Edited version of private ruling

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Ruling

Subject: living-away-from-home Allowance benefits

Questions

1. Is the employee considered to be living away from their usual place of residence for the purposes of section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)

Answer: No

2. If the answer to question 1 is yes, is the proposed allowance a living-away-from-home allowance (LAFHA) pursuant to section 30 of the FBTAA?

Answer: As the answer to question 1 is no this has not been addressed

3. If the answer to question 2 is yes, will the taxable value of the allowance be reduced to nil pursuant to section 31 of the FBTAA?

Answer: As the answer to question 2 is no this has not been addressed.

This ruling applies for the following periods:

Year ended 31 March 2010

Year ended 31 March 2011

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

23 March 2009

Relevant facts and circumstances

The employee is an employee of the employer. The employer is located in Locality A.

The employee is originally from Country A whose entire family resides there.

Prior to leaving Country A the employee was living in an apartment in Locality B. This was an apartment belonging to the employee's family and the employee did not pay any rent for it. The apartment was sold late last year as it was vacant since the employee left for Country B.

The employee owns a share in apartments in Country A and would return to Locality B if the employee left Country B as the family resides there. However the employee has made no statement regarding an intent to return to Locality B at the end of the current visa.

The employee relocated to Country B from Country A under Visa A and whilst in Country B worked casually in Locality A.

Visa A was subsequently changed to Visa B.

The employee commenced to work for the employer on Date A and was already living in Locality A when they commenced employment with the employer.

On a date subsequent to Date A the employee applied for Visa C (to replace their earlier Visa B. This was granted and is valid to Date B.

The employee has not purchased property in Country B and has left personal effects is Country A.

The employee is living in Locality A.

The employee has returned to Country A since relocating to Country B and intends to visit again.

Proposed allowance

The employer wishes to pay the employee an allowance titled a LAFHA of $X per annum.

This is made up an accommodation and food component. A break-up was provided

The employer has stated that the reason they are paying the allowance is:

The reason for paying the LAFHA is to compensate the employee for additional costs incurred because the employee is required to live away from their usual place of residence in order to perform their employment-related duties.

The LAFHA is not in addition to the employee's current salary. It is a component of the current salary. It is intended that the LAFHA will be provided by way of a purported salary sacrifice arrangement (SSA).

The employee will be required to give the employer a declaration as to the particulars of the usual place and actual place of residence for the fringe benefits tax (FBT) year during which the allowance is paid.

Relevant legislative provisions

FBTAA 30.

Reasons for decision

Question 1

Is the employee living-away-from-home?

It is the facts of the case which determine whether an employee is living-away-from-home and MT 2030 provides guidance on how the Commissioner determines whether an employee is living-away-from-home. Paragraph 14 states in part:

. . .the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e., the place where the employee is living at the time or some other place. 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. It would be relevant in reaching that view that there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality. This would be relevant even if the employee is living in temporary quarters close to a temporary job site. . .

In essence, this paragraph effectively states that 'but for' having to relocate temporarily for employment an employee would not have changed their residence and, once that temporary employment ceases the employee will return to that residence.

For the purposes of the FBTAA a place of residence is defined in subsection 136(1) and paragraph 12 of MT 2030, which explains this definition, states:

A place of residence of a person is thus the place where he or she resides or has some form of sleeping accommodation. The customary meaning of the word "reside" is to dwell permanently or for a considerable time, or have one's abode for a time. In turn, "residence" means the place, especially the house, in which one resides; a dwelling place; or a dwelling.

Therefore for an employee to be living-away-from-home, the employee would have had to have two places of residence and that the employee moved to the second place of residence as a result of the employee having to work temporarily for their employer at another locality. In addition the employee wouldn't have moved from the first residence if not for the fact that they had to work temporarily for their employer elsewhere.

In this case the employee is from Country A and prior to leaving Country A was residing in Locality B. In respect of expatriates paragraph 22 of MT 2030 looks at expatriate employees who are living-away-from-home. It states:

Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence.

So in looking at paragraphs 14 and 22 of MT 2030 for the employee to be living-away-from-home she would need to satisfy the following:

· the employee was living in Locality B

· changed residence in order to take up temporary employment with the employer:

· would not have left the home in Locality B if not for taking up temporary employment with the employer: and

· will be returning to Locality B when that temporary employment ceases.

In this case the employee left the home in Locality B to come to Country B on Visa A, but was under Visa B when employed by the employer.

In addition the employee was already living in Locality A when first employed by the employer.

Therefore as the employee was not living in Locality B when accepting the employment with the employer it cannot be said that the employee would have remained there if they hadn't taken up employment with the employer. This is because leaving Locality B predated working for the employer Locality A.

All their employment with the employer has done is extend an existing absence from Locality B. The reason for leaving Locality B was not a direct result of taking up the employment with their employer. The decision to take up employment with the employer was made after the employee had already relocated to Locality A and as such there was no requirement to change residence in order to take up employment.

However it should also be noted that once the current visa expires there is nothing to stop the employer sponsoring the employee for a further visa. Nor has the employee stated an intention to return to Locality B when the current visa expires. These factors leave it open for the employee to remain in Country B beyond the term of the current visa.

Given the length of time the employee has been in Country B, changed visas since being in Country B which extended the stay and has not given an indication of when the employee actually intends to return to Locality B the usual place of residence (notwithstanding that remaining in Country B is subject to having a valid visa), is probably now Locality A and not Locality B.

However as the original decision to leave Locality B is unrelated to taking up employment with the employer we do not need to look at whether or not Locality A is in fact now the employee's usual place of residence.

The employee is not living-away-from-home in the sense required under section 30 of the FBTAA as the absence from Locality B was not a consequence of her employment with her employer.

Questions 2 and 3

As both these questions were only to be answered if the answer to the previous question was yes they have not been addressed.