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Ruling

Subject: Living-away-from-home allowance benefit

Question 1

Does the allowance paid by the employer to a particular employee constitute a living-away-from-home allowance benefit under section 30 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

The scheme commences on:

July 2011

Relevant facts and circumstances

The employer is paying an allowance to a particular employee in respect of the employee's employment with the employer.

The employer is paying the allowance on the stated basis that it is in the nature of compensation for either additional expenses (not being deductible expenses) incurred by the employee or additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which the employee is subject.

The employee is a current employee of the employer.

The employee's stay in Australia is sponsored by the current employer under the Australian Temporary Business (Long Stay) visa (subclass 457 visa) program (457 visa).

The employee's employment with the current employer is for a finite period (expected to be for no more than X years).

The employee and the employee's spouse and are citizens of overseas country 1.

The employee retains a fully furnished vacant residence in overseas country 1.

The employee and the employee's spouse maintain driver's licences and vehicles registered in overseas country 1.

The employee and the employee's spouse maintain voter's registration in overseas country 1.

The employee and the employee's spouse retain bank accounts and other significant assets and investments in overseas country 1.

The employee and the employee's spouse remain members of superannuation funds in overseas country 1.

The employee's extended family resides in overseas country 1.

The employee and the employee's spouse do not hold permanent residency, citizenship or any significant assets or investments in any country other than overseas country 1

The employee had been employed in overseas country 2 by a previous employer for approximately X years.

The employee had been working in overseas country 2 under the terms of a temporary working visa. The employee neither applied for citizenship in overseas country 2 nor is the employee domiciled in overseas country 2.

The employee resided in rental accommodation in overseas country 2 provided by the employee's previous employer and the employee did not purchase any property or other significant assets in overseas country 2.

Whilst in overseas country 2, the employee had been taxed as a 'non-resident'.

The employee and the employee's family had resided in overseas country 1 for an approximate period of X years immediately prior to taking up the position in overseas country 2 and before which the employee had been on an international assignment.

After the cessation of the employee's employment contract in overseas country 2, the employee and the employee's spouse were repatriated back to overseas country 1 by the employee's previous employer.

The employee provisionally accepted the employment position with the current employer whilst still in overseas country 2 on the condition that the employee successfully obtained a 457 visa to enter Australia.

The employee was located in overseas country 1 whilst awaiting the clearances required for the 457 visa.

The employee was still located in overseas country 1 when the employee was notified by the current employer that the employee's 457 visa had been approved and the employee's contract with the current employer was, therefore, then finalised.

The majority of the employee's personal items were firstly transferred from overseas country 2 to overseas country 1 and then, subsequently, re-shipped to Australia.

The employee will rent accommodation in Australia and the employee has stated that the employee does not intend to buy property in Australia.

The employee has no investments in Australia and the employee has stated that the employee does not intend to accumulate Australian based investments.

The employee has no club, association or social memberships in Australia (nor in overseas country 2).

The employee has stated an intention for the employee and the employee's family to return to the overseas country 1 at least once, if not twice, per year during the employee's period of employment in Australia and on such occasions for them to reside at their property in overseas country 1 during those return visits.

The employee has stated that if the employee had not accepted employment with the current employer then the employee would have remained in overseas country 1 after the employee's return from overseas country 2.

The employee has stated that the employee does not intend to take up permanent residence in Australia.

The employee has stated that the employee intends to return to live at the employee's property in overseas country 1 at the end of the employee's employment with the current employer.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 30

Fringe Benefits Tax Assessment Act 1986 Sub-section 136(1)

Reasons for decision

1. Section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) states:

30(1) [Provision of benefit]

Where:

(a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and

(b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:

(i) additional expenses (not being deductible expenses) incurred by the employee during a period; or

(ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period;

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;

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

30(2) [Benefit to offshore oil and gas rig workers]

...

2. The term 'place of residence' is defined in subsection 136(1) of the FBTAA as follows:

place of residence, in relation to a person, means:

(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.

3. Miscellaneous Taxation Ruling MT 2030, Fringe benefits tax: living-away-from-home allowance benefits, provides the following guidance in respect of living-away-from-home allowance benefits:

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.

13. Various decisions of Taxation Boards of Review relating to the former section 51A of the Income Tax Assessment Act 1936, which authorised deductions for 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.

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...Reference is made to the following decisions by way of illustration.

...

C International airline pilot

17. An allowance paid to the taxpayer to enable him to maintain his standard of living while on a 2 year posting to London was accepted by the Board of Review in this case - 12 CTBR (NS) Case 106 - as a living-away-from-home allowance. The Board found persuasive in concluding that the taxpayer was living away from his usual place of abode that the overseas appointment was of fixed maximum duration, that he would ordinarily have continued to live at his Australian home but for the posting and that he expected to return there to live at the end of the posting.

...

22. 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.

4. In the circumstances of this particular case it is noted that:

(a) The employee is a current employee of the employer.

(b) The employee is being paid an allowance by the current employer.

(c) The employee is being paid the above allowance by the current employer in respect of the employee's employment with the current employer.

(d) The current employer states that it is paying the above allowance to the employee on the basis that it is in the nature of compensation for either additional expenses (not being deductible expenses) incurred by the employee or additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which the employee is subject.

(e) The employee is working in Australia under the terms of a visa that is subject to a finite term (usually X years).

(f) The employee's employment with the current employer is for a finite term (expected to be no more than X years).

(g) The employee has retained significant assets and other continuing ties with overseas country 1.

(h) The employee had returned to overseas country 1 at the end of the employee's last overseas employment and prior to coming to Australia.

(i) The employee has stated that the employee does not intend to take up permanent residence in Australia.

(j) The employee has stated that the employee intends to return to overseas country 1 at the expiry of the employee's employment with the current employer.

5. It is considered, therefore, that in such overall circumstances it can be properly concluded that the above allowance being paid by the current employer to the employee is being paid, in whole or part as the case may be, 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 duties of employment with the current employer.

6. It is also considered that the circumstances under which the employee stayed in overseas country 2 and also the period that the employee spent in overseas country 2 does not alter the above view.

7. Consequently, the above allowance being paid to the employee will constitute a living-away-from-home allowance benefit under section 30 of the FBTAA.

Further issues for you to consider

1. Whether an allowance may constitute a living-away-from-home-allowance, for the purposes of section 30 of the FBTAA, is not only dependent on the reasons for the payment of the allowance but also, most importantly, the specific factual circumstances of the recipient at the time(s) that allowance is being paid.

2. If the taxable value of a living-away-from-home allowance fringe benefit is determined under subsection 31(a) of the FBTAA then to reduce the taxable value of the living-away-from-home allowance fringe benefit by the 'exempt accommodation component' and/or the 'exempt food component' a declaration must be provided by the employee to the employer setting out the employee's usual place of residence and actual place of residence during the period of the allowance. If the declaration is not obtained, the whole amount of the living-away-from-home allowance fringe benefit is taxable for fringe benefit tax purposes. The declaration must be in a form approved by the Commissioner.