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Ruling

Subject: Fringe benefits tax

Issue 1

Question 1

In relation to scenario A, are the meals provided to the employees in the dining room at one of the employer's business premises property benefits which are exempt under section 41 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 2

In relation to scenario A, will section 47(5) of the Fringe Benefits Tax Assessment Act 1986 apply to the provision of accommodation at the relevant premises to the relevant employees?

Answer

No

Question 3

In relation to scenario A, can the taxable value of fringe benefits arising from the provision of accommodation at the relevant premises to the relevant employees be reduced under section 52 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 4

In relation to scenario B is the provision of accommodation to the relevant employees a residual benefit that is exempt under section 47(5) of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

Question 5

In relation to scenario B, can the taxable value of fringe benefits arising from the provision of accommodation to the relevant employees be reduced under section 52 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 6

In relation to scenario C, will the breakfast or/and dinner/lunch allowance paid to the relevant employees be a living-away-from-home allowance pursuant to subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

Question 7

If the answer to question six is yes, will you be entitled to concessional treatment for the payment under subsection 31(2) of the Fringe Benefits Tax Assessment Act 1986?

Answer

Not applicable

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

The scheme commences on:

1 April 2013

Issue 2

Question 1

In relation to scenario A, can you apply the concessional treatment under section 31 of the FBTAA to the LAFHA fringe benefits in the 2015 FBT year?

Answer

Yes

Question 2

In relation to scenario B, can you apply the concessional treatment under section 31 of the FBTAA to LAFHA fringe benefits in the 2013 FBT year?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

The scheme commences on:

1 April 2013

Issue 3

Question 1

In relation to scenario A, is the allowance paid to the employee a travel allowance and not a living-away-from-allowance benefit under section 30 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 2

In relation to scenario B, is the allowance paid to the employee a travel allowance and not a living-away-from-allowance benefit under section 30 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 3

In relation to scenario C, is the allowance paid to the employee a travel allowance and not a living-away-from-allowance benefit under section 30 of the Fringe Benefits Tax Assessment Act?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

The scheme commences on:

1 April 2013

Relevant facts and circumstances

Issue one

You have a dining room at your business premises that provides breakfast, lunch and dinner seven days per week.

You are required, from time to time, to utilise particular employees from other areas of the organisation to work at that location for varying lengths of time.

The relevant employees who are seconded to the location, are required as part of their position to undertake such duties.

These employees are required to live away from home to undertake their duties at the location.

They work from Monday to Friday with the weekend off, when they are allowed to return home.

These seconded employees are provided with accommodation.

Employees receive meals at no cost in the dining room located on the business premises.

Scenario A

Permanent employee

Maintains a home in Australia for his family in location N

Period away from usual place of residence is 30 days

Meals provided at the dining room on business premises

Accommodation is provided on business premises

Scenario B

Permanent employee

Maintains a home in Australia for his family in location N

Period away from usual place of residence is 30 days

Meals provided at the dining room on business premises

Due to limited space, accommodation will be provided nearby

Scenario C

You might pay the employee in scenario B breakfast and lunch allowance in accordance with your policy as he or she is not accommodated at business premises.

Due to time constraints the employee might need to finish breakfast/lunch in the accommodation before commencing work. The accommodation does not have kitchen facilities.

Issue two

Every year you send some employees to Area A for a several weeks during a particular period to undertake work.

These employees reside accommodation that you provide. However you pay them living-away-from-home allowances (LAFHA) to compensate them for the additional food expenses incurred because they are required to live away from their usual place of residence to perform the duties of employment.

In the last few years you received LAFH declarations from these employees who were temporarily transferred.

Most of the employees who temporarily transfer to Area A are junior employees who are single.

You will apply the new LAFHA law to these employees for their LAFHA which will re-commence in mid 2013.

The following scenarios may happen in the 2013 and 2014 calendar years:

Scenario A

The employee maintains a home in Australia in the 2013 year for his or her immediate use and enjoyment at all times while required to live away from home for his or her work at the temporary location in mid 2013.

He or she receives a LAFHA while living at Area A.

He or she provides you with a declaration about living away from home.

The employee also maintains a home in Australia in the 2014 year for his or her immediate use and enjoyment at all times while required to live away from home for his or her work at the temporary location in mid 2014.

He or she also receives the LAFHA while living at Area A in 2014.

There is a twelve month gap between his or her 2013 and 2014 journeys.

Scenario B

Employees who volunteer to work at the temporary location are mostly junior employees.

The employee in this scenario lives with his or her parents in the 2013 calendar year.

The employee does not have an ownership interest in his or her parents' home.

He or she also receives a LAFHA while living away from home at Area A during mid 2013.

He or she provides a declaration about living away from home.

Issue three

You have employees who are required to travel to various locations every day.

The employee may be required to go to various locations in country areas.

While he or she is in country areas he or she is required to stay in a motel with no kitchen facilities and should be near the work location.

Scenario A

The employee is paid meal and accommodation allowance when he or she is in Town A, Town B, Town C and Town D.

The employee is based in Home Town and is required to travel to the other towns.

His or her family home is in Home Town, which he or she has been using as a family home only.

He or she has receipts to substantiate his or her expenses.

His or her routine is provided below:

This pattern of travel is representative of travel for the whole year.

Whilst at these locations he or she is required to stay in motels near the work location with no kitchen and self-catering facilities.

Scenario B

The employee is paid meal and accommodation allowance.

The employee is based in Home Town and is required to work in Home Town office from Monday to Friday.

Every second week he or she is required to travel to Town E from Monday to Friday.

He or she has a home in Home Town for personal use only.

During his or her period in Town F and Town E he or she stays in motel accommodation near the work location with no kitchen and self-catering facilities.

He or she can provide receipts for the expenses.

This pattern of travel is representative of travel for the whole year.

Scenario C

The employee is paid meal and accommodation allowance.

The employee is based in Home Town. His or her family home is in Home Town which or she has been using it for a family home only.

He or she has receipts to substantiate his or her expenses.

He or she receives accommodation and/or meal allowances while he or she is in Town G, Town H, Town I and Town J.

During the period he or she stays in motels near the work location with no kitchen facilities.

This pattern of travel is representative of travel for the whole year.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 30,

Fringe Benefits Tax Assessment Act 1986 Section 31,

Fringe Benefits Tax Assessment Act 1986 Section 31B,

Fringe Benefits Tax Assessment Act 1986 Section 31C,

Fringe Benefits Tax Assessment Act 1986 Section 31D,

Fringe Benefits Tax Assessment Act 1986 Section 31F,

Fringe Benefits Tax Assessment Act 1986 Section 41,

Fringe Benefits Tax Assessment Act 1986 Subsection 47(5),

Fringe Benefits Tax Assessment Act 1986 Section 52 and

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

Reasons for decision

Issue 1 Question 1

Summary

The meals provided to the employees in the dining room are property benefits that are exempt under section 41 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Detailed reasoning

Under section 40 of the FBTAA where:

…at a particular time, a person (in this section referred to as the "provider") provides property to another person (in this section referred to as the "recipient"), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.

'Property benefit' is defined in subsection 136(1) of the FBTAA to mean:

a benefit referred to in section 40 but does not include a benefit that is a benefit by virtue of a provision of subdivision A of Divisions 2 to 10 (inclusive) of Part III.

The meals provided to the employees do not constitute entertainment and are not benefits by virtue of a provision of subdivision A of Divisions 2 to 10.

The meals provided to the employees are property benefits.

Food and drink are considered to be tangible property as defined in subsection 136(1) of the FBTAA therefore its provision to the instructors is the provision of a property benefit.

To be an exempt benefit under section 41 of the FBTAA, the property benefit must be provided to:

· a current employee of the employer in respect of his or her employment, and

· consumed by the employee on a working day on the business premises of the employer.

In paragraph 44 of Taxation Ruling TR 97/17 which discusses the application of section 41 of the FBTAA, it is noted that a working day is any 24 hour period during which work is usually performed by the employee.

The employees perform the duties of their employment at your business premises from Monday to Friday and return home on the weekends. The meals they are provided with are consumed on the days that they are performing their duties.

The meals are provided in the dining room which is on your business premises.

Therefore the meals provided to the employees in the dining room are exempt under section 41 of the FBTAA.

Issue 1 Question 2

Summary

Subsection 47(5) of the FBTAA will not apply to the provision of accommodation on the business premises to the relevant employees as they are travelling in the course of performing their duties of employment rather than living away from home.

Detailed reasoning

The accommodation provided to the relevant employees is a residual benefit.

As is applicable subsection 47(5) of the FBTAA states that:

Where:

a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment;

b) the unit of accommodation is for the accommodation of eligible family members and is provided 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;

c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment…

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

To determine if the subsection applies to the provision of accommodation it is necessary to consider whether the employee is:

· living away from his or her usual place of residence in order to perform the duties of his or her employment or

· travelling in the course of performing his or her duties of employment

· whilst at the temporary location.

Miscellaneous Taxation Ruling MT 2030 addresses the issue of the distinction between travelling and living away from home allowances. Paragraphs 35 to 43 of MT2030 outline various factors that may be considered in making the distinction.

Although the employees are not paid an allowance but are provided with the use of a unit of accommodation, the same factors may be considered to determine the reason why the accommodation is being provided for the purposes of subsection 47(5) of the FBTAA.

Paragraph 38 of MT 2030 states the following:

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 actually 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.

The employees are required to undertake duties of employment at the temporary location as part of their position. This is an indication that the employee in scenario A is more likely to be considered travelling in order to carry out the requirements of the job.

Paragraphs 39 and 40 of MT2030 refer to length of time that the employee is away from home:

Travelling allowances are often paid for comparatively short periods, exceptions being allowances where the employment is inherently itinerant in nature or where travelling is regular incident of the occupation…

…The nature of the allowance is not to be determined by reference solely to the period for which it is paid…

The employee in scenario A is working at the temporary location for 30 days and returns home for the weekend. This is a further indication that the employee is travelling rather than living away from home.

Paragraphs 42 and 43 refer to family members accompanying the employee:

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.

That is not to say that an unaccompanied employee should always be treated as travelling and an accompanied one regarded as living away from home. While those factors may be indicative of the nature of the employee's absence, the tests for determining the purpose of the allowance are as previously explained…

The employee's family resides at home whilst he or she is at the temporary location. Although this is not determinative it is a further indication that he or she is more likely to be travelling.

Taking into consideration the indicators as a whole it is concluded that he or she is travelling in the course of his or her employment. Therefore paragraph 47(5)(c) of the FBTAA is not satisfied and the provision of the accommodation will not be exempt under subsection 47(5) of the FBTAA.

Issue 1 Question 3

Summary

The taxable value of the provision of accommodation to the employee in scenario A may be reduced in accordance with the otherwise deductible rule under section 52 of the FBTAA.

Detailed reasoning

The provision of accommodation at your premises to the employee in scenario A is a residual fringe benefit because it is not exempt.

Under section 52 of the FBTAA the taxable value of a residual fringe benefit may be reduced in accordance with the otherwise deductible rule as the recipient of the fringe benefit is the employee.

Broadly, this means that you may reduce the taxable value by the amount the employee would have been entitled to claim as an income tax deduction if the residual benefit had not been provided as a fringe benefit and the employee had paid for the accommodation that comprises the residual benefit.

We have established that the employee is travelling in the course of his or her employment. If he or she had paid for any accommodation whilst travelling, he or she would have been entitled to claim an income tax deduction.

There is no requirement for the employee to provide either a travel diary or a declaration in order for this hypothetical deduction to be applied to reduce the taxable value of the residual fringe benefit.

This is because the residual fringe benefit is an exclusive employee residual benefit as defined in subsection 136(1) of the FBTAA and is not an extended travel residual benefit as defined in subsection 136(1) of the FBTAA.

Consequently, the taxable value of the provision of accommodation to the employee in scenario A may be reduced to nil under section 52 of the FBTAA.

Issue 1 Question 4

Summary

Subsection 47(5) of the FBTAA will not apply to the provision of accommodation to the employee in scenario B.

Detailed reasoning

See reasons for decision to question two of issue one. The employee in scenario B is also considered to be travelling the course of his employment duties.

Issue 1 Question 5

Summary

The taxable value of the provision of accommodation at your premises may be reduced to nil under section 52 of the FBTAA for the employee in scenario B.

Detailed reasoning

See reasons for decision for question three.

Issue 1 Question 6

Summary

The breakfast or/and dinner/lunch allowance paid to the employee in scenario C is not a living-away-from-home allowance under subsection 30(1) of the FBTAA, rather it is a travel allowance.

Detailed reasoning

Subsection 30(1) of the FBTAA 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.

The employee in scenario C is the same employee described in scenario B. He or she is considered to be travelling in the course of his or her employment duties. Thus any additional expenses in relation to food and drink that he or she might incur would be deductible.

As outlined in subsection 30(1) of the FBTAA a LAFHA is not designed to compensate an employee for expenses that are deductible. Consequently the allowance paid in scenario C will not be a LAFHA. Rather it is considered to be a travel allowance.

Issue 1 Question 7

Summary

N/A

Issue 2 Question 1

Summary

In relation to scenario A, you can apply the concessional treatment under section 31 of the FBTAA for snow allowances in the 2015 FBT year.

Detailed reasoning

The taxable value of a LAFHA may be calculated in accordance with section 31 of the FBTAA where the conditions in subsection 31(1) are met:

This section applies to a living-away-from-home allowance fringe benefit covered by section 30(1) in relation to a year of tax to the extent that the employee satisfies all of the following for the fringe benefit and the period to which it relates:

a) section 31C (about maintaining an Australian home);

b) section 31D (about the first 12 months);

c) section 31F (about declarations).

In accordance with section 31C of the FBTAA an employee satisfies this section if:

a) the place in Australia where the employee usually resides when in Australia

i. is a unit of accommodation in which the employee or the employee's spouse has an ownership interest (within the meaning of the Income Tax Assessment Act 1997); and

ii. continues to be available for the employee's immediate use and enjoyment during the period that the duties of that employment require the employee to live away from it; and

b) it is reasonable to expect that the employee will resume living at the place when that period ends.

Employees are sent from where they normally work to work at Area A for several weeks during a particular period of the year. The employee in scenario A will be maintaining a home in Australia for his or her immediate use and enjoyment at all time whilst he or she is working at the Area A in mid 2013.

This will also be the case when he or she is working and living at Area A in mid 2014.

As section 31C of the FBTAA will be satisfied, paragraph 31(1)(a) of the FBTAA will therefore be satisfied for year ended 31 March 2014 and the year ended 31 March 2015.

Subsection 31D(1) states that section 31D of the FBTAA will be satisfied if:

…the fringe benefit relates only to all or part of the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she usually resides when in Australia.

For the purposes of subsection 31D(1), paragraph 31D(2)(a) allows for the employer to pause the 12-month period.

For the employee in scenario A:

· the 12 month period commences when the employee initially goes to Area A for several weeks in mid 2013

· when the employee returns to the home for 12 months the 12 month period is paused, and

· it then recommences when the employee returns to Area A in mid 2014.

For the year ended 31 March 2015, section 31D of the FBTAA will be satisfied and consequently paragraph 31(1)(b) of the FBTAA will be satisfied..

You will satisfy section 31F of the FBTAA where the employee gives to you a declaration, in a form approved by the Commissioner, setting out:

· the address of the place in Australia where the employee usually resides when in Australia, and

· that section 31C is satisfied for that place, and

· the address of each place where the employee actually resided during the period to which the benefit relates.

The employee in scenario A provides a declaration about living away from home therefore this section will be satisfied and consequently paragraph 31(1)(c) of the FBTAA will also be satisfied.

Therefore as the employee in scenario A will satisfy all of the requirements of subsection 31(1) of the FBTAA, the taxable value of the LAFHA fringe benefits provided for the year ended 31 March 2015 may be calculated in accordance with section 31 of the FBTAA.

Issue 2 Question 2

Summary

The taxable value of the LAFHA paid to the employee in scenario B cannot be determined using the concessional treatment under section 31 of the FBTAA. Instead the taxable value will be calculated using section 31B of the FBTAA which is the amount of the allowance.

Detailed reasoning

The employee in scenario B will be performing his or her duties of employment at Area A during a particular period during 2013. The allowance paid to him or her is in the nature of compensation for additional food expenses while living away from his or her normal place of residence, i.e. his or her parent's home.

The allowance is a LAFHA benefit under subsection 30(1) of the FBTAA.

As previously noted the taxable value of a LAFHA under section 31 of the FBTAA requires that the employee satisfy certain conditions. The first of those conditions is contained in section 31C of the FBTAA. To satisfy that condition the employee or employee's spouse must have an ownership interest in the place in Australia where he or she usually resides.

The employee in scenario B does not have an ownership interest in the unit of accommodation where he or she usually resides. Therefore he or she does not satisfy section 31C or section 31 of the FBTAA.

Consequently, the taxable value of the LAFHA fringe benefit must be determined under either section 31A or section 31B of the FBTAA.

For the taxable value to be determined under section 31A of the FBTAA the employee must satisfy section 31E of the FBTAA, i.e. fly-in fly-out or drive-in or drive-out. This does not apply to the employee in scenario B therefore the taxable value cannot be determined under section 31A of the FBTAA.

The taxable value must therefore be determined under section 31B of the FBTAA which states that the taxable value of the fringe benefit 'is the amount of the fringe benefit' i.e. the amount of the allowance.

Issue 3 Question 1

Summary

In relation to scenario A, the allowance paid to the employee is a travel allowance because he or she is travelling in the course of performing his or her duties, and not a living-away-from-allowance benefit under section 30 of the FBTAA.

Detailed reasoning

As stated in the reasons for decision in question two of issue one, MT 2030 addresses the issue of the distinction between travelling and living away from home allowances. There are various factors which indicate whether an allowance is a LAFHA or a travel allowance.

Employees are required to travel to different locations every day. The employee in scenario A:

· is based in Home Town

· is required to travel is required to travel to the other towns

· is away from his or her residence for relatively short periods of time, at most a week, on a regular basis

· stays in motels near the work location.

The facts in scenario A indicate that the employee is travelling in the course of his or her employment rather than living away from his or her usual place of residence.

The allowance paid to the employee is to cover meals and accommodation.

Therefore the allowance that is paid to the employee is a travel allowance rather than a LAFHA under subsection 30(1) of the FBTAA.

Issue 3 Question 2

Summary

The allowance paid to the employee in scenario B is a travel allowance because he or she is travelling in the course of performing his or her duties of employment, and not a LAFHA benefit under subsection 30(1) of the FBTAA.

Detailed reasoning

As with the employee in scenario A, the facts indicate that the employee in scenario B is travelling in the course of his or her duties:

· the employee is based in Home Town

· the employee travels every second week to Town E from Monday to Friday

· he or she stays in motel accommodation near the work location.

The allowance is paid to cover accommodation and food.

Therefore the allowance paid to the employee a travel allowance rather than a LAFHA under subsection 30(1) of the FBTAA.

Issue 3 Question 3

Summary

The allowance paid to the employee in scenario C is a travel allowance because he or she is travelling in the course of performing his or her duties of employment, and not a LAFHA benefit under subsection 30(1) of the FBTAA.

Detailed reasoning

As with the employee in scenario A, the facts indicate that the employee in scenario C is travelling in the course of his or her duties:

· the employee is based in Home Town

· the employee travels to Town G, Town H, Town I and Town J for short periods of time

· he or she stays in motels near the work location.

The allowance is paid to cover accommodation and food.

Therefore the allowance paid to the employee a travel allowance rather than a LAFHA under subsection 30(1) of the FBTAA.

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