Edited version of private advice

Authorisation Number: 5010090417960

Date of advice: 5 April 2023

Ruling

Subject: Exempt residual fringe benefits

Question

Will accommodation provided by the Employer for employees working under a Drive-In-Drive-Out arrangements be an exempt residual benefit under subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following period:

1 April 20XX to 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

•         The employer employs diesel fitters at a mine which is located in a remote area.

•         Diesel fitters are mechanics that carry out the regular servicing of machinery, maintenance, and breakdown repairs of light machinery.

•         They work 6am to 6pm, 7 days on, 7 days off roster that is as follows:

-       On Tuesday, they drive from their usual place of residence to the remote area (a 140km journey).

-       They stay at the remote area for 7 days (until Monday).

-       On Tuesday they return to their usual place of residence where they stay for 7 days.

•         The employer provides accommodation at the remote area during this period.

•         The employees pay for the utilities which are not reimbursed.

Relevant legislative provisions

Fringe Benefits Assessment Act 1986 section 31

Fringe Benefits Assessment Act 1986 subsection 47(5)

Reasons for decision

Subsection 47(5) of the FBTAA provides that accommodation provided by an employer to an employee can be an exempt benefit where certain conditions are met.

Subsection 47(5) states that a benefit is an exempt benefit:

(5) 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.

Subsection 47(5)(a) Accommodation is a residual benefit

Subsection 136(1) of the FBTAA defines a residual benefit to mean a benefit that is a residual benefit by virtue of section 45.

Section 45 of the FBTAA states that a benefit is a residual benefit for the purposes of the FBTAA if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). In basic terms, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

Divisions 2 to 11 are not relevant to the arrangement subject to this ruling. Therefore, the benefit provided by the employer does not fall within any of the provisions of the Subdivision A of Division 2 to 11 of the FBTAA and the accommodation provided is therefore a residual benefit under section 45 of the FBTAA.

Subsection 47(5)(b) Accommodation is provided solely because the employee is Living-Away-from-Home

The unit of accommodation to be provided by the company is provided for the employee solely because of the employment duties that require the employee to live away from his or her normal residence whilst working in the remote area.

Subparagraph 47(5) (ba) states that the employee must satisfy section 31C and 31D or the FIFO and DIDO requirements of section 31E before paragraph 47(5)(ba) can be satisfied. In this case, section 31E is the relevant section to address.

Section 31E of the FBTAA establishes the criteria that must be met for an arrangement to be considered a FIFO or DIDO.

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:

(a) his or her usual place of employment; and

(b) 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.

The requirements are further explored below:

Subsection 31E(a) Regular and rotational

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], (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 employees will continue to work on a regular and rotational basis as required by Section 31E.

Subsection 31E (b) Industry custom

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

Paragraph 3 of TD 94/97 goes on to say

In defining the employer's industry, this Office will accept categorisation based on any recognised industry classification system. Examples of these are the industry codes for business income used by this Office (listed in the company income tax return instructions), and Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.

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

The employees are comprised of diesel fitters whose job are to maintain and service the equipment located at the mine. Based on the ANZSIC codes, maintenance services fall under the division "Other machinery and equipment repair and maintenance". It is established that it is common for employees performing similar duties across the mining industry to operate under a FIFO or DIDO arrangement in scenarios where the employment duties are required to be performed in a remote location.

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

Subsection 31E (c) Unreasonable to travel on a daily basis

Given the remote location in which the employees work, the hours of duty and the length of the round trip commute from their normal residence to the remote location it is unreasonable to expect the employees to travel to and from work and their normal residence on a daily basis. Paragraph 31E(c) would therefore be satisfied

Subsection 31E(d) Will return to usual place of residence

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 the requirements in section 31E are satisfied, paragraph 47(5)(ba)ii is also satisfied. We now need to consider if the remaining criteria in subsection 47(5) are met.

Subsection 47(5) (c) Accommodation is not provided whilst the employee is undertaking travel in the course of performing the duties of that employment

The employees residing in the remote location for the purposes of their employment are considered to be living away from home as opposed to travelling for business. Employees do not live in the remote location on a permanent basis, despite being their regular place of employment. They are required to travel from their usual place of residence outside of the remote location and their employment duties will require them to live away from their place of residence on a regular and rotational basis. As accommodation is not being provided while the employee is travelling, subsection 47(5)(c) is satisfied.

Subsection 47(5)(d) Declaration

Subparagraph 47(5)(d)(iii) requires the declaration to be given to the employer before the declaration date.

Declaration date' is defined in subsection 136(1) to mean:

... the date of lodgement of the return of the fringe benefits taxable amount of the employer of the year of tax, or such later date as the Commissioner allows.

Although the application does not indicate whether the declarations were obtained by the declaration date, to satisfy this condition declarations must be obtained. If those declarations are obtained paragraph 47(5)(d) will be satisfied.

Therefore, on the basis that the declarations are obtained the provision of accommodation will be an exempt benefit under subsection 47(5) of the FBTAA.

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