Edited version of your written advice

Authorisation Number: 1051209404236

Date of advice: 12 April 2017

Ruling

Subject: Fringe Benefits Tax - Residual benefits - Other (provision of accommodation)

Question 1

Does the provision of accommodation constitute a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), in the circumstances described?

Answer

Yes.

Question 2

Is the provision of accommodation by the Organisation to the manager of an accommodation facility (the Facility), a housing fringe benefit pursuant to Division 6 of the FBTAA?

Answer

No.

Question 3

Is the provision of accommodation by the Organisation to the manager of the Facility, a residual fringe benefit pursuant to Division 12 of the FBTAA?

Answer

Yes, however the provision of accommodation will be an exempt benefit pursuant to subsection 47(5) of the FBTAA for a period of 12 months commencing from the manager's date of employment. This exemption is subject to the manager providing the Organisation with the relevant declaration in accordance with subparagraph 47(5)(d)(ii) of the FBTAA, as soon as practicable. Upon cessation of the 12 month period, the provision of accommodation will be treated as a residual fringe benefit under Division 12.

Question 4

If the provision of accommodation is a fringe benefit under Division 6 or Division 12, will the value of the fringe benefit provided be calculated on the basis of the weeks that the manager works?

Answer

No. In the circumstances described, the taxable value of the accommodation will not be calculated on the basis of the weeks that the manager works.

Question 5

Is the provision of accommodation to the manager of the Facility by the Organisation an exempt benefit pursuant to section 58 of the FBTAA?

Answer

No.

This ruling applies for the following periods:

FBT year ended 31 March 2014

FBT year ended 31 March 2015

FBT year ended 31 March 2016

Relevant facts and circumstances

The Organisation is an endorsed public benevolent institution which is entitled to FBT concessions. It is also a registered charity with the Australian Charity and Not-for-Profit Commission under the charity subtypes of a public benevolent institution and advancing health.

The Organisation's activities include providing accommodation to patients and their carers in an accommodation facility ('the Facility') which is situated close to nearby hospitals. The Facility, which is located in Town B, contains a number of self-contained fully furnished apartments for patients and their carers to stay whilst the patients receives medical treatment. Patients can stay at the Facility for a lengthy period of time.

The Facility has a day manager and an after-hours caretaker.

It is a secured building with an after-hours caretaker for any emergencies.

Accommodation charges

The Organisation has a standard charge per night and in certain circumstances the Organisation will charge a reduced amount for the room.

Where guests qualify for assistance from the various State government sponsored patient travel and accommodation schemes ('PTAS'), the Organisation will 'bulk bill' these schemes on their behalf and reduce the 'out of pocket charge' to a reduced amount per night. Most guests qualify for government assistance from the various PTASs.

Where in some cases, financial distress prevents guests from meeting the reduced charge, the Organisation will work with the guest / family to establish their capacity to make any contribution and adjust accordingly. This process involves collecting and verifying financial information such as monthly income and expenditure, available savings and so on.

Some people will be accommodated for free at the Facility, some for a much lesser amount and so on.

Eligibility criteria for the accommodation service

There are no strict rules around eligibility to access accommodation services. The Organisation's overall approach is to assist people in need whenever it can. The Organisation works with social workers and other referral sources to identify cases of genuine need.

This may be based on a number of different things such as:

● Financial hardship — the Organisation often encounters situations where breadwinners are either the patient or have elected to leave work to act as carer for the patient creating cash flow problems.

● Family situations — the Organisation has a number of large apartments suitable for families. The Organisation will tend to focus on families.

● Residential domicile of guests - the Organisation focuses on people coming from interstate and country areas for medical treatment.

The patient's social worker makes an initial assessment for referral to the Organisation's accommodation service. The Organisation does not seek formal advice or supporting documentation from the social worker who will have obtained a detailed knowledge of the patient's situation. This is in order to direct the patient to the appropriate support services.

The Organisation completes its own enquiries to satisfy itself that it is providing suitable support on a case by case basis.

Employee

In 20XX, an individual was engaged as a (day) manager for the Facility. The individual also entered into an employment contract with the Organisation for the Manager's position of the Facility. This position reports to the managing director of the Organisation.

Initially, they were employed on a temporary basis for a period of several months. At the end of this time, they were appointed to the manager's position on an ongoing basis, subject to satisfactory job performance and the terms of their employment contract.

The same individual i.e the manager also performs duties as the Facility's after-hours caretaker. Further details about the duties of the after-hours caretaker role is provided below and in the section titled 'After-hours caretaker position'.

The manager's position is a paid position. According to the manager's employment contract they work four days per week during normal business hours.

The duties of the after-hours caretaker position require that they be available outside of business hours weekdays and all day and night on the weekend and public holidays'. The after-hours caretaker position carries with it the right to occupy an apartment in the Facility free of charge.

The manager is rostered off one week for every several weeks worked. In accordance with their employment contract, this rostered week off is unpaid leave. They also take leave from the after-hours caretaker position during that week. The rostered week off is to provide the manager with a break from the demands of their work as a manager and after-hours caretaker. During that week they go home to Town A for the entire week or to somewhere of their choice. Town A is located several hundred kilometres from Town B where the Facility is located.

The manager has an office in the Facility to perform their daytime duties.

No contribution is made by the manager / after-hours caretaker to the Organisation for the accommodation that it provides.

Refer to the section titled 'Connection to Town A' in the description of relevant facts and circumstances for further details of the manager's living arrangements in Town A.

Manager's duties

The manager's position description and duty statement details the position's key responsibilities and duties and requires that the manager, amongst others ensures that the:

● facility is operationally efficient, operating costs are kept within budget and income is collected appropriately,

● guests are provided with a professional and supportive service,

● facility is maintained to a high level of presentation and cleanliness,

● volunteers are managed effectively,

● Organisation's work is promoted to the community, clubs and other financial supporters.

Further details of the duties of the manager's position were provided by the applicant and include the following:

● Dealing with requests for accommodation from individuals, social workers, treating hospitals and other agencies;

● Administrative duties such as invoicing for services, collecting and processing payments;

● Dealing with property maintenance issues;

● Coordinating volunteer activities and building services such as linen laundering;

● Assisting guests with accessing support services e.g medical support groups, Centrelink;

● Assisting guests with their travel arrangements and with their day to day needs e.g helping with the shopping, replacing linen and towels;

● Assisting guests in cases of medical emergency - call ambulance or other emergency services as appropriate;

● Ensuing the security of the building;

● Assisting to assess 'special needs' cases, preparing documentation to support requests for financial assistance for guests in financial difficulty;

● Coordinating and quality checking cleaning of apartments and public areas of the building;

Employment Contract between the manager and Organisation

Other relevant terms of the agreement entered between the manager and Organisation deal with:

● Performance of duties - the Organisation may issue the manager with a duty statement or revised duty statement. The manager agrees to perform duties in accordance with any policies or directions given to them through the Organisation's managing director. The manager is to work during normal business hours and such additional hours as may be required for the performance of their duties.

● The terms of the manager's leave entitlements including annual leave, sick leave, long service leave, parental leave and leave during public holidays.

● Remuneration package - The manager's remuneration package consists of salary, superannuation contributions and any other non-salary benefits.

The contract also provides details of the hours worked, days worked and their work cycle i.e several weeks on, one week off.

After-hours Caretaker role

By way of background, the manager commenced volunteering with the Organisation some years ago. They undertook various volunteering activities for the Organisation on an intermittent basis. They did not occupy the after-hours caretaker apartment whilst they undertook these activities.

A few years before the manager commenced their employment at the Facility, they offered to take on the after-hours caretaker position, sharing this position with other volunteers. This position was an unpaid position. When the volunteers were unavailable, staff at the Organisation would respond to any calls from guests.

The availability of other volunteers gradually declined. Shortly or just before the commencement of the manager's employment, the manager took on the after-hours caretaker role on a full-time basis.

At the same time, the manager commenced their employment as Facility Manager the work arrangements for the after-hours caretaker were changed with a rostered week off every several weeks to coincide with the work arrangements of the manager's position.

As mentioned previously, as Facility manager, the manager works for four days per week. On the other working day, weekends and public holidays no manager is strictly available. As an after-hours caretaker, they are also available 7 days a week outside of business hours, weekends and public holidays. Given the length of the working hours, the Facility manager/ caretaker is rostered on for several weeks with one week off.

When the Facility manager / caretaker is rostered off or unavailable during after hours, staff at the Organisation will respond to any calls.

As mentioned previously, the after-hours caretaker is provided with accommodation, which is a self-contained apartment at the facility. This room is constantly made available to the manager. Their belongings are left there when they have their week off. The apartment remains vacant during their rostered week off.

After-hours caretaker position

There is no written agreement with the individual (i.e manager) or any other document setting out the terms of their engagement and responsibilities to the full-time after-hours caretaker position. Nor is there any document including e-mails notifying that same individual of their appointment to the full-time after-hours caretaker position.

The after-hours caretaker is under the direct control and reports to the managing director.

A description of the responsibilities and current arrangements relating to the after-hours caretaker position are set out in a document.

The position operates all hours outside of business hours on week days and all day and night Saturdays, Sundays and public holidays.

The after-hours caretaker is to be provided with access to an apartment without charge, subject to a number of conditions relating to use.

The conditions of use include, amongst other things, that the apartment is only available when the after-hours caretaker is on duty and must be vacated upon the request of management.

This same document also details the responsibilities associated with the position which are as follows:

● Ensure the building is fully secured - checking external doors are locked, car park secure etc

● Respond to any emergencies - fire alarms, building systems failures such as lift, air conditioning and heating

● Attend to calls for assistance from guests including the provision of bed-linen, accidental lock outs etc. In cases of medical emergencies, calling emergency services, allowing access to the building etc.

Connection to Town A

The manager has resided in Town A for most of their life. They have their immediate family residing in that same town.

The manager's home in Town A is not tenanted or occupied by any other persons. It is in the complex with only a small rear courtyard maintained by the manager.

During the relevant FBT years the manager has returned to their home in Town A approximately 8 times per year.

Over the last few years the manager has occasionally combined their rostered week off with their annual leave to maximise travel opportunities.

The manager retains the bulk of their belongings (furniture, home wares, clothing etc.) at the Town A residence. Some clothing is held in the apartment at the Facility.

The manager does not have any family or others residing with them at the Town A property.

The manager intends to return permanently to Town A, where the majority of their family reside, when their employment with the Organisation ceases.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 25

Fringe Benefits Tax Assessment Act 1986 paragraph 31(1)(i)

Fringe Benefits Tax Assessment Act 1986 section 31C

Fringe Benefits Tax Assessment Act 1986 section 31D

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 section 46

Fringe Benefits Tax Assessment Act 1986 subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(a)

Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(b)

Fringe Benefits Tax Assessment Act 1986 section 51

Fringe Benefits Tax Assessment Act 1986 section 58

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(b)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 subsection 148(1)

Fringe Benefits Tax Assessment Act 1986 section 149

Income Tax Assessment Act 1997 section 118-30

Income Tax Assessment Act 1997 section 995-1

Taxation Administration Act 1953 section 12-35

Reasons for decision

Unless otherwise indicated, all future legislative references are references to provisions contained in the Fringe Benefits Tax Assessment Act (1986).

Question 1

Summary

The provision of the accommodation to the manager constitutes a fringe benefit within the meaning of that term under subsection 136(1) as all the requisite conditions are met.

Detailed reasoning

In general terms a fringe benefit will arise under subsection 136(1) when:

● a benefit is provided to an employee;

● by the employer, an associate or a third party under an arrangement;

● that is in respect of the employment of the employee.

For the purposes of subsection 136(1), a 'benefit' is defined to include:

'any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under -

(a) an arrangement for ….

(i) …..;

(ii) ……

(b) …….; or

(c) an arrangement for or in relation to the lending of money';

As the Organisation has conferred on the manager the right to occupy an apartment effectively on a full time basis, a benefit was provided for the purposes of the fringe benefits tax provisions.

The term 'employee' is defined at subsection 136(1) to mean a 'current, future or former employee'.

A 'current employee' is defined at subsection 136(1) to mean 'a person who receives, or is entitled to receive, salary or wages'.

'Salary or wages' is defined at subsection 136(1) to mean a payment from which an amount must be withheld under one of the listed provisions in Schedule 1 to the Taxation Administration Act 1953 (TAA).

It is clear that the manager is an employee as their employment contract stipulates that they is entitled to receive salary and wages in consideration for the work that they performs for the Organisation. These salary and wages are amounts which are subject to withholding under section 12-35 of the TAA.

Employment Duties

A benefit will not be a fringe benefit unless there is the necessary connection between the provision of the benefit and the employment of the employee.

The term 'employment' is defined in subsection 136(1) to mean

“in relation to a person, includes …., 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"

This definition of employment looks to all activities of a person (past, present and future) that result in the person being treated as an employee.

In the present circumstances there is a written contact between the manager and the Organisation stipulating that individual is to perform the Manager's role. Supporting this contract is the manager's duty statement which sets out in detail the duties of this position. Therefore, clearly the activities of the day-time manager role form part of the manager's employment.

The manager also performs duties as an 'after-hours caretaker'. As the manager's written contract is silent about the performance of the after-hours caretaker role, an issue therefore arises as to whether the duties of the after-hours caretaker forms part of the manager's employment.

At law, the terms and conditions of a person's employment contact can be found in the express terms of the contract, whether written, verbal or a combination of both, or they can be implied by a particular set of circumstances or by law.

In this instance, the manager agreed to perform the duties of the after-hours caretaker role, sometime in 20XX, shortly or just before their appointment as the day manager.

The performance of the after-hours caretaker role carries with it the right to occupy the apartment, as stipulated in the description of duties for the after-hours caretaker position. As the manager's home is in Town A, the right to occupy the apartment is critical to not only the performance of their duties as the after-hours caretaker but also as manager of the Facility.

It therefore would follow that without the performance of the after-hours caretaker's duties which carries with it a right to on-site accommodation, the manager would be unable to fulfil or effect the terms of their employment contract given that their home is in Town A (which is several hundred kilometres away).

It should also be noted that the requirement for the manager to perform the duties of the after-hours caretaker is a continuing obligation given their ongoing employment as the permanent paid day manager. As such, the manager cannot simply opt in and out of performing the after-hours caretaker role. Further, any leave taken by the manager from their after-hours caretaker duties is directly linked and subject to their leave entitlements as the paid manager in accordance with the terms and conditions set out in the manager's employment agreement for example leave during the rostered fifth week off and annual leave.

Consequently, having regard to the manager's terms of employment and the surrounding circumstances, it is considered that it is an implicit condition of their paid employment as the day manager that they also performs the after-hours caretaker duties in exchange for the on-site accommodation.

Accordingly, it is concluded that the manager's employment includes both activities, specifically those activities for which they is renumerated as manager and those activities relating to their after-hours caretaker role.

In respect of

A benefit is provided 'in respect of' employment where it is provided by “reason of, by virtue of, or in relation directly or indirectly to that employment” (see subsection 136(1)).

Subsection 148(1) extends the meaning of a reference to the provision of a benefit in respect of employment in certain circumstances.

Under subsection 148(1), a benefit will be regarded as being provided in respect of the employment of an employee where amongst other things, the “benefit is also provided in respect of, by reason of, by virtue of, or for or in relation directly or indirectly to any other matter, or thing” [emphasis added] - see paragraph 148(1)(a).

Subsection 148(1) does not remove the fundamental requirement that before there can be a fringe benefits tax liability, the benefit under consideration has to be provided in respect of the employment of the employee.

Where that requirement is satisfied, subsection 148(1) ensures that the benefit will not be regarded as other than a fringe benefit subject to tax by reasons, one of which is mentioned above (see paragraph 5 of Miscellaneous Taxation Ruling MT 2016 Fringe benefits tax: benefits not taxable unless provided in respect of employment).

The meaning of “in respect of” employment was considered by the Full Federal Court in J and G Knowles and Associates Pty Ltd v FC of T (2000) 96 FCR 402 which involved advances of money by a company to its directors and their families. In that case, Heerey, Merkel and Findlestein JJ stated:

The words “in respect of” have no fixed meaning. They are capable of having a very wide discernible meaning denoting a relationship or connection between two things or subject matters. However, the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found…

…it must be remembered that what must be established is that there is a sufficient or material connection rather than a, causal connection or relationship

In Federal Commissioner of Taxation v Scully (2000) 201 CLR 148; 2000 ATC 4111; (2000) 43 ATR 718, consideration of the words 'in respect of' highlighted the importance of the context in which the phrase appears and resulted in the requirement that there be some 'discernable rational link' between the two subject matters.

In the present circumstances, the duties of the Facility manager demand that they be present on-site. For example assisting guests with day to day needs, travel arrangements or accessing support services and dealing with property maintenance issues all require their presence on-site.

However, the employee's home is in Town A which is several hundred kilometres away. In the absence of any accommodation in Town B (where the Facility is located) or thereabouts, it is considered that the manager would not have been in position to take on the role of Facility manager and perform the duties required of this position.

Therefore, there is a connection between the manager's employment and the provision of ongoing accommodation at the Facility. This connection is considered to be sufficient and material because as mentioned above, in the absence of such accommodation, the manager would not be in a position to be able to perform the duties associated with their position.

The manager as part of their employment also performs the duties of an after-hours caretaker on a full-time basis.

The securing of the after-hours caretaker role also brought with it the right to occupy an apartment. The provision of an apartment or some other space is consistent with the role of an after-hours caretaker e.g. to attend to after-hours calls for assistance from guests or ensuring the building is secured at night. Therefore, there is also clearly a relationship between the provision of accommodation and the duties involved as an after-hours caretaker.

Accordingly, for the reasons set out above, it is considered that the accommodation is provided in respect of the employment of the manager in respect of all of their employment duties.

In respect of - “some other matter or thing”

In the alternative, even if the duties of the after-hours caretaker were regarded as separate and distinct to the manager's employment as Facility manager (which is not conceded), subsection 148(1) would still operate to treat the accommodation benefit as being provided in respect of the manager's employment.

As previously mentioned, subsection 148(1) will deem a benefit as being in respect of a person's employment where that benefit relates to a person's employment and directly or indirectly to “some other matter or thing”, so long as the requirement that the benefit is provided in respect of the employee's employment is met.

In the present circumstances, it was previously established that there is a connection between the Organisation's provision of accommodation and the manager's employment sufficient for the benefit to be regarded as being provided in respect of the duties that they perform as the paid manager.

Therefore, notwithstanding that the accommodation is provided to the paid manager in their capacity as an after-hours caretaker, subsection 148(1) will deem the accommodation benefit as being provided in respect of the employment of the Facility manager for the purposes of the fringe benefits tax provisions.

Accordingly, as all the requirements of a fringe benefit are met, the provision of accommodation to the manger is a 'fringe benefit' under subsection 136(1).

Question 2

Summary

The provision of an apartment to the manager is not a housing fringe benefit under section 25 as no 'housing right' was provided within the meaning of that term under subsection 136(1). A housing right will be taken to exist where, amongst others the accommodation provided by the employer is the employee's usual place of residence. After examining the principles in Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefit and relevant case law, it is concluded that the manager's usual place of residence is in Town A (where they own a residence).

Detailed reasoning

Under section 25 a housing fringe benefit arises if an employee, or an associate of an employee, is granted a housing right. A housing right is a right to occupy, under a lease or licence, a unit of accommodation as the recipient's usual place of residence - see subsection 136(1).

Relevantly, the definition of 'unit of accommodation' includes 'a house, flat or home unit' - see subsection 136(1). Clearly, the apartment at the Facility is a 'unit of accommodation'.

The word "licence'' is not defined in the Act. Its ordinary meaning in this context imports permission, leave or authority to occupy or use land where that otherwise would be unlawful (for example it may be trespass). Accordingly, unlike a "lease", which requires some formal arrangement (e.g written agreement), a licence does not need to be reduced to formal terms and its duration may be indefinite.

In present circumstances, the Facility manager has the right to occupy an apartment in their role as the after-hours caretaker. This right is pursuant to an informal arrangement between the manager and the Organisation. Consequently, it is considered that the manager has a right to occupy under a licence, the apartment.

The FBTAA does not define the term 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' to mean:

(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.

Both the Town A home and the apartment qualify as the manager's 'place of residence' as both places at least, meet the statutory definition in paragraph (b) of a “place at which the person has sleeping accommodation”.

Where an employee has a choice of two places of residence as such as the case here, an issue arises regarding the determination of an employee's 'usual place of residence'.

Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefit, provides guidelines to determine an employee's usual place of residence.

MT 2030 states, as a general principle, that a person will be 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 (refer to paragraph 14 of MT 2030).

Paragraphs 15 to 18 of MT 2030 provide a brief description of the decisions from some cases which illustrate this point. It is then concluded at paragraph 19 that: 'an underlying theme of the cases is the general presumption that the employee's usual place of residence will be close to where he or she is permanently employed'.

One of these cases is Case B47 2 TBRD 201 which illustrates the relevance of a taxpayer's continual association with a former residence in determining their usual place of residence.

In this regard, paragraph 16 of MT 2030 states the following:

The taxpayer in Case B47 2 TBRD 201, maintained a home in Perth where his wife lived for a period of 6 years while he worked in a town 130 miles away, staying in hotel accommodation and returning home each weekend and for holidays. The Board of Review found that his home in Perth was more permanent and was his "usual" place of abode.

In contrast, Case 88 1 TBRD 353 provides an example of a case wherein an employee had changed his place of residence. In that case, the taxpayer had been compulsorily moved to another capital city which he had to accept under the terms of his employment and bought his family to live with him (refer to paragraph 15 of MT 2030).

The relevance of a person's intention to return to their former home was of some import in 12 CTBR (NS) Case 106 (paragraph 17 of MT 2030). In that case, an allowance was paid to the taxpayer to enable him to maintain his standard of living while on a 2-year posting to London as a living-away-from-home allowance. In concluding that the taxpayer was living away from his usual place of abode, the Board of Review found persuasive that the overseas appointment was of fixed maximum duration, that he would ordinarily have continued to live at his Australian home but for the posting and that he expected to return there to live at the end of the posting.

In Compass Group (Vic) Pty Ltd (as trustee for White Roche and Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051, the Administrative Appeals Tribunal considered the meaning of the term 'usual place of residence' where the employee had more than one place of residence.

After reviewing the various cases which had considered the term 'usual place of abode or usual place of residence', Deputy President SA Forgie identified at paragraph 56, the relevant considerations for determining a taxpayer's usual place of residence stating that:

'…all cases looked to the taxpayer's place of residence before he or they 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 their 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 they so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

In the present circumstances, the manager resided in Town A for most of their life and but for their employment with the Organisation would have continued to reside there. The manager owns a residence in Town A. The majority of their family resides in Town A.

Since commencing their employment with the Organisation, the manager has maintained their association with Town A. They return regularly to their home in Town A during their rostered weeks off. It is estimated that for each year subject to the ruling, they have made eight such visits out of possible 10 rostered weeks off.

The manager's home in Town A is a place to which they can freely return to at will. In this regard, the manager's home unit is left vacant in their absence i.e not leased or otherwise occupied and thus remains available for their use. Upon ceasing their employment with the Organisation, the manager intends to return to their home in Town A to live.

A relevant consideration in determining a person's usual place of abode is the location of the family. Although none of the manager's family resides with them in the Town A property, most of their family reside in that township. The majority of the manager's belongings such as furniture, clothing, homewares etc are located in their Town A home.

Whilst the manager's tenure of employment with the Organisation is for an indefinite term, it is considered that their move to Town B could be viewed as 'temporary' given that they have maintained a permanent home in Town A to which they regularly visit and intend to return to at the end of their employment with the Organisation.

Therefore, in light of the above, it is considered that the taxpayer has maintained the necessary connection to their home in Town A, for it to be considered their usual place of residence.

As the accommodation in Town B is not the manager's usual place of residence, there is no 'housing right' being provided to the manager in respect of that accommodation. Consequently, there is no housing fringe benefit being provided by the Organisation to the manager under section 25.

Accordingly, section 25 has no application to the circumstances presented here.

Question 3

Summary

The provision of the apartment by the Organisation is a residual benefit within the meaning of that term under section 45. However, subsection 47(5) will apply to exempt that benefit from fringe benefits for a period of 12 months from the commencement date of their employment in 20XX. This is on the condition that the manger supplies the Organisation with a declaration in the approved form, as explained later.

Detailed reasoning

A residual benefit is defined in section 45 to mean a benefit that is not covered by any other category of benefits in Subdivision A of Divisions 2 to 11 (inclusive) of Part III of the FBTAA, such as housing or car benefits.

As explained in Question 1 of this report, it is considered that the provision of accommodation by the Organisation falls within the definition of the term 'benefit' as it is a right that is granted by the Organisation to the manager to occupy the apartment.

Further, the provision of accommodation is not covered by any other category of benefits as specified above.

Consequently, this benefit is a residual benefit under section 45.

Exempt Housing Benefit

Under subsection 47(5) a benefit which consists of the provision of accommodation will be an exempt fringe benefit where relevantly all of the following conditions are satisfied:

1. The benefit provided to the employee is in the form of a lease or licence of a unit of accommodation - see paragraph 47(5)(a).

2. The accommodation must be for the accommodation of eligible family members and must be provided solely because the employee is required to live away from their normal residence in order to perform their employment duties - see paragraph 47(5)(b).

3. The employee maintains an Australian home in accordance with section 31C - see paragraph 47(5)(ba).

4. The employee satisfies the requirements in section 31D.

5. The accommodation must not be provided while the employee is undertaking travel in the course of performing the duties of employment - see paragraph 47(5)(c).

6. The employee provides a declaration in the approved form - subparagraph 47(5)(d)(ii).

Taking each of the abovementioned conditions in turn:

1. Lease or licence of a unit of accommodation.

It was previously concluded under the discussion regarding 'Housing Fringe Benefits' in Question 2 that the apartment which the manager occupies is a 'unit of accommodation'. Further, it was concluded that the manager's right to occupy the apartment qualifies as a licence.

Consequently, the requirement in paragraph 47(5)(a) about the leasing or licencing of a unit of accommodation to an employee is met in this case.

2. Eligible family members and living away from the normal residence.

The first part of this condition requires that the accommodation be provided to an eligible family member. An 'eligible family member' includes the employee - see subsection 136(1).

In the present circumstances, the manager qualifies as an 'eligible family member' for the purposes of the exemption provision.

Therefore, accommodation i.e the apartment is provided to an eligible family member, the manager.

The second part of this condition requires that the accommodation must be provided solely because the employee is required to live away from his or her normal residence in order to perform the duties of employment. An employee's normal residence is their usual place of residence in Australia - see subsection 136(1).

It was previously concluded that the manager's usual place of residence is in Town A. The question that arises is whether the accommodation i.e the apartment is provided solely because the duties of their employment require the employee to live away from their Town A residence.

It was considered earlier in this report that the manager's employment duties, including the after-hours caretaker duties require that the manager reside in the Organisation's accommodation or to live nearby for example to attend to calls for assistance after hours. Therefore, it is accepted that the employee is required to live away from their normal place of residence in order to perform their employment duties.

In the alternative, even if, the caretaker component of the manager's duties did not form part of their employment (which is not conceded), the manager's duties in isolation would still require they take up residence in Town B as they are required to be present on-site at the Organisation to perform these duties.

Thus, it is considered that the requirements in paragraph 47(5)(b) are met.

3. Maintenance of a home by the employee in Australia under section 31C.

Under section 31C, an employee will maintain a home in Australia where the following requirements are met:

(a) the employee usually resides in a unit of accommodation in which the employee or employee's spouse has an ownership interest- subsection 31C(a)(i).

(b) the unit of accommodation continues to be available for the employee's immediate use and enjoyment - subsection 31C(a)(ii), and

(c) it is reasonable to conclude that the employee will resume living in the unit of accommodation when the period of living away from home ends - subsection 31C(b).

It was determined previously that the manager usually resides in Town A. Further, that the manager's accommodation in Town A of a home unit is a 'unit of accommodation' within the meaning of that term in subsection 136(1).

'Ownership interest' in land or a dwelling is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as having the meaning given by section 118-130 of the ITAA 1997.

Relevantly, under subsection 118-130(1) of the ITAA 1997 an ownership interest in a dwelling includes a legal or equitable interest in the strata of a flat or home unit or a licence or right to occupy it. A 'dwelling' includes a building which consists mainly or wholly of residential accommodation.

It is considered that the nature of the manager's interest in their home unit is by way of a legal or equitable interest in the strata of the unit complex. Consequently, the manager has an ownership interest in their Town A residence. Therefore the first requirement is met.

The home unit continues to be available for the manager's immediate use and enjoyment during the period that they are required to live away from it. Consequently, the second requirement is met.

In relation to the third requirement, the manager intends to return to their home in Town A upon cessation of their employment with the Organisation. Therefore, it can be concluded that the manager will resume living at the place where they usually resides at the end of their employment.

Therefore, the manager satisfies all the requirement of section 31C about maintain a home in Australia.

4. The employee satisfies the requirements in section 31D.

Under section 31D, the fringe benefit must relate to all or part of the first 12 months of the employment of the employee unless:

● the employer pauses the 12 month period because the employee takes annual leave, long service leave or sick leave - paragraph 31D(2)(a); or.

● a new 12 month period commences because the employee is required to live at another location for the purposes of that employment -- paragraph 31D(2)(b).

Effectively, the exemption available under subsection 47(5) will be limited to the first 12 months from the commencement of the manager's employment; or extended from that date should the employer pause the 12 month period in accordance with paragraph 31D(2)(a).

5. The employee is not travelling in the course of performing their employment duties - see paragraph 47(5)(c).

In relation to the fifth condition, the manager is provided with the accommodation while they are providing their services at the Facility, Town B. Therefore, it is accepted that the accommodation is not being provided while the manager is undertaking travel in the course of performing their duties of employment.

6. The employee provides a declaration in the approved form setting out certain matters - subparagraph 47(5)(d)(ii).

In relation to the final condition, the employer must obtain from the employee to whom the accommodation is provided a declaration setting out the following matters by the declaration date:

(i) the employee's usual place of residence;

(ii) that section 31C is satisfied (about maintaining a home in Australia) and

(iii) the place at which the employee actually resided while living away from his or their usual place of residence.

The declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

The Commissioner will grant an extension of the declaration date where circumstances indicate that it is fair and reasonable to do so.

In these circumstances, the Organisation was unaware of its liability to fringe benefits tax in respect of this benefit until this present time.

Therefore it is considered that to enable the Organisation to obtain the necessary declarations for the 2014 and 2015 FBT years from the manager, it is fair and reasonable to extend the declaration date.

In this instance the Commissioner has exercised his discretion to extend the declaration date in order that the declaration is obtained from the employee, as soon as practicable, in respect of 20YY and 20ZZ FBT returns.

This results in subparagraph 47(5)(d)(ii) of the FBTAA being satisfied.

As all the conditions in subsection 47(5) are met, the provision of accommodation will be an exempt benefit commencing from the date of commencement of the manager's employment for a period of 12 months. This is subject to the employer obtaining a declaration, as soon as practicable, from the employee setting out the matters, as specified above.

Upon cessation of the 12 month exemption period, accommodation provided to the manager will be subject to fringe benefits tax as a residual benefit under Division 12.

Question 4

Summary

The provision of accommodation to the manager is classified as an external period residual benefit under section 49 of the FBTAA. The effect of the operation of the relevant FBT provisions is that a licence to occupy or use real property will be taken to exist for the period when the licence subsists.

In the circumstances, it is considered that the manager has a right to use or occupy the apartment for each tax year. Consequently, it is considered that a residual benefit will arise even during the weeks that the manager is not working.

Detailed reasoning

It was determined previously that the accommodation provided was a residual benefit under Division 12 and exempt from fringe benefits for a period of 12 months from the commencement of employment. This is subject to the employee making the appropriate declaration.

Upon cessation of the 12 month exemption period, accommodation provided to the manager will be subject to fringe benefits tax as a residual benefit under Division 12.

Relevantly, a residual fringe benefit is valued as an in-house residual fringe benefit if the employer (or associate) provides identical benefits to the public in the ordinary course of its business; and in similar circumstances and subject to identical terms and conditions as those that are applied to the recipient.

Whilst it is considered that the Organisation provides accommodation to the public in the ordinary course of its business, it cannot be said that the accommodation which is provided free to the manager on an indefinite basis is on identical terms and conditions and in similar circumstances to the Organisation's guests who require accommodation on a short to long term basis in order to receive medical treatment.

Thus, the provision of accommodation cannot be classified as an in-house residual fringe benefit.

Broadly, a residual fringe benefit that is not an in- house residual fringe benefit is an external residual fringe benefit. The timing of the provision of an external residual benefit will depend upon whether it is a period residual fringe benefit or a non-period residual fringe benefit.

A period residual fringe benefit is defined to mean a residual fringe benefit that is provided during a period.

Under section 149, a benefit is taken to be provided during a period if, and only if, it is provided and subsists during a period of more than one day and is not deemed to be provided at a particular time or on a particular day. In the case of a lease or licence of property (real or personal) the benefit is taken to be provided during the period when the lease or licence subsists.

Further, subsection 46(1) stipulates that a benefit is to be treated as having been provided in each year of tax during which any part of that period occurred.

Consequently, a benefit constituting of a lease or licence of real property will be taken to be provided for the period that the lease or licence subsists. If the lease is granted for a number of a tax years, the benefit will be treated as being provided in each of those tax years.

In the present circumstances, it was previously considered that the right to use the apartment constituted a licence of the property as it gave the manager a right to occupy or use the apartment on an ongoing basis. There is no agreement between the manager and the Organisation setting out the terms of use of the apartment.

It is noted that the document describing the caretaker's duties stipulates that the apartment is only available when the after-hours caretaker is on duty which is outside of business hours on weekdays, all weekends and public holidays.

However, the circumstances surrounding the use of the apartment by the manager show otherwise. The manager has the right to access and occupy the apartment on a 24 hours basis during the weeks that they are rostered on. Further, the apartment is made available for the manager to store their belongings during their week off. During that rostered week off, the apartment remains unoccupied. This is consistent with the statement that the apartment is constantly made available to the manager.

Accordingly, it considered that the manager has a licence i.e a right to occupy or use the apartment, even during the weeks that the manager does not work, such as the manager's rostered week off.

Therefore, the residual benefit will be calculated for the entire tax year for each tax year subject to the ruling and not on the basis of the weeks that the manager works.

The taxable value of an external period residual fringe benefit is calculated in accordance with section 51. In the present circumstances, neither paragraphs (a) and (b) of section 51 have any relevance here. Paragraph (a) is concerned with arrangements where a benefit is purchased; paragraph (b) is concerned where expenditure is incurred to provide the benefit.

Under paragraph (c), the taxable value of a residual benefit is the notional value of the benefit less any employee contribution. No contribution is made by the manager for the apartment. The term 'notional value' is defined in subsection 136(1) as the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm's length transaction.

Subsection 136(1) further provides that 'arm's length transaction' means a transaction where the parties to the transaction are dealing with each other at arm's length in relation to the transaction.

Generally, the notional value would generally represent the market value of the benefit. Of assistance here is Miscellaneous Taxation Ruling MT 2025: Fringe Benefits Tax: Guidelines for Valuation of Housing Fringe Benefits, which provides guidelines for determining the market value of housing provided to employees, including caretaker employees, albeit in the context of calculating the taxable value of a housing fringe benefit under section 25.

In conclusion, the taxable value of the accommodation benefit will be calculated in each tax year as an external period residual fringe benefit under paragraph 51(c) even during the weeks that the manager is not working.

Question 5

Summary

The Organisation's eligibility for exemption under section 58 turns on whether the manager's duties consists of, or consists principally of caring for those persons in 'necessitous circumstances'. The term 'necessitous circumstances' refers to financial necessity. Therefore, the question of whether eligible recipients of the Organisation's accommodation services are in necessitous circumstances is restricted to a consideration of their financial situation.

We have examined the manner in which the Organisation selects eligible recipients for its accommodation services. We have found that although there may be instances where the Organisation may assist persons who are in financial need because of their non-financial needs, there is no evidence to show that the persons who access the Organisation's services are all or mainly in financial necessitous circumstances. Accordingly, the exemption in section 58 does not apply.

Detailed reasoning

For the provision of accommodation provided to the manager to be an exempt benefit under section 58, the conditions in paragraphs 58(1)(a) to (d) must be satisfied.

For paragraph 58(1)(a) to be satisfied:

● The Organisation must fall within one of the categories of entities specified in subparagraphs 58(1)(a)(i) to (iv) and

● The Organisation's activities must consist of or include caring for elderly or disadvantaged persons.

The Organisation falls within subparagraph (iii) as it is an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act).

Further, it is not registered as an entity whose purpose is the advancement of religion for the purposes of the ACNC Act.

The persons accommodated at Facility can be persons of any age, not necessarily those that are elderly. Therefore, as the Organisation is not involved in the care of elderly persons it is necessary to determine whether the Organisation's activities consist of or include the care of disadvantaged persons. This is also relevant in relation to paragraph 58(1)(b) which concerns the duties of the employment of employees.

In this regard for paragraph 58(1)(b) to be satisfied, the duties of the employment of the manager must consist of, or consist principally of:

● caring for disadvantaged persons and any children of those disadvantaged persons who reside with those disadvantaged persons.

The term disadvantaged person is defined in subsection 136(1) and means:

(a) a person who is intellectually, psychiatrically or physically handicapped; or

(b) a person who is in necessitous circumstances.

'Necessitous circumstances' is not defined within the legislation. Guidance as to what is meant by necessitous circumstances can be found in Taxation Ruling TR 2000/9 Income tax: necessitous circumstances funds which sets out the views of the ATO on public funds established and maintained for the relief of persons who are in necessitous circumstances.

In paragraph 29 of TR 2000/9, the following summary is provided in relation to the meaning of necessitous circumstances:

● necessitous circumstances concern financial necessity;

● it involves some degree of poverty, though it may be less than abject poverty or destitution;

● it is relative to a modest standard of living;

● it is a relative term, which has no fixed quantitative measure and it may be relative to particular circumstances; and

● it is to be distinguished from the inability to afford merely desirable advantages.

In paragraphs 30 and 31 of TR 2000/9 it is also noted that:

The expression 'necessitous circumstances' refers to financial necessity. It does not extend to needs generally. Kitto J said in Ballarat Trustees Executors and Agency Co Ltd v. FC of T (1950) 80 CLR 350 at 353:

It was contended… that the expression “necessitous circumstances”…includes any circumstances of need, such as the need for hospital attention, and is not confined to circumstances of financial necessity. In my opinion so wide a construction of the expression should not be adopted, having regard to ordinary usage, the context in which the words appear and the history of the sub-section [8(5) of the Estate Duty Assessment Act 1914 - 1942]. I construe the expression as referring to circumstances characterised by some degree of financial necessity.

Accordingly, the needs of the sick, incapacitated, aged, etc., do not, on their own, constitute necessitous circumstances. However, it may be the case that a non-financial need causes financial necessity.

Therefore, the question of whether the persons and/or carers who are accommodated at the Facility are in necessitous circumstances is restricted to a consideration of their financial situation.

In addressing what is meant by 'relative to a modest standard of living' the following is noted from paragraphs 34 to 36 of TR 2000/9:

Whether a person is in necessitous circumstances depends on whether he or they can obtain a modest standard of living. In Ballarat Trustees Kitto J said at 80 CLR 355:

…I should say that a person is in necessitous circumstances if his financial resources are insufficient to enable him to obtain all that is necessary, not only for a bare existence, but for a modest standard of living in the Australian community.

TR 2000/9 notes that a strong indicator, though not the only indicator, can be whether the person is entitled to government welfare assistance i.e where a person's level of income is such that they are eligible to receive income-tested government benefits - see paragraph 35.

However, receipt of government assistance, on its own, is not conclusive evidence that a person is in necessitous circumstances. For example, in Case X13 90 ATC 165 at 171 Purvis J did not accept that being in receipt of government social welfare was sufficient evidence of necessitous circumstances:

'There was not any evidence as to the financial resources of the student beneficiaries other than that their parents or parent were or was in receipt of social security. There was not any evidence of an inability on the part of a parent or the student to afford the necessaries associated with living in Australia.'

It is noted that most of the Organisation's guests are eligible recipients for financial assistance under the various State's PTAS. From the information available about the operation of these schemes, the eligibility criterion for financial assistance which is common to all of these schemes is the residency of the PTAS applicant.

Other criteria applied by the PTAS schemes include distance from specialist services, eligibility to Medicare benefits.

However, none of the PTAS schemes impose an income test on potential recipients for financial assistance. Consequently, recipients of PTAS assistance may or may not be in financial necessitous circumstances.

Therefore, it is considered that the receipt of assistance from a PTAS scheme does not provide any indication of whether a guest of the Organisation is in financial necessitous circumstances.

In selecting recipients for its accommodation services, the Organisation does not apply any strict eligibility criteria. Each request for the Organisation's services is decided on its own merits. The Organisation's approach is to provide their services to those persons in genuine need. These needs could arise because of financial hardship, a requirement for family accommodation; or the patient resides interstate and requires medical treatment.

It is accepted that the Organisation in some instances will assist persons who are in financial need as a consequence of their non-financial needs for example a breadwinner who has become ill, as cited by the applicant.

However, there is no evidence to show that persons who access the Organizations' accommodation services are all or mainly in financial necessitous circumstances, as the Organisation selects recipients for its services based broadly on a person's needs which are not necessarily financial needs - for example the need for family accommodation or the interstate residency of a patient.

No financial assessment is undertaken by the Organisation of its guests in determining eligibility for its services, other than in the limited circumstances where a guest is unable to pay the full amount of the tariff.

Further, there is no evidence that social workers or other referral agencies apply any financial criteria before referring those persons to the Organisation for its accommodation services.

Accordingly, it is considered that the requirement that the employee's duties consists of caring for those mainly in necessitous circumstances is not met.

Therefore as the duties of the employee are not principally concerned with the care of elderly or disadvantaged persons, the benefit will not be exempt under section 58 of the FBTAA.

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