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This edited version has been archived due to the length of time since original publication.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: 1012395012996

Ruling

Subject: FBT Relocation Benefits

Question 1

Will the provision of advice by the professional Relocation Assistance company be an exempt benefit under section 58AA of the Fringe benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Will the payment of the cost of moving and if necessary storing the employee's personal effects set out in your relocation policy be an exempt benefit under section 58B of the FBTAA?

Answer

Yes

Question 3

Will the reimbursement of the expenses nominated in your relocation policy be an exempt benefit under section 58C of the FBTAA?

Answer

Yes

This ruling applies for the following period

Year ending 31 March 2013

The scheme commenced on

1 April 2012

Relevant facts

You are proposing to recruit an employee who currently resides outside the metropolitan area.

The employee will undertake his employment duties in your corporate offices that are located in the central business district.

Your first priority in your operations is the personal safety of your workforce and others working on your work sites. This safety culture is deeply entrenched in your workforce and includes extensive safety inductions and training sessions for new employees.

As a reflection of this safety culture you require your employees to live within the metropolitan area.

Consequently, you propose to assist the employee to relocate his residence to a location that is within the metropolitan area.

This assistance will be provided in the form of:

These payments and reimbursements will be made in accordance with your reimbursement policy.

You provided a copy of the policy.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 58AA

Fringe Benefits Tax Assessment Act 1986 section 58B

Fringe Benefits Tax Assessment Act 1986 section 58C

Reasons for decision

1. Will the provision of advice by the professional relocation assistance company be an exempt benefit under section 58AA of the Fringe benefits Tax Assessment Act 1986 (FBTAA)?

In accordance with your relocation policy you have retained the services of a professional Relocation Assistance company to provide assistance to the employee with:

Under section 58AA the services provided by a relocation consultant will be an exempt benefit when the specified conditions are met. Section 58AA states:

Therefore, the provision of the assistance by the professional relocation assistance company will be an exempt benefit if the following conditions are met:

Each of these conditions is considered below:

In broad terms, section 20 of the FBTAA provides that an expense payment benefit will arise when the employer either pays a third party in satisfaction of expenses incurred by an employee or reimburses an employee for expenses which he or she has incurred.

Under the arrangement you will retain the services of a professional Relocation Assistance company that will provide advice to the employee. As you are engaging the services of the relocation consultant the employee will not incur the expense for the advice provided. Therefore, the benefit will not be an expense payment benefit.

Section 45 provides that a benefit will be a residual benefit if it is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). In the arrangement being considered the benefit that will be received by the employee will be advice in relation to obtaining permanent accommodation in the metropolitan area, the connection of utilities and services, selection and entry by the employee's children into educational institutions and familiarisation with the local area and facilities. As this advice does not come within any of the specific benefit types it will be a residual benefit under section 45.

The term 'in respect of' is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. The reason for the employee receiving the advice is to enable the employee to commence employment duties in accordance with your policies. Therefore, the employment of the employee can be seen to be the reason for the services of the professional Relocation Assistance company being provided to the employee.

The benefit consists of the engagement of a relocation consultant.

Paragraph 58AA(c) contains three possible reasons for the services of a relocation consultant being provided. For the condition in this paragraph to be met, one or more of these reasons must be the only reason for the services of the relocation consultant being provided. The relevant reason for the purpose of this ruling is that 'the employee is required to change his or her usual place residence to perform those duties'.

The term 'required' is not defined in the FBTAA. Therefore, it must take its ordinary meaning in the context in which it is used. Relevantly , The Macquarie Dictionary [ Multimedia], version 5.0.0, 01/10/01, defines 'require' as: 'to have need of; need; to impose need or occasion for; make necessary or indispensable; to place under an obligation or necessity.'

Therefore, it is considered that the term 'required' as it is used in subparagraph 58AA(1)(c)(iii) does not mean that the change of usual place of residence must be compulsory. Rather, the change may be one that is necessary in the circumstances in order for the employee to perform the duties of their employment.

In the Administrative Appeals Tribunal case of Re Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v. FC of T [ 2008] AATA 845; 2008 ATC 10-051; (2008) 71 ATR 720 (Compass), the Tribunal examined the meaning of the word 'required' in the context of living-away-from-home allowance benefits under former subsection 30(1).

In Compass an employee temporarily accepted a more senior position from his employer. The position required him to work an additional five and a half hours each week. The employee's usual place of residence was 60 kilometres from his place of employment. As a result of his extended working hours, the employee rented premises closer to his place of employment and stayed there during the week. His employer did not require him to do so. The employee intended to return to his home when the extended working arrangements came to an end. The employee was paid a weekly allowance by his employer for the additional costs he incurred in renting the property.

The Tribunal considered whether the employee was required to live away from his usual place of residence in order to perform the duties of his employment and, therefore, whether the allowance was a living-away-from-home allowance within the meaning in former subsection 30(1).

The Tribunal said in Compass:

In the circumstances being considered, you have a policy that requires employees to live within the metropolitan area. If a new employee's usual place of residence is outside this area your relocation policy sets out the assistance that you will provide to the employee to enable him or her to relocate their usual place of residence to a location situated within the metropolitan area.

As the new employee currently resides outside the metropolitan area, the employee on commencing employment will be required to change their usual place of residence so as to comply with the obligations imposed by your policy. As this is the only reason for the employee relocating their usual place of residence to the metropolitan area the engagement of the relocation consultant will come within subparagraph 58AA(1)(c)(iii) .

Paragraph 58AA(d) contains three possible reasons for the services of a relocation consultant being provided to help a 'family member'.

'Family member' is defined in subsection 136(1) to mean:

Where subparagraph 58AA (1) (c) (iii) applies the reason is:

This condition will be met as the assistance is being provided to help a 'family member' settle at the location of the employee's new usual place of residence.

As the assistance will be provided in accordance with your relocation policy that applies to all new employees whose usual place of residence is outside of the metropolitan it is accepted that the benefit is not being provided under a non-arm's length arrangement.

As the benefit is a residual benefit it is not necessary to consider this condition.

Conclusion

As each of the conditions of section 58AA are met the provision of the assistance by the professional relocation assistance company will be an exempt benefit.

Under your relocation policy you will pack, insure and ship the employee's personal effects and household goods at no cost provided the personal effects and household goods do not exceed the limits set out in the policy.

In general terms, section 58B of the FBTAA provides that an expense payment benefit or a residual benefit will be an exempt benefit where the benefit relates to the removal or storage of household effects of an employee who is required to change their usual place of residence in order to perform their duties of employment.

Subsection 58B (1) contains the conditions that must be met for the exemption to apply. Subsection 58B (1) states:

Therefore, the removal and storage of the personal effects will be an exempt benefit under section 58B if the following conditions are met:

Each of these conditions is considered below:

(i) Is the benefit an expense payment benefit or residual benefit where the benefit relates to the removal or storage of household effects of the employee?

Under the policy you will pack, insure and ship the employee's personal effects and household goods at no cost to the employee. As the employee is not incurring any of these expenses the benefits will not be expense payment benefits. Rather, they will be residual benefits.

The meaning of household effects is contained within subsection 58(2) which states:

The items that you will transport that are listed in your relocation policy are:

The policy also lists the following items which you will not transport:

To come within the exemption the items that are transported must come within the definition of 'tangible property'. 'Tangible property' is defined in subsection 136(1) to mean goods and includes animals.

Each of the items that you will pay to be transported come within this definition. This includes the two automobiles as although a car may not come within the ordinary meaning of 'household effects', the Tax Office at the meetings of the FBT subcommittee of the National Tax Liaison Group held on 19 May 2005 and the FBT States and Territories Industry Partnership held on 20 March 2003 agreed that a car will come within the very broad definition contained in subsection 58B(2) provided the car is kept primarily for the personal use of family members.

(ii) Is the removal or storage is required solely for one of the reasons listed in paragraph 58B(1)(b)?

The reasons listed in paragraph 58B(1)(b) include the reason contained in subparagraph 58B(1)(b)(iii) which states:

As this is the same requirement as that contained within subparagraph 58AA (1)(c)(iii) which as discussed above is met, it is accepted that this condition is also met.

(iii) Is the removal or storage required to enable a family member to undertake one of the actions listed in paragraph 58B(1)(c)?

As subparagraph 58B(1)(b)(iii) applies the relevant reason to consider under paragraph 58B(1)(c) is contained in subparagraph 58B(1)(c)(iii) which states:

As this is the same requirement as that contained within subparagraph 58AA(1)(d)(iii) which as discussed above is met, it is accepted that this condition is also met

(iv) Will the removal or storage takes place within 12 months after the day on which the employee commences to perform the duties of employment at the employee's new place of employment and is the benefit provided under an arm's length arrangement?

For the reasons discussed above in relation to the provision of the services of the relocation consultant it is accepted that the removal and storage of the household effects will be provided under an arm's length arrangement as it is provided under the same relocation policy.

Therefore, this condition will be met if the removal or storage occurs within 12 months after the employee begins to perform the duties of employment at the new place of employment.

(v) If subparagraph 58B (1) a (i) applies will documentary evidence be given to the employer before the declaration date?

Subparagraph 58B(1)(a)(i) applies where the benefit is an expense payment benefit. As the benefit is a residual benefit it is not necessary to consider this condition.

(vi) Will the removal or storage be provided in connection with travel undertaken by the employee in the course of performing the duties of employment?

This condition will also be met as the removal and storage is provided in connection with a change in the usual place of residence. It is not provided in connection with travel undertaken by the employee in the course of performing the duties of employment.

Conclusion

Provided the removal or storage occurs within 12 months after the employee begins to perform the duties of employment at the new place of employment each of the conditions in section 58B will be met. Therefore, provided the removal or storage occurs within the stipulated timeframe the removal and storage of household effects under the relocation policy will be an exempt benefit.

3. Will the reimbursement of the expenses nominated in your relocation policy be an exempt benefit under section 58C of the FBTAA?

Under your relocation policy you will reimburse certain nominated expenses associated with the sale of the property that was the employee's usual place of residence prior to the employee commencing their duties of employment at your office and the purchase of the property located within the metropolitan area that will become the employee's usual place of residence. This reimbursement will be an expense payment benefit.

In general terms section 58C provides that an expense payment benefit will be an exempt benefit when the expenses are the result of the employee being required to change their usual place of residence so as to perform their duties of employment.

For the benefit to be an exempt benefit it is necessary for:

Are the conditions in subsection 58C(1) met?

Subsection 58C (1) states:

Therefore, the pre-conditions set out in subsection 58C(1) require:

Each of these conditions is considered below:

(i) Does the employee have a relevant interest in a dwelling?

The employee currently owns the property that is being sold.

(ii) Will the interest be sold solely because the employee is required to change his or her usual place of residence in order to perform the duties of his or her employment?

As discussed above, the sole reason for the employee changing their usual place of residence is to enable the employee to comply with the policy that requires the employee to reside in the metropolitan area.

(iii) Was the interest held at the time you notified the employee that he or she was required to perform the duties of employment at your office?

As discussed above, the employee owns the property.

(iv) Was the property the employee's usual place of residence at the time the employee was notified of the requirement to perform the duties of employment at the new place of employment?

The property was the employee's usual place of residence at the time the employee was notified of the requirement to perform their duties of employment at your office.

Conclusion

Each of the conditions in subsection 58C(1) are met.

Are the conditions in subsection 58C(2) met in relation to the expenses that relate to the sale of the property that was the employee's usual place of residence?

Under your relocation policy you will reimburse the following expenses that relate to the sale of the property that was the employee's usual place of residence:

The expense payment benefit that arises from the reimbursement of these expenses will be an exempt benefit if the conditions in subsection 58C(2) are met. Subsection 58C(2) states:

Where:

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

Therefore, the reimbursement of the expenses related to the sale of the property that was the employee's usual place of residence will be an exempt benefit under subsection 58C(2) if:

the expenditure is incidental to the sale of the property;

the employee enters into a contract for sale within two years after the day on which the employee commenced to perform the duties of employment at the new place of employment;

documentary evidence is provided to the employer before the date on which the fringe benefits tax return is lodged; and

the benefit is not provided under a non-arm's length arrangement.

Each of these conditions is considered below:

(i) Is the expenditure incidental to the sale of the property?

The following expenditure is listed in subsection 141A(1) as expenditure that is incidental to the sale of a property:

This list includes each of the expenses you will reimburse.

(ii) Will the employee enter into a contract for sale within two years after the day on which the employee commenced to perform the duties of employment at the new place of employment?

This condition will be met as your relocation policy provides that the assistance will not be available for expenses incurred after 24 months from the commencement of work at the new location.

(iii) Will documentary evidence be provided to you before the date on which the fringe benefits tax return is lodged?

This condition will be met as your relocation policy requires the receipts for payment to be attached to the form used to claim a reimbursement of expenses.

(iv) Is the benefit provided under an arm's length arrangement?

This requirement is met as the benefit is being provided under the terms of your relocation policy which enables the assistance to be provided to all employees who are required to relocate their usual place of residence.

Conclusion

As each of the conditions in subsections 58C(1) and 58C(2) are met the reimbursement of the expenses incurred in the sale of the of the property that was the employee's usual place of residence will be an exempt benefit.

Are the conditions in subsection 58C(3) met in relation to the expenses that relate to the purchase of the property that became the employee's usual place of residence?

Under your relocation policy you will reimburse the following expenses that relate to the purchase of the property that became the employee's usual place of residence:

The expense payment benefit that arises from the reimbursement of these expenses will be an exempt benefit if the conditions in subsection 58C(3) are met. Subsection 58C(3) states:

Therefore, the reimbursement of the expenses related to the purchase of the property that became the employee's usual place of residence will be an exempt benefit under subsection 58C(3) if:

Each of these conditions is considered below:

(i) Does the employee acquire a prescribed interest in land on which there is a dwelling?

This condition will be met as the assistance is only available for the purchase of a property that will become the employee's usual place of residence.

(ii) Does the employee acquire the interest solely because the employee is required to change his or her usual place of residence?

As discussed above, the sole reason for the employee changing their usual place of residence is to enable the employee to comply with the policy that requires the employee to reside in the metropolitan area.

(iii) Does the employee enter into the contract for the acquisition of the interest within four years after the day on which the employee commenced to perform the duties of employment at the new place of employment?

This condition will be met as your relocation policy provides that the assistance will not be available for expenses incurred after 24 months from the commencement of work at the new location.

(iv) Will the employee occupy the dwelling as his or her usual place of residence?

This condition will be met as the assistance is not available for the purchase of an investment property.

(v) Is the benefit an expense payment benefit where the expenditure is incidental to the acquisition of the interest?

As the benefit is the reimbursement of an expense incurred by the employee it will be an expense payment benefit.

The following expenditure is listed in subsection 141A(1) as expenditure that is incidental to the purchase of a property:

This list includes each of the expenses you will reimburse.

(vi) Will documentary evidence be provided to you before the date on which the fringe benefits tax return is lodged?

This condition will be met as your relocation policy requires the receipts for payment to be attached to the form used to claim a reimbursement of expenses.

(vii) Is the benefit provided under an arm's length arrangement?

This requirement is met as the benefit is being provided under the terms of your relocation policy which enables the assistance to be provided to all employees who are required to relocate their usual place of residence.

Conclusion

As each of the conditions in subsections 58C(1) and 58C(3) are met the reimbursement of the expenses incurred in the purchase of the of the property that becomes the employee's usual place of residence will be an exempt benefit.

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The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

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