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Ruling

Subject: Fringe Benefits Tax

Question 1

Is the provision of accommodation provided to employees, an exempt housing benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

The scheme commenced on :

In the year ended 31 March 2002

Relevant facts and circumstances

The employer falls within subsection 140(1B) of the FBTAA.

The employer provides residential accommodation to employees in Town A.

The employee works for the employer in Town A.

City B has a 1981 census population of less than 130,000.

City B is the closest 'eligible urban area' and is situated less than 100 kilometres away from Town A.

Relevant provisions:

Fringe Benefits Tax Assessment Act 1986 Section 25.

Fringe Benefits Tax Assessment Act 1986 Subsection 58ZC(1).

Fringe Benefits Tax Assessment Act 1986 Subsection 58ZC(2).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 140(1)(b)(i).

Fringe Benefits Tax Assessment Act 1986 Paragraph 140(1A)(a).

Fringe Benefits Tax Assessment Act 1986 Paragraph 140(1B)(d)

Fringe Benefits Tax Assessment Act 1986 Subsection 140(3).

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

Reasons for decision

Summary

The employer is a charitable organisation. Therefore the accommodation provided is not in or adjacent to an 'eligible urban area' and is an exempt housing benefit.

Detailed reasoning

Housing benefit

The term 'housing benefit' is defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to mean a benefit referred to in section 25 of the FBTAA.

Section 25 of the FBTAA sets out the circumstances in which a housing benefit will be taken to exist for fringe benefits tax purposes. A benefit under section 25 is defined as a housing benefit.

A housing benefit will arise in relation to a year where a housing right, granted by one person (the provider) to another (the recipient), subsists during all or part of the year. The benefit is taken to be provided by the provider to the recipient.

The term 'housing right' is defined in subsection 136(1) of the FBTAA to mean a lease or licence granted to someone to occupy or use a unit of accommodation at a time when the unit of accommodation is the person's usual place of residence.

In this case, the employer is providing the relevant employees with residential accommodation in Town A.

Therefore, the employer is providing a housing benefit, to the relevant employees.

Remote area housing benefit

Subsection 58ZC(1) of the FBTAA states that a housing benefit that is a 'remote area housing benefit' is an exempt benefit. However, all of the following conditions contained in subsection 58ZC(2) of the FBTAA must be satisfied for the remote area housing exemption to apply:

(i) for the whole of the tenancy period the unit of accommodation was not at a location in, or adjacent to, an eligible urban area;

(ii)f or the whole of the tenancy period the accommodation was occupied by a person who was a current employee of the employer and the usual place of employment of the employee was in the remote area;

(iii)t is necessary for the employer to provide or arrange free or subsidised accommodation because, amongst other criteria, the nature of the employer's business is such that employees are liable to move frequently from one residential location to another, or it is customary for employers in that industry to provide free or subsidised accommodation for employees; and

(iv) the recipients overall housing right was not granted under a non-arm's length arrangement, nor was granted for a purpose that included the purpose of enabling the employer to obtain the benefit of the application of section 58ZC of the FBTAA (that is, the housing right was granted under bona fide circumstances).

Conditions (ii) and (iv) above are satisfied.

For condition (iii) above, we accept that is customary for this profession to be provided with accommodation in remote areas.

Therefore conditions (ii), (iii) and (iv) in subsection 58ZC(2) of the FBTAA are satisfied.

However, the first condition needs to be addressed.

Whether the accommodation in Town A is not located in, or adjacent to, an 'eligible urban area' for an employer who falls into subsection 140(1B) of the FBTAA. Section 140 of the FBTAA looks at 'eligible urban areas'.

Accommodation not in, or adjacent to, an eligible urban area

Subsection 140(3) of the FBTAA defines 'census population' in relation to an urban centre to mean the census count on an actual location basis of the population of that 'urban centre' specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981.

Section 140(1A) of the FBTAA states for an employer that falls within subsection 140(1B), then paragraph 140(1A)(a) applies.

The employer falls into subsection 140(1B) of the FBTAA.

The Tax Office guidance in applying these provisions is set out in Law Administration Practice Statement PSLA 2000/6, Fringe Benefits Tax exemption on remote area housing.

In the practice statement, where an employer is included is subsection 140(1B) of the FBTAA, then Attachment 2 applies. The attachment contains a listing of towns establishing whether they are remote or non-remote, as defined in subsection 140(1A) of the FBTAA. In this attachment, the accommodation only needs to be located less than 100 kilometres from the town with a 1981 population census of 130,000 or more to be located in a remote area.

A location will be in a remote area where the eligible urban area were a reference to an eligible urban area that is an urban centre with a census population of not less than 130,000.

Furthermore, the accommodation provided (housing benefit in town A) is situated not less than 100 kilometres from the centre point of an eligible urban area (City B) with a 1981 census population of not less than 130,000.

Therefore Town A is not located in, or adjacent to an eligible urban area (City B), as provided in paragraph 140(1)(b)(ii) of the FBTAA 1986 and therefore a remote area. Therefore condition (i) of the subsection 58ZC(2) of the FBTAA 1986 is satisfied.

Conclusion:

In accordance with section 25 of the FBTAA, the provider (employer) has provided the recipient (employees) with a housing benefit.

The employer meets all the conditions set out in subsection 58ZC(2) of the FBTAA:

· The accommodation provided to an employee in Town A, is not in, or adjacent to, an 'eligible urban area' (City B), as outlined in subsection 140(1A) of the FBTAA (eligible urban area) and

· during the period of tenancy, the current employee's usual place of residence was located in a remote area (Town A), and

· the provision of such accommodation by the employer appears necessary taking into account the factors in paragraph 58ZC(1)(d) of the FBTAA, and

· the housing benefit was provided under an arm's length agreement.

Therefore as subsection 58ZC(2) of the FBTAA requirements are met, and the housing benefit provided by the employer to the employees in Town A, will be a remote area housing benefit that is an exempt benefit under section 58ZC(1) of the FBTAA.