Edited version of your written advice

Authorisation Number: 1012737943705

Ruling

Subject: Living Away From Home Allowance fringe benefit - exempt accommodation component

Question 1

Are the non-resident employees of the taxpayer "fly-in fly-out" (FIFO) employees under section 31E of the Fringe Benefits Tax Assessment Act 1986 (FBT Act), so that the rental payment by the company is an FBT exempt accommodation benefit under section 31A of the FBT Act?

Answer

The non-resident employees of the company are FIFO employees under section 31E of the FBT Act. Furthermore, the rental payment by the company is an FBT exempt accommodation benefit under section 31A of the FBT Act.

Question 2

If the non-resident employees of the taxpayer are not FIFO employees under section 31E of the FBT Act, is the entire rental payment subject to FBT under section 31B of the FBT Act?

Answer

As the non-resident employees are FIFO employees under section 31E of the FBT Act and the rental payment by the company is an FBT exempt accommodation benefit under section 31A of the FBT Act, the entire rental payment is not subject to FBT under section 31B of the FBT Act.

This ruling applies for the following periods:

FBT years 1/4/2013 - 31/3/2014; 1/4/2014 - 31/3/2015; 1/4/2015 - 31/3/2016; 1/4/2016 - 31/3/2017

The scheme commences on:

1/4/2013

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.

The taxpayer provides services to the energy sector and employs both Australian residents and non-residents on 457 and short stay visas.

The taxpayer rents a house in mainland Australia to provide accommodation for its non-resident employees. The non-resident employees live at the house when they are not working on an offshore facility. The taxpayer pays the rent and the non-resident employees do not contribute to the cost of the accommodation.

The majority of the non-resident employees work on a two month on and a one month off rotation.

When the non-resident employees are in mainland Australia they are based at the staff house. These employees fly out to the offshore facility when required. When these employees are not on the facility during their two month period, they work a standard 5 day week at the taxpayer's office in mainland Australia.

After the two month period has finished, these employees return to their homes overseas for their one month off rotation.

For the FBT year ended 31 March 2014, the employees had not provided the declarations required under section 31F to their employer by the due date for the lodgement of the FBT return for that year, being 28/21 May 2014. These declarations were instead provided on 30 January 2015. The declarations will be maintained for all future years.

In your ruling application you consider that the non-resident employees meet the requirements for FIFO employees under section 31E. In particular, you are satisfied that the non-resident employees meet the requirements of subsection 31E(b) to (d). You also believe that the non-resident employees meet the requirements of subsection 31E(a) as the intention of the law as it has been written is to treat these non-resident employees as FIFO workers.

The non-resident employees are required to fly into mainland Australia in order to commence their working duties. It is not possible for these employees to fly directly from their overseas residences to the offshore facility. As these employees are required to fly into mainland Australia prior to going to the offshore facility, the taxpayer has an obligation to house these employees for a period of time before they can fly out to perform their duties on the offshore facility. After their two month working period has been finalised they return home to their overseas addresses.

In your opinion, you do not believe that FBT applies in this circumstance due to the operation of section 31E.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 30,

Fringe Benefits Tax Assessment Act 1986 section 31A,

Fringe Benefits Tax Assessment Act 1986 section 31B,

Fringe Benefits Tax Assessment Act 1986 section 31E,

Fringe Benefits Tax Assessment Act 1986 section 31F and

Fringe Benefits Tax Assessment Act 1986 section 136.

Reasons for decision

Question 1

Under subsection 30(1) of the FBT Act, a living away from home allowance (LAFHA) fringe benefit arises where an employer pays an employee an allowance to compensate for additional expenses or disadvantages suffered because the employee has to live away from home for employment purposes.

Under subsection 30(2), a LAFHA fringe benefit may also arise where an employee works on an offshore facility at sea with accommodation provided at or near the worksite and an allowance is paid to compensate the employee for the additional disadvantages of having to live away from the employee's usual place of residence.

Under section 31A, the taxable value of LAFHA benefits covered by subsection 30(1) provided to FIFO (and DIDO (drive-in drive-out)) employees is the amount of the fringe benefit reduced by any exempt accommodation component and any exempt food component, provided the employees:

(a) Have residential accommodation at or near their usual place of employment;

(b) Are working on a FIFO basis under section 31E; and

(c) Provide the employer with a declaration confirming that they are employed on a FIFO basis under section 31F.

Under section 31E, the requirements for FIFO employees are that:

(a) the employee, on a regular and rotational basis:

(i) works for a number of days and has a number of days off (but not the same days on consecutive weeks); and

(ii) on completion of the working days, travels from his or her usual place of employment to his or her normal residence and, on completion of the days off, returns to that usual place of employment; and

(b) it is customary for such arrangements to exist for employees performing similar duties in that industry;

(d) it would be unreasonable to expect the employee to travel on a daily basis on work days between his or her usual place of employment and his or her normal residence; and

(e) it is reasonable to expect the employee will resume living at his or her normal residence where the duties of that employment no longer require him or her to live away from it.

Under subsection 136(1), "normal residence" for non-resident employees is either their usual place of residence or the place in Australia where the employees usually reside.

Under section 31F, a FIFO employee is required to give the employer a declaration that sets out:

(a) the address of the employee's usual place of residence;

(b) that it is reasonable to expect the employee will resume living at his/her normal residence when his/her duties no longer require him/her to live away from it; and

(c) the places where the employee actually resided during the period he/she was required to live away from home.

Furthermore, the employee must give the employer the declaration before the declaration date for the year of tax during which the benefit was provided.

Under subsection 136(1), 'declaration date' means the date of lodgement of the return of the fringe benefits taxable amount of the employer of the year of tax, or such later date as the Commissioner allows.

To the extent that the requirements under section 31A are not satisfied, the taxable value of the LAFHA allowance fringe benefit (the rental payment) is the entire amount of the benefit, under section 31B. A LAFHA fringe benefit under subsection 30(2) is also taxable in full under section 31B.

On the facts, the rental payment by the taxpayer for the accommodation provided to its non-resident employees in mainland Australia is a LAFHA benefit under subsection 30(1). Subsection 30(2) is not applicable on the facts.

We also consider that the three requirements under section 31A are all satisfied.

First, the non-resident employees have residential accommodation on their usual place of employment (the offshore facility).

Second, the non-resident employees meet all the requirements for FIFO employees under section 31E:

(a) The employees, on a regular and rotational basis, work for two months on and then have one month off. The employees will also not work the same days on consecutive weeks as they work on a roster or shift basis. On completion of the working days, the employees travel from their usual place of employment to their normal residence and, on completion of the days off, return to their usual place of employment.

• While the employees are in Australia, their normal residence is the staff house in mainland Australia where the taxpayer houses them before they fly out to perform their duties on the offshore facility on each rotation. It is not possible for the employees to fly directly from their overseas residences to the offshore facility. When the employees are not on the offshore facility during their two month period, they work a standard 5 day week at the taxpayer's office in mainland Australia.

• After their two month working period has expired, the employees return back to their other normal residence, their usual place of residence overseas.

(b) It is also considered customary for employees in the relevant industry to work shifts on an offshore facility on a regular and rotational basis and to return to their normal residence on days off.

(c) The distance between the employees' usual place of employment on an offshore facility and their normal place of residence in mainland Australia also make it unreasonable to expect the employees to travel daily on each work day between the two locations.

(d) It is also reasonable to expect that the employees will resume living at their normal residence overseas when the employment duties no longer require them to live away from that home, as they return home to their overseas addresses after each two month working period has been completed.

Third, the non-resident employees meet the declaration requirements under section 31F. For the FBT year ended 31 March 2014, while the declarations were not provided by the due date for the lodgement of the FBT return for that year, being 28/21 May 2014, they were still provided by the declaration date, as the Commissioner allowed a later date. The declarations will also be maintained for all future years.

As all the requirements under section 31A are satisfied, the rental payment made by the company for its non-resident employees is an FBT exempt accommodation benefit in determining the taxable value of the LAFHA fringe benefit.

Question 2

As the non-resident employees are FIFO employees under section 31E of the FBT Act and the rental payment by the taxpayer is an FBT exempt accommodation benefit under section 31A of the FBT Act, the entire rental payment is not subject to FBT under section 31B of the FBT Act.

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