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Edited version of your written advice
Authorisation Number: 1012933918848
Date of advice: 8 January 2016
Ruling
Subject: FBT and whether customary in industry to provide residential accommodation to employees
Question 1
Is it "customary" in the machinery and equipment manufacturing industry for employers to provide free or subsidised residential accommodation to employees in respect of section 58ZC(1) of the Fringe Benefits Tax Assessment Act 1986?
Answer
Yes.
This ruling applies for the following periods:
1 July 2015 to 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
• You are an employer in the machinery and equipment manufacturing industry.
• You operate in a remote area pursuant to 58ZC(2) of the Fringe Benefit Tax Assessment Act 1986.
• Your employees are required to live and work in the remote area as a condition of their employment.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 sec 58ZC(1).
Reasons for decision
Question 1
Summary
Yes it is considered customary in the machinery and equipment manufacturing industry to provide residential accommodation to your employees for the purposes of section 58ZC(1) of the Fringe Benefits Tax Assessment Act 1986 (the FBT Act).
Detailed reasoning
The provision of accommodation may be an exempt benefit under subsection 58ZC(1) of the FBT Act where the accommodation is located in a remote area and is the employee's usual place of residence. Subsection 58ZC(2) states:
A housing benefit in relation to an employer for a year of tax and for a unit of accommodation, being a benefit provided to an employee of the employer in respect of the employee's employment, is a remote area housing benefit if:
(a) during the whole of the tenancy period, the unit of accommodation was located in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and
(b) during the whole of the tenancy period, the recipient was a current employee of the employer and the usual place of employment of the recipient was not at a location in, or adjacent to, an eligible urban area; and
(c) …
(d) it would be concluded that it was necessary for the employer, during the year of tax, to provide, or to arrange for the provision of, residential accommodation for employees of the employer because:
(i) the nature of the employer's business was such that employees of the employer were liable to be frequently required to change their places of residence; or
(ii) there was not, at or near the place or places at which the employees of the employer were employed, sufficient suitable residential accommodation for those employees (other than residential accommodation provided by or on behalf of the employer); or
(iii) it is customary for employers in the industry in which the recipient was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned; and
(e) the recipients overall housing right was not granted to the recipient under:
(i) a non-arm's length arrangement; or
(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section.
You have requested a ruling specifically on subparagraph 58ZC(2)(d)(iii) of the FBT Act in relation to whether "it is customary for employers in the industry in which the recipient was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned".
The meaning of the phrase 'customary for employers in the industry' is discussed in Taxation Determination TD 94/97 Fringe benefits tax: what does the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees? (TD 94/97).
TD 94/97 states:
2. A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary.
It is accepted that it is customary for employees in the machinery and equipment manufacturing industry to be in receipt of housing assistance from their employer. Therefore, according to paragraph 58ZC(2)(d) of the FBTAA, it is necessary for you to provide or arrange for the provision of the accommodation.
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