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Ruling

Subject: Payment of allowance

Question 1

Is the $50 allowance per night paid for meals when the employees are required to travel a living away from home allowance or a travel allowance or a meal allowance?

Answer 1

Travel allowance

This ruling applies for the following period

01 July 2011 - 30 June 2012

Relevant facts

The following relevant facts are based on:

o Your application for a Private Binding Ruling

o Further information provided

The employer is in the specialized removal industry and engages in this type of work at various locations throughout Australia.

They employ people from numerous locations and due to the nature of the industry, travel is considered to be an essential for the employees to perform their working duties.

When the employees are required to travel, the employer pays for all accommodation costs. They are now also considering commencing paying their employees a $xx allowance per night for meals.

At present the clients have some employees working on a 21 consecutive days roster and have a seven day break and the remaining employees work rosters of less than 21 sequential days.

All employees maintain their principal place of residence and their families do not accompany them when they travel.

The employees do not have a regular place of work when not travelling. Work is at various locations and for various lengths of time.

The employees are spread across several work locations depending upon the length and type of job.

During break periods the employees go back to their principal place of residence and families.

The employees travel from one work location to other work locations directly whilst rostered on if they have completed the job. If the job isn't complete when they are due for their break they will return to the same location after the break to finish the job before moving on to the next work location. If it is complete when they take the break they will move to another location after the break.

On average the employees go to six or seven different work locations.

There is no time frame for the jobs. Each job varies depending on the time it would take to complete.

The types of accommodation the employees reside in when they are travelling on work are motel rooms & caravan park cabins

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 30

Income tax Assessment Act 1997 subsection 900-30(3)

Reasons for decision

Question 1

Summary

Travelling allowances are often paid for comparatively short periods. A travelling allowance is paid because the employee is travelling in the course of performing his or her job. The employee is simply travelling in order to carry out the requirements of the job and is not living away from their usual place of residence for a long period.

Detailed reasoning

Miscellaneous Taxation Ruling MT 2030: Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) outlines the distinction between a travelling allowance and a living away from home allowance.

The Taxation Office view on what qualifies as a travel allowance is outlined in Taxation Ruling MT 2030.

Paragraphs 38 and 39 of the ruling look at the distinction between a living away from home allowance (LAFHA) and a travelling allowance and states:

A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. In the former case, there is a change of job location and an actual change of residence to a place at or near that location. In the latter, the employee does not change job locations but simply travels in order to carry out the requirements of the job.

Unlike living-away-from-home allowances, there is generally no change of employment location in relation to the payment of travelling allowances. While the expenses that they are intended to compensate for may be similar - meals and accommodation, etc., - the circumstances in which the allowances are paid are essentially different.

It further states at paragraph 41:

There will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from-home allowance. For longer periods, it will be necessary to determine the nature of the allowance with the guidance provided by this Ruling.

And paragraph 42:

An employee travelling in the course of employment ordinarily would not be accompanied by his or her spouse and family. On the other hand, it is more common for the spouse and children of an employee who has temporarily changed job locations and is living away from the usual place of residence to have his or her family living at the new location.

Travelling allowances are often paid for comparatively short periods. A travelling allowance is paid because the employee is travelling in the course of performing his or her job. The taxpayer is simply travelling in order to carry out the requirements of the job and is not living away from their usual place of residence for a long period.

Travel allowance is defined in subsection 900-30(3) IT 1997 as an allowance paid by the employer to cover losses or outgoings for accommodation or food or drink and incidentals incurred for travel in or outside Australia, away from the taxpayer's ordinary residence, where the travel is undertaken in the course of the employee's duties.

Subsection 900-30(3) ITAA 1997 defines a travel allowance as:

an allowance your employer pays or is to pay to you to cover losses or outgoings:

(a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and

(b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel.

The travel may be within or outside Australia.

A living away from home allowance for purposes of section 30 of the Fringe Benefits Tax Assessment Act 1986 Section 30.is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties at the new (but temporary) workplace.

MT 2030 suggests that a living away from home allowance would necessitate a change of job location from a regular place of work and an actual change of residence to a place at or near that location. The employee would be living away from their usual place of residence for a reasonably long period at their new place of residence near their new job location.

The following factors indicate that the $xx allowance paid to the employees would not amount to a living away from home allowance but would constitute a travel allowance:

1. The employees would not be away from their usual place of residence residing at a new place of residence near their new job location for a reasonably long period

2. The employees are required to travel to different locations in the performance of their duties. They move on to a different location after a job is completed and do not take up a regular place of temporary residence for a lengthy period away from their usual place of residence

3. The employees have not moved to and taken up a new place of temporary residence for a lengthy period but instead only occupy temporary accommodation in a motel room or caravan park cabins while travelling in the course of performing their duties. Motel rooms and caravan park cabins are generally considered temporary short term accommodation.

4. There is no change of job location from a regular place of work as the employees do not have a regular job location but are but simply travel in order to carry out the requirements of their job.

5. Some employees are on a 21 consecutive days roster and have a seven day break and the other employees work rosters of no more than 21 sequential days before their break. On completion of their rosters they go back to their principal place of residence and families for the breaks. After the break they move on to a new location or return to the pre break location to complete the job and then move on to a new location.

6. They are not accompanied by their spouse or family.

7. After completing their roister during break periods they go back to their principal place of residence and families

Accordingly, the $xx allowance per night paid to employees for meals when the employees are required travel is a travel allowance.

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