Edited version of private advice

Authorisation Number: 1012629214126

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Ruling

Subject: FBT - Living away from home and exempt accommodation

Question 1

Is the accommodation leased by the Employer and provided to the Employee, during the period xx to xx, exempt under subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following period:

1 April 2013 - 31 March 2014

The scheme commences on:

dd mm 2013

Relevant facts and circumstances

The Employee commenced employment with the Employer on the DD MM YYYY on a casual basis (working full time hours) before entering into a fixed term employment agreement.

During the period of casual employment, the Employee travelled from their home in City A on a fortnightly basis for his work with the Employer

During this period of travel, the Employer provided accommodation for the Employee in either a serviced apartment or hotel, depending upon accommodation availability.

The fixed term appointment differs from the casual appointment.

The Employee's standard working hours are x hours per day, 5 days a week.

The Employee then commenced living away from their home in City A to undertake the role in City B. The Employee's family residence is located in City A.

The Employee and their spouse own their family home in City A.

The Employee's spouse and child are remaining living in the City A home while the Employee is in City B.

The Employee is not changing the following while working in City B:

• driver's licence

• electoral enrolment details

• professional membership details

• bank details.

The Employee intends to return to their family home in City B at the end of the fixed term period.

The Employee will be required to return to City A on a regular basis (approximately up to one week per every x to x weeks) to undertake his role.

The Employer has leased accommodation which is provided to the Employee during the fixed term appointment. There are no payments to the Employee.

The Employee will provide the Employer with the appropriate living away from home allowance declarations to access the concessions for the first 12 months.

Relevant legislative provisions

Section 25 of the Fringe Benefits Tax Assessment Act 1986

Section 31C of the Fringe Benefits Tax Assessment Act 1986

Section 31D of the Fringe Benefits Tax Assessment Act 1986

Section 45 of the Fringe Benefits Tax Assessment Act 1986

Subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Section 118-115 of the Income Tax Assessment Act 1997

Section 118-130 of the Income Tax Assessment Act 1997

Subsection 995-1(1) of the Income Tax Assessment Act 1997

Reasons for decision

Issue 1

Question 1

Is the accommodation leased by the Employer and provided to the Employee, during the period xx to xx, an exempt benefit under subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

1. Subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) exempts the provision of accommodation to employees under certain limited circumstances. Subsection 47(5) of the FBTAA states (as relevant here):

47(5)

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; and

(b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and

(ba) the employee satisfies:

(i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months);...

(ii) ...and

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

(d) any of the following conditions is satisfied:

(i) ...

(ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii);

(iii) ...

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

2. Therefore, exemption is granted under subsection 47(5) of the FBTAA where all the following conditions are met (as relevant here):

(a) there is a residual benefit consisting of the subsistence of a lease or licence in respect of a unit of accommodation.

(b) the residual benefit is provided to an employee of an employer in respect of the employee's employment.

(c) the unit of accommodation is for the accommodation of eligible family members.

(d) the unit of accommodation is provided solely because the duties of the employee's employment require the employee to live away from the employee's normal residence.

(e) the employee satisfies the requirements of section 31C of the FBTAA.

(f) the employee satisfies the requirements of section 31D of the FBTAA.

(g) the accommodation is not provided while the employee is undertaking travel in the course of performing the employee's duties of employment.

(h) the employee gives to the employer the required declaration, in the approved form, by the required date.

(a) is there a residual benefit consisting of the subsistence of a lease or licence in respect of a unit of accommodation?

3. The term 'benefit' is defined in subsection 136(1) of the FBTAA to include any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility. It is considered, therefore, that the provision of accommodation in City B, to the Employee, will constitute a benefit to each of them for the purposes of the FBTAA.

4. The provision of the accommodation in City B to The Employee indicates that section 25 of the FBTAA may have a possible application to this case. Section 25 of the FBTAA states that a housing benefit will arise where a 'housing right' is provided by one person to another.

5. The term 'housing right' is defined in subsection 136(1) of the FBTAA as meaning a 'lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence'.

6. Accommodation in a house, flat or home unit is a 'unit of accommodation' under paragraph (aa) of the definition a 'unit of accommodation' in subsection 136(1) of the FBTAA. The accommodation in City B provided to The Employee will, therefore, meet the definition of a 'unit of accommodation'.

7. The definition of 'housing right', in subsection 136(1) of the FBTAA , further requires that the relevant lease or licence is granted at a time when the relevant unit of accommodation is the person's 'usual place of residence'.

8. The FBTAA does not define what is meant by the expression 'usual place of residence', however, the FBTAA defines what is meant by a 'place of residence' in subsection 136(1) of the FBTAA as follows:

place of residence, in relation to a person, means:

(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.

9. Therefore, The Employee's house in City A and also the accommodation provided to The Employee in City B are both a 'place of residence' of The Employee.

10. However, it is considered that the wording of the definition of 'housing right' (see paragraph 7 above) connotes that for the purposes of the aforementioned definition there can be only one 'usual' place of residence of the person at the relevant time.

11. In the absence of a legislative reference it is relevant to refer to the ordinary meaning of 'usual'. The Macquarie Dictionary defines 'usual' to mean:

1. habitual or customary: his usual skill.
2. such as is commonly met with or observed in experience; ordinary: the usual January weather.
3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

12. Guidelines for determining an employee's usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030).

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

14. 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.

14. Further discussion occurs at paragraphs 19 to 25. Paragraph 19 states:

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.

15. Paragraph 20 provides the following general rule:

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.

16. As an example of the application of this general rule paragraph 22 states:

22. 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.

17. 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. At paragraphs 55 and 56 Deputy President S A Forgie said:

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

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.

18. In considering the factors referred to by the AAT the following factors indicate that The Employee is living away from their usual place of residence:

• there is a choice between 2 residences - the City A residence and City B residence

• The Employee is required to be away from the Sydney residence for xx period of time

• The Employee's spouse and child are remaining in the City A residence

• The Employee is not changing the following while working in City B:

• their driver's licence

• their electoral enrolment details

• their professional membership details

• their bank details.

• The Employee is intending to return to their City A residence at the end of their fixed term contract.

19. Therefore, The Employee's usual place of residence is their home in City A.

20. In this case, The Employee still has a house in City A which is the usual place of residence for The Employee and their immediate family, and to which The Employee intends to return at the end of their contract with The Employer.

21. Albeit the accommodation in City B is also a place of residence of The Employee, the accommodation in City B is, nonetheless, not the 'usual' place of residence of The Employee.

22. As the accommodation in City B is not the 'usual' place of residence of The Employee, there is no 'housing right' being provided to The Employee in respect of that accommodation nor, consequently, is there a 'housing benefit' being provided under section 25 of the FBTAA. Therefore, section 25 of the FBTAA has no application to this case.

23. Section 45 of the FBTAA states that a residual benefit is one that is not a benefit by virtue of any provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA. Therefore, in basic terms, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

24. It has been determined above (at paragraph 22) that section 25 of FBTAA has no application. It is also considered that no other no other specific benefit type applies to The Employee's circumstances.

25. It is further considered, therefore, that the provision of the accommodation in City B to The Employee is a residual benefit.

26. This condition is met.

(b) is the residual benefit provided in respect of the employee's employment?

27. As determined above (at paragraph 25) the provision of the accommodation in City B to The Employee is a residual benefit.

28. The meaning of the phrase 'in respect of the employment of the employee' was considered in J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; 44 ATR 22 (Knowles). It was found in Knowles that the words 'in respect of' must be given a meaning that depends on the context in which they are used.

29. In the case of the FBTAA, this means that there must be a sufficient or material relationship or connection between the provision of the benefit and the employee's employment. The establishment of a mere causal link between the benefit and the employee's employment is not necessarily enough.

30. The Employee is employed by The Employer under the terms of their Offer of Employment.

31. The Employee is being provided with accommodation during the period dd mm yyyy to dd mm yyyy to enable them to complete their duties of employment with the Employer.

32. Therefore, it is considered that the accommodation provided in City B, during the period dd mm yyy to dd mm yyyy, is provided to The Employee in respect of their employment.

33. This condition is met.

(c) is the unit of accommodation for the accommodation of eligible family members?

34. As determined previously (at paragraph 6) the accommodation in City B will meet the definition of a 'unit of accommodation'. The term 'eligible family member' is defined in subsection 136(1) of the FBTAA to mean (as relevant here):

eligible family member means:

(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) ...

35. The accommodation in City B is occupied by The Employee.

36. The Employee, consequently, meets the requirements of subparagraph (a)(i) of the definition of 'eligible family member', in subsection 136(1) of the FBTAA.

37. Nonetheless, paragraph (a) of the current definition 'eligible family member', in subsection 136(1) of the FBTAA, also requires that the employee's duties of employment make it necessary for the employee to live away, for a period, from the employee's normal residence.

38. The term 'normal residence' is defined (as applicable here) in paragraph (a) of the definition of that term in subsection 136(1) of the FBTAA as meaning the employee's usual place of residence if the employee's usual place of residence is in Australia.

39. In this case, The Employee's 'usual place of residence' is at their house in City A. Consequently, The Employee's house in City A is both their 'usual place of residence' and also their 'normal residence' for the purposes of the FBTAA.

40. ATO Interpretative Decision ATOID 2013/8 Fringe Benefits Tax: Employee required to change usual place of residence in order to perform duties of employment, concerns a situation in which employment duties require an employee to change residence and live away from home in order for those duties to be performed effectively. Although ATOID 2013/8 relates to the test in subparagraph 58B(1)(b)(iii) which is expressed differently for the test in the definition of eligible family member in subsection 136(1), it highlights some of the factors which would be, nonetheless, relevant in establishing whether employment duties require an employee to live away from their normal residence pursuant to the definition of eligible family member in subsection 136(1) of the FBTAA.

41. The following facts are relevant where there is a considerable distance between the employee's home and work:

• The distance between the employee's usual place of residence and their new place of employment

• Whether the employee is permitted perform their new duties of employment from their normal residence

• Whether the employer provides transport for the employee to commute between home and work

• Whether the employee is required to work on-call or sign on for duty within a short period of time after being contacted by their employee.

42. In this case, The Employee's usual place of residence is in City A and his new place of employment is in City B so there is a significant distance between the two places. The Employee's employment duties are such that they are required to work 5 days a week, for xx hours a day. Further, the position summary states that:

The Job Title will be based at The Employer's location in City B, xxx.

43. The position is therefore based in City B and The Employee is not permitted to perform the duties of employment from their City A residence due to the nature of the work.

44. The employer does not provide transport for The Employee to commute between their home in City A and their work in City B due to the distance involved. The Employee is not required to be on call.

45. Based on the above factors, the duties of employment require The Employee to live away from their normal residence. This condition is met.

(d) is the unit of accommodation provided solely because the duties of the employee's employment requires the employee to live away from the employee's normal residence?

46. It was determined above (at paragraph 45) that the duties of The Employee's employment require them to live away from their normal residence.

47. However, it also needs to be determined that the City B accommodation is provided to The Employee 'solely' because their duties of employment require him to live away, for a period, from their normal residence.

48. It is accepted, in the absence of any evidence to the contrary, that the only reason The Employee is provided with the accommodation in City B is because their duties of employment require them to live away from their normal residence in Australia.

49. This condition is met.

(e) does the employee meet the requirements of section 31C of the FBTAA?

50. Section 31C of the FBTAA was introduced by Tax Laws Amendment (2012 Measures No.4) Act 2012 (TLAA 142) and applies generally to employees who are living away from their normal residence on or after 1 October 2012 regardless of when the allowance or benefit was received or provided.

51. Consequently, section 31C will apply to the accommodation in City B provided to The Employee from dd mm yyyy as they were living away from their normal residence on or after 1 October 2012.

52. Section 31C of the FBTAA states:

SECTION 31C

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

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

(i) are the requirements of paragraph 31C(a) of the FBTAA met?

53. As determined above at paragraph 19, The Employee's home in City A is The Employee's usual place of residence.

54. Accommodation in a house, flat or home unit is a 'unit of accommodation' under paragraph (aa) of the definition a 'unit of accommodation' in subsection 136(1) of the FBTAA. The Employee's home in City A will, therefore, meet the definition of a 'unit of accommodation'.

55. Ownership interest in land or a dwelling is defined in subsection 995-1(1) of the ITAA 1997 has having the meaning given by section 118-130.

56. Subsection 118-130(1) of the ITAA 1997 states:

SECTION 118-130 Meaning of ownership interest in land or a dwelling

118-130(1) You have an ownership interest in a land or a *dwelling if:

(a) For land - you have a legal or equitable interest in it or a right to occupy it; or

(b) For a dwelling that is not a flat or home unit - you have a legal or equitable interest in the land on which it is erected, or a licence or right to occupy it; or

(c) For a flat or home unit - you have:

(i) a legal or equitable interest in a *stratum unit in it; or

(ii) a licence or right to occupy it; or

(iii) a share in a company that owns a legal or equitable interest in the land on which the flat or home unit is erected and that gives you a right to occupy it.

57. Dwelling is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 118-115. Section 118-115 states:

SECTION 118-115 Meaning of dwelling

118-115(1) A dwelling includes:

(a) a unit of accommodation that:
(i) is a building or is contained in a building; and
(ii) consists wholly or mainly of residential accommodation; and

(b) a unit of accommodation that is a caravan, houseboat or other mobile home; and

(c) any land immediately under the unit of accommodation.

58. The Employee's family residence is located at City A and The Employee and their spouse own their family home in City A. The Employee therefore has an ownership interest in their residence in City A.

59. The Employee's spouse and child continue to live in the City A residence while The Employee is in City B. The home continues to be available for The Employee's immediate use and enjoyment during the period The Employee is required to live away from it.

60. Therefore, the requirements of paragraph 31C(a) are met.

(ii) are the requirements of paragraph 31C(b) of the FBTAA met?

61. Paragraph 31C(b) of the FBTAA requires that it is reasonable to expect that when the relevant period ends the employee will resume living where the employee usually resides when in Australia.

62. The Employee intends to return to their house in City A at the end of their employment contract. The Employee's spouse and child are remaining living at the house in City A. It is considered that the requirements of paragraph 31C(b) of the FBTAA are, therefore, met.

63. Therefore, The Employee satisfies the applicable requirements of section 31C of the FBTAA for the period dd mm yyyy to dd mm yyyy.

(f) does the employee meet the requirements of section 31D of the FBTAA?

64. Section 31D of the FBTAA states (as relevant here):

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....

65. In this case, The Employee entered into a fixed employment agreement with The Employer on the dd mm yyyy. From dd mm yyyy to the dd mm yyyy, The Employee travelled on a fortnightly basis from their home in City A to undertake their work in City B.

66. The duties of employment differ between the casual and fixed term employment. Under the fixed term employment agreement, The Employee was required to pass probation criteria and work according to specific tasks and responsibilities which were not specified in the casual contract.

67. Therefore, the requirements of section 31D are met as the duties of The Employee's employment did not require them to live away from the place in Australia where they usually resides until the dd mm yyyy.

(g) is the accommodation provided while the employee is undertaking travel in the course of performing the employee's duties of employment?

68. The relevant accommodation is provided while The Employee is providing their services for an extended period at The Employer's offices or at such other place(s) as may be reasonably required by The Employer.

69. It is accepted, therefore, that the relevant accommodation is not being provided while The Employee is undertaking travel in the course of performing their duties of employment.

(h) will the employee give to the employer the required declaration, in the approved form, by the required date?

70. This condition is met as The Employee will provide all necessary declarations, in the approved form, to The Employer at the required times.

Conclusion on exemption under current subsection 47(5) of the FBTAA for period 7 October 2013 to 31 March 2014

71. The provision of the accommodation in City B to The Employee, during the period dd mm yyyy to dd mm yyyy inclusive, is exempt under subsection 47(5) of the FBTAA as all the required conditions have been met.

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