ATO Interpretative Decision
ATO ID 2003/159
Fringe Benefits Tax
Remote area housing: reduction of taxable value - remote area housing rentFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxable value of the expense payment fringe benefit reduced by 50% of the gross rent incurred by the employee when the rent relates to a unit of remote area accommodation under subsection 60(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
Yes, because the gross rent is the amount of the 'recipients expenditure as relates to the occupation period'.
Facts
The employee leases a house and lives in the house which is the employee's usual place of residence.
The employee pays rent to the landlord under the terms of the lease.
The employee is a current employee of the employer. The dwelling is situated in a 'remote area'. The employee works in a 'remote area'. In the employer's industry it is customary to provide 'housing assistance' to employees.
During the year the employee incurs rent of $5,000. The employer reimburses the full amount of the $5,000 rent expense incurred. This reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.
The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'.
There is no 'recipients contribution' made by the employee to the employer.
Paragraph 60(2A)(d) of the FBTAA is about not allowing non-arms length arrangements or arrangements entered into for the purposes of obtaining the tax concessions available under section 60. Paragraph 60(2A)(d) of the FBTAA does not apply to this arrangement.
Alternative facts
The facts as above continue to apply with the following exception.
Instead of the employer reimbursing the full amount of the $5,000 rent expense incurred, the employer only reimburses (in part), half of the $5,000 rent expense incurred. This reimbursement, $2,500, is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.
Reasons for Decision
The recipient of the $5,000 (or $2,500) 'expense payment fringe benefit' is the employee of the employer. Paragraph 60(2A)(a) of the FBTAA is satisfied.
'Recipients expenditure', as defined in section 136(1) of the FBTAA means, in relation to an 'expense payment benefit', the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA.
The expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA is the amount of rent incurred by the employee. That is, the amount of the gross rent incurred before reimbursement, which is $5,000 in both factual situations.
The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'.
During the year, the rent expense accrues and the employee lives in the accommodation as his or her usual place of residence. Paragraph 60(2A)(c) of the FBTAA is satisfied.
Paragraph 60(2A)(d) of the FBTAA does not apply.
Subsection 60(2A) of the FBTAA is satisfied. Accordingly, the employer is entitled to a reduction in taxable value equal to 50% of the gross rent incurred by the employee as relates to the occupation period.
Example calculation
Based on the facts (and alternative facts) contained above, the reduction in taxable value of the 'expense payment fringe benefit' would be calculated as follows:
| $(facts) | $(alternative facts) | |
| Expense payment fringe benefit | 5,000 | 2,500 |
| Less 'recipients contribution' | Nil | Nil |
| Taxable value before reduction | 5,000 | 2,500 |
| Less subsection 60(2A) reduction, 50% of gross rent (50% x $5,000) | 2,500 | 2,500 |
| Reduced taxable value | 2,500 | Nil |
Note: Unlike the reduction contained in subsection 60(2) of the FBTAA the 50% reduction contained in subsection 60(2A) of the FBTAA refers to 50% of the employee's expenditure (the gross rent) not to 50% of the taxable value. ATO Interpretative Decision ATO ID 2003/157 contains an example of the application of subsection 60(2)of the FBTAA in relation to remote area housing interest.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 6 April 2018 | Issue, Reason for Decision, Example calculation | Minor punctuation and grammar amendments |
Year of income: Year ended 31 March 2002
Legislative References:
Fringe Benefits Tax Assessment Act 1986
paragraph 20(b)
subsection 60(2A)
paragraph 60(2A)(a)
paragraph 60(2A)(b)
paragraph 60(2A)(c)
paragraph 60(2A)(d)
subsection 136(1)
subsection 142(1A)
ATO ID 2003/157
ATO ID 2003/158
ATO ID 2003/160
Keywords
Expense payment fringe benefits
FBT expense payment
FBT housing rent
FBT remote area housing
FBT taxable value
Fringe benefits
Fringe benefits tax
Reduction of taxable value
Date reviewed: 12 March 2018
ISSN: 1445-2782