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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012241128136

Ruling

Subject: Fringe Benefits Tax - remote housing benefit

Question 1

Will the provision of housing to employees be an exempt benefit under subsection 58ZC(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Can the value of the expense payment benefit that arises from the reimbursement of the home loan interest be reduced under subsection 60(2) of the FBTAA?

Answer

Yes

Question 3

Can the value of an expense payment benefit that arises from the payment of rental expenses be reduced under subsection 60(2A) of the FBTAA?

Answer

Yes

Question 4

Can the value of the benefit arising from the reimbursement or supply of residential fuel be reduced under section 59 of the FBTAA?

Answer

Yes

This ruling applies for the following periods:

1 April 2012 - 31 March 2013

1 April 2013 - 31 March 2014

1 April 2014 - 31 March 2015

The scheme commences on:

1 April 2012

Relevant facts and circumstances

You operate a business providing products and services to various industries through your branches throughout Australia.

You have branches that are located in remote towns. These branches provide product and services predominately to the mining and mining related industries.

You require staff that have specialised skills. In order to retain existing staff and attract new staff of the required calibre in your remote branches you are considering offering them a range of benefits.

The benefits you are considering are:

You propose to offer the benefits as there is a shortage of suitable accommodation in the remote towns. You are considering acquiring or leasing suitable accommodation in these locations as it becomes available.

The benefits will be provided only to employees, not jointly with associates.

The benefits may be provided by allowing salary packaging of these benefits under the terms of a salary sacrifice arrangement (SSA) agreed upon and documented before any benefits are paid and before the work is performed.

You advise that the provision of housing assistance in remote locations is a common feature in industries conducting business where there are mining activities.

You have advised of an article published in a rural paper for the area in which your branch is located which indicates that it is customary for employers in the region to provide these benefits.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 25

Fringe Benefits Tax Assessment Act 1986 Section 58ZC

Fringe Benefits Tax Assessment Act 1986 Section 59

Fringe Benefits Tax Assessment Act 1986 Subsection 60(2)

Fringe Benefits Tax Assessment Act 1986 Subsection 60(2A)

Fringe Benefits Tax Assessment Act 1986 Subsection 140

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1)(b)

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1A)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1A)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(2E)

Reasons for decision

Question 1

Will the provision of housing to employees be an exempt benefit under subsection 58ZC(1) of the FBTAA?

You propose to lease or acquire residential properties in the towns in which your remote branches are located to allow employees to use the premises as their usual place of residence.

In determining whether the proposed benefit will be exempt it is first necessary to determine the category of benefit that will be provided. Within the FBTAA there are thirteen different categories of benefits. Each category has its own valuation rules and most categories specify certain benefits that are exempt benefits.

Section 25 of the FBTAA provides that a housing benefit arises from the provision of the use of a residential property by an employee where the property is the employee's usual place of residence.

As you will provide your employees with the use of residential premises for their usual place of residence, the benefit will be a housing benefit.

Will the provision of a housing benefit be an exempt benefit?

Under section 58ZC of the FBTAA a housing benefit that is provided to a current employee will be an exempt benefit where certain conditions are met.

Subsection 58ZC(2) of the FBTAA sets out the conditions that need to be satisfied for a housing benefit to be a remote area housing benefit. It states:

· during the whole of the tenancy period, the recipient was a current employee of the employer and the usual place of employment of the recipient was not at a location in, or adjacent to, an eligible urban area; and

To summarise the conditions to be met are:

Is the accommodation located in a remote area?

A remote area is one that is not located in or adjacent to an eligible urban area. Section 140 of the FBTAA contains two definitions of eligible urban areas.

The first definition contained within paragraph 140(1)(b) of the FBTAA is used in relation to:

Our fact sheet Fringe benefits tax - remote areas provides a list of towns which are considered to be either located in a remote area or a non-remote area.

The towns in which your remote branches are located are listed as being located in remote areas.

Therefore, this condition is satisfied.

Is the usual place of employment of the employee in a remote area?

The usual place of employment of the employees is in the towns in which your remote branches are located. As discussed above, these are in a remote area.

Therefore this condition is satisfied.

Is it necessary for you to provide or arrange the provision of residential accommodation for one of the listed reasons?

Of the three reasons that are listed, the most relevant reason is the second reason.

You have advised that:

Therefore it can be concluded that it is necessary for you to provide accommodation for your employees.

Is the accommodation provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

ATO Interpretative Decision ATO ID 2005/156 Fringe Benefits Tax: Exempt Benefits: remote area housing - non-arm's length arrangement discusses what is meant by the expression non-arm's length arrangement and states:

The expression 'at arm's length' is defined in The CCH Macquarie Concise Dictionary of Modern Law , 1988, CCH Australia Ltd/ Macquarie Library Pty Ltd, Sydney as meaning that the parties to a transaction are not connected in such a way as to bring into question the ability of one to act independently of the other.

In Granby Pty Ltd v. FCT (1995) 30 ATR 400; 95 ATC 4240, where the expression 'dealing with each other at arm's length' in section 160ZH of the Income Tax Assessment Act 1936 was in question, Lee J said (at ATR 403; ATC 4243):

In your situation it is necessary to provide accommodation to your employees due to the shortage of suitable accommodation in the towns in which your remote branches are located and the necessity to compete with other industries to both attract and retain suitably qualified employees.

You have stated that there will be no novation of existing rental agreements held by employees will be entered into.

We therefore agree that the accommodation was not provided under a non-arm's length arrangement or for a purpose that allows you to obtain a benefit from the application of subsection 58ZC(2) of the FBTAA.

This conclusion will also apply to the accommodation provided under a salary sacrifice arrangement.

ATO Interpretative Decision ATO ID 2010/182 Fringe benefits tax: exempt benefits - remote area housing benefits - salary sacrifice arrangement discusses the circumstances where the provision of remote are housing benefits under a salary sacrifice arrangement was entered into for the employer to obtain a benefit. It states:

Subparagraph 58ZC(2)(e)(ii) of the FBTAA requires that the parties to the arrangement enter into the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of the section.

In Newton v. Federal Commissioner of Taxation (1958) 98 CLR 1; (1958) 11 ATD 442; (1958) 7 AITR 298, the Privy Council examined the meaning of the word 'purpose'.

Lord Denning said at page number CLR 8; ATD 445; AITR 304,

Lord Denning also said (at the same page),

In this arrangement which provides or grants the 'recipient's overall housing right', the arrangement is entered into by each of the parties for the purpose of enabling the employer to provide the benefit of housing to its employee. There are no overt acts by which one could predicate that the arrangement has been implemented by any of the parties for the purpose of allowing the employer to enjoy the benefits of the tax exemption. The arrangement can be explained as being one of ordinary business dealings as is customary in the employer's industry.

Accordingly, the recipient's overall housing right was not granted to an employee under an arrangement described in subparagraph 58ZC(2)(e)(ii) of the FBTAA. Subparagraph 58ZC(2)(e)(ii) is not satisfied.

This situation is similar to yours. We therefore consider that where the accommodation is provided under a valid salary sacrifice arrangement, it will not be provided under a non-arm's length arrangement, or for a purpose that allows you to obtain a benefit from the application of subsection 58ZC(2) of the FBTAA

Conclusion

As all of the conditions detailed in subsection 58ZC(2) of the FBTAA are satisfied, the provision of accommodation to employees located in at your remote branches is a remote area housing benefit and therefore an exempt benefit.

Question 2

Can the value of the expense payment benefit that arises from the reimbursement of the home loan interest be reduced under subsection 60(2) of the FBTAA?

You propose to reimburse your employees interest incurred on remote area housing loans.

Subsection 60(2) of the FBTAA provides for a 50% reduction of the taxable value of expense payment fringe benefits in respect of remote area housing loan interest payment where all the conditions in that subsection are satisfied.

Subsection 60(2) of the FBTAA states:

Where:

the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;

the recipients expenditure is in respect of interest in respect of a remote area housing loan connected with a dwelling;

the recipient occupied or used the dwelling as his or her usual place of residence during a period (in this section referred to as the ``occupation period'') during which the interest accrued; and

the fringe benefit was not provided under:

a non-arm's length arrangement; or

an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

In summary the value of the benefit can be reduced where:

Will the benefit be an expense payment fringe benefit?

Section 20 of the FBTAA states:

As you will reimburse your employees for the interest incurred on their housing loans the benefit will be an expense payment fringe benefit under section 20 of the FBTAA.

Will the employee's expenditure be in respect of interest on a remote area housing loan for a dwelling?

The term 'dwelling' is defined in subsection 136(1) of the FBTAA as 'a unit of accommodation constituted by, or contained in a building, being a unit that consists, in whole or a substantial part, of residential accommodation.'

You are proposing to pay the interest expenses incurred by your employees, located at your remote branches, arising from their residential housing loans.

A remote area housing loan is defined in subsection 142(1) of the FBTAA as follows:

the common conditions set out in subsection (2E) are satisfied in relation to the occupation period; and

the loan was not made to the employee pursuant to:

a non-arm's length arrangement; or

an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60.

In summary the conditions to be met are:

Will the dwelling be the employee's usual place of residence?

You have stated that the dwellings will be the usual place of residence for your employees.

(i) Will the residence be located in a remote area?

As discussed above the towns in which you have your remote branches are considered to be located in a remote area.

(ii) Will the employee's usual place of employment be located in a remote area?

As per the discussion in question 1 above, the employees' usual place of employment will be in the towns in which you have your remote branches.

(b) Will the common conditions stated in subsection 142(2E) of the FBTAA be met

The common conditions in subsection 142(2E) of the FBTAA are stated as follows:

The meaning of the phrase 'customary for employers in the industry' is discussed in Taxation Determination TD 94/97 Fringe benefits tax: what does the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees?

Paragraphs 2 and 3 of TD 94/97 state:

You advise that it is a common feature in industries conducting business in remote areas where there are mining activities, as they are required to compete for employees and need to offer similar assistance and benefits to retain and attract employees.

In support of this contention you have referred to an article from a local paper which indicates it is customary for employers in the industry you serve to provide accommodation to their employees.

You have also stated that there is a shortage of suitable accommodation in both towns in which your remote branches are located.

Therefore we agree that it is both customary and necessary for you to provide housing assistance to your employees that reside and work in a remote area.

(c) Is the accommodation provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

For the same reasons discussed in question 1 this condition has been met.

As all the conditions listed under subsection 142(1) of the FBTAA are satisfied the housing loan is a remote area housing loan.

Will the employee occupy or use the dwelling as their usual place of residence?

As discussed in question 1 the dwelling will be the employee's usual place of residence.

Is the accommodation provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

For the same reasons discussed above this condition is met.

Conclusion

The taxable value of the expense payment fringe benefit resulting from the payment of the remote area housing loan interest will qualify for reductions in taxable value available under subsection 60(2) of the FBTAA.

Question 3

Can the value of an expense payment benefit that arises from the payment of rental expenses be reduced under subsection 60(2A) of the FBTAA?

Due to a shortage of suitable accommodation in both towns in which your remote branches are located you are considering acquiring or leasing suitable properties as they become available. You then propose to allow employees to use the properties as their usual place of residence.

Subsection 60(2A) of the FBTAA provides for a 50% reduction of the taxable value of expense payment fringe benefits in respect of remote area housing rental payments where all the conditions in that subsection are satisfied.

Subsection 60(2A) of the FBTAA states as follows:

In summary the conditions to be met are:

Will the benefit be an expense payment fringe benefit?

As discussed in question 2, where you reimburse an employee for an expense they have incurred, you will be providing an expense payment fringe benefit.

Will the employee's expenditure be in respect of remote area housing rent of their accommodation?

You have advised that you propose to reimburse your employees for their rental expenses in respect of their accommodation.

Subsection 142(1A) of the FBTAA sets out the conditions to be met for rent of accommodation to qualify as remote area housing rent. Subsection 142(1A) states:

In summary the conditions to be met are:

The payment by you for the housing rental payments of your employees located at your remote branches will constitute remote area housing rent as all the requirements of subsection 142(1A) of the FBTAA have been satisfied.

Will the employee occupy or use the dwelling as their usual place of residence?

As discussed in question 1 the dwelling will be the employee's usual place of residence.

Is the accommodation provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

For the same reasons discussed above this condition is met.

Conclusion

The taxable value of the expense payment fringe benefit resulting from the payment of the remote area housing rental payments of your employees will qualify for reductions in taxable value as per subsection 60(2A) of the FBTAA.

Question 4

Can the value of the benefit arising from the reimbursement or supply of residential fuel be reduced under section 59 of the FBTAA?

You propose to either supply or reimburse your employees for the whole or part of the cost of electricity, gas or other residential fuel.

Residential fuel is defined under subsection 136(1) of the FBTAA as 'any fuel (including electricity) for use for domestic purposes.'

Section 59 of the FBTAA provides for a reduction in the taxable value of remote area residential fuel where certain conditions are met.

Remote area housing benefit

Subsection 59(1) states:

In summary, where you reimburse or supply residential fuel, the taxable value will be reduced where:

Will the employee receive a remote area housing benefit?

As discussed in question 1, you will be providing your employees with remote area housing benefits.

Will the benefit be an expense payment benefit, a property benefit or a residual benefit?

Where you reimburse your employees for their fuel costs you will be providing an expense payment fringe benefit.

Therefore the 50% reduction available under subsection 59(1) of the FBTAA will apply where you supply or reimburse your employees' for the cost of their residential fuel.

Remote area housing loan

A reduction in the taxable value of the benefit that arises from the provision of residential fuel will apply under subsection 59(2) of the FBTAA where an employee is in receipt of a remote area housing loan and the conditions listed under subsection 59(2) are met.

Subsection 59(2) states:

To summarise, the taxable value of the benefit provided to your employees can be reduced by 50% where:

Will the benefit be an expense payment benefit, a property benefit or a residual benefit?

As discussed previously you will be providing an expense payment benefit, property benefit or residual benefit when you supply or reimburse your employees for the whole or part of the cost of electricity, gas or other residential fuel

Will the residential fuel be for use in connection with the employee's usual place of residence for which the employee has an obligation to repay a remote area housing loan?

We have previously agreed at question 2, that your employees' accommodation is their usual place of residence and that their housing loan is considered to be a remote area housing loan.

Is the benefit provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

For the same reasons as were discussed previously it is accepted that the supply or reimbursement of an employees residential fuel will not occur under a non-arm's length arrangement, or an arrangement entered into b any of the parties for purposes that include the purpose of enabling you to obtain the 50% reduction

Conclusion

As all the conditions listed under subsection 59(2) will be met the taxable value of the expense payment fringe benefit, property fringe benefit or residual fringe benefit can be reduced.

Remote area housing rent

A reduction in the taxable value of the benefit that arises from the provision of residential fuel will apply under subsection 59(3) of the FBTAA where an employee's expenditure is in respect of remote area housing rent and the conditions listed under subsection 59(3) are met.

Subsection 59(3) states:

To summarise, the taxable value of the benefit provided to your employees can be reduced by 50% where:

Will the benefit be an expense payment benefit, a property benefit or a residual benefit?

As discussed previously you will be providing an expense payment benefit, property benefit or residual benefit when you supply or reimburse your employees for the whole or part of the cost of electricity, gas or other residential fuel

Will the residential fuel be for use in connection with the employee's usual place of residence for which remote area housing rent has accrued?

We have previously agreed at question 3, that your employees' accommodation is their usual place of residence and that their expenditure on their housing rent is considered to be a remote area housing rent.

Is the benefit provided under a non-arm's length arrangement or as part of an arrangement entered into by any of the parties for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section?

For the same reasons as were discussed previously it is accepted that the supply or reimbursement of an employees residential fuel will not occur under a non-arm's length arrangement, or an arrangement entered into any of the parties for purposes that include the purpose of enabling you to obtain the 50% reduction

Conclusion

As all the conditions listed under subsection 59(3) will be met the taxable value of the expense payment fringe benefit, property fringe benefit or residual fringe benefit can be reduced by 50%.


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