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Ruling

Subject: Living away from home allowance

Question 1

Can the allowance paid to the employee continue to be treated as a living-away-from home-allowance?

Answer

No

This ruling applies for the following period<s>:

Year ended 31 March 2012

Year ended 31 March 2013

The scheme commences on:

Early 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

For two periods in 2010 and 2011 because of the location of work contracts requiring the employer's equipment, the employee was required to move away from the location of the family home to perform work duties.

The employee subsequently submitted a living away from home declaration and the employer commenced paying a living away from home allowance for these periods. As the living away from home allowance was for additional accommodation expenses the employee could reasonably be expected to incur at the alternative location, it fell into the category of being FBT exempt.

In 2012 the employer again required the employee to move away from the family home to perform work duties. The employee's spouse accompanied the employee this time and has taken up permanent employment in the area the employee has moved away to.

The employee and spouse have rented a three bedroom house at the away location.

The employee is maintaining the family home which the employee intends to return to after work duties finish at the current away location. The employee's adult children who were living in the house prior to the employee moving away are still living in the house, but it is being maintained by the employee.

At this stage there is no date for cessation of work and return to the family home. It may be up to two more years.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 30(1) and

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

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

The allowance paid to the employee is not a living-away-from home-allowance benefit (LAFHA) under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as the employee is not considered to be living away from the employee's normal residence.

Detailed reasoning

Under subsection 30(1) of the FBTAA an allowance paid to an employee will be a LAFHA:

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 duties of that employment require the employee to live away from his or her normal residence;

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.

Normal residence is defined in subsection 136(1) of the FBTAA:

…in relation to an employee, means:

(a) if the employee's usual place of residence is in Australia - the employee's usual place of residence; or

(b) otherwise - either:

(i) the employee's usual place of residence; or

(ii) the place in Australia where the employee usually resides when in Australia.

Place of residence of a person is defined in subsection 136(1) to mean:

(a) a place at which the person resides; or

(b) a place at which the person has sleeping accommodation…

To determine whether an employee is living away from his or her usual place of residence generally involves a choice between two places of residence. The two places of residence for this employee are the family home and the residence at the away location.

The issue of what is meant by the term usual place of residence is addressed in paragraphs 11 to 25 of MT 2030. Paragraph 14 states:

 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.

Paragraphs 15 to 18 provide a brief description of the decisions from some cases which illustrate this point. It is then concluded at paragraph 19 that: 'an underlying theme of the cases is the general presumption that the employee's usual place of residence will be close to where he or she is permanently employed'.

 Employees who move in order to undertake a position of limited duration and who intend to return to the old locality at the end of that employment will generally be considered to be living away from their usual place of residence.

Collectively the following facts indicate that for the relevant period the away location is where the employee is permanently employed:

· the period of time that the employee is there is open ended,

· the employee works wherever the employer's equipment is needed, and

· the employee's spouse has accompanied the employee and has taken a permanent position at that location.

As the employee is permanently employed at the away location, the implication is that the usual place of residence is at the away location.

Conversely, the fact that the employee intends to return to the family home, where the employee's adult children are currently residing, after work duties finish at the away location supports the contention that the family home is the usual place of residence.

On balance, however, the facts lend greater weight to the conclusion that the employee's usual place of residence is the residence at the away location because it is where the employee is permanently employed. Therefore the away location will be the employee's normal residence for the purposes of section 30 of the FBTAA.

Since it has been established that the employee's normal residence is the away location the allowance paid to the employee will not be a LAFHA under section 30 of the FBTAA.

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