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Edited version of your written advice
Authorisation Number: 1012931868074
Date of advice: 23 December 2015
Ruling
Subject: Relocation costs
Question 1
Are the employee's relocation costs an exempt benefit under section 58B of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?
Answer
No
Question 2
Can the Commissioner, exercise discretion to allow the relocation costs as an exempt benefit under section 58B of the FBTAA 1986?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
A new employee, who was living in City A, was offered a position in mid-20XX and commenced employment with the firm in City B in late 20XX.
The employee bought a house in City B in late 20XX, but due to a series of events, the employee was living and working in City B Monday-Friday and travelling to City A many weekends.
The employee did not relocate their household goods to City B until mid 20YY.
The firm paid for the employee's relocation costs from City A to City B in mid 20YY.
Therefore the relocation expense was incurred more than 12 months after the employee's commencement date.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 20
Fringe Benefits Tax Assessment Act 1986 Section 58B
Fringe Benefits Tax Assessment Act 1986 Section 136(1)
Reasons for decision
Under the FBTAA 1986, a fringe benefit is a benefit provided in respect of employment. Subsection 136(1) of the FBTAA 1986 defines the term 'employment', in relation to a person, to mean 'the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee'. Subsection 136(1) also defines the term 'employee' to include a current employee, a future employee or a former employee.
We consider that the person is an employee of the firm for Fringe Benefits Tax (FBT) purposes.
Section 20 of the FBTAA 1986 sets out the circumstances in which an expense payment benefit will arise. Section 20 states:
Where a person (in this section referred to as the provider):
(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or
(b) reimburses another person (in this section also referred to as the recipient) in whole or in part, in respect of an amount of expenditure incurred by the recipient;
the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.
The firm paid the costs incurred for the removal, packing and storage of household effects from City A to City B directly to the supplier.
This payment may be an exempt benefit under section 58B of the FBTAA 1986 if certain requirements are satisfied.
Section 58B states:
(1) Where:
(a) either of the following benefits is provided in, or in respect of, a year of tax in respect of the employment of an employee:
(i) an expense payment benefit where the recipients expenditure is in respect of the removal or storage of household effects of the employee;
(ii) a residual benefit where the recipients benefit consists of the removal or storage of household effects of the employee;
(b) the removal or storage is required solely because:
(i) the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;
(ii) the employee, having lived away from his or her usual place of residence in order to perform the duties of that employment, is required to return to his or her usual place of residence:
(A) in order to perform those duties; or
(B) because the employee has ceased to perform those duties; or
(iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment;
(c) the removal or storage is required to enable a family member to:
(i) if subparagraph (b)(i) applies-take up residence, or to continue to reside, at or near the place where the employee performs the duties of that employment while living away from his or her usual place of residence;
(ii) if subparagraph (b)(ii) applies-take up residence at the employee's usual place of residence; or
(iii) if subparagraph (b)(iii) applies-take up residence, or to continue to reside, at the employee's new usual place of residence;
(d) if subparagraph (b)(iii) applies:
(i) the removal takes place, or the storage commences to be provided, within 12 months after the day on which the employee commenced to perform the duties of that employment at the employee's new place of employment; and
(ii) the benefit is not provided under a non-arm's length arrangement;
(e) if subparagraph (a)(i) applies-documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date; and
(f) the removal or storage was not provided in connection with travel undertaken by the employee in the course of performing the duties of that employment;
the benefit is an exempt benefit in relation to the year of tax.
Although the firm made an expense payment for the employee's relocation costs from City A to City B, it was incurred more than 12 months after their commencement date as an employee of the firm.
Therefore not all requirements are satisfied for the payment to be an exempt benefit under the FBTAA 1986. Hence the relocation costs are not an exempt benefit.
Also, under the FBTAA 1986, there is no provision allowing the Commissioner to exercise discretion where the requirements of section 58B have not been satisfied.
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