Edited version of your written advice

Authorisation Number: 1051493034659

Date of advice: 13 March 2019

Ruling

Subject: Fringe benefits tax

Question 1

Will employees working under a Drive-in Drive-out (DIDO) arrangement satisfy the requirements set out in section 31E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Will accommodation provided to employees working under a DIDO arrangement be exempt under subsection 47(5) of the FBTAA?

Answer

Yes

Question 3

Will the food allowance provided to employees to compensate them for additional food expenses be considered a living-away-from-home allowance (LAFHA)?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

Employees will travel to and from X to fulfil their employment duties based on a particular roster. You have provided details of those rosters.

Employees will undertake their duties in X on a rotational basis with each team operating in a multi-disciplinary role during the roster period.

Where a task is not completed by employees in one roster, it is intended that the employees in the subsequent roster will assume responsibility for those duties.

While the employee is working in X, they are housed at no personal expense to the employee. The costs involved in maintaining their usual place of residence are at the personal expense of the individual employee.

In addition employees are provided with a food allowance to meet the additional cost of food during the day for the days rostered, as a result of living away from home.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 30(1)

Fringe Benefits Tax Assessment Act 1986 section 31A

Fringe Benefits Tax Assessment Act 1986 section 31E

Fringe Benefits Tax Assessment Act 1986 subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

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

Question 1

Summary

Employees working under a DIDO arrangement will satisfy the requirements set out in section 31E.

Detailed reasoning

Section 31E states:

The employee satisfies this section if:

(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 in 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) the basis of work described in paragraph (a) is customary for employees performing similar duties in that industry, and

(c) it would be unreasonable to expect the employee to travel on a daily basis on work days between:

(i) his or her usual place of employment, and

(ii) his or her normal residence,

having regard to the location of those places, and

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

Paragraph 31E(a)

ATO Interpretative Decision ATO ID 2013/43 provides the following guidance on the phrase ‘regular and rotational basis’:

The meaning of 'regular and rotational basis' is not defined in the FBTAA. Therefore, it is relevant to consider the ordinary meanings of the terms 'regular' and 'rotational' in the context in which they are used in the FBTAA.

The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 (Macquarie Dictionary), defines 'regular' as:

usual; normal; customary; conforming in form or arrangement; characterised by fixed principle, uniform procedure, etc; recurring at fixed times; periodic; adhering to rule or procedure.

The word ‘rotational’ in the employment context is defined in the Cambridge Dictionaries Online as:

relating to a system in which the person who does a particular job is regularly changed: The shifts work on a rotational basis. Depending on the department, some recruits will participate in rotational placements.

Guidance in relation to the meaning of the term ‘irregular’ is provided in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits in the context of the minor benefits exemption in section 58P. Paragraph 203 of TR 2007/12 refers to the Macquarie Dictionary meaning of ‘irregular’ as being ‘not characterised by any fixed principle, method or rate’.

Paragraphs 24 to 129 of TR 2007/12 contain 13 examples that illustrate the application of the term ‘irregular’ in the context of section 58P. Examples 1 to 4 in paragraphs 24 to 64 in considering Christmas parties and/or gift indicate that a benefit provided every Christmas will be considered to be regularly provided. By contrast, benefits provided on an ad hoc basis are considered to be irregular.

Guidance for considering whether any difference in the off days is sufficient to conclude that the days are not the same in consecutive weeks is provided in the example in part 11.9 of Fringe benefits tax: a guide for employers:

An employee works in the mining industry on a 7-day on, 7-day off roster. The employee works Sunday through to Saturday, and has the following Sunday through to Saturday off.

In this case, the employee is not working the same days in consecutive weeks because the employee is working every day in one week, then not working in the next, and is doing this on a rotational basis.

This is contrasted with an employee who works Monday through to Friday and has Saturday and Sunday off, and does the same in the next week. An employee in this instance is working the same days in each week – they are working on a consecutive basis, week after week.

The working pattern of employees on each of the rosters satisfies the requirements of paragraph 31E(a).

Paragraph 31E(b)

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?

Paragraph 2 of TD 94/97 states that:

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.

In relation to this condition in section 31E the Explanatory Memorandum to Tax Laws Amendment (2012 Measures No. 4) Bill 2012 states:

it is customary in the industry in which the employee works for employees performing similar duties to work on a rotational basis and return home during days off; for example, miners - the work duties continue to be undertaken by other employees on a rotational basis while any particular employee is on days off

It is accepted that paragraph 31E(b) is satisfied.

Paragraph 31E(c)

Given the particular circumstances it is unreasonable to expect the employees to travel to and from work and their normal residence on a daily basis.

Paragraph 31E(d)

In the circumstances it is reasonable to expect that the employees will resume living at their normal residence when their employment duties no longer require him or her to live away from home.

As all of the requirements are met, it is accepted that the employees satisfy the fly-in fly-out and drive-in drive-out requirements in section 31E.

Question 2

Summary

The accommodation provided to employees working under the DIDO arrangement is exempt under subsection 47(5).

Detailed reasoning

This residual benefit will be an exempt benefit when the requirements in subsection 47(5) are met:

Where:

(a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and

(b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and

(ba) the employee satisfies:

(i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or

(ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and

(c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(d) any of the following conditions is satisfied:

(i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee ' s usual place of residence and the employee ' s usual place of employment;

(ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii) ;

(iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii) ;

the benefit is an exempt benefit in relation to the year of tax.

The provision of accommodation to employees will be an exempt benefit under subsection 47(5) as:

● the use of the unit of accommodation is a residual benefit as it is not the employee’s usual place of residence

● the accommodation is provided to the employee who is a family member as defined in subsection 136(1)

● the employees satisfy section 31E as DIDO employees

● during the period in which the accommodation will be provided the employees will be living away from home, rather than travelling

● relevant declarations will be provided.

Question 3

Summary

The food allowance provided to employees to compensate them for additional food expenses is considered to be a LAFHA.

Detailed reasoning

Subsection 30(1) set out the circumstances in which an allowance will be a LAFHA benefit:

Where:

(a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee, and

(b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:

(i) additional expenses (not being deductible expenses) incurred by the employee during a period, or

(ii) additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which the employee is subject, during a period,

by reason that the duties of that employment require the employee to live away from his or her normal residence,

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

Normal residence is defined in subsection 136(1):

In relation to an employee means:

(a) if the employee’s usual place of residence is in Australia – the employee’s usual place of residence; or

(b) otherwise – either:

(i) the employee’s usual place of residence; or

(ii) the place in Australia where the employee usually resides when in Australia.

The food allowance provided to employees is a LAFHA benefit as:

● its purpose is to meet the additional cost of food during the day for the days they are rostered on to work

● the employees maintain their usual place of residence, and

● they are required to live away from their normal residence in order to undertake their duties of employment.

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