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Ruling

Subject: Fringe benefits tax: living-away-from-home allowance

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

Answer

Yes.

This ruling is based on the living-away-from-home allowance provisions that are currently contained in sections 30 and 31 of the FBTAA.

As part of the Mid-Year Economic and Fiscal Outlook 2011-12, the Treasurer announced that the government will introduce reforms to the living-away-from-home allowance and benefits provisions. If enacted, these proposed reforms will apply from 1 July 2012.

You should note that if the law has been substantively changed, the part of the private ruling dealing with the changed law ceases to apply.

More information regarding the proposed reforms is available in:

· The Treasurers Media Release No. 148 of 2011, 'Tax Measures in Mid-Year Economic and Fiscal Outlook', 29 November 2011; and

· The Consultation Paper titled 'Fringe Benefits Tax (FBT) Reform Living-away-from-home benefits', 29 November 2011.

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

The scheme commenced on:

6 June 2011

Relevant facts and circumstances

You have employed a person from Country X under a subclass 457 temporary resident visa. His employment is a permanent position and subject to him retaining the 457 visa.

The employee has not applied for Australian residency or citizenship and he intends to return to Country X prior to the expiration of his 457 visa.

The employee's partner is included in his 457 visa. She is currently residing in Country X but intends to move to Australia.

The employee owns a property in Country X and intends to return to it annually for maintenance. He has ongoing financial obligations on the property including mortgage repayments, electricity, water charges and council tax.

The employee maintains a bank account and motor vehicle in Australia.

Your employee will be entering into a new employment agreement with you. Under the terms of the agreement you will pay him employee an allowance to compensate him for the additional expenses of living away from home in order to perform his duties of employment.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 30

Fringe Benefits Tax Assessment Act 1986 Subsection 30(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1936 Section 51A

Reasons for decision

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

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:

a) 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

b) 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.

(a) 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. As the employee would not be able to claim an income tax deduction for these expenses this requirement is satisfied.

(b) 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 his 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) 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:

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 section 51A of the Income Tax Assessment Act 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.

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] 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's usual place of residence is in Country X:

· the employee has residency status in Country X

· the employee is in Australia on a Subclass 457 temporary resident visa

· the employee owns property in Country X and has ongoing financial commitments to the property

· the employee intends to return to Country X annually to maintain his property, and

· the employee intends to return to Country X prior to the expiration of his 457 visa.

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

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

Conclusion

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.

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