Edited version of private ruling

Authorisation Number: 1011597973108

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Ruling

Subject: Living-away-from-home allowance

Questions:

1. Should the living away from home allowance (LAFHA) received by you be included in assessable income as a travel allowance?

Answer: No

2. Are you entitled to a deduction for food and accommodation expenses when you are in receipt of a LAFHA?

Answer: No.

This ruling applies for the following period:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2007

Relevant facts and circumstances

As part of your employment you were required to travel to work sites to perform your duties.

In recognition of the fact that you had to travel to a number of work sites you received compensation expressed as a LAFHA. This was paid at a daily rate for the increased cost of accommodation and meals. Your employer has advised you that the fringe benefits tax (FBT) taxable value of the allowance was nil and is not a reportable fringe benefit.

Your payment summaries do not include the LAFHA either as an allowance or in gross earnings.

You worked at a number of locations during the income year.

Your work on site would vary from a few days to a few months.

In between working at these locations you had time off work.

Whilst working on site you obtained accommodation at your own expense in the nearest town for the duration of the assignment.

You also paid for your own meals.

Whilst on site you continued to maintain a place of residence at location A.

Your spouse and children continued to reside at location A when you were on site and never accompanied you to work site locations.

You resided at location A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Fringe Benefits Tax Assessment Act 1986 subsection 30(1).

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

· Subsection 30 (1) of the FBTAA provides a definition of what is LAFHA. For payment to constitute a LAFHA benefit under this subsection the following conditions must be met:

· the employer pays an allowance to the employee in respect of the employee's employment;

· the employee is required to live away from their usual place of residence to perform the duties of their employment; and

· the allowance is paid to compensate the employee for non-deductible additional expenses that the employee incurs, or for both non-deductible additional expenses that the employee incurs and other disadvantages arising, as a result of having to live away from home.

Is the payment an allowance?

As described in paragraph 2 of Taxation Ruling TR 92/15, Income tax and fringe benefits tax: the difference between an allowance and a reimbursement, 'A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance.'

In this case the payment made by your employer was a predetermined daily rate to cover food and accommodation costs incurred by you when on site. In addition there is no evidence to suggest that you had to justify your expenditure on accommodation and food to your employer.

Therefore the payment being made to you is an allowance.

Is the allowance in respect of employment?

The allowance is paid because you had to stay near the work site where you were performing the duties of your employment.

Therefore the allowance is being paid in respect your employment.

Were you living-away-from-home?

Whether an employee is living-away-from-home is a question of fact and Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits 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. . .

To paraphrase the above paragraph, an employee is living-away-from-home where there is a choice of two residences but they would not have left their first residence if they had not been required to work and reside temporarily at another locality.

For the purposes of the FBTAA a place of residence is defined in subsection 136(1) of the FBTAA as:

in relation to a person, means:

(a) a place at which the person resides; or

(b) 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 this case you always maintained a place of residence at which your spouse and children stayed and when on site you obtained accommodation near where you worked. Both of these would be place of residences as defined under subsection 136(1) of the FBTAA.

In looking at the facts of the case and comparing the two places of residence, the house in which your family continued to reside whilst you were away on site, would be your usual place of residence. In order to perform the duties of your employment you had to reside away from that home. What needs to be determined is whether you were travelling or living-away-from-home.

In looking at you circumstances and whether you are living-away-from-home paragraph 20 of MT 2030 states:

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.

In this case you moved to a location near a job site for the duration of your assignment and then returned to your usual place of residence. This paragraph would indicate that you were living-away-from-home. This is because you leave your home to reside where your work location is, perform the duties of your employment and then return to your usual place of residence.

In respect of a travelling allowance versus a LAFHA paragraph 37 and 38 of MT 2030 states:

Unlike living-away-from-home allowances, there is generally no change of employment location in relation to the payment of travelling allowances. While the expenses that they are intended to compensate for may be similar - meals and accommodation, etc., - the circumstances in which the allowances are paid are essentially different.

A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. In the former case, there is a change of job location and an actual change of residence to a place at or near that location. In the latter, the employee does not change job locations but simply travels in order to carry out the requirements of the job.

Although paragraph 41 of MT 2030 contains a practical general rule that where the period away does not exceed 21 days the allowance will be treated as a travelling allowance, it is meant to be used in circumstances where it is difficult to conclude whether an employee is travelling or living-away-from-home.

As the period away in the sample period ranged from a few days to over a few months we cannot apply the 21 day rule in this case. This is because the conditions of your employment remain the same regardless of the length of time away from home. Therefore we have to look at the overall picture rather than the individual absences.

For the sample period, in addition to the fact you moved from site to site, when not on site you were not working for your employer at a locality near your usual place of residence. You went home and awaited the next assignment. In the sample period it could not be concluded that you had a job location other than the site you were at to be travelling from. All the travel undertaken was to allow you to get to where you were employed.

Although the employment agreement does state a job location, it also states that you would have to work at other locations as required. Therefore the conditions of your employment require you to work at various sites (this is confirmed in your employment agreement) which is similar to the pattern of employment in the sample period. If those sites were away from your usual place of residence you would have to have had to travel to the site and reside somewhere near that location.

Therefore as your employment requires you to work at numerous job locations you are not travelling in the course of your employment. Each time you change job location you are travelling to a new job location as opposed to travelling from a job location to carry out the requirements of your job. Therefore you were required to live-away-from-home to perform the duties of your employment rather than travelling to perform the duties of your employment.

Therefore the allowance cannot be a travelling allowance. The allowance will be a LAFHA providing it is paid to you to compensate you for non-deductible additional expenses incurred by you as a result of having to live away from home.

Non-deductible additional expenses or both non-deductible additional expenses and other disadvantages?

For an expense to be deductible it has to be incurred in gaining or producing your assessable income and it cannot be a loss or outgoing of a private or domestic nature. (see section 8-1 of the Income Tax Assessment Act 1997)

The allowance has been paid to you to compensate you for food and accommodation expenses near your work locality. In respect of food and accommodation paragraph 29 of Taxation ruling TR 95/18 states:

Private or domestic expenditure is considered to include costs of living such as food, drink and shelter. In Case T47 18 TBRD (NS) 242; 14 CTBR (NS) Case 56, J F McCaffrey (Member) stated (TBRD at 243; CTBR at 307):

'In order to live normally in our society, it is requisite that individual members thereof be clothed, whether or not they go out to work. In general, expenditure thereon is properly characterised as a personal or living expense...'

However food and accommodation expenses are deductible if an employee is travelling in the course of business, but as we consider you to be living-way-from-home rather than travelling your accommodation and food costs remain non-deductible.

Therefore, as you have been paid a LAFHA as described in subsection 30(1) of the FBTAA, the amount is not included in your assessable income. Additionally, you are not entitled to a deduction for the cost of meals and accommodation while living away from home.