Edited version of your written advice

Authorisation Number: 1051270662960

Date of advice: 24 August 2017

Ruling

Subject: Fringe benefits tax

Question 1

Are tutors considered employees for the purposes of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 2

Is the accommodation the usual place of residence in each of the scenarios a, b and c?

Answer

a) No

b) No

c) Yes

Question 3

Is accommodation provided to these tutors identical or similar to the accommodation offered to outsiders?

Answer

Yes

This ruling applies for the following period:

Year ended 31 March 2018

The scheme commences on:

April 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 employer is in the business of providing accommodation.

Tutors assist in providing support and supervision of guests.

A job description has been provided.

Tutors are not paid a wage and do not have any set hours of work. However each tutor is given a discount on accommodation fees in return for undertaking the role.

Details of the accommodation have been provided.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 25,

Fringe Benefits Tax Assessment Act 1986 paragraph 26(1)(b),

Fringe Benefits Tax Assessment Act 1986 section 45,

Fringe Benefits Tax Assessment Act 1986 subsection 136(1) and

Fringe Benefits Tax Assessment Act 1986 section 137.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.

Question 1

Summary

The tutors are considered to be employees for the purposes of the Fringe Benefits Tax Assessment Act 1986.

Detailed reasoning

An employee is defined in subsection 136(1) to be:

● a current employee

● a future employee, or

● a former employee.

Subsection 136(1) also sets out that a current employee is someone who receives, or is entitled to receive, salary or wages.

Section 137 further expands this to include persons who receive non-cash remuneration in circumstances where the person would have been treated as an employee if the non-cash remuneration had been received by way of a cash payment.

Subsection 137(1) states:

For the purpose only of ascertaining whether a person is an employee or an employer within the meaning of this Act, where:

(a) a benefit is provided by a person (in this subsection referred to as the first person) to, or to an associate of, another person (in this subsection referred to as the second person);

(b) but for this subsection, the benefit would not be regarded as having been provided in respect of the employment of the second person; and

(c) either of the following conditions is satisfied:

(i) if the benefit were provided by the first person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the first person to the second person;

(ii) …

a definition in subsection 136(1) applies as if the benefit were salary or wages paid to the second person by:

(d) in a case to which subparagraph (c)(i) applies - the first person; or

(e) ...

The facts indicate that the tutors are contracted to provide their labour.

Therefore although the tutors are not paid salary or wages, if the discounted accommodation was provided to them by way of a cash payment, it would constitute salary or wages.

Consequently, the tutors are deemed to be employees as provided for in subsection 137(1).

Question 2

Summary

The accommodation is not the usual place of residence for the tutor in scenario a) and b), but is the usual place of residence for the tutor in scenario c).

Detailed reasoning

A housing benefit arises in accordance with section 25 where an employee is provided with the right to use a unit of accommodation and the lease or licence which grants that right exists at a time when that unit of accommodation is the usual place of residence of the employee.

If the unit of accommodation is not the employee's usual place of residence, the right to use the unit is not a housing benefit. However, it may give rise to a residual fringe benefit in accordance with section 45.

It is necessary to determine whether the accommodation is the tutor’s usual place of residence in order to ascertain the type of benefit that is provided.

Whether a place is an employee's usual place of residence is a question of fact, based on all the circumstances.

The term place of residence is defined in subsection 136(1):

in relation to a person, means:

(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.

The general presumption is that a person's usual place of residence will be close to where they are permanently employed.

Various decisions of Taxation Boards of Review relating to the former section 51A of the Income Tax Assessment Act 1936 deal with whether a particular employee was living away from his or her usual place of abode. It is considered that the words 'residence’ and 'abode’ may be taken as synonymous therefore the decisions are helpful when considering an employee’s usual place of residence.

More recently, the concepts of usual place of abode and usual place of residence were considered by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051; (2008) 71 ATR 720.

a) In this scenario, it is concluded that the tutor’s usual place of residence is not at the accommodation.

b) In this scenario there are sufficient grounds for concluding that the accommodation is not the tutor’s usual place of residence.

c) In this scenario, for the period of the academic year, it is concluded that the accommodation is the tutor’s usual place of residence.

Question 3

Summary

The accommodation provided to the tutors is identical or similar to the accommodation offered to outsiders.

Detailed reasoning

The taxable value of accommodation provided in a caravan, mobile home, hotel, motel, hostel or guesthouse where the person providing the benefit is carrying on a business of providing such accommodation to the public is calculated in accordance with paragraph 26(1)(b).

Under sub-paragraph 26(1)(b)(iv) the taxable value of the recipient’s accommodation is 75% of the market rental value in a case where,

..if the fringe benefit were not a housing fringe benefit, it would be an in-house residual fringe benefit…

As is relevant an in-house residual fringe benefit is defined in subsection 136(1) as follows:

in relation to an employer, means a residual fringe benefit in relation to the employer:

(a) where both of the following conditions are satisfied:

(i) the provider is the employer or an associate of the employer;

(ii) at or about the comparison time, the provider carried on a business that consisted of or included the provision of identical or similar benefits principally to outsiders; or

(b) …

but does not include a benefit provided under a contract of investment insurance.

In order to determine the taxable value of any housing fringe benefits, it is necessary to consider whether the accommodation provided to the tutors is identical or similar to the accommodation provided to outsiders.

This also applies if the accommodation provided to a tutor is a residual fringe benefit, as the taxable value of the fringe benefit will be 75% of the lowest arm’s length price charged to the public for the accommodation where it is an in-house residual fringe benefit.

The terms identical and similar are not defined in the FBTAA and therefore take on their ordinary meaning.

The Macquarie Dictionary, [Online], www.macquariedictionary.com.au defines identical as:

1. (sometimes followed by to or with) corresponding exactly in nature, appearance, manner, etc.: this leaf is identical to that.

2. the very same: I almost bought the identical dress you are wearing …

Similar is defined as:

1. having a likeness or resemblance, especially in a general way.

As defined in subsection 136(1) the term identical benefit:

in relation to a recipients benefit in relation to a residual fringe benefit, means another benefit that is the same in all respects, except for differences (if any) that are minimal or insignificant and do not affect the value of the other benefit.

This is not inconsistent with the ordinary (dictionary) meaning of identical.

The term outsiders, is defined in subsection 136(1):

In relation to the employment of an employee of an employer, means a person not being:

(a) an employee of the employer;

(b) an employee of an associate of the employer;

(c) an employee of a person (in this definition referred to as the provider) other than the employer or an associate of the employer who provides the benefits to, or to associates of , employees of the employer or an associate of the employer under an arrangement between:

(i) the employer or an associate of the employer ; and

(ii) the provider or another person; or

(d) an associate of an employee to whom any of the preceding paragraphs apply.

The employer is in the business of providing accommodation to guests. The accommodation provided to the tutors is the same accommodation provided to guests.

It is clear that the employer is providing accommodation that is identical to the accommodation provided to outsiders.

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