Edited version of your written advice

Authorisation Number: 1012702813132

Ruling

Subject: Expense payment fringe benefits

Question 1

Can the taxable value of the expense payment fringe benefits in relation to the temporary relocation expenses be reduced under sections 61C and 61D of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following period:

1 April 2013 to 31 March 2014

The scheme commenced on:

13 December 2014

Relevant facts and circumstances

1. State government public servants are governed by a state government Directive, regarding the transfer and appointment expenses, which details eligibility, entitlement, documentary evidence, paid time off work, travel expenses, overnight accommodation and meals in transit, temporary board and lodgings, cash advances, conditions to qualify for payment, expenses to be paid, other allowances and matters in relation to transfers and appointments expenses.

2. An employee relocates permanently within the state.

3. The employee left his/her former usual place of residence and lived at the former location in a motel and then a hotel. The department paid the accommodation and meal expenses, which is 75 per-cent of the actual cost.

4. The accommodation and meal expenses were also incurred at the new location. Within a reasonable time, the employee was able to find suitable long term accommodation.

5. The employee transfer form and other evidentiary documents state the official start date.

6. The transfer expense claim form was processed by the employer in the 2014 FBT year.

7. The employee stated he/she started work a week earlier than the official start date.

8. The new employer stated that the employee commenced work from the official start date.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 20,

Fringe Benefits Tax Assessment Act 1986 58F,

Fringe Benefits Tax Assessment Act 1986 61C,

Fringe Benefits Tax Assessment Act 1986 61D,

Fringe Benefits Tax Assessment Act 1986 135P

Fringe Benefits Tax Assessment Act 1986 143A

Reasons for decision

Section 61C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) applies to reduce the taxable value of certain types of fringe benefits which meet the cost of temporary accommodation for an employee who changes their usual place of residence in the course of their employment (relocation or permanent transfer).

Section 61C is complemented by section 61D of the FBTAA which applies to reduce the taxable value of fringe benefits in relation to meals incurred by an employee who is staying at temporary accommodation which falls within section 61C.

The analysis below takes into account both accommodation and meals.

Section 61C(1) of the FBTAA sets out the conditions that must be satisfied for application of either or both:

1. The reduction rule relating to temporary accommodation at the former locality (subsection 61C(2), and/or

2. The reduction rule relating to temporary accommodation at the new locality (subsection 61C(3).

These conditions are set out in paragraphs (a) to (e) of subsection 61C(1):

9. Only certain types of fringe benefits incurred can be reduced. In this case, it is not when the cash advances were made or when the expenses were incurred, but when the reimbursement of the expense incurred which resulted in an expense payment fringe benefit. These expense payment fringe benefits fall into the 2014 fringe benefits tax year and is covered by this concession.

10. The temporary accommodation must be required solely because the employee is required to change his or her usual place of residence in order to perform employment duties (para (b)). The employee is transferring to a new employer and has incurred expenses in relation to temporary accommodation and meals after leaving their usual place of residence at the former location.

11. Where the temporary accommodation is provided at the employee's former usual place of residence, it is a condition that the temporary accommodation is necessary because the employee's home at the former locality becomes unavailable. The employee had moved out of their usual abode and spent time in temporary accommodation at his/her former location.

12. Where the temporary accommodation is provided at the new locality, it is a condition that, as soon as reasonably practicable after commencing duty at the new locality, the employee begins to make sustained and reasonable efforts to purchase or lease a unit of accommodation that the employee intends to use as a long-term place of residence. The employee arrived at the new location and commenced occupying a new usual place of residence within a relatively short period.

13. The benefit must not be provided under a non-arm's length arrangement. The information and the documentary evidence provided to the employer names motels, etc. that are available for hire under arm's length basis.

Reduction of taxable value

The taxable value of a fringe benefit which comes within subsection 61C(1) of the FBTAA may be reduced under subsection 61C(2), which applies to accommodation near the former usual place of residence, and subsection 61C(3), which applies to accommodation near the new place of residence.

Temporary accommodation at the former location (subsection 61C(2)).

If the unit of accommodation in respect of which the fringe benefit is provided is located near the employee's former usual place of residence, the taxable value of the benefit will be reduced to the extent that the taxable value is attributable to the subsistence of the lease or licence during the period of 21 days ending on the day on which the employee commences work at the new locality. The start date is important in calculating the reductions. We begin from the start date at the new location and work backwards from that date to see whether all, some or no reductions apply.

Expense payment fringe benefits in relation to accommodation and meal can receive concessional treatment for a 21 day period ending on the day the employee commences work at the new location.

The employer is allowed, to provide a concessional benefit for 21 day period ending on the day the employee commences work at the new locality.

The employer has to account for these expenses accurately in accordance with the FBT legislation. However, there is an issue based on the employee stating that the employee commencing employment duties was a week earlier than the official start date as per the transfer/appointment expense claim form received from the employee.

Temporary accommodation at new location (subsection 61C(3))

The legislation states that the concession (reduction in the taxable value of the expense payment fringe benefit) starts 7 days before the commencement of employment and if the employee had not found suitable accommodation at the new location, ends when suitable accommodation is found (within reasonable guidelines).

The employee commenced residing at his/her new place of residence within a couple of weeks of the employee's arrival.

The employee is stating that the employee actually commenced employment at the new location one week before the official start date and the employer has stated that the official commencement date was the official start date. Therefore we need to determine when the employee actually started employment at the new location.

The start date is important as the employer has to account accurately for the fringe benefits provided but also to work out if any reduction in the taxable value (concessional treatment as stated in subsections 61C(2) and (3) of the FBTAA).

When an employer works out the concessions, they have to work backwards from the start date.

The transfer expense claim form, signed by the principal states that the employee commenced duties on the official start date.

Although, the employer has taken the date of commencement of the new employment as the official start date, (one day after the official start date) and returned the expense payment fringe benefits based on this start date in their 2014 FBT return, the transfer expense claim form states the commencement date to be the official start date. Therefore, the official start date is the commencement date of employment at the new location.

The reason for using this date is because the employee commenced to earn assessable income by using the employee's skills to earn assessable income. Anything the employee carries out before this date is preliminary to earning assessable income.

The official start date is easily identifiable and is a consistent date for all state schools. This date is the formal date that the employee must report to the new employer.

The official start date is the objective date for all parties concerned. The employer has to account for the expenses incurred, reimburse the employee for the costs or reconcile the cash advance with the re-imbursement, in accordance with State government policy and calculate the fringe benefits based on the Fringe Benefits Assessment Act 1986.

The official start date allows for proper accounting of all temporary accommodation, meals and transport costs incurred by the employee; calculate the FBT concessions available (if any) and the taxable valuable of the applicable fringe benefits.

Conclusion

We have accepted the commencement date of the new employment as the official start date.

As the start date is the official start date, the expense payment fringe benefit and the reportable fringe benefits amount have been calculated correctly. This means that no concession applies for the accommodation and meal expenses incurred, at the former and new locations.

Accordingly, the employer has calculated the fringe benefits tax in relation to relocation accommodation and meals expense payment fringe benefits for this employee using the official start date.

The reportable fringe benefits amount is calculated correctly therefore, no adjustments will be made to the calculations made by the employer in their 2014 FBT return lodged.

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