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Ruling

Subject: Fringe benefits tax: living-away-from home allowance

Question 1

For the purposes of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), will the employee be required to live away from their usual place of residence in order to perform the duties of their employment?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2011

Relevant facts and circumstances

Prior to taking up their employment position for a fixed term appointment of X years, the employee was employed in another state for a number of years.

The employment contract provides that the employee may revert to a continuing substantive appointment at the completion of the X year period if no further appointment in the current role is offered.

Although the employment contract offers a continuing position the employee plans to return home at the end of the contract term to their family residence where they had previously resided for a number years.

For the period of the employee's appointment their family will remain at the residence where their spouse is employed full-time.

The employee and their spouse have purchased a small apartment a short distance from the employees workplace where the employee will live, although their home residence will continue to be in another state where their family including their spouse will remain living.

The reason for purchasing the apartment is to provide a long term investment for the employee and their spouse and to save on rental costs during the employment term.

Prior to moving into the apartment the employee leased an apartment which was extended on an annual basis.

For the period of the employee's appointment they intend to travel on weekends to be with their family, and expect that this will occur at least twice a month on average, depending on the demands of their position, and also return during vacation period.

The employee resided in the area during the period 19XX - 19XX and has had no association with prior to taking up this appointment. Their only reason for intending to reside in this area is to perform the duties of their appointment.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 30(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1936 Section 51A

Reasons for decision

Issue 1

Question 1

Summary

For the purposes of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), the employee will be required to live away from their usual place of residence in order to perform the duties of their employment.

Detailed reasoning

Discussion of law

For the purposes of applying subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), it is necessary to consider whether an employee is 'required to live away from his or her usual place of residence in order to perform the duties of his or her employment'.

Usual place of residence

In order to determine whether an employee is required to live away from a residence to perform their employment duties, their 'usual place of residence' needs to be identified.

'Usual place of residence' is not defined in the FBTAA 1986. However 'place of residence' is defined in subsection 136(1) in relation to a person, to mean:

(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.

The principles for determining whether an employee is living away from their usual place of residence have been established over the years by case law decisions. Whether or not an employee is living away from home then will depend on the facts of each case.

The FBT guide for employers (Fringe benefits tax: a guide for employers - NAT 1054-08.2006) explains that in determining whether an employee is living away from their usual place of residence, factors such as the lifestyle of the employee, residency status, type of profession and industry often need to be taken into consideration.

In establishing principles for determining whether or not an employee may be regarded as living away from their usual place of residence, the Commissioner issued Miscellaneous Taxation Ruling MT 2030, entitled Fringe benefits tax: living-away-from-home allowance benefits. The ruling draws on various decisions of Taxation Boards of Review relating to the former section 51A of the Income Tax Assessment Act 1936 (ITAA 1936), which allowed deductions for employees being paid a living-away-from-home allowance.

Paragraph 14 from MT 2030 summarises a general principle:

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…

Application of the law to your circumstances

The employee resided at their home in another state for a number of years prior to commencing their current employment contract for a fixed term appointment of several years.

The employer has stated their intention to reside in this area for the duration of the term of the appointment and then to return to their family residence regardless of the fact that the employment contract offers a continuing position.

Following the general principle in paragraph 14 of MT 2030, the employee will be regarded as living away from their usual place of residence while undertaking this employment. If it were not for their assignment to this role they would have continued to live in their family residence. This is supported by the fact that their spouse will remain at this residence.

A relevant consideration in arriving at this conclusion is that the employee intends to return to their home at the end of the contacted employment period.

It is considered that the general principle in paragraph 14 applies to the employee's situation even though they have been offered ongoing employment with the employer following completion of their fixed term appointment. Support for the temporary nature of this appointment is found in the fact that the employee has communicated to their employer their intention to return home upon expiration of the term, together with the fact that their family will remain in the family home for the term.

Support can also be found in the judgment by P.M. Roach in Case R99 84 ATC 650 at 657:

In the case of a married man with a family who is temporarily absent from the family home, albeit for a prolonged period, it is relatively easy to conclude that his "usual" place of abode is the family home so long as it is his intention to return there.

MT 2030 also provides case examples to assist with a determination of whether an employee is living away from home, including the following finding of a 1951 Board of Review:

16. The taxpayer in Case B47 2 TBRD 201, maintained a home in Perth where his wife lived for a period of 6 years while he worked in a town 130 miles away, staying in hotel accommodation and returning home each weekend and for holidays. The Board of Review found that his home in Perth was more permanent and was his "usual" place of abode.

In finding that his Perth home was more permanent, the board considered relevant that he returned to Perth at every available opportunity. Likewise, subject to the commitments of their role, the employee for the period of the appointment intends to travel on weekends to be with their family, and expects that this will occur at least twice a month on average, depending on the demands of their position.

Paragraph 19 of MT 2030 expresses the following general presumption about a person's usual place of residence:

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.

While the general presumption from paragraph 19 is that a person's home will be near where they are permanently employed, the presumption may be rebutted in cases such as this. While the offer of permanent employment has been made, the employee has communicated their intention only to perform the fixed term role, before returning home. In this case, they have an alternative residence at which to reside, which is considered more usual than their temporary accommodation.

Although the employee will move from their leased apartment to a small apartment located a short distance from his workplace purchased by themself and their spouse, their home residence will continue to be in another State where their family including their spouse will remain living. The reason for purchasing the apartment is to provide a long term investment for the employee and their spouse and to save on rental costs during the employment term.

The employee's position is of limited duration, as required to make the presumption in paragraph 20, and while they maintain the intention to return, they can be treated as living away from their usual place of residence. They will be maintaining their home for this purpose.

Required in order to perform duties

It is accepted that the Residence in which the employee had been living prior to their appointment is their usual place of residence. The next question to be asked is whether the employee is required to live away from that residence in order to perform the duties of their employment.

It is clear that the appointment which the employee has accepted with the employer necessitates they take up residence there. It is acknowledged that their role could not be performed while residing at their family residence. Also, there are no reasons for the employee to reside in this area other than to perform the duties of their new role.

This is further supported by the fact that the employee resided in the area from 19XX until 19XX and has had no association with area prior to taking up this appointment. Their only reason for intending to reside in the area is to perform the duties of their appointment.

Conclusion

In conclusion, for the purposes of applying subsection 30(1) of the FBTAA, it is considered that the employee will be required to live away from their usual place of residence in order to perform the duties of their employment contract.