Edited version of private advice

Authorisation Number: 1012618264129

Ruling

Subject: Living-away-from-home allowance

Question 1

If an allowance is paid for a period after 1 October 2012 on the same basis as the allowance that was paid for the period from 27 April 2012 to 21 June 2012, will the allowance be a living-away-from-home allowance?

Answer

Yes.

Question 2

If the allowance is a living-away-from-home allowance will the taxable value of the fringe benefit be calculated under section 31 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Section 31 of the FBTAA will apply to the living-away-from-home allowance if it relates to the period between 1 October 2012 and 30 September 2013. Where the allowance relates to a period after 30 September 2013, the taxable value of the fringe benefit will be calculated under section 31B of the FBTAA.

Please note that if section 31 is used to calculate the taxable value of the living-away-from-home allowance, the exempt food component will not include the food expenses of the employee's spouse and children as they do not live with the employee during the period he is living away from his normal residence.

This ruling applies for the following period:

1 October 2012 - 31 March 2013

1 April 2013 - 30 June 2014.

Relevant facts and circumstances

You entered an employment agreement with your employee on in 2011.

Your employee was an overseas resident who entered Australia on a temporary work (skilled) subclass 457 visa as a temporary resident in January 2012.

Under the terms of the employment agreement:

• the employment is for a fixed four year fixed term;

• the employee is expected to perform duties of employment in Capital city;

• you agreed to sponsor the employee for permanent residence in Australia under the Employer Nomination Scheme, and met the costs of the sponsorship fee.

Your employee has retained a property in the overseas country.

On arriving in Australia, the employee, his wife and children initially resided in Interstate location.

Although the employee's employment location is in Capital city, his wife and children have continued to reside in Interstate location since coming to Australia as the employee's wife has a medical condition which requires her to be near her support network. The support network includes her medical consultant and friends who are able to care for the employee's spouse when a medical incident occurs while the employee is at work.

When undertaking his employment duties, the employee resides at the employment location. However, on weekends he returns to the residence in Interstate location.

Although the employee applied for permanent residency, he has stated an intention to resume living in the overseas country when the employment agreement in Australia concludes and he has provided a declaration stating that his usual place of residence was in a specified location in the overseas country.

Your employee obtained permanent residency in 2013.

You entered into a new agreement with your employee, in May 2012, where you agreed to pay an allowance for:

• the Capital city accommodation costs incurred by the employee; and

• the additional food expenses for the employee, spouse and children

for the period from 27 May 2012 to 21 June 2012.

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 31G

Fringe Benefits Tax Assessment Act 1986 section 31H

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Tax Laws Amendment (2012 Measures No. 4) Act 2012 item 27

Reasons for decision

1. If an allowance is paid for a period after 1 October 2012 on the same basis as the allowance that was paid for the period from 27 April 2012 to 21 June 2012, will the allowance be a living-away-from-home allowance?

Section 30 of the FBTAA sets out the circumstances in which an allowance will be a living-away-from-home allowance.

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 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.

In summarising the requirements of subsection 30(1), an allowance will be a living-away-from home-allowance if:

(a) it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for:

• additional non deductible expenses incurred by the employee during a period; or

• additional non deductible expenses and other additional disadvantages to which the employee is subject during a period; and

(b) the additional expenses and other disadvantages arise because the duties of employment require the employee to live away from his or her normal place of residence.

(a) Is the allowance paid for additional non deductible expenses?

The allowance is comprised of an accommodation and a food component.

The accommodation component is paid to compensate the employee for the accommodation expenses incurred by the employee in renting premises in Capital city.

The food component is paid to compensate the employee for the additional food expenses incurred by the employee and family members.

The employee is not able to claim an income tax deduction for these expenses.

(b) Do the additional expenses arise because the employee is required to live away from his normal place of residence in order to perform the duties of employment?

Subsection 136(1) defines 'normal residence' to mean:

(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.

The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' to mean:

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

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

whether on a permanent or temporary basis and whether or not on a shared basis.

In the period being considered the overseas country, Interstate location and Capital city can be considered to be a residence.

Guidelines for determining which of these locations is the usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030).

Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former section 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states:

As the decisions illustrate, 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. This would be relevant even if the employee is living in temporary quarters close to a temporary job site.

Further discussion occurs at paragraphs 19 to 25. Paragraphs 19 and 20 provide the following general rules:

19. An underlying theme of the cases is a general presumption that a person's usual place of residence will be close to the place where he or she is permanently employed. Correspondingly, an employee who changes his or her place of residence because of a change in the location of a permanent job, whether by reason of a transfer with the same employer or a change of employment, would not usually be living away from home on moving to a new place of residence close to the new job location. That would be the case notwithstanding that the new place of residence was a temporary one pending the obtaining of suitable long term accommodation.

20. Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live.

As an example of the application of the general rule in paragraph 20, paragraph 22 states:

Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence.

These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051 (Compass). At paragraph 56, Deputy President S A Forgie said:

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

In considering the factors referred to in MT 2030 and in Compass, it is relevant to refer to the following factors:

• the employee initially came to Australia on a Subclass 457 temporary resident visa;

• the term of the employment contract is for a four year term;

• at the time the employee came to Australia, his intention was to return to live in the Overseas country at the conclusion of his employment with you;

• approximately two years after the commencement of the employment contract the employee became a permanent Australian resident;

• the employee only resides in Capital city whilst undertaking employment duties;

• when not undertaking employment duties, the employee returns to Interstate location to reside with his family;

• the employee's family have never resided in Capital city, but were residing with the employee in the Overseas country prior to moving to Interstate location;

• the employee's belongings were shipped out from the Overseas country to Interstate location.

Although the information provided does not indicate the type of visa the employee's family was on when they arrived in Australia, or whether they had an intention to return to reside in the Overseas country, it is accepted that the general rule discussed in paragraph 20 of MT 2030 and the associated example in paragraph 22 of MT 2030 apply to the employee. That is, it is accepted that at the commencement of the appointment, the employee's usual place of residence was in the Overseas country as:

• the appointment is for a limited four year period;

• the employee was in Australia on a 457 visa which expired at the conclusion of the four year period; and

• there was a stated intention to return to the Overseas country at the conclusion of the four year period.

In reaching this conclusion it is relevant to note that the employee has retained the ownership of the property in the Overseas country and has not purchased a property in Australia.

However, upon becoming a permanent Australian resident, the general rule in paragraph 20 of MT 2030 ceased to apply as there are no factors that indicate the employee will return to reside in the Overseas country at the conclusion of the four year appointment. Therefore, for the period after the employee became a permanent resident it is necessary to consider whether the employee's usual place of residence was in Interstate location, or in Capital city.

In so doing, it is relevant to consider the factors set out in Compass; namely:

(a) the employee's place of residence before he or she acquired another place of residence; and

(b) the employee's continuing connection to the first place of residence as shown by the family continuing to reside at the first residence, the frequency of visits to the first residence, whether the employee could return at will to the first residence and the nature of the employee's employment.

(a) The employee's place of residence before he or she acquired another place of residence

As noted in Compass, all but one of the cases referred to in the decision looked to the employee's place of residence before he or she acquired another place of residence. The exception was Case 50 (1971) 17 CTBR(NS) 332; Case C55 71 ATC 242 (Case 50).

In discussing the decision in Case 50, Deputy President S A Forgie in Compass said at paragraphs 43 and 44:

43. Case 50 concerned a taxpayer employed at a mining town, R, and living with his family in a house rented from his employer. In 1965, he decided to move the family home to another town, B, where there were better educational facilities for his children. He continued to live in the same rented house in the mining town for 12 days out of each 14 and visited his family on the remaining two days. From 1 July 1966, his employer paid him a living-away-from-home allowance. He returned the whole of the amount as income but claimed a deduction amounting to $8 per week for the whole of the year under s 51A. The Commissioner disallowed the taxpayer's claim but the Taxation Board of Review No 2 decided to allow it in part. The Board decided that:

"On the rather special facts in the case before us, we have concluded that this is a case wherein the taxpayer in the year of income maintained a home which should be regarded as his 'usual place of abode', but in which, because of the distance between it and his place of employment, he could live continuously or for long."[(1971) 17 CTBR 322 at 328]

44. In view of what it described as "special facts", the Board had actually considered them and tested them on a basis different from those that they found had actually occurred. They said:

"... [W]e are of the opinion that undue weight should not be given to the fact that the taxpayer was living at R in the accommodation described prior to his family's move to B. The matter should be tested on the basis that the situation were as if the taxpayer had lived with his family at B and had then gone to R and taken up the employment and accommodation which we have described, and had returned to B only for the stated periods. The circumstances of the taxpayer so far as his accommodation and his relationship with his family were concerned were so different prior to their move to B that we think it would not be correct to stress the fact that he lived in the same house or even in the same town before and after the move."[(1971) 17 CTBR 322 at 325-326]

The situation being considered also has special circumstances as the family was unable to reside at the employment location due to the medical support required by the employee's spouse whilst he was at work. Consequently, when they moved from the Overseas country they did not move to Capital city, but instead moved to Interstate location where the employee's spouse had the necessary support. Given these circumstances, Case 50 can be applied to disregard the general rule contained in paragraph 19 of MT 2030. That is, undue weight should not be given to the fact that the employee's employment location is in Capital city.

Rather, in using the test applied in Case 50, the matter should be tested on the basis that the situation were as if the employee had lived with his family in Interstate location and had then gone to Capital city to take up the employment and the accommodation.

(b) The employee's continuing connection to the Interstate location residence

In considering the other factors referred to in Compass, it is relevant to note the following:

• the employee's family continues to reside in Interstate location;

• the employee returns to reside with the family on weekends and when he is on leave;

• the employee is able to return to the Interstate location residence at will; and

• neither the employee, nor his family has an ongoing connection with Capital city that will result in him continuing to reside in Capital city at the conclusion of his appointment.

On the basis of these factors, it can be concluded that Capital city has not become the employee's usual place of residence. Rather, the employee's usual place of residence during the relevant period was:

• the Overseas country for the period until the employee became a permanent resident; and

• Interstate location after the employee became a permanent resident.

Given the distance between both of these locations and the employment location in Capital city it is accepted the employee was required to live away from his normal residence to perform his duties of employment.

Conclusion

If an allowance is paid to the employee on the same basis as applied to the allowance paid for the period 27 April 2012 to 21 June 2012, it will be a living-away-from-home allowance as it will be paid as compensation for additional expenses that are not deductible expenses incurred by the employee as a result of being required to live away from his normal residence.

2. If the allowance is a living-away-from-home allowance will the taxable value of the fringe benefit be calculated under section 31 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Sections 31, 31A and 31B of the FBTAA provide three alternate methods that can be used to calculate the taxable value of a living-away-from-home allowance fringe benefit. The relevant method to use depends upon whether the requirements of subsection 31(1) or subsection 31A(1) of the FBTAA are met.

If the requirements of subsection 31(1) of the FBTAA are met, the taxable value under subsection 31(2) will be the amount of the fringe benefit reduced by any exempt accommodation component and any exempt food component.

Alternatively, if the requirements of subsection 31A(1) of the FBTAA are met (as the employee satisfies the fly-in fly-out and drive-in drive-out requirements contained in section 31E of the FBTAA), the taxable value under subsection 31A(2) of that Act will be the amount of the fringe benefit reduced by any exempt accommodation component and any exempt food component.

However, if the requirements of neither of these subsections are met, the taxable value under section 31B will be the amount of the allowance.

As your employee is not a fly-in fly-out and drive-in drive-out employee, the taxable value of the living-away-from-home allowance paid to your employee will depend upon whether the requirements of subsection 31(1) of the FBTAA are met. However, the application of this subsection is subject to the transitional provisions contained in Tax Laws Amendment (2012 Measures No. 4) Act 2012 (TLA Measures No. 4 Act).

Do the transitional provisions in TLA Measures No. 4 Act apply?

Sub items 27(1) and 27(2) of TLA Measures No. 4 Act enable some of the tests in subsection 31(1) to be disregarded during the transitional period. These sub items state:

27 Transitional - existing employment arrangements

(1) During the transitional period, disregard paragraph 31C(a) and section 31D of the Fringe Benefits Tax Assessment Act 1986 if:

(a) the employee is neither a temporary resident nor a foreign resident; and

(b) during the entire period:

(i) starting at the Budget time; and

(ii) ending on 30 September 2012;

that employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed.

(2) During the transitional period, disregard section 31D of the Fringe Benefits Tax Assessment Act 1986 if:

(a) the employee is a temporary resident or a foreign resident; and

(b) during the entire period:

(i) starting at the Budget time; and

(ii) ending on 30 September 2012;

that employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed.

Both of these sub items require the employment to be covered by an eligible employment arrangement that was neither varied in a material way nor renewed during the period between Budget time and 30 September 2012.

The term 'budget time' is defined in item 27 of TLA Measures No. 4 Act, to mean:

7:30 pm, by legal time in the Australian Capital Territory on 8 May 2012.

The term 'eligible employment arrangement' is also defined in item 27 of TLA Measures No. 4 Act to mean:

… an arrangement under which:

(a) the employer; or

(b) an associate of the employer;

commits to provide the employee with an allowance or benefit for the employee's accommodation, food or drink while the duties of that employment require the employee to live away from his or her normal residence.

In discussing this definition, part 11.10 of Fringe benefits tax: a guide for employers states:

Eligible employment arrangement

An eligible employment arrangement is the arrangement under which the employer or an associate of the employer commits to provide a particular employee with an allowance or benefit for the employee's accommodation, food or drink. This is as a result of the employee's duties of employment requiring the employee to live away from his or her normal residence.

Depending on the circumstances, an eligible employment arrangement could be the contract of employment, award, enterprise agreement, or any additional arrangements involving the employer and employee.

A general agreement covering all employees, such as an award or enterprise agreement, which provides for the payment of an allowance or benefit if an employee's employment duties require the employee to live away from his or her normal residence, is not an eligible employment arrangement.

Example

Peter is an Australian resident who commenced employment in his employer's Melbourne branch prior to 8 May 2012.

Peter's employment arrangement is governed by an enterprise agreement entered into before 8 May 2012. The enterprise agreement provides for the payment of a LAFHA to employees who are required to live away from their normal residence to perform their duties of employment.

Peter's normal residence is in Melbourne.

In January 2013, Peter and his employer agreed for him to commence an 18-month secondment in the Sydney branch from 1 February 2013. As part of the agreement, the employer advised Peter that he will be paid a LAFHA during the secondment period, in accordance with the terms of the enterprise agreement.

The eligible employment arrangement in this example is the subsequent agreement under which the employer committed to pay Peter a LAFHA during the 18-month secondment period - it is not the enterprise agreement. As the eligible employment arrangement was not in place before 7.30pm (AEST) on 8 May 2012, the transitional rules will not apply to the LAFHA paid to Peter.

In applying this guidance, the relevant employment arrangement is the salary packaging agreement entered into on 8 May 2012. As this agreement ended on 21 June 2012, the employment was not covered by an eligible employment arrangement during the period between Budget time and 30 September 2012.

Therefore, the transitional arrangements will not apply and the taxation of the allowance will depend upon whether the requirements of subsection 31(1) of the FBTAA are met.

Are the requirements of subsection 31(1) of the FBTAA met?

Subsection 31(1) of the FBTAA states:

This section applies to a living-away-from-home allowance fringe benefit covered by subsection 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).

Are the requirements of section 31C met?

Section 31C of the FBTAA requires an employee to maintain a home in Australia from which they are living away from.

Section 31C states:

SECTION 31C MAINTAINING A HOME IN AUSTRALIA

The 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

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

In discussing the requirement to have an ownership interest, part 11.7 of Fringe benefits tax: a guide for employers states:

Ownership interest includes both a legal or equitable interest, and a licence or right to occupy a dwelling. An employee or their spouse can have an ownership interest in a home they own or rent.

As discussed above, the place in Australia where the employee usually resides is the accommodation rented by the employee that is located in Interstate location. As the employee rents this accommodation the employee has the necessary ownership interest.

Further, as the rental property continues to be available for the employee's immediate use and enjoyment and it is reasonable to expect the employee to resume living with his family in this accommodation at the conclusion of his appointment the requirements in section 31C are met.

Are the requirements of section 31D met?

Section 31D of the FBTAA limits the use of the valuation method in section 31 to a 12 month period.

Section 31D states:

SECTION 31D  FIRST 12 MONTHS EMPLOYEE IS REQUIRED TO LIVE AWAY FROM HOME

31D(1)  The employee satisfies this section 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.

31D(2)  Each of the following paragraphs applies for the purposes of subsection (1):

(a) the employer may pause the 12-month period;

(b) start a separate 12-month period if:

(i) the employer later requires the employee to live at another location for the purposes of that employment; and

(ii) it would be unreasonable to expect the employee to commute to that other location from an earlier location for which the employer provided a benefit of the same kind to the employee;

(c) other changes in the nature of that employment are irrelevant;

(d) treat as one employer any of the employee's earlier employers that is or has been an associate of the current employer.

As section 31D applies from 1 October 2012, the effect of section 31D is to limit the availability of the section 31 concessional valuation to the 12 month period from 1 October 2012 to 30 September 2013. Therefore, section 31 can only apply to an allowance that is paid for the period 1 October 2012 to 30 September 2013. Section 31 will not apply to an allowance that relates to the employment duties performed in Capital city after 30 September 2013.

Are the requirements of section 31F met?

The final condition to be satisfied is for the employee to provide you with the relevant declaration.

Section 31F states:

SECTION 31F DECLARATIONS

31F(1) The employee satisfies this section if the employee gives the employer a declaration, in a form approved by the Commissioner, purporting to set out:

(a) for a fringe benefit to which section 31 (about employees who maintain an Australian home) applies:

(i) the address of the place in Australia where the employee usually resides when in Australia; and

(ii) that section 31C is satisfied for that place; and

(iii) the address of each place where the employee actually resided during the period to which the benefit relates; or

….

31F(2) The employee must give the employer the declaration before the declaration date for the year of tax during which the benefit was provided.

The relevant declaration can be obtained from our website at www.ato.gov.au.

Providing you obtain the relevant declaration from your employee, this condition will be met.

Conclusion

Provided the employee provides you with a declaration in the approved form, section 31 of the FBTAA can be used to calculate the taxable value of the living-away-from-home allowance fringe benefit that relates to the period from 1 October 2012 to 30 September 2013.

However section 31 will not apply where the allowance relates to a period after 30 September 2013. Where the allowance relates to the period after 30 September 2013, the taxable value of the allowance under section 31B will be the amount of the allowance.

Calculation of the taxable value where section 31 applies

Subsection 31(2) of the FBTAA states:

…the taxable value of the fringe benefit in relation to the year of tax is the amount of the fringe benefit reduced by:

(a) any exempt accommodation component; and

(b) any exempt food component.

Subsection 136(1) of the FBTAA defines the exempt accommodation component to mean:

… so much of the accommodation component as is equal to the total of the expenses that:

(a) are incurred by the employee for that accommodation; and

(b) are substantiated under section 31G

Subsection 31H(1) of the FBTAA defines the exempt food component to be:

… so much of the result of subsection (2) as is equal to the total of the expenses that:

(a) are incurred by the employee for food or drink for eligible family members during the period to which the fringe benefit relates; and

(b) if section 31G applies to the expenses - are substantiated under that section.

Both of these subsections require the expenses to be substantiated in accordance with the substantiation requirements in section 31G of the FBTAA.

Subsection 31G(1) states:

This section applies to the following expenses incurred by the employee:

(a) an expense for the accommodation of eligible family members during the period to which a living-away-from-home allowance fringe benefit relates;

(b) an expense for food or drink for eligible family members during the period to which a living-away-from-home allowance fringe benefit relates, if the total of those food or drink expenses for that period exceeds the amount the Commissioner considers reasonable.

31G(2) The employee substantiates the expense if the employee:

(a) before the declaration date for the year of tax during which the fringe benefit was provided gives the employer:

(i) documentary evidence of the expense, or a copy; or

(ii) a declaration, in a form approved by the Commissioner, purporting to set out information about the expense; and

(a) if the employee gives a declaration under subparagraph (a)(ii) - retains documentary evidence of the expense for a period of 5 years starting at that declaration date.

In complying with this requirement, subsection 31H(1) of the FBTAA limits the exemption for food expenses to those incurred by the employee for food or drink for eligible family members.

In relation to the people who are eligible family members, it is noted that the spouse and children were listed as being eligible family members in the agreement dated May 2012. In relation to this part of the agreement, it is noted that subsection 136(1) of the FBTAA defines 'eligible family member' to mean:

(a) in relation to an employee whose duties of employment require the employee to live away, for a period, from his or her normal residence:

(i) the employee; or

(ii) the spouse of the employee, or a child of the employee, being a spouse or child, as the case may be:

(A) who lived with the employee during that period; and

(B) whose usual place of residence during that period was the same as the usual place of residence of the employee; and

(b) in relation to a living-away-from-home allowance fringe benefit in relation to an employee, means:

(i) the employee; or

(ii) the spouse of the employee, or a child of the employee, being a spouse or child, as the case may be:

(A) in respect of whom the fringe benefit is paid;

(B) who lived with the employee during the period to which the fringe benefit relates; and

(C) whose usual place of residence during that period was the same as the usual place of residence of the employee.

One of the requirements of this definition is for the family member to live with the employee during the period to which the fringe benefit relates. Given the employee during the relevant period resided in Capital city and the spouse and children resided in Interstate location, it is not clear how this requirement is met. If they are not living with the employee during the relevant period, they will not be an eligible family member and their food expenses will not be part of the exempt food component of the allowance.

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