 a benefit will arise where a person grants a 'housing right' to another person.
'Housing right' is defined in subsection 136(1) as meaning a lease or licence being granted to a person to occupy a unit of accommodation as that person's current usual place of residence.
'Unit of accommodation' is defined in subsection 136(1) to include (amongst other things) accommodation in a house, flat, or home unit.
The employer is providing some of its current employees with accommodation in locations where it conducts its business, and those employees will occupy such premises as their usual place of residence at the relevant time. Therefore, such arrangements constitute housing benefits that the employer provides to its employees.
Subsection 140(1A) sets out what is an eligible urban area and what is a location that is adjacent to an eligible urban area (using the 1981 Census population figures) for specific types of employers including charitable institutions.
For charitable institutions, a location will be adjacent to an eligible urban area only if it is within 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of at least 130,000. Consequently, in the circumstances outlined in subsection 140(1A), an area will be remote where it is at least 100 kilometres by the shortest practicable route from a centre with a census population of 130,000 more.
In Attachment 2 to ATO Practice Statement Law Administration PS LA 2000/6, each of the locations is listed as being remote. The nearest eligible urban area is more than 100 kilometres from these towns. Therefore all of the locations at which the employer is providing accommodation are not in or adjacent to an eligible urban area.
The employees who are receiving the housing benefits are all current employees of the employer. Their usual place of employment is in the same location as their accommodation and therefore is not in or adjacent to an eligible urban area.
The employer has indicated that subparagraphs 58ZC(2)(d)(i) and (ii) do not apply to their situation. It is subparagraph 58ZC(2)(d)(iii) that must be satisfied.
Taxation Determination TD 94/97 provides guidance on what the phrase 'customary for employers in the industry' means in relation to the provision of fringe benefits to employees. It states at paragraph 2:
A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary.
The employer provides the accommodation to Employee A because it is customary in that industry to designate a residence for such an employee to occupy during their appointment.
It is arguable that this would also apply to the accommodation to the other employees as it is likely that free or subsidised accommodation would also be provided to people in similar positions in that industry. For example, employees who are required to undertake similar duties would also be required to live on site.
The employees who are receiving the housing benefits are receiving them because of their duties of employment. Their positions require that they are provided with accommodation. There is no indication that the benefits are provided under a non-arm's length arrangement.
The employer has been paying fringe benefits tax on these housing benefits until now. This indicates that there is no arrangement in place to enable the employer to obtain the benefit of the application of section 58ZC.
Since all of the conditions in section 58ZC are met, the housing benefits provided to the employees will be exempt benefits.
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