Edited version of private ruling

Authorisation Number: 1011592158189

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Ruling

Subject: Living-Away-From-Home Allowance

Question

Will an allowance provided to an employee be a Living-Away-From-Home Allowance (LAFHA) in accordance with section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

This ruling applies for the following period

1 April 2010 - 31 March 2011

The scheme commenced on

1 April 2010

Relevant facts

Approximately two years ago the employee came to Australia, with his family to work for you in Australia on a 457 Visa.

The employee has established a new place of abode in Australia and had has no family home or other assets in the overseas country.

The employee has no intention to return to the overseas country and has informed you of his intention to apply for permanent residency in Australia upon the expiration of his 457 visa.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Paragraph 30(1)(b)

Fringe Benefits Tax Assessment Act 1986 Section 30

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1936 Section 51A

Reasons for decision

Will an allowance provided to an employee be a Living-Away-From-Home Allowance (LAFHA) in accordance with section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The requirements to be met in determining an allowance will be a LAFHA as set out under subsection 30(1) of the FBTAA.

One of the conditions is that the employee is required to live away from their usual place of residence in order to perform their duties of their employment.

Your employee has established a new place of residence in Australia and has no assets or family home to return to. The employee is therefore not required to live away from his usual place of residence to perform his duties of employment. Any allowance paid by you tho the employee will not be a LAFHA.

Detailed reasoning

Section 30 of the FBTAA sets out the circumstances where an allowance will be treated as a LAFHA fringe benefit:

Where:

· at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and

· it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:

· additional expenses (not being deductible expenses) incurred by the employee during a period; or

· additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period,

· by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment,

· the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

Paragraph 30(1)(b) of the FBTAA requires the allowance be paid 'by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment'. It is therefore necessary to identify the usual place of residence.

The FBTAA does not define 'usual place of residence'. However, subsection 136(1) of the FBTAA defines a 'place of residence' to mean:

· a place at which the person resides; or

· a place at which the person has sleeping accommodation;

· whether on a permanent or temporary basis and whether or not on a shared basis.

In the absence of a legislative reference it is relevant to refer to the ordinary meaning of 'usual'. The Macquarie Dictionary defines 'usual' to mean:

habitual or customary: his usual skill.
2. such as is commonly met with or observed in experience; ordinary: the usual January weather.
3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

Guidelines for determining an employee's usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits.

Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former section 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states:

As the decisions illustrate, 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.

Further discussion occurs at paragraphs 19 to 25. Paragraph 20 provides the following general rule:

Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live.

As an example of the application of this general rule paragraph 22 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.

These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051. At paragraphs 55 and 56 Deputy President S A Forgie said:

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

As stated in paragraph 14 of MT 2030, the question of whether an employee is living away from their usual place of residence normally involves a choice between two places of residence.

Your employee has no family home or assets in the overseas country. The employee has established a new place of residence here in Australia.

As stated in paragraph 20 of MT 2030, an employee who moves to a new locality to take a up a position of limited duration with the intention to return to the old locality at the end of the appointment would generally be considered to be living away from their usual place of residence. However, from the information provided, your employee has no intention to return to their previous locality, they have no home or assets there. Also, there is no continuing connection with the first place of residence as stated in paragraph 56 of MT 2030.

Your employee has stated their intention to apply for a permanent visa. An employee can receive a LAFHA up until the date permanent residency is granted, however, the employee is still required to be living away from their usual place of residence.

In your situation, we consider your employee is not living away from their usual place of residence in order to perform their duties of employment.

Conclusion

As your employee is not living away from his usual place of residence all the conditions stated under subsection 30(1) of the FBTAA are not met. Accordingly any allowance paid to your employee will not be a LAFHA.