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Ruling

Subject: Fringe Benefits Tax on Various Payments to Employees

The decision in a Private Ruling issued to the employer reads as follows;

It is clear that the principal activities of the employer are to promote, by research, education and publication, the prevention and control of infectious diseases in humans and related health issues.

Subsection 5B(1D) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) states that if any benefits provided in respect of employment are exempt benefits under section 57A of the FBTAA, then the employer's 'fringe benefits taxable amount' is increased by the employer's 'aggregate non-exempt amount' for the year of tax concerned.

Accordingly the benefits provided by the rulee to its employees in respect of their employment are exempt from fringe benefits tax under section 57A(5) of the FBTAA 1986.

However, the operation of subsection 5B(1E) of the FBTAA effectively limits the exemption. This limit is currently $30,000 grossed up taxable value per employee per FBT year.

Question 1;

Are the payments made by the employer to its employees under the following scenarios subject to Fringe Benefits tax?

Situation 1 (S1)

The employee mentioned in Situation 1 is already making full use of the grossed up $30,000 exemption.

This is a situation where the employee is commencing a new job, not being transferred from one branch to another.

The employer will incur the following costs:

§ Salary

§ Cost of all air tickets from City A to City B and return (estimated to be 8 per year)

§ Cost of accommodation for the employee in City B

§ Cost of 'travel allowance' of $141 per day for all days away from City A

§ Cost of provision of a fully maintained motor vehicle in City B including full entitlement to private use while in City B.

§ Cost of travel from City A to other location (e.g. City C WA) to attend a business conference or meeting, and then travel back to City A. This is an example where the cost of travel City A to City C is much greater than the cost of travel City B to City C.

Cost of travel from City A to other location (for example City D) to attend a business conference or meeting, then following the meeting the employee travels on

§ To City B to commence work duties in City B.

§ Cost of travel from City B to other location (e.g. City D NT) to attend a conference or business meeting, and then following the meeting the employee travels on to City A.

Under contractual commitments, the employer is obligated to pay all of the costs listed above.

S1 A; Is the payment of Salary subject to Fringe Benefits?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments

Salary or wages are not fringe benefits. The term 'Salary or Wages' means a payment from which an amount must be withheld;

(a)  a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income; and

(aa)  a payment from which an amount must be withheld (even if the amount is not withheld) under paragraph 12-110(1)(ca) (about parental leave pay) in Schedule 1 to the Taxation Administration Act 1953 , other than a payment under Part 3-3 of the Paid Parental Leave Act 2010 (Payment of instalments by Secretary); and

(b)  a payment from which an amount must be withheld (even if the amount is not withheld) under section 12-47 in Schedule 1 to the Taxation Administration Act 1953 where:

(i)  the payment is made to a religious practitioner by a religious institution; and

(ii)  the activity, or series of activities, for which the payment is made is done by the religious practitioner as a member of the religious institution.

Conclusion
Fringe Benefits Tax does not apply to Salary and or a Wage paid to an employee.

S1 B; Is the cost of all air tickets from City A to City B and return subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The employee will be in receipt of a benefit, as defined by subsection 136(1) as the travel costs incurred by the employee in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City A and City B is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee lives permanently in City A, and will commute to City B about 8 times per year. On average, he will be in City B for about 61% of his work time, that is, 19 days per month. For the remainder of the time the employee will work for the employer at his home in City A. As the employee works from home for the balance of his employed hours being 39% of the time, it brings into question whether the employee is in fact travelling between places of employment/business.

Whether a home constitutes a place of work necessarily depends on the nature and extent of the activities undertaken there. In this case the employee works full time in the administration of the company. Whether in City B or at his home in City A the employee will be working full time in the administration of the company which would indicate that the nature and extent of the activities undertaken would be considerable.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936.

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

For travel allowance expenses - The employee must sleep away from home.

Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

how they worked out their claim;

an entitlement to a deduction (for example that work-related travel was undertaken);

a bona fide travel allowance was paid; and

if accommodation is claimed, that commercial accommodation was used.

The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

Conclusion
Where an employer incurs an expense for an employee to travel from one place of business to perform other employment duties, the expenses are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

In this scenario the costs incurred for the air travel from City A to City B and return for an employee to perform work related duties is not subject to fringe benefits.

S1 C; Is the cost of accommodation for the employee in City B subject to Fringe Benefits tax?

Answer;

No.

Residual Benefit

Section 45 of the FBTAA states that a benefit is a residual benefit if the benefit is not a benefit under any of Subsections 2 to 11 of Subdivision A of the FBTAA

The provision of accommodation to an employee may be either a housing fringe benefit or a residual fringe benefit. However, where the accommodation is provided solely by reason that the employee is required to 'live away from their usual place of residence in order to perform their duties of employment', subsection 47 (5) of the FBTAA will operate to exempt the accommodation from FBT.

Exempt Residual Benefit

Subsection 47(5) of the FBTAA (living away from home accommodation benefits) exempts residual benefits in respect of accommodation provided to employees in certain circumstances.

The requirements of subsection 47(5) of the FBTAA are given in paragraphs (a) to (d) of that subsection. 

Paragraph (a) of subsection 47(5) requires that, the residual benefit that arises in respect of accommodation is provided to an employee of the employer in respect of employment;

Paragraph (b) of subsection 47(5) requires that, the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from the employee's usual place of residence in order to perform the employee's employment duties;

Paragraph (c) of subsection 47(5) requires that, the accommodation is not provided while the employee is undertaking travel in the course of performing employment duties.

Employee Declaration

Paragraph (d) of subsection 47(5) requires that, as relevant to this case, the employee gives the employer, before the declaration date, a declaration purporting to set out the employee's usual place of residence and the place at which the employee actually resided while living away from the usual place of residence.

Under subsection 136(1) of the FBTAA the declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

The employee must provide the relevant declaration required for this exemption to apply.

Residual benefits for accommodation in respect of the employment of an employee

The meaning of the phrase 'in respect of the employment of the employee' was considered in the Full Federal Court case of J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402. It was found in this case that the phrase 'in respect of' means that there must be a sufficient or material relationship or connection between the provision of the benefit and the employee's employment.

To establish whether a sufficient or material connection exists between the provision of the allowance and the employment of the employee, it is necessary to consider the circumstances in which it has been provided.

In your case the accommodation is being provided to the employee whilst he carries out his duties as an employee of the employer.

Based on the information provided, the employee is employed by the employer and the conditions of the employment require that the employee perform duties away from the employee's usual place of residence, and that appropriate accommodation will be provided by the employer to the employee during these periods of employment.

Required to live away from the employee's usual place of residence

Various decisions of Taxation Boards of Review relating to the former section 51A of the ITAA 1936, which authorised deductions or employees being paid a living-away-from-home allowance, deals with whether a particular employee was living away from his 'usual place of abode' in order to perform his duties as an employee.

In seeking assistance from the decisions in applying relevant provisions of the Act, it is considered that the words 'residence' and 'abode' may be taken as being synonymous.

Accordingly, the decisions are useful in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Subsection 136(1) of the FBTAA provides the definition of a place of residence

'Place of residence' is defined in section 136(1)

(a)     It means, in relation to a person, a place at which the person resides
or a

(b)     Place at which the person has sleeping accommodation, whether on a permanent or temporary basis and whether or not on a shared basis..

Miscellaneous Taxation Ruling 2030 (MT 2030) gives consideration as to when a person may be considered to be living away from home. The following extracted paragraphs from MT 2030 State;

12. 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.

…

14. 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.

…

19. An underlying theme of the cases is a general presumption that a person's usual place of residence will be close to the place where he or she is permanently employed. Correspondingly, an employee who changes his or her place of residence because of a change in the location of a permanent job, whether by reason of a transfer with the same employer or a change of employment, would not usually be living away from home on moving to a new place of residence close to the new job location. That would be the case notwithstanding that the new place of residence was a temporary one pending the obtaining of suitable long term accommodation.

…

20. 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.

21. Some employees may be unable to establish that they are living away from their usual place of residence because the transitory nature of their lifestyle means that their usual place of residence is wherever they happen to sleep at night. Employees who follow the job, say, from construction site to construction site and have no permanent place of residence would fit into this particular category.

…

25. On the other hand 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 r she eventually intends to reside.

These paragraphs of MT 2030 give rise to the following principles;

An employee's usual place of abode is near where he or she is permanently employed. If the employees place of permanent employment changes and the employee moves as a consequence, the employee would not be considered to be living away from his or her usual place of residence.

The employee needs to demonstrate that he or she is only working temporarily at the new location and will return, or there is a legitimate expectation of a return to live at the former place of abode on cessation of work at the new location.

Whether an employee is living away from his or her usual place of residence depends on all the facts of the particular case and is not solely dependent on whether a person is merely living away from his or her point of origin.

It has been accepted in MT 2030 that various decisions of former section 51A of the ITAA 1936 may be used in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Conclusion
Based on the information provided in scenario 1, where the conditions of employment require the employee to perform duties away from the employee's usual place of residence, and that appropriate accommodation is provided by the employer to the employee during these periods of employment, the provision of the accommodation is an exempt benefit under subsection 47(5) of the FBTAA.

S1 D; Is the payment of a 'travel allowance' of $141 per day for all days away from City A subject to Fringe Benefits tax?

Answer;

No.

Payments by employer to employee

If the company makes a decision to pay an allowance, the Commissioner would accept that there is a nexus between the business activities being carried on by the employer and the employer's provision of the entitlement, such that payment of the entitlement is incidental and relevant to the production of the assessable income of the business.

The amount will be incurred by the rulee company when it is paid to the employee.

Whether the amount is revenue or capital in nature depends on the character of the payment when made by the company. In this instance the payment represents an allowance to the employee to undertake duties on behalf of the company in various locations. This is considered to be on account of revenue.

Section 8-1 of the ITAA 1997 provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in carrying on a business for the purposes of gaining or producing assessable income and is not:

§ capital, private or domestic in nature,

§ incurred in gaining or producing exempt income, or

§ prevented form being deductible by a provision of the Act.

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income.

What is the travel allowance?

The travel allowance must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The Commissioner takes the view that the term travel away from the employees ordinary residence means that the employee must sleep away from their home. The travel allowance must be paid to cover the cost of accommodation (domestic travel only) or food or drink or expenses incidental to the travel (paragraph 900-30(3)(b) of the ITAA 1997.

Travel allowance must be paid for specific journeys undertaken or to be undertaken for work-related travel.

Travel allowance, living away from home allowance and reimbursement

Whilst the allowance the company wishes to pay the employee is deductible under section 8-1 of the ITAA 1997, the company must give consideration to the determination of whether the allowance is a travel allowance, reimbursement of expenditure or living away from home allowance as these have different taxation treatments.

Living-away-from-home allowances and reimbursements are taxable fringe benefits in accordance with the FBTAA. Whereas travelling allowances form part of the employee's assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling in the course of carrying out the duties of employment. Refer Taxation Rulings 92/15 and MT 2030.

Reasonable amount of travel allowance

The payment must be a bona fide travel allowance which is an amount that could reasonably be expected to cover accommodation or meals or expenses incidental to travel and there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. A token amount or general payment is not a bona fide travel allowance.

Reasonable amounts for travel and meal allowance expenses for the 2010-11 income year are set out in Taxation Determination TD 2010/19. In setting these, the Commissioner does not determine the amount an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee.

The Commissioner determines the reasonable amount of travel and meal allowance expenses only for the purposes of the tax law, that is, the amount that will be accepted for exception from the requirement to obtain and keep written evidence for substantiation purposes.

The reasonable amounts reflect accommodation expenses incurred in commercial establishments for short term daily accommodation and the relevant food and drink expenses incurred during the period of that travel.

Taxation Determination 2005/32 must be read in conjunction with Taxation Ruling 2004/6 to determine the substantiation requirements in relation to travel allowance and meal allowance expenses.

Conclusion
The travel allowance paid to the employee must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income. The payment of the travelling allowance would not be subject to fringe benefits tax.

S1 E; Is the cost of provision of a fully maintained motor vehicle in City B including full entitlement to private use while in City B subject to Fringe Benefits tax?

Answer;

No.

Generally speaking, where an employee is provided with the use of a motor vehicle for private use or it is available for private use by an employee (please note that a car that is garaged at an employees home is treated as being available for the private use by the employee regardless of whether or not the employee has permission to use it privately), a liability for fringe benefits tax (FBT) will arise.

However, under subsection 8(2) of the FBTAA, an exemption from FBT will apply where the private use of certain vehicles is limited to work-related travel and other private use by the employee, or an associate of the employee, which is minor, infrequent or irregular.

According to subsection 8(2) of the FBTAA:

A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a)     the car is:

(i)                a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii)               any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and

(b)     there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i)                work-related travel of the employee; and

(ii)               other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

The conditions for subsection 8(2) of the FBTAA exemption to apply are as follows:

(a)   a car benefit must be provided;

(b)   the benefit must be provided in respect of employment of a current employee;

(c)   the car must be an eligible car; and

(d)   the private use of the car is restricted to work-related travel and other private use by the employee or an associate that is minor, infrequent and irregular.

The motor vehicle is a car for FBT purposes

A motor vehicle is a car for FBT purposes under subsection 136(1) of the FBTAA if it meets one of the following two definitions:

(a)     a motor car, station wagon, panel van, utility truck or similar vehicle, designed to carry a load of less than 1 tonne; or

(b)     any other road vehicle designed to carry a load of less than 1 tonne or fewer than 9 passengers;

The FBT definition of a car does not include a motor cycle or similar vehicle.

Work related travel

Work-related travel is defined in subsection 136(1) of the FBTAA to be:

(a)     travel by the employee between:

(i).     the place of residence of the employee; and

(ii).   the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b)     travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

As the private use of the vehicle will be restricted to travel to and from work plus other private travel by the employee or an associate of the employee which is minor, infrequent or irregular; the restricted private use requirement is satisfied.

Conclusion

The provision to a current employee of a vehicle will qualify as an exempt benefit if the private use of the vehicle does not exceed the restricted private use requirements.

S1 F; Is the cost of travel from City A to other location (for example City C) to attend a business conference or meeting, and then travel back to City A subject to Fringe Benefits?

Answer;

No.

(This is an example where the cost of travel City A to City C is much greater than the cost of travel City B to City C)

S1 G; Is the cost of travel from City A to other location (for example City D) to attend a business conference or meeting, and then following the meeting the employee travels on to City B to commence work duties in City B subject to Fringe Benefits tax?

Answer;

No.

S1 H; Is the cost of travel from City B to other location (for example City D) to attend a conference or business meeting, and then following the meeting the employee travels on to City A subject to Fringe Benefits?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The employee will be in receipt of a benefit, as defined by subsection 136(1) as the travel costs incurred by the employees in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City A and City B or City C or City D is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the ITAA 1997 where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee lives in City A and works from his home/office and is required to travel to City B, City C or City D to attend conferences. The travel between places of employment/business to attend work related activities such as conferences is part of the duties of the employee.

In this case the employee works full time in the administration of the company, whether in City B or at his home in City A the employee will be working full time in the administration of the company, which would require travel to be undertaken as required.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the ITAA 1936 Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027.

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

§ Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

§ Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

§ For travel allowance expenses - The employee must sleep away from home.

§ Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

§ Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

§ Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

§ how they worked out their claim;

§ an entitlement to a deduction (for example that work-related travel was undertaken);

§ a bona fide travel allowance was paid; and

§ if accommodation is claimed, that commercial accommodation was used.

§ The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

§ Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

The costs incurred for travel of an employee to perform work related duties are not fringe benefits. Where an employer incurs an expense for an employee to travel to perform the duties the expenses incurred are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature

Situation 2 (S2)

The employee mentioned in Situation 2 is already making full use of the grossed up $30,000 exemption.

One of the senior staff members, who lived in City B for the past 4 years, intends to move permanently to City A in the near future. His employment will change from full time in City B to part time (0.5 FTE) in City A, where he will undertake computer-based work from his home in City A.

The employer will pay the travel costs and accommodation in City B for this part time employee on the occasions when he needs to be in City B for work related purposes.

This situation differs from the previous case above in that this is not a new employee but a current employee who wishes to voluntarily cease living in City B and relocate to City A but continue to work part time for the City B based employer.

The employer will incur the following costs:

§ Cost of moving personal possessions from City B to City A

§ Cost of air tickets City B to City A for initial move

§ Salary

§ Cost of all air tickets from City A to City B and return

§ Cost of accommodation for the employee in City B

§ Cost of "travel allowance" of $141 per day for all days away from City A

§ Cost of provision of a hired car in City B including full entitlement to private use while in City B

§ Cost of travel from City A to other location (e.g. City C WA) to attend a business conference or meeting, and then travel back to City A. This is an example where the cost of travel City A to City C is much greater than the cost of travel City B to City C

§ Cost of travel from City A to other location (for example City D) to attend a business conference or meeting, and then following the meeting the employee travels on to City B to commence work duties in City B

§ Cost of travel from City B to other location (for example City D) to attend a conference or business meeting, and then following the meeting the employee travels on to City A.

Under contractual commitments, the employer is obligated to pay all of the costs listed above.

S2 A; Is the cost of moving personal possessions from City B to City A subject to Fringe Benefits tax?

Answer;

No.

Removal and storage of household effects

Where you pay for removal and storage of household effects of employees (both new and existing) who have to live away from home because of a change in their job location, the benefit is exempt. The exemption includes the costs of removal, storage, packing, unpacking and insurance of household effects (including pets) kept primarily for the personal use of the employee or their family.

Similarly, the exemption also applies where the employee's usual place of residence changes to another location if the removal takes place or the storage commences, not more than 12 months after the employee begins employment duties at the new location

Under section 58B of the FBTAA certain benefits may be exempt in relation to the removal and storage of household goods as a result of relocation. This exemption include the costs of removal, storage, packing unpacking and insurance of household effects kept primarily for the personal use of the employee or family.

Under subsection 136(1) of the FBTAA an employee means:

(a)     a current employee

(b)     a future employee; or

(c)     a former employee

The person associated with the relocation is considered an employee under subsection 136(1) at the time the relocation expenses occurred.

Requirements of section 58B

A benefit is only exempt under section 58B if the following conditions are met:

(a)   The benefit provided is for the removal or storage of household effects of the employee.

(b)   The removal or storage of the household effects must have been required because the employee is required to:

(i)           live away from his or usual place of residence in order to perform employment duties;

(ii)          return to his or her usual place of residence at the end of a period during which the employee moved away from that place in order to perform the employment related duties; or

(iii)         change his of her usual place of residence in order to perform employment related duties.

(c)   Where the employee is required to live away from, or change his or her usual place of residence ((i) and (iii) above), the removal or storage must be necessary to enable the employee (or family member) to take up residence, or continue to reside at the new locality

(d)   Where the employee changes his or her usual place of residence, the benefit is only exempt if it is provided under an arms length arrangement and if the removal or storage occurs within 12 months from the day the employee commences employment at the new place of employment

(e)   In the case of an expense payment benefit, documentary evidence of the expenditure incurred by the employee must be given to the employer before the date the employer has to submit a fringe benefits return for the year.

(f)     The exemption under section 58B of the FBTAA does not apply where the employee is undertaking travel in the course of performing employment duties.

Are the requirements of section 58B met?

When costs have been incurred in the removal and transportation of the employee's household effects. This constitutes an expense payment under section 20 of the FBTAA given that you are reimbursing the employee for the costs involved and therefore satisfies paragraph (a) above.

The removal and transportation of the household effects was required because the employee has changed their place of residence by moving from City B to City A in order to perform their employment duties. This satisfies paragraph (b) above.

The household effects are required to enable the employee to move into their new residence at their new location in City A. This satisfies paragraph (c) above.

There is no evidence to suggest that the benefits are provided other than under an arms length arrangement and the relocation costs have occurred within 12 months of the commencement date of the employee's relocation to City A. This satisfies paragraph (d) above.

Given that you will receive the invoices and documentation from the employee regarding the removal and transportation of the household goods paragraph (e) above is satisfied.

The employee did not travel in connection with employment duties, this satisfies paragraph (f) above.

All the required conditions of section 58B of the FBTAA have been satisfied; therefore the relocation or storage of the employee's personal household effects is exempt from FBT.

S2 B; Is the cost of air tickets City B to City A for initial move subject to Fringe Benefits?

Answer;

No.

Section 58F Exempt Benefits relocation transport

Relocation transport may be exempt under section 58F of the FBTAA.

Requirements under section 58F

A benefit may be exempt under section 58F where:

(a)     a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer;

(b)     the benefit is in respect of relocation transport; and

(c)     in the case of an expense payment benefit:


(i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and;

(ii) documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date.

Have the requirements under section 58F been met?

In this instance you are reimbursing the employee for the airfare expense paid in relation to the relocation. This constitutes an expense payment under section 20 of the FBTAA and therefore paragraph (a) of section 58F of the FBTAA is satisfied.

To meet the requirements paragraph (b) of section 58F of the FBTAA the benefit must be made in respect of relocation transport. Relocation transport is taken to have been undertaken if the following relevant conditions under section 143A of the FBTAA have been met:

§ the employee has been provided with an expense payment benefit in respect of the provision of transport.

§ that transport is required solely because the employee is to relocate their usual place of residence to perform their employment duties

§ the transport is not in relation to travel undertaken while performing duties of employment

§ the benefit is provided in an arms length transaction

You are paying for the airfare of the employee and hence providing an expense payment benefit in relation to the transport.

Your employee was previously a resident of City B and this was taken to be his usual place of residence.

The employee relocated from City B to City A. This is the sole reason that your employee required the transport which enabled the employee to take up residence in City A.

The transport was not provided while your employee was undertaking travel in the course of employment related duties.

The invoices and receipts that you have obtained in relation to the airfares indicate there is no evidence of a non arms length transaction.

In view of the information outlined above the reimbursement of the airfare expense is classified as being a benefit in respect of relocation transport. This satisfies paragraph (b) of 58F.

Given that the employee has supplied you with the documentary evidence of the expenses incurred paragraph (c) of section 58F is also satisfied.

Therefore paragraphs (a), (b) and (c) of section 58F are all satisfied and the airline ticket is an exempt benefit.

S2 C; Is the payment of Salary subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments

Salary or wages are not fringe benefits. The term 'Salary or Wages' means a payment from which an amount must be withheld;

(a)  a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income; and

(aa)  a payment from which an amount must be withheld (even if the amount is not withheld) under paragraph 12-110(1)(ca) (about parental leave pay) in Schedule 1 to the Taxation Administration Act 1953 , other than a payment under Part 3-3 of the Paid Parental Leave Act 2010 (Payment of instalments by Secretary); and

(b)  a payment from which an amount must be withheld (even if the amount is not withheld) under section 12-47 in Schedule 1 to the Taxation Administration Act 1953 where:

(i)  the payment is made to a religious practitioner by a religious institution; and

(ii)  the activity, or series of activities, for which the payment is made is done by the religious practitioner as a member of the religious institution.

Conclusion
Fringe Benefits Tax does not apply to Salary and or Wage paid to an employee.

S2 D; Is the cost of all air tickets from City A to City B and return subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The employee) will be in receipt of a benefit , as defined by subsection 136(1) as the travel costs incurred by the employees in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City A and City B is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the ITAA 1997 where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee will live permanently in City A, and will commute to City B on occasions. For the remainder of the time the employee will work at his home in City A. As the employee works from home for the majority of the time, it brings into question whether the employee is in fact travelling between places of employment/business.

Whether a home constitutes a place of work necessarily depends on the nature and extent of the activities undertaken there. In this case the employee works full time in computer applications for the company. Whether in City B or at his home in City A the employee will be working full time in computer applications for the company, which would indicate that the nature and extent of the activities undertaken would be considerable.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the ITAA 1936. Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027.

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936.

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

§ Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

§ Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

§ For travel allowance expenses - The employee must sleep away from home.

§ Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

§ Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

§ Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

§ how they worked out their claim;

§ an entitlement to a deduction (for example that work-related travel was undertaken);

§ a bona fide travel allowance was paid; and

§ if accommodation is claimed, that commercial accommodation was used.

§ The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

§ Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

The costs incurred for travel of an employee to perform work related duties are not fringe benefits. Where an employer incurs an expense for an employee to travel to perform the duties the expenses are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

Conclusion

The costs incurred for the air travel from City A to City B and return for an employee to perform work related duties is not subject to fringe benefits.

S2 E; Is the cost of accommodation for the employee in City B subject to Fringe Benefits tax?

Answer;

No.

Residual Benefit

Section 45 of the FBTAA states that a benefit is a residual benefit if the benefit is not a benefit under any of Subsections 2 to 11 of Subdivision A of the FBTAA.

The provision of accommodation to an employee may be either a housing fringe benefit or a residual fringe benefit. However, where the accommodation is provided solely by reason that the employee is required to 'live away from their usual place of residence in order to perform their duties of employment', subsection 47 (5) of the FBTAA will operate to exempt the accommodation from FBT.

Exempt Residual Benefit

Subsection 47(5) of the FBTAA (living away from home accommodation benefits) exempts residual benefits in respect of accommodation provided to employees in certain circumstances. The requirements of subsection 47(5) of the FBTAA are given in paragraphs (a) to (d) of that subsection. 

Paragraph (a) of subsection 47(5) requires that, the residual benefit that arises in respect of accommodation is provided to an employee of the employer in respect of employment.

Paragraph (b) of subsection 47(5) requires that, the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from the employee's usual place of residence in order to perform the employee's employment duties.

Paragraph (c) of subsection 47(5) requires that, the accommodation is not provided while the employee is undertaking travel in the course of performing employment duties.

Employee Declaration

Paragraph (d) of subsection 47(5) requires that, as relevant to this case, the employee gives the employer, before the declaration date, a declaration purporting to set out the employee's usual place of residence and the place at which the employee actually resided while living away from the usual place of residence.

Under subsection 136(1) of the FBTAA the declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

Under subsection 136 (1) of the FBTAA the declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

The employee must provide the relevant declaration required for this exemption to apply.

Residual benefits for accommodation in respect of the employment of an employee

The meaning of the phrase 'in respect of the employment of the employee' was considered in the Full Federal Court case of J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402. It was found in this case that the phrase 'in respect of' means that there must be a sufficient or material relationship or connection between the provision of the benefit and the employee's employment.

To establish whether a sufficient or material connection exists between the provision of the allowance and the employment of the employee, it is necessary to consider the circumstances in which it has been provided.

In your case the accommodation is being provided to the employee whilst he carries out his duties as an employee of the employer.

Based on the information provided, the employee is employed by the company and the conditions of the employment require that the employee perform duties away from the employee's usual place of residence, and that appropriate accommodation will be provided by the employer to the employee during these periods of employment.

Required to live away from the employee's usual place of residence

Various decisions of Taxation Boards of Review relating to the former section 51A of the ITAA 1936, which authorised deductions or employees being paid a living-away-from-home allowance, deals with whether a particular employee was living away from his 'usual place of abode' in order to perform his duties as an employee.

In seeking assistance from the decisions in applying relevant provisions of the Act, it is considered that the words 'residence' and 'abode' may be taken as being synonymous. Accordingly, the decisions are useful in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Subsection 136(1) of the FBTAA provides the definition of a place of residence

'Place of residence' is defined in section 136(1)

(a)     It means, in relation to a person, a place at which the person resides
or a

(b)     Place at which the person has sleeping accommodation, whether on a permanent or temporary basis and whether or not on a shared basis..

Miscellaneous Taxation Ruling 2030 (MT 2030) gives consideration as to when a person may be considered to be living away from home. The following extracted paragraphs from MT 2030 State;

12. 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.

…

14. 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.

…

19. An underlying theme of the cases is a general presumption that a person's usual place of residence will be close to the place where he or she is permanently employed. Correspondingly, an employee who changes his or her place of residence because of a change in the location of a permanent job, whether by reason of a transfer with the same employer or a change of employment, would not usually be living away from home on moving to a new place of residence close to the new job location. That would be the case notwithstanding that the new place of residence was a temporary one pending the obtaining of suitable long term accommodation.

…

20. 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.

21. Some employees may be unable to establish that they are living away from their usual place of residence because the transitory nature of their lifestyle means that their usual place of residence is wherever they happen to sleep at night. Employees who follow the job, say, from construction site to construction site and have no permanent place of residence would fit into this particular category.

…

25. On the other hand 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 r she eventually intends to reside.

These paragraphs of MT 2030 give rise to the following principles;

An employee's usual place of abode is near where he or she is permanently employed. If the employees place of permanent employment changes and the employee moves as a consequence, the employee would not be considered to be living away from his or her usual place of residence.

The employee needs to demonstrate that he or she is only working temporarily at the new location and will return, or there is a legitimate expectation of a return to live at the former place of abode on cessation of work at the new location.

Whether an employee is living away from his or her usual place of residence depends on all the facts of the particular case and is not solely dependent on whether a person is merely living away from his or her point of origin.

It has been accepted in MT 2030 that various decisions of former section 51A of the ITAA 1936 may be used in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Conclusion
Based on the information provided in scenario 2, where the conditions of employment require the employee to perform duties away from the employee's usual place of residence, and that appropriate accommodation is provided by the employer to the employee during these periods of employment, the provision of the accommodation is an exempt benefit under subsection 47(5) of the FBTAA.

S2 F; Is the payment of a 'travel allowance' of $141 per day for all days away from City A subject to Fringe Benefits tax?

Answer;

No.

Payments by employer to employee

If the company makes a decision to pay an allowance, the Commissioner would accept that there is a nexus between the business activities being carried on by the employer and the employer's provision of the entitlement, such that payment of the entitlement is incidental and relevant to the production of the assessable income of the business.

The amount will be incurred by the rulee company when it is paid to the employee.

Whether the amount is revenue or capital in nature depends on the character of the payment when made by the company. In this instance the payment represents an allowance to the employee to undertake duties on behalf of the company in various locations. This is considered to be on account of revenue.

Section 8-1 of the ITAA 1997 provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in carrying on a business for the purposes of gaining or producing assessable income and is not:

§ capital, private or domestic in nature,

§ incurred in gaining or producing exempt income, or

§ prevented form being deductible by a provision of the Act.

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income.

What is the travel allowance?

The travel allowance must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The Commissioner takes the view that the term travel away from the employees ordinary residence means that the employee must sleep away from their home. The travel allowance must be paid to cover the cost of accommodation (domestic travel only) or food or drink or expenses incidental to the travel (paragraph 900-30(3)(b) of the ITAA 1997). Travel allowance must be paid for specific journeys undertaken or to be undertaken for work-related travel.

Travel allowance, living away from home allowance and reimbursement

Whilst the allowance the company wishes to pay the employee is deductible under section 8-1 of the ITAA 1997, the company must give consideration to the determination of whether the allowance is a travel allowance, reimbursement of expenditure or living away from home allowance as these have different taxation treatments.

Living-away-from-home allowances and reimbursements are taxable fringe benefits in accordance with the FBTAA. Whereas travelling allowances form part of the employee's assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling in the course of carrying out the duties of employment. Refer Taxation Rulings 92/15 and MT 2030.

Reasonable amount of travel allowance

The payment must be a bona fide travel allowance which is an amount that could reasonably be expected to cover accommodation or meals or expenses incidental to travel and there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. A token amount or general payment is not a bona fide travel allowance.

Reasonable amounts for travel and meal allowance expenses for the 2010-11 income year are set out in Taxation Determination TD 2010/19. In setting these, the Commissioner does not determine the amount an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee.

The Commissioner determines the reasonable amount of travel and meal allowance expenses only for the purposes of the tax law, that is, the amount that will be accepted for exception from the requirement to obtain and keep written evidence for substantiation purposes.

The reasonable amounts reflect accommodation expenses incurred in commercial establishments for short term daily accommodation and the relevant food and drink expenses incurred during the period of that travel.

Taxation Determination 2005/32 must be read in conjunction with Taxation Ruling 2004/6 to determine the substantiation requirements in relation to travel allowance and meal allowance expenses.

Conclusion
The travel allowance paid to the employee must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income. The payment is not subject to fringe benefits.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

S2 G; Is the cost of provision of a hired motor vehicle in City B including full entitlement to private use while in City B subject to Fringe Benefits tax?

Answer;

No.

Generally speaking, where an employee is provided with the use of a motor vehicle for private use or it is available for private use by an employee (please note that a car that is garaged at an employees home is treated as being available for the private use by the employee regardless of whether or not the employee has permission to use it privately), a liability for fringe benefits tax (FBT) will arise.

However, under subsection 8(2) of the FBTAA, an exemption from FBT will apply where the private use of certain vehicles is limited to work-related travel and other private use by the employee, or an associate of the employee, which is minor, infrequent or irregular.

According to subsection 8(2) of the FBTAA:

A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a)     the car is:

(i)                a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii)               any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and

(b)     there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i)                work-related travel of the employee; and

(ii)               other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

The conditions for subsection 8(2) of the FBTAA exemption to apply are as follows:

(a)   a car benefit must be provided;

(b)   the benefit must be provided in respect of employment of a current employee;

(c)   the car must be an eligible car; and

(d)   the private use of the car is restricted to work-related travel and other private use by the employee or an associate that is minor, infrequent and irregular.

The motor vehicle is a car for FBT purposes

A motor vehicle is a car for FBT purposes under subsection 136(1) of the FBTAA if it meets one of the following two definitions:

(a)     a motor car, station wagon, panel van, utility truck or similar vehicle, designed to carry a load of less than 1 tonne; or

(b)     any other road vehicle designed to carry a load of less than 1 tonne or fewer than 9 passengers;

The FBT definition of a car does not include a motor cycle or similar vehicle.

Work related travel

Work-related travel is defined in sub-section 136(1) of the FBTAA to be:

(a)     travel by the employee between:

(i).     the place of residence of the employee; and

(ii).   the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b)     travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

As the private use of the vehicle will be restricted to travel to and from work plus other private travel by the employee or an associate of the employee which is minor, infrequent or irregular; the restricted private use requirement is satisfied.

Conclusion

The provision to a current employee of a vehicle will qualify as an exempt benefit if the private use of the vehicle does not exceed the restricted private use requirements.

S2 H; Is the cost of travel from City A to other location (for example City C) to attend a business conference or meeting, and then travel back to City A subject to Fringe Benefits tax?

Answer;

No.

(This is an example where the cost of travel City A to City C is much greater than the cost of travel City B to City C)

S2 I; Is the cost of travel from City A to other location (for example City D) to attend a business conference or meeting, and then following the meeting the employee travels on to City B to commence work duties in City B subject to Fringe Benefits tax?

Answer;

No.

S2 J; Is the cost of travel from City B to other location (for example City D) to attend a conference or business meeting, and then following the meeting the employee travels on to City A subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The Computer Consultant (the employee) will be in receipt of a benefit, as defined by subsection 136(1) as the travel costs incurred by the employees in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City A and City B is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the ITAA 1997 where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee lives in City A and works from his home/office and is required to travel to City B, City C or City D to attend conferences. The travel between places of employment/business to attend work related activities such as conferences is part of the duties of the employee.

In this case the employee works in computer based applications for the company, whether in City B or at his home in City A and the employee is required travel to attend conferences and meetings as required.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the ITAA 1936. Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027.

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936.

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

§ Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

§ Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

§ For travel allowance expenses - The employee must sleep away from home.

§ Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

§ Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

§ Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

§ how they worked out their claim;

§ an entitlement to a deduction (for example that work-related travel was undertaken);

§ a bona fide travel allowance was paid; and

§ if accommodation is claimed, that commercial accommodation was used.

§ The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

§ Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

Where an employer incurs an expense for an employee to travel to perform the duties the expenses incurred are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

Conclusion

The costs incurred for travel of an employee to perform work related duties are not fringe benefits.

Situation 3 (S3)

The employee mentioned in Situation 3 is already making full use of the grossed up $30,000 exemption.

Another staff member, who has lived in City B for many years, intends to move permanently to City E in the near future. Her employment will continue to be full time after she moves to City E from where she will undertake computer-based work from her home in City E.

The employer will pay the travel costs and accommodation in City B for this full time employee on the occasions when she needs to be in City B for work related purposes.

This situation differs from the previous cases above in that this is not a new employee but a current employee who wishes to voluntarily cease living in City B and relocate to City E, but retain full time work based at the City B office.

The employer will incur the following costs:

§ Cost of moving personal possessions from City B to City E

§ Cost of air tickets City B to City E at time of initial move

§ Salary

§ Cost of all air tickets from City E to City B and return

§ Cost of accommodation for the employee in City B

§ Cost of "travel allowance" of $110.35 per day for all days away from City E

§ Cost of provision of a motor vehicle in City B including full entitlement to private use while in City B

§ Cost of travel from City E to other location (for example City C) to attend a business conference or meeting, and then travel back to City E. This is an example where the cost of travel City E to City C is much greater than the cost of travel City B to City C

§ Cost of travel from City E to other location (for example City D) to attend a business conference or meeting, and then following the meeting the employee travels on to City B for a brief period before returning to City E

§ Cost of travel from City B to other location (e.g. City D NT) to attend a conference or business meeting, and then following the meeting the employee travels on to City E.

Under contractual commitments, the employer is obligated to pay all of the costs listed above.

S3 A; Is the cost of moving personal possessions from City B to City E subject to Fringe Benefits tax?

Answer;

No.

Under section 58B of the FBTAA certain benefits may be exempt in relation to the removal and storage of household goods as a result of relocation. This exemption include the costs of removal, storage, packing unpacking and insurance of household effects kept primarily for the personal use of the employee or family.

Under subsection 136(1) of the FBTAA an employee means:

(a)     a current employee

(b)     a future employee; or

(c)     a former employee

The person associated with the relocation is considered an employee under subsection 136(1) at the time the relocation expenses occurred.

Requirements of section 58B

A benefit is only exempt under section 58B if the following conditions are met:

(a)   The benefit provided is for the removal or storage of household effects of the employee.

(b)   The removal or storage of the household effects must have been required because the employee is required to:

(i)           live away from his or usual place of residence in order to perform employment duties;

(ii)          return to his or her usual place of residence at the end of a period during which the employee moved away from that place in order to perform the employment related duties; or

(iii)         change his of her usual place of residence in order to perform employment related duties.

(c)   Where the employee is required to live away from, or change his or her usual place of residence ((i) and (iii) above), the removal or storage must be necessary to enable the employee (or family member) to take up residence, or continue to reside at the new locality

(d)   Where the employee changes his or her usual place of residence, the benefit is only exempt if it is provided under an arms length arrangement and if the removal or storage occurs within 12 months from the day the employee commences employment at the new place of employment

(e)   In the case of an expense payment benefit, documentary evidence of the expenditure incurred by the employee must be given to the employer before the date the employer has to submit a fringe benefits return for the year.

(f)     The exemption under section 58B of the FBTAA does not apply where the employee is undertaking travel in the course of performing employment duties.

Are the requirements of section 58B met?

When costs have been incurred in the removal and transportation of the employee's household effects. This constitutes an expense payment under section 20 of the FBTAA given that you are reimbursing the employee for the costs involved and therefore satisfies paragraph (a) above.

The removal and transportation of the household effects was required because the employee has changed their place of residence by moving from City B to City E in order to perform their employment duties. This satisfies paragraph (b) above.

The household effects are required to enable the employee to move into their new residence at their new location in City E. This satisfies paragraph (c) above.

There is no evidence to suggest that the benefits are provided other than under an arms length arrangement and the relocation costs have occurred within 12 months of the commencement date of the employee's relocation to City E. This satisfies paragraph (d) above.

Given that you will receive the invoices and documentation from the employee regarding the removal and transportation of the household goods paragraph (e) above is satisfied.

The employee did not travel in connection with employment duties, this satisfies paragraph (f) above.

All the required conditions of section 58B of the FBTAA have been satisfied; therefore the relocation or storage of the employee's personal household effects is exempt from FBT.
 

S3 B; Is the cost of air tickets City B to City E at time of initial move subject to Fringe Benefits tax?

Answer;

No.

Section 58F Exempt Benefits relocation transport

Relocation transport may be exempt under section 58F of the FBTAA.

Requirements under section 58F

A benefit may be exempt under section 58F where:

(a)     a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer;

(b)     the benefit is in respect of relocation transport; and

(c)     in the case of an expense payment benefit:


(i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and;

(ii) documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date.

 

Have the requirements under section 58F been met?

In this instance you are reimbursing the employee for the airfare expense paid in relation to the relocation. This constitutes an expense payment under section 20 of the FBTAA and therefore paragraph (a) of section 58F of the FBTAA is satisfied.

To meet the requirements paragraph (b) of section 58F of the FBTAA the benefit must be made in respect of relocation transport. Relocation transport is taken to have been undertaken if the following relevant conditions under section 143A of the FBTAA have been met:

§ the employee has been provided with an expense payment benefit in respect of the provision of transport.

§ that transport is required solely because the employee is to relocate their usual place of residence to perform their employment duties

§ the transport is not in relation to travel undertaken while performing duties of employment

§ the benefit is provided in an arms length transaction

You are paying for the airfare of the employee and hence providing an expense payment benefit in relation to the transport.

Your employee was previously a resident of City B and this was taken to be her usual place of residence.

The employee relocated from City B to City E. This is the sole reason that your employee required the transport which enabled the employee to take up residence in City E.

The transport was not provided while your employee was undertaking travel in the course of employment related duties.

The invoices and receipts that you have obtained in relation to the airfares indicate there is no evidence of a non arms length transaction.

In view of the information outlined above the reimbursement of the airfare expense is classified as being a benefit in respect of relocation transport. This satisfies paragraph (b) of 58F.

Given that the employee has supplied you with the documentary evidence of the expenses incurred paragraph (c) of section 58F is also satisfied.

Therefore paragraphs (a), (b) and (c) of section 58F are all satisfied and the airline ticket is an exempt benefit.

S3 C; Is the payment of Salary subject to Fringe Benefits?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments

Salary or wages are not fringe benefits. The term 'Salary or Wages' means a payment from which an amount must be withheld;

(a)  a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income; and

(aa)  a payment from which an amount must be withheld (even if the amount is not withheld) under paragraph 12-110(1)(ca) (about parental leave pay) in Schedule 1 to the Taxation Administration Act 1953 , other than a payment under Part 3-3 of the Paid Parental Leave Act 2010 (Payment of instalments by Secretary); and

(b)  a payment from which an amount must be withheld (even if the amount is not withheld) under section 12-47 in Schedule 1 to the Taxation Administration Act 1953 where:

(i)  the payment is made to a religious practitioner by a religious institution; and

(ii)  the activity, or series of activities, for which the payment is made is done by the religious practitioner as a member of the religious institution.

Conclusion
Fringe Benefits Tax does not apply to Salary and or Wage paid to an employee.

S3 D; Is the cost of all air tickets from City E to City B and return subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The employee will be in receipt of a benefit, as defined by subsection 136(1) as the travel costs incurred by the employees in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City E and City B is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the ITAA 1997 where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee lives permanently in City E, and will commute to City B when required. For the remainder of the time the employee will work at her home in City E. As the employee works from home for the majority of her employed hours, it brings into question whether the employee is in fact travelling between places of employment/business.

Whether a home constitutes a place of work necessarily depends on the nature and extent of the activities undertaken there. In this case the employee works full time in computer based applications for the company. Whether in City B or at her home in City E the employee will be working full time in computer based applications for the employer, which would indicate that the nature and extent of the activities undertaken would be considerable.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the ITAA 1936. Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027.

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

§ Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

§ Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

§ For travel allowance expenses - The employee must sleep away from home.

§ Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

§ Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

§ Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

§ how they worked out their claim;

§ an entitlement to a deduction (for example that work-related travel was undertaken);

§ a bona fide travel allowance was paid; and

§ if accommodation is claimed, that commercial accommodation was used.

§ The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

§ Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

The costs incurred for travel of an employee to perform work related duties are not fringe benefits. Where an employer incurs an expense for an employee to travel to perform the duties the expenses are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

Conclusion

The costs incurred for the air travel from City E to City B and return for an employee to perform work related duties is not subject to fringe benefits.

S3 E; Is the cost of accommodation for the employee in City B subject to Fringe Benefits tax?

Answer;

No.

Residual Benefit

Section 45 of the FBTAA states that a benefit is a residual benefit if the benefit is not a benefit under any of Subsections 2 to 11 of Subdivision A of the FBTAA.

The provision of accommodation to an employee may be either a housing fringe benefit or a residual fringe benefit. However, where the accommodation is provided solely by reason that the employee is required to 'live away from their usual place of residence in order to perform their duties of employment', subsection 47 (5) of the FBTAA will operate to exempt the accommodation from FBT.

Exempt Residual Benefit

Subsection 47(5) of the FBTAA (living away from home accommodation benefits) exempts residual benefits in respect of accommodation provided to employees in certain circumstances. The requirements of subsection 47(5) of the FBTAA are given in paragraphs (a) to (d) of that subsection. 

Paragraph (a) of subsection 47(5) requires that, the residual benefit that arises in respect of accommodation is provided to an employee of the employer in respect of employment;

Paragraph (b) of subsection 47(5) requires that, the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from the employee's usual place of residence in order to perform the employee's employment duties;

Paragraph (c) of subsection 47(5) requires that, the accommodation is not provided while the employee is undertaking travel in the course of performing employment duties.

Employee Declaration

Paragraph (d) of subsection 47(5) requires that, as relevant to this case, the employee gives the employer, before the declaration date, a declaration purporting to set out the employee's usual place of residence and the place at which the employee actually resided while living away from the usual place of residence.

Under subsection 136(1) of the FBTAA the declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

Under subsection 136 (1) of the FBTAA the declaration date means the date of lodgement of the Fringe Benefits Tax (FBT) return for the year of tax, or such later date allowed by the Commissioner.

The employee must provide the relevant declaration required for this exemption to apply.

Residual benefits for accommodation in respect of the employment of an employee

The meaning of the phrase 'in respect of the employment of the employee' was considered in the Full Federal Court case of J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402. It was found in this case that the phrase 'in respect of' means that there must be a sufficient or material relationship or connection between the provision of the benefit and the employee's employment.

To establish whether a sufficient or material connection exists between the provision of the allowance and the employment of the employee, it is necessary to consider the circumstances in which it has been provided.

In your case the accommodation is being provided to the employee whilst she carries out her duties as an employee.

Based on the information provided, the employee is employed and the conditions of the employment require that the employee perform duties away from the employee's usual place of residence, and that appropriate accommodation will be provided by the employer to the employee during these periods of employment.

Required to live away from the employee's usual place of residence

Various decisions of Taxation Boards of Review relating to the former section 51A of the ITAA 1936, which authorised deductions or employees being paid a living-away-from-home allowance, deals with whether a particular employee was living away from his 'usual place of abode' in order to perform his duties as an employee.

In seeking assistance from the decisions in applying relevant provisions of the Act, it is considered that the words 'residence' and 'abode' may be taken as being synonymous. Accordingly, the decisions are useful in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Subsection 136(1) of the FBTAA provides the definition of a place of residence

'Place of residence' is defined in section 136(1)

(a)     It means, in relation to a person, a place at which the person resides
or a

(b)     Place at which the person has sleeping accommodation, whether on a permanent or temporary basis and whether or not on a shared basis..

Miscellaneous Taxation Ruling 2030 (MT 2030) gives consideration as to when a person may be considered to be living away from home. The following extracted paragraphs from MT 2030 State;

12. 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.

…

14. 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.

…

19. An underlying theme of the cases is a general presumption that a person's usual place of residence will be close to the place where he or she is permanently employed. Correspondingly, an employee who changes his or her place of residence because of a change in the location of a permanent job, whether by reason of a transfer with the same employer or a change of employment, would not usually be living away from home on moving to a new place of residence close to the new job location. That would be the case notwithstanding that the new place of residence was a temporary one pending the obtaining of suitable long term accommodation.

…

20. 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.

21. Some employees may be unable to establish that they are living away from their usual place of residence because the transitory nature of their lifestyle means that their usual place of residence is wherever they happen to sleep at night. Employees who follow the job, say, from construction site to construction site and have no permanent place of residence would fit into this particular category.

…

25. On the other hand 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 r she eventually intends to reside.

These paragraphs of MT 2030 give rise to the following principles;

An employee's usual place of abode is near where he or she is permanently employed. If the employees place of permanent employment changes and the employee moves as a consequence, the employee would not be considered to be living away from his or her usual place of residence.

The employee needs to demonstrate that he or she is only working temporarily at the new location and will return, or there is a legitimate expectation of a return to live at the former place of abode on cessation of work at the new location.

Whether an employee is living away from his or her usual place of residence depends on all the facts of the particular case and is not solely dependent on whether a person is merely living away from his or her point of origin.

It has been accepted in MT 2030 that various decisions of former section 51A of the ITAA 1936 may be used in establishing principles for determining whether or not an employee may be regarded as living away from his or her usual place of residence for fringe benefits tax purposes.

Conclusion
Based on the information provided in scenario 3, where the conditions of employment require the employee to perform duties away from the employee's usual place of residence, and that appropriate accommodation is provided by the employer to the employee during these periods of employment, the provision of the accommodation is an exempt benefit under subsection 47(5) of the FBTAA.

S3 F; Is the payment of a 'travel allowance' of $110.35 per day for all days away from City E subject to Fringe Benefits tax?

Answer;

No.

Payments by employer to employee

If the company makes a decision to pay an allowance, the Commissioner would accept that there is a nexus between the business activities being carried on by the employer and the employer's provision of the entitlement, such that payment of the entitlement is incidental and relevant to the production of the assessable income of the business.

The amount will be incurred by the rulee company when it is paid to the employee.

Whether the amount is revenue or capital in nature depends on the character of the payment when made by the company. In this instance the payment represents an allowance to the employee to undertake duties on behalf of the company in various locations. This is considered to be on account of revenue.

Section 8-1 of the ITAA 1997 provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in carrying on a business for the purposes of gaining or producing assessable income and is not:

§ capital, private or domestic in nature,

§ incurred in gaining or producing exempt income, or

§ prevented form being deductible by a provision of the Act.

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income.

What is the travel allowance?

The travel allowance must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The Commissioner takes the view that the term travel away from the employees ordinary residence means that the employee must sleep away from their home. The travel allowance must be paid to cover the cost of accommodation (domestic travel only) or food or drink or expenses incidental to the travel (paragraph 900-30(3)(b) of the ITAA 1997). Travel allowance must be paid for specific journeys undertaken or to be undertaken for work-related travel.

Travel allowance, living away from home allowance and reimbursement

Whilst the allowance the company wishes to pay the employee is deductible under section 8-1 of the ITAA 1997, the company must give consideration to the determination of whether the allowance is a travel allowance, reimbursement of expenditure or living away from home allowance as these have different taxation treatments.

Living-away-from-home allowances and reimbursements are taxable fringe benefits in accordance with the FBTAA. Whereas travelling allowances form part of the employee's assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling in the course of carrying out the duties of employment. Refer Taxation Rulings 92/15 and MT 2030.

Reasonable amount of travel allowance

The payment must be a bona fide travel allowance which is an amount that could reasonably be expected to cover accommodation or meals or expenses incidental to travel and there must be relativity between the quantum of the travel allowance and the purpose for which it is said to be paid. A token amount or general payment is not a bona fide travel allowance.

Reasonable amounts for travel and meal allowance expenses for the 2010-11 income year are set out in Taxation Determination TD 2010/19. In setting these, the Commissioner does not determine the amount an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee.

The Commissioner determines the reasonable amount of travel and meal allowance expenses only for the purposes of the tax law, that is, the amount that will be accepted for exception from the requirement to obtain and keep written evidence for substantiation purposes.

The reasonable amounts reflect accommodation expenses incurred in commercial establishments for short term daily accommodation and the relevant food and drink expenses incurred during the period of that travel.

Taxation Determination 2005/32 must be read in conjunction with Taxation Ruling 2004/6 to determine the substantiation requirements in relation to travel allowance and meal allowance expenses.

Conclusion
The travel allowance paid to the employee must be paid to cover work-related travel expenses incurred or to be incurred for travel away form the employees ordinary residence, undertaken in the course of performing duties as an employee (subsection 900-30(3) of the ITAA 1997).

The payment of a travel allowance would be an allowable deduction under section 8-1 of the ITAA 1997 as an expense incurred in carrying on a business for the purpose of gaining or producing assessable income. The payment is not subject to fringe benefits.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

S3 G; Is the cost of the provision of a motor vehicle in City B including full entitlement to private use while in City B subject to Fringe Benefits tax?

Answer;

No.

Generally speaking, where an employee is provided with the use of a motor vehicle for private use or it is available for private use by an employee (please note that a car that is garaged at an employees home is treated as being available for the private use by the employee regardless of whether or not the employee has permission to use it privately), a liability for fringe benefits tax (FBT) will arise.

However, under subsection 8(2) of the FBTAA, an exemption from FBT will apply where the private use of certain vehicles is limited to work-related travel and other private use by the employee, or an associate of the employee, which is minor, infrequent or irregular.

According to subsection 8(2) of the FBTAA:

A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a)     the car is:

(i)                a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii)               any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and

(b)     there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i)                work-related travel of the employee; and

(ii)               other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

 

The conditions for subsection 8(2) of the FBTAA exemption to apply are as follows:

(a)   a car benefit must be provided;

(b)   the benefit must be provided in respect of employment of a current employee;

(c)   the car must be an eligible car; and

(d)   the private use of the car is restricted to work-related travel and other private use by the employee or an associate that is minor, infrequent and irregular.

The motor vehicle is a car for FBT purposes

A motor vehicle is a car for FBT purposes under subsection 136(1) of the FBTAA if it meets one of the following two definitions:

(a)     a motor car, station wagon, panel van, utility truck or similar vehicle, designed to carry a load of less than 1 tonne; or

(b)     any other road vehicle designed to carry a load of less than 1 tonne or fewer than 9 passengers;

The FBT definition of a car does not include a motor cycle or similar vehicle.

Work related travel

Work-related travel is defined in subsection 136(1) of the FBTAA to be:

(a)     travel by the employee between:

(i).     the place of residence of the employee; and

(ii).   the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b)     travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

As the private use of the vehicle will be restricted to travel to and from work plus other private travel by the employee or an associate of the employee which is minor, infrequent or irregular; the restricted private use requirement is satisfied.

Conclusion

The provision to a current employee of a vehicle will qualify as an exempt benefit if the private use of the vehicle does not exceed the restricted private use requirements.

S3 H; Is the cost of travel from City E to other location (for example City C) to attend a business conference or meeting, and then travel back to City E subject to Fringe Benefits tax?

Answer;

No.

(This is an example where the cost of travel City A to City C is much greater than the cost of travel City B to City C)

S 3I; Is the cost of travel from City E to other location (for example City D) to attend a business conference or meeting, and then following the meeting the employee travels on to City B for a brief period before returning to City E subject to Fringe Benefits tax?

Answer;

No.

S3 J; Is the cost of travel from City B to other location (for example City D) to attend a conference or business meeting, and then following the meeting the employee travels on to City E subject to Fringe Benefits tax?

Answer;

No.

The definition of fringe benefit in subsection 136(1) of the FBTAA requires that a benefit must be provided to an employee, or an associate, in respect of the employment of the employee. The definition of fringe benefit also excludes certain benefits, such as salary or wages and eligible termination payments.

A benefit is defined in subsection 136(1) and it includes any right, privilege, service or facility. The employee will be in receipt of a benefit, as defined by subsection 136(1) as the travel costs incurred by the employees in travelling by air are paid for by the company.

In this case the payment of the air fare is made by the employer which means that the expense for the air travel is not incurred by the employee. Section 45 of the FBTAA states that a benefit

...is a residual fringe benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision Subdivision A of Division 2 to 11 (inc).

Section 52 of the FBTAA allows a reduction in the taxable value of a residual fringe benefit where the recipient of the benefit is an employee. Broadly this means that the taxable value may be reduced by the amount that the employee is entitled to claim as an income tax deduction if both of the following conditions had been satisfied

1. the residual benefit had not been provided as a fringe benefit; and

 

2. the employee had acted as a consumer or members of the public in purchasing the service or privilege, etc., of which the residual benefit is comprised.

In order to determine whether the travel between City E and City B is business or private, it is necessary to consider whether it is used exclusively in the course of gaining or producing assessable income. This test is the same for FBT purposes as it is for income tax purposes. Expenses incurred in travelling to work would be deductible under section 8-1 of the ITAA 1997 where the expenditure is incurred in gaining or producing assessable income.

Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34 explain the Commissioners view on home to work travel.

MT 2027 refers to, and reiterates the principle in Taxation Ruling IT 112 that in general, travel between home and work is private. Paragraph 14 of MT 2027 cites the High Court case, Lunney & Hayley V FCT (1958)100 CLR 478. This case held that the deductibility of the costs of travel between home and a place of employment or business is ordinarily private travel. In this case it was determined that while travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

MT 2027 explains that there are exceptions to this principle as there are circumstances where travel between home and a place of employment or business may be regarded as business travel, being travel which is exclusively in the course of gaining or producing assessable income.

The exceptions to this principle are:

1. Travel while on stand by duty.

2. Travel between places of employment/business.

3. Employment duties of an itinerant nature.

4. Business trip on way to or from work.

5. Travel incorporating the transport of equipment.

Travel between two places of employment/business

In this case the employee lives in City E and works from her home/office and is required to travel to City B, City C or City D to attend conferences. The travel between places of employment/business to attend work related activities such as conferences is part of the duties of the employee.

In this case the employee works in computer based applications for the company, whether in City B or at her home in City E and the employee is required travel to attend conferences and meetings as required.

As the employee is working from home as part of the conditions of employment with the employer, and that employee is required to travel from that place of business to carry out further duties on behalf of the employer at another place of business the travel will be from one place of business to another.

Travelling between home and work are generally not allowable under subsection 51(1) of the ITAA 1936. Exceptions to this general view are set out in Taxation Ruling Nos. IT 112, IT 113, IT 2122, IT 2199, IT 2273 and MT 2027.

Where allowances are paid in circumstances referred to in these Taxation Rulings, deductions are allowable, subject to the application of the substantiation rules in Subdivision F of Division 3 of Part III of the ITAA 1936.

Briefly summarised, the exceptions are:

§ where the taxpayer's home constitutes a place of employment and travel is between two places of employment or business such as the medical practitioner in Garrett v F.C. OF T. 82 ATC 4060, 12 ATR 684 who carried on a business of primary production at home and a medical practice in the city (see Taxation Ruling No. IT 2199 for details);

§ where the taxpayer's employment can be construed as having commenced before or at the time of leaving home…

§ where the taxpayer has to transport by vehicle bulky equipment …

§ where the taxpayer's employment is inherently of an itinerant nature …

§ where the taxpayer is required to break his or her normal journey to perform employment duties…

The costs incurred for travel of an employee to perform work related duties from one place of business which is also his home are not fringe benefits.

TD 2010/19

1. This Determination sets out the amounts that the Commissioner considers are reasonable (reasonable amounts) for the substantiation exception in Subdivision 900-B of the ITAA 1997 for the 2010-11 income year in relation to claims made for:

(a) overtime meal allowance expenses - for food and drink in connection with overtime worked and where a meal allowance has been paid under an industrial instrument;

(b) domestic travel allowance expenses - accommodation, food and drink, and incidentals that are covered by the allowance;

(c) travel allowance expenses for employee truck drivers - food, drink and incidentals that are covered by the allowance; and

(d) overseas travel allowance expenses - food, drink and incidentals that are covered by the allowance.

TR 2004/6

2. This Determination should be read together with Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses which explains the substantiation exception and the way in which these expenses are able to be claimed. It is important to remember that '[i]n setting the reasonable amount ... the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee'. (Refer to paragraph 33 of TR 2004/6.)

3. Key points from TR 2004/6 about claiming travel allowance expenses and overtime meal allowance expenses are:

§ Claim must be allowable - A deduction claim cannot exceed the amount actually incurred for work-related purposes. The payment of an allowance does not of itself allow a deduction to be claimed.

§ Allowance must be paid - The substantiation exception only applies if the employee is paid an overtime meal allowance or a travel allowance. The allowance must have an identifiable connection with the nature of the expense covered.

§ For travel allowance expenses - The employee must sleep away from home.

§ Substantiation exception - Where the amount claimed is no more than the applicable reasonable amount, substantiation of the claim with written evidence is not required.

§ Claims in excess of reasonable amounts - If the amount claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess.

§ Verification of reasonable claims - In appropriate cases, where the substantiation exception is relied on, the employee may still be required to show:

§ how they worked out their claim;

§ an entitlement to a deduction (for example that work-related travel was undertaken);

§ a bona fide travel allowance was paid; and

§ if accommodation is claimed, that commercial accommodation was used.

§ The nature and degree of evidence will depend on the circumstances: for example the circumstances under which the employer pays allowances, the occupation of the employee, and the total amount of allowances received and claimed during the year by the employee.

§ Tax return treatment - Where a travel or overtime meal allowance which does not exceed the reasonable amounts is not shown on the payment summary, and it has been fully spent on deductible expenses, neither the allowances nor the expenses need be shown on the employee's tax return. If an amount less than the allowance has been spent, the income tax return must include the allowance and the expense claimed. Whenever a claim is made for overtime meal or travel allowance expenses the allowance must also be included in the tax return…

Reasonable amount for 2010-11

The reasonable amounts for daily travel allowance expenses, according to salary levels and destinations, for the 2010-11 income year are shown in Tables 1 to 6 of this ruling.

Where an employer incurs an expense for an employee to travel to perform the duties the expenses incurred are a business expense and deductible under section 8-1 of the ITAA 1997.

Section 8-1 of the ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business, except where the outgoings are of a capital, private or domestic nature.

Conclusion

The costs incurred for travel of an employee to perform work related duties are not fringe benefits.