Edited version of private advice

Authorisation Number: 5010073190131

Date of advice: 24 May 2021

Ruling

Subject: Remote area housing benefit exemption

Question 1

For the purposes of accessing the remote area housing benefit exemption under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is it both customary and necessary for the Employer to provide housing assistance to its employees for the reasons listed in subsection 142(2E) of the FBTAA?

Answer

No

Question 2

If the answer to question one is yes, will the housing benefit provided under a valid salary sacrifice arrangement be considered an exempt benefit under section 58ZC of the FBTAA?

Answer

As the answer to question one is no, the housing benefit provided under a valid salary sacrifice arrangement is not an exempt benefit under section 58ZC of the FBTAA.

This ruling applies for the following periods

FBT Year Ending 31 March 20XX

FBT Year Ending 31 March 20XX

FBT Year Ending 31 March 20XX

FBT Year Ending 31 March 20XX

The scheme commences on

1 April 20XX

Relevant facts and circumstances

The Employer operates a business in a remote area of Australia for FBT purposes.

The Employer is proposing to offer the following housing assistance to potential employees:

1.    For employees that purchase a residence in the local area, the Employer will provide an expense payment benefit for interest accrued by the employee on a housing loan connected to the remote area dwelling; and

2.    For employees who rent, the Employer will provide an expense payment benefit for rent accrued by the employee for a unit of accommodation used as their usual place of residence.

The Employer states that there are minimal rental properties available in the remote area for employees to rent due to the resource industry placing demand on housing in the area. Due to this situation, the Employer claims suitable accommodation can be difficult to source.

A search on the real estate website http://www.realestate.com.au undertaken reveals that there are numerous properties for sale in the remote area and also numerous properties for rent.

The Employer states that other employers in the same industry find it difficult to attract qualified employees to the remote area to perform similar roles and that other local employers in the same industry offer housing assistance to enable potential employees to be able to move to the area. Housing assistance is offered as part of a salary sacrifice arrangement.

The Employer states that to attract employees to the remote area, it will become normal to offer incentives to relocate in the form of remote area expense payment benefits including remote area housing assistance.

When questioned whether it is normal/customary for the industry to provide housing to their employees, the applicant responded that "Even though this is not normal for the industry, in this remote area, it is a normal practice".

No evidence was provided by the Employer suggesting it is customary in the Employer's industry to provide housing assistance to employees (e.g. statistical evidence as to how common the practice is, for how long the practice has continued or whether providing housing assistance to employees has achieved acceptance generally by other relevant employers).

No evidence was provided suggesting that the Employer is meeting a genuine need for housing assistance (e.g. statistical evidence, articles on housing needs in the area and/or industry or evidence of difficulties in securing appropriate housing for employees in the region).

Assumption(s)

Valid salary sacrifice agreements will be put in place with new employees.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 142

Fringe Benefits Tax Assessment Act 1986 subsection 142(2E)

Fringe Benefits Tax Assessments 1986 section 58ZC

Reasons for decision

Question One

For the purposes of accessing the remote area housing benefit exemption in section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is it both customary and necessary for the Employer to provide housing assistance to its employees for the reasons listed in subsection 142(2E) of the FBTAA?

Summary

It is not deemed both customary and necessary for the Employer to provide housing assistance to its employees for any of the reasons listed in subsection 142(2E) of the FBTAA.

Detailed reasoning

The common conditions listed under subsection 142(2E) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply where an employer provides remote area housing assistance in the form of the payment or reimbursement of rent or the payment or reimbursement of the interest accrued on a housing loan, amongst other things (subsection 142(3) of the FBTAA).

The Employer is proposing to provide housing assistance to its potential employees by either paying or reimbursing their rent or by paying their interest accrued on a housing loan. As such, subsection 142(2E) of the FBTAA applies to the Employer's situation.

The common conditions that need to be satisfied in order to access the remote area housing benefit exemption under section 58ZC of the FBTAA are outlined in Subsection 142(2E) of the FBTAA as follows:

(a) it is customary for employers in the industry in which the employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees;

(b) it would be concluded that it was necessary for the employer, during the year of tax, to provide or arrange for the provision of housing assistance 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;

(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 employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees.

The common conditions outlined in both paragraphs (a) and (b) need to be satisfied in order to access the remote area housing benefit exemption under section 58ZC of the FBTAA (i.e. providing housing assistance to employees needs to be both customary within the industry and necessary due to one of the reasons listed in paragraph (b) to qualify for the exemption).

(a)  Is it customary for employers in your industry to provide housing assistance to employees?

Whether or not it is customary for employers within a particular industry to provide housing assistance to their employees is a question of fact.

The relevant test is not whether it is customary in remote areas for employers to provide housing assistance to their employees, but whether it is customary within the relevant industry for employers to provide housing assistance to their employees.

Guidelines on what the phrase 'customary for employers in the industry' means, is provided 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:

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.

In applying this guidance to the information provided there is no evidence to suggest it is customary (or normal) for employers in the industry to provide housing assistance to their employees.

It is not sufficient that other employers in the same industry in the same area normally provide housing assistance to their employees; it must be customary for employers across the industry to provide housing assistance to their employees in order to meet the requirements of paragraph 142(2E)(a) of the FBTAA.

As it is not considered customary for employers in the industry to provide housing assistance to employees under paragraph 142(2E)(a) of the FBTAA, the remote area housing exemption does not apply. This is regardless of whether the conditions outlined in paragraph 142(2E)(b) are satisfied because in order to qualify for the exemption, the common conditions in both paragraphs (a) and (b) need to be satisfied.

However; for completeness purposes we have also considered whether the Employer satisfies the conditions outlined in paragraph 142(2E)(b) of the FBTAA.

(b)  Can it be concluded that it is necessary for you as an employer to provide housing assistance for your employees because:

i)             the nature of your business is such that your employees are liable to be frequently required to change their places of residence;

We consider that employees in the same industry are unlikely to be required to move frequently from one residential location to another due to the nature of the business. This requirement is therefore not met.

ii)            there is not, at or near the place or places at which your employees are employed, sufficient suitable residential accommodation for those employees (other than residential accommodation provided by you or on your behalf); or

There appears to be sufficient suitable residential accommodation, other than residential accommodation provided by the Employer or on its behalf, available in the remote area. A search on the real estate website http://www.realestate.com.au reveals that there are numerous properties for sale in the remote area and numerous properties for rent. This requirement is therefore not met.

iii)           it is customary for employers in your industry in which your employees work to provide housing assistance for their employees.

As stated above, there is no evidence to suggest that it is customary for employers in the industry to provide housing assistance to their employees. This requirement is therefore not met.

As none of the conditions outlined in paragraph 142 (2E)(b) of the FBTAA have been satisfied, it is not necessary for the Employer to provide housing assistance to its employees.

Conclusion

As the Employer has not been able to satisfy the common conditions outlined in both paragraphs (a) and (b) of subsection 142(2E) of the FBTAA, the Employer is unable to access the remote area housing benefit exemption under section 58ZC of the FBTAA (i.e. it has been concluded that it is not customary and necessary for the Employer to provide housing assistance to its employees).

Question 2

If the answer to question one is yes, will the housing benefit provided under a valid salary sacrifice arrangement be considered an exempt benefit under section 58ZC of the FBTAA?

Summary

As the answer to question one is no, the housing benefit provided under a valid salary sacrifice arrangement is not an exempt benefit under section 58ZC of the FBTAA.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).