Edited version of private ruling

Authorisation Number: 1011711999820

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Ruling

Subject: Application of Section 47 and 52 of the Fringe Benefits Tax Assessment Act 1986

Question 1

Is the provision of accommodation to the employee a fringe benefit pursuant to the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Answer;

Yes

Question 2

Can the taxable value of the benefit be reduced to nil under Section 52 of the Fringe Benefits Tax Assessment Act 1986?

Answer;

Yes

This ruling applies for the following period

1 April 2008 to 31 March 2009

1 April 2009 to 31 March 2010

1 April 2010 to 31 March 2011

The scheme commenced on

1 April 2008

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling

The taxpayer has entered into a lease for residential premises in New South Wales.

The applicant's head office is located in New South Wales.

The residential premise is located approximately 1.5km from Head Office.

The employee is the chairperson and founder of the applicant. The employee is an author of books and articles in relation to work, leadership, spirituality and family life amongst other things.

The residential premises are fully furnished and it is intended that the residential premises will be made available to the employee during the time of their employment duties for the applicant. The residential premises will be available for other company purposes at the times when the employee is not using it.

The employee's current home is located 757km from Head Office. The employee has a home office at their current residence.

During an average month (comprising approximately 22 working days), the employee usually works from their current residence for 10 to 12 of those working days, in NSW for approximately five working days and travels either interstate or to New Zealand for work for approximately three to five working days.

Question 1

Is the provision of accommodation to the employee a fringe benefit pursuant to the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Detailed reasoning

Subject to subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) being satisfied, the provision of accommodation to the employee is an exempt benefit.

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.

Housing Benefit

Section 25 of the FBTAA considers the granting of a housing right to be a housing benefit. The granting of a housing right occurs when an employee or an associate is granted a right to occupy, as a usual place of residence, a unit of accommodation provided by an employer or other provider.

Circumstances in which the provision of accommodation would not constitute a housing right, for example, would be where an employee is living away from his or her usual place of residence in order to carry out the duties of employment. In this case the benefit would be exempt under sub-section 47(5) of the FBTAA.

Subsection 136(1) of the FBTAA defines a place of residence in relation to a person as: 

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

(b) a place at which the person has sleeping accommodation, whether on a

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

As the employee's residence at the previous location satisfies the above definition it is, therefore, necessary to determine whether the employee is, in fact, living away from her usual place of residence at the time she performs the employment duties for the employer.

This, in turn, effectively means determining whether her residence is her usual place of residence during the time she is working for the employer.

MT 2030

The following extracted paragraphs from Miscellaneous Taxation Ruling MT 2030, Fringe benefits tax: living-away-home allowance benefits provide guidance on the subject of whether an employee is living away from his or her usual place of residence: 

14. 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.  

19. An underlying theme of the [Taxation Boards of Review cases relating to the former section 51A of the Income Tax Assessment Act 1936] 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.

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 or she eventually intends to reside.

Basically, paragraph 25 relates to persons, such as teachers, who are required to move to a different location as a normal consequence of their job. However, it is accepted that, in this instance the general position outlined in paragraph 25 will not apply, as the position held by the employee has been taken up in different circumstances to that outlined in the paragraph.

Guidance to be drawn from the above, regarding whether an employee is living away from his or her usual place of residence, includes:

(a) There is a general presumption that a persons usual place of residence will be close to where he or she is permanently employed and that in order to refute such a presumption the employee needs to demonstrate that he or she has only moved temporarily to the new location to undertake the relevant work and will return, or there is a legitimate expectation of a return, to live at the employees former place of residence on the cessation of the work at the new location. 

(b) However, the fact that an employee may have a permanent job in one location does not necessarily mean, in itself, that the location where the permanent job is located is the employees usual place of residence when other overriding factors may point to the employee usually residing elsewhere.

The employee continues to live at her normal residence and will only reside at the leased premises supplied by her employer to complete the requirements of her employment.

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 Subdivisions 2 to 11 (inclusive) of Subdivision A of the FBTAA

The benefit that arises in respect of the relevant accommodation provided to the employee by the employer is provided solely because the employee is required to live away from home to perform the duties of the position held.

Therefore, it is considered that the accommodation constitutes a residual benefit under section 45 of the FBTAA as the accommodation does not fall within any other category of benefits under Subdivision A of Divisions 2 to 11 of the FBTAA.

Exempt residual benefits

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; and

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.

Applying the requirements of subsection 47(5) of the FBTAA to the employee of the applicant as follows:

(a) Residual benefits for accommodation in respect of employee's employment.

The employee is employed by the applicant. The provision of the relevant accommodation to the employee of the employer is a residual benefit.

Therefore it is considered that this requirement is met.

(b) Accommodation provided to eligible family member because employee required to live away from usual place of residence to perform employment-related duties

The definition of an eligible family member contained in subsection 136(1) of the FBTAA includes an employee.

As stated above, it is considered that the employee is living away from home.

Therefore, it is considered that this requirement is met.

(c) The accommodation is not provided while the employee is undertaking travel in the course of performing employment duties.

The position held by the employee does not require her to travel to perform her duties. The accommodation is provided as a result of the employee being required to be in attendance at his place of employment throughout the whole of the day.

Therefore, this requirement is met.

(d) Declaration given, at required time and in approved form, to employer by employee setting out employees usual and actual places of residence.

Either subparagraph 47(5)d(i) or (ii) of the FBTAA need to be satisfied. In this instance subparagraph 47(5)d(i) is not relevant and therefore is not satisfied.

Subject to subparagraph 47(5)d(ii) which is considered below being satisfied, the requirement of subsection 47(5) will be met.

Subparagraph 47(5)(d)(ii) of the FBTAA states that the employee must give to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the employees usual place of residence and the place at which the employee actually resided while living away from his or her usual place of residence.

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

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

The employee must provide the relevant declaration to the employer (which has been accepted by the Commissioner), and the benefit provided satisfies the requirements of subsection 47(5) of the FBTAA, the benefit will be an exempt benefit.

In this instance the relevant declaration in respect of the employers 2008 & 2009 FBT return will be accepted, the Commissioner has exercised his discretion to extend the declaration date as defined under s136(1) of the FBTAA.

This results in subparagraph 47(5)(d)(ii) of the FBTAA being satisfied.

As the client has satisfied the requirements of Subsection 47(5) of the FBTAA, the provision of accommodation as a condition of her employment is an Exempt Benefit.

Question 2

Can the taxable value of the benefit be reduced to nil under Section 52 of the Fringe Benefits Tax Assessment Act 1986?

Detailed reasoning

As the decision in relation to question 1is that the client satisfies the requirements of Subsection 47(5) of the FBTAA, and the provision of accommodation as a condition of her employment and that benefit is an Exempt Benefit the otherwise deductible rule does not apply.

The benefit provided is an exempt benefit under Section 47(5) of the FBTAA therefore Section 52 of the Fringe Benefits Tax Assessment Act 1986 does not apply.