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Ruling

Subject: Living away from home

Question 1

For the purposes of section 21 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) was your employee living away from his usual place of residence for the FBT years ending 31 March 2005 to 31 March 2011?

Answer

Yes.

This ruling applies for the following periods:

1 April 2004 - 31 March 2005

1 April 2005 - 31 March 2006

1 April 2006 - 31 March 2007

1 April 2007 - 31 March 2008

1 April 2008 - 31 March 2009

1 April 2009 - 31 March 2010

1 April 2010 - 31 March 2011.

The scheme commenced on:

During 2005.

Relevant facts and circumstances:

Your employee is a citizen of Country X.

Your employee worked for you in the Country X for a number of years.

Your employee undertook a temporary assignment in Country Y. However, following a reorganisation of your regional structure your employee's assignment location was moved to Country Z.

Your employee took his family with him.

Your employee agreed to cut short his Country Z assignment and accept a temporary assignment in Australia. Your employee arrived in Australia on a 457 visa which was later extended for 12 months.

Your Australian subsidiary has paid your employee's entitlements to non-salary remuneration.

While in Australia, your employee has remained in the pension plan for Country X as well as continuing his contributions to that Countries social security scheme.

All of your employee's investments are in Country X.

No property has been purchased in Australia.

Each year the employee returns to Country X with his family to visit relatives.

At all times it has been you and your employee's intention that he would return to Country X at the completion of his assignment.

Each year your employee has signed living-away-from-home declarations, stating that his usual place of residence is in Country X.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 21

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

For the purposes of section 21 of the FBTAA was your employee living away from his usual place of residence for the FBT years ending 31 March 2005 to 31 March 2011?

Detailed reasoning

In general terms, section 21 provides an exemption from fringe benefits tax for the payment of accommodation expenses incurred by an employee who is required to live away from his or her usual place of residence in order to perform the duties of their employment.

Section 21 of the FBTAA states:

Where -

(a) an expense payment benefit is provided in a year of tax to a current employee of an employer in respect of his or her employment;

(b) the recipients expenditure is in respect of accommodation for eligible family members;

(ba) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment:

(c) the accommodation is required solely 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;

and

(d) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out -

(i) the employee's usual place of residence; and

(ii) the place at which the employee actually resided while living away from his or her usual place of residence,

the benefit is an exempt benefit in relation to the year of tax.

For this section to apply there are five conditions that must be met. They are:

(a) an expense payment benefit must be provided

(b) the recipients expenditure must be in respect of accommodation for eligible family members

(ba) the accommodation must not be provided while the employee is undertaking travel in the course of performing his or her employment

(c) the accommodation must be required solely because the employee is required to live away from his or her usual place of residence in order to perform their duties of employment, and

(d) the relevant declaration must be provided to the employer.

(a) Has an expense payment benefit been provided to a current employee?

Expense payment benefits are described under section 20 of the FBTAA which states:

Where a person (in this section referred to as the "provider"):

(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the "recipient") to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b) reimburses another person (in this section also referred to as the "recipient"), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a) or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

You have stated that you pay the rent on behalf of the employee therefore paragraph (a) above applies.

You have provided an expense payment benefit to your employee.

(b) Was the recipient's expenditure in respect of accommodation for eligible family members?

Eligible family members is defined in subsection 136(1) of the FBTAA in relation to an employee who is required to live away from his or her usual place of residence during a period in order to perform the duties of his or her employment to be the employee, or a spouse or child of the employee who lived with the employee and whose usual place of residence during that period was the same as the usual place of residence of the employee.

The accommodation is for the employee, his wife and children.

(ba) Was the accommodation provided while the employee is undertaking travel in the course of performing the duties of that employment?

The accommodation is not provided while the employee is undertaking travel in the course of performing the duties of his employment.

(c) Was the accommodation required solely 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 employment?

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

(a) a place at which the person resides; or

(b) 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 Macquarie Dictionary defines 'usual' to mean:

adjective

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 (MT 2030).

Paragraphs 15 to 18 of MT 2030 refer to various decisions of Taxation Boards of Review relating to the former section 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 in paragraphs 19 to 25 of MT 2030, and 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 of MT 2030 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.

These principles and the various cases that have been considered 'usual place of abode' or 'usual place of residence' were discussed by the Administrative Appeals Tribunal (AAT) in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051. 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 that your employee was living away from his usual place of residence:

§ the employee is a citizen of Country X

§ you are a company of Country X

§ the employee was working for you in Australia on a fixed term class 457 visa

§ the employee has remained in the pension plan for Country X

§ the employee continues to contribute to the social security scheme in Country X

§ the employee has no investments outside Country X

§ the employee returns to Country X each year with his wife and children to visit relatives, and

§ the employee indicated an intention to return to Country X at the end of the visa period.

We consider that the employee's usual place of residence is in Country X while his work location is in Australia.

(d) Has the relevant declaration been provided?

You have received signed declarations each year which state that your employee was living away from his usual place of residence in Country X.

As all the above conditions have been met the benefit provided to the employee is an exempt accommodation expense payment benefit.

Conclusion

We consider for the purposes of section 21 of the FBTAA the employee was living away from his usual place of residence for period 31 March 2005 to 31 March 2011.

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