Edited version of private ruling

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Ruling

Subject: Fringe Benefits Tax - relocation expenses

Question

Does the payment of removal expenses by the Board in relation to the relocation of a retired person gives rise to an exempt benefit under section 58B or 58F of the Fringe Benefit Tax Assessment Act 1986 (FBTAA) for the fringe benefits tax year ended 31 March 2010?

Answer

No.

This ruling applies for the following period

1April 2009 to 31 March 2010

The scheme commenced on

1 April 2009

Relevant facts and circumstances

The employer seeks clarification on the application of fringe benefits tax (FBT) on relocation expenses for permanent employees moving back home upon retirement.

A permanent officer has retired after eight years service. The employer has relocated the retiree back home and paid all removal expenses.

Relevant legislative provisions

Fringe Benefit Tax Assessment Act 1986 section 58B

Fringe Benefit Tax Assessment Act 1986 section 58F

Fringe Benefit Tax Assessment Act 1986 section 136(1)

Summary

The removal expenses of the retiree paid by the employer, after eight years service as a permanent employee, on his/her return home will not be exempt benefits as the expenses paid by the employer are not considered to be living away from home allowances. The expenditure will be subject to FBT.

Detailed reasoning

Section 58B of the FBTAA applies to relocation expenses - removals and storage of household effects. Where an employer meets the costs of removal and storage of household effects of employees (both new and existing) who are required to live away from home because their job location changes, the benefit is exempt.

Section 58F of the FBTAA applies to relocation expense - transport. Where an employee is required to live away from home, or is required to relocate their usual place of residence, in order to perform employment-related duties, the costs of providing relocation transport to the employee and family members are exempt benefits. The exemption also applies where the employee is returning to their usual place of residence after working at another location.

Both are exempt benefits if the employee is required to live away from home to perform their employment duties.

Paragraph 14 of the Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living away from home allowance benefits clarifies a 'usual place of residence' as

A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for his employer at another locality, the employee would have continued to live at the former place.

Paragraph 23 of MT 2030 explains the circumstances to apply living away from home allowance under the FBTAA.

The same applies in a case where an employee transfers to a new locality within Australia on an appointment of fixed duration provided the permanent job location does not change, e.g., under an arrangement where an employee transfers to a branch office of the employer in another State for a two or three year term on the basis of return to the permanent position at the end of that time.

In paragraph 25 of MT 2030, it goes on to say that:

…certain kinds of occupations have a career structure which brings with it the necessity to accept regular transfers from one location to another, e.g., police officers, school teachers, members of the defence force, bank employees, etc. Employees in these situations will generally not be treated as living away from home when they move on transfer to live in proximity to the current work place. That will be the case even if the employee owns a home elsewhere in which he or she eventually intends to reside.

The location of the retiree's usual place of residence is dependent on whether he/she had a change in permanent job location or was undertaking a position of limited duration.

In your circumstances, we do not consider an eight year permanent service of the retiree to be temporarily living away from home.

The relocation expenses of the retiree are not in respect of living away from home.

Where the expenses are not in respect of living away from home, they are not exempt benefits under section 58F or section 58B of the FBTAA.