Edited version of your private ruling

Authorisation Number: 1011946966779

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: FBT - accommodation and meals provided to tutors

Question 1

Will a fringe benefit arise from the subsidised accommodation provided to your tutors?

Answer

No

Question 2

Will a fringe benefit arise from the meals provided to your tutors?

Answer

No

This ruling applies for the following periods:

01 April 2006 - 31 March 2007

01 April 2007 - 31 March 2008

01 April 2008 - 31 March 2009

01 April 2009 - 31 March 2010

01 April 2010 - 31 March 2011

The scheme commences on:

01 April 2006

Relevant facts and circumstances

You are an accommodation facility.

You provide:

· accommodation for students attending an educational institution

· fully catered accommodation and academic and pastoral support for students

The tutors all come from outside the capital city.

The tutors are engaged for the full academic year All the tutors have returned home at least once during the semester breaks

Accommodation is contracted with an option to stay in the accommodation facility during the holiday breaks.

The tutors are practically on call 24 hours a day, seven days a week.

The tutors receive three meals a day, seven days a week. Breakfast is a light hot breakfast and cereal while lunch and dinner are cooked meals.

All meals are served in your dining room located on the accommodation facility grounds.

Payment for food and accommodation is required at a discount.

The tutors have provided you with living-away-from-home declarations.

A copy of the Job Description has been provided.

Once appointed, the tutors are:

· not free to employ a substitute to perform their duties for them

· not paid, and receive no cash payments in exchange for services provided

· provided with subsidised accommodation, meals and an allowance to cover entertainment and reimbursement of related calls when required

· not free to perform their duties when they choose

· required to be available for students requiring their services between certain hours most nights, and must eat regularly in your dining room

· responsible to the Dean and Master of your accommodation facility and absence from your accommodation facility must be approved in advance, and

· not free to perform their duties outside of the accommodation facility and must take up residence within the accommodation facility in specified accommodation to perform their duties.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 40

Fringe Benefits Tax Assessment Act 1986 Section 41

Fringe Benefits Tax Assessment Act 1986 Section 45

Fringe Benefits Tax Assessment Act 1986 Section 47

Fringe Benefits Tax Assessment Act 1986 Subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 137

Fringe Benefits Tax Assessment Act 1986 Subsection 137(1)

Reasons for decision

Question 1

Will a fringe benefit arise from the subsidised accommodation provided to your tutors?

Detailed reasoning

The definition of fringe benefit within sub-section 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) defines a fringe benefit to mean a benefit:

(a) provided at any time during the year of tax;

(b) provided in respect of the year of tax

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the "arranger") other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

in respect of the employment of the employee, but does not include:…

The definition goes on to provide that benefits listed in paragraphs (f) to (s) will not be fringe benefits.

Therefore, a fringe benefit will arise if the following criteria are satisfied:

· a benefit is provided

· the benefit will be provided to the employee or an associate of an employee

· the benefit will be provided by:

o the employer;

o an associate of the employer, or

o a person other than the employer or an associate of the employer under an arrangement, or a situation that comes within paragraph (ea) of the fringe benefit definition

· the benefit will be provided in respect of the employment of the employee; and

· the benefit is not listed under paragraphs (f) to (s) of the definition of fringe benefit.

Will a benefit be provided?

The term 'benefit' is defined under subsection 136(1) of the FBTAA which states:

"benefit" includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right benefit, privilege, service or facility that is, or is to be, provided under:

…

As you will be providing subsidised accommodation a benefit will be provided.

Will the benefit to be provided to an employee?

In your application you discuss the application of subsection 137(1) of the FBTAA. Subsection 137(1) applies to deem a person to be an employee, even though they do not receive a cash payment.

From the information provided we agree that the tutors are deemed to be employees under subsection 137(1) of the FBTAA.

Will the benefit provided in respect of the employment of the employee?

Tutors will receive subsidised accommodation in return for their contribution as tutors.

Therefore the benefit is provided in respect of the employment of the employee.

Will the benefit be provided by the employer?

Yes, the benefit will be provided by the employer.

Will the benefit be one of the benefits listed under paragraphs (f) to (s) of the definition of fringe benefit?

The relevant paragraph to consider under the definition of 'fringe benefit' is paragraph (g) which states:

a benefit that is an exempt benefit in relation to the year of tax;'

Will the benefit be an exempt benefit?

Subsection 47(5) of the FBTAA provides that accommodation provided by an employer to an employee can be an exempt benefit where certain conditions are met.

Subsection 47(5) states:

Where:

(a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment;

(b) 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 his or her usual place of residence in order to perform the duties of that employment;

(c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(d) either of the following conditions is satisfied:

(i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax, when the lease of licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment;

(ii) the employee gives to the employer, before the declaration date, a declaration in a form approve by the Commissioner, purporting to set out:

(A) the employee's usual place of residence and

(B) the place at which the employee actually resided while living away from his or her usual place of residence;

the benefit is an exempt benefit in relation to the year of tax.

Therefore the provision of subsidised accommodation will be an exempt benefit where the following conditions are met:

1. the benefit is a residual benefit consisting of the provision of accommodation

2. the accommodation is provided as the employee is required to live away from their usual place of residence

3. the employee is not travelling while performing their employment duties, and

4. the employee provides a declaration in the approved form.

1. Will the benefit be a residual benefit consisting of the provision of accommodation?

As the provision of accommodation may be a housing benefit it is necessary to determine whether the subsidised accommodation is a housing benefit.

What is a housing benefit?

Section 25 of the FBTAA sets out the circumstances in which a housing benefit will be provided. It states:

The subsistence during the whole or a part of a year of tax of a housing right granted by a person (in this section referred to as the "provider") to another person (in this section referred to as the "recipient") shall be taken to constitute a benefit provided by the provider to the recipient in respect of the year of tax.

'Housing right' is defined under subsection 136(1) of the FBTAA to mean:

a lease or licence granted to the person to occupy or use a unit of accommodation insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence.

Therefore a housing benefit will be provided where the accommodation is the employee's usual place of residence. Where the accommodation is not the employee's usual place of residence the benefit will be a residual benefit.

Is the accommodation the tutor's usual place of residence?

The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' 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.

In the absence of a legislative reference it is relevant to refer to the ordinary meaning of 'usual'. The Macquarie Dictionary defines 'usual' to mean:

1. habitual or customary: his usual skill.

2. such as is commonly met with or observed in experience; ordinary: the usual January weather.

3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

Guidelines for determining an employee's usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits.

Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states:

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.

Further discussion occurs at paragraphs 19 to 25. Paragraph 20 provides the following general rule:

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.

As an example of the application of this general rule paragraph 22 states:

Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence.

These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051. At paragraphs 55 and 56 Deputy President S A Forgie said:

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

In considering the factors referred to by the AAT the following factors indicate that your tutors are living away from their usual place of residence:

· the tutor is required to live in the accommodation facility during the semester

· the tutor returns to their family home during vacation breaks

· the tutors personal belongings are kept at their family home, and

· the period of the tutors contract is for the academic year.

In applying the factors listed above we consider that the accommodation provided to the tutors is not their usual place of residence. The tutor's usual place of residence is their family home. Therefore the benefit provided will be a residual benefit.

2. Is the accommodation provided as the employee is required to live away from their usual place of residence?

The tutors are required to reside at the accommodation facility through out the academic year. Therefore the tutors are provided with the subsidised accommodation as they are required to live at the accommodation facility away from their usual place of residence.

3. Is the employee travelling while performing their employment duties?

The tutors are not travelling in the course of their employment duties.

4. Will the employee provide you with a declaration in the approved form?

You have advised that the tutors have provided you with declarations as required under subparagraph 47(5)(d)(ii) of the FBTAA.

As all the criteria have been met the provision of subsidised accommodation will be an exempt benefit under subsection 47(5) of the FBTAA.

Question 2

Will a fringe benefit arise from the meals provided to your Academic Tutors?

Detailed reasoning

Section 41 of the FBTAA states:

Where:

(a) a property benefit is provided to a current employee of an employer in respect of his or her employment; and

(b) the property is provide to, and consumed by, the employee on a working day and on business premises of:

(i) the employer; or

(ii) if the employer is a company, of the employer or of a company that is related to the employer;

the benefit is an exempt benefit.

To determine whether the provision of the meals will constitute an exempt benefit under section 41 it is necessary to consider the following questions:

(a) Will a property benefit be provided to a current employee?

(b) Will the property benefit be provided in respect of the employee's employment?

(c) Will the property be provided to and consumed by the employee on a working day? and

(d) Will the property be provided to and consumed by the employee on the business premises of the employer?

(a) Will a property benefit be provided to a current employee?

Property benefit is defined under subsection 136(1) of the FBTAA to mean a benefit referred to in section 40, but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III.

Section 40 of the FBTAA provides that:

Where, at a particular time, a person (in this section referred to as the "provider") provides property to another person (in this section referred to as the "recipient"), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.

The provision of the meals satisfies the requirements of section 40 as it involves the provision of property.

Therefore, we accept that you will be providing your employees with property benefits.

(b) Will the property benefit be provided in respect of the employee's employment?

As the meals will be provided to the tutors this condition is met.

(c) Will the property be provided to and consumed by the employee on a working day?

The term 'working day' is not defined in the FBTAA. However, Miscellaneous Taxation Ruling MT 2048 looks at the meaning of "working days" in connection with section 143 of the FBTAA. Paragraphs 11 and 12 state:

The meaning of the expression '"working day" according to the Macquarie Dictionary, is "a day ordinarily given to working (opposed to holiday)".

The expression "working days" in its context in paragraph 143(1)(h) is considered to be dealing with working days of an employee rather than those of an employer. It is considered to extend only to days which, according to popular expression and understanding, are ordinarily given to working and for which the employee must have the employer's permission if the employee is not to attend work on those days….

As the tutors are on call 24 hours a day, 7 days a week the meals will be consumed on a working day.

(d) Will the property be provided to and consumed by the employee on the business premises of the employer?

The dining room in which the meals are provided to the tutors is located on the accommodation facility grounds. As you are an accommodation facility that provides both accommodation and meals to students it is considered that the dining room is part of your business premises.

Therefore the property will be provided to and consumed by the tutors on your business premises.

Conclusion

The meals provided to your tutors are considered to be the provision of property benefits. As the property benefits are consumed by your employees on your business premises, they are considered exempt benefits under section 41 of the FBTAA.