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Ruling

Subject: Living-away-from-home

Question

Will the employee of the employer be living away from their usual place of residence for the purpose of applying section 30 of the Fringe Benefits Tax Assessment Act 1986 following the grant of a second temporary subclass 457 visa?

Answer

Yes

This ruling applies for the following periods:

1 April 2011 to 31 March 2012

1 April 2012 to 31 March 2013

1 April 2013 to 31 March 2014

1 April 2014 to 31 March 2015

1 April 2015 to 31 March 2016

Relevant facts and circumstances

The employee is employed by an employer which is a member of a multinational group of companies.

The employee arrived in Australia on a temporary subclass 457 visa on a temporary assignment from a foreign country.

The employer pays the employee a living-away-from-home allowance as part of their renumeration package.

The employee was employed by a company within the group in their home country before accepting the temporary appointment.

Due to a change in business requirements, the employer wishes to extend the employee's initial assignment by a further period of up to four years.

The employer will need to obtain a second subclass 457 visa for the employee upon expiry of their original 457 visa.

The duration of the employee's temporary role in Australia has been extended as the scope of their assignment has changed from that originally envisaged.

The employer will issue a new assignment contract to the employee in view of the extended assignment. The new contract will state an expected end date for their role in Australia, and will contain a clause stating that the employer will be responsible for the costs of relocation to their home country.

The employee currently resides in Australia with their spouse and young child. They have no investments in Australia, with the exception of a bank account, and lives in rented accommodation. They have no family ties to Australia other than their spouse and child who live with them.

Although the employee did not own property in their home country it is their intention to return home following the conclusion of their Australian assignment.

The employee and their spouse are citizens of their home country.

They have the majority of their investments in their home country.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 30 and

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

Reasons for decision

Summary

The employee will be living away from their usual place of residence for the purposes of section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) on being granted a second temporary subclass 457 visa.

Detailed reasoning

Section 30 of the FBTAA sets out the circumstances in which an allowance is a living-away-from-home allowance (LAFHA).

A LAFHA is an allowance paid by an employer to an employee to compensate for additional expenses incurred and any disadvantages suffered because the employee is required to live away from their usual place of residence in order to perform their employment related duties.

Additional expenses do not include expenses the employee would be entitled to claim as an income tax deduction.

In determining whether the additional expenses arise because of a requirement to live away from the usual place of residence it is necessary to identify the usual place of residence.

The FBTAA does not define 'usual place of residence'. However, subsection 136(1) defines a 'place of residence' to mean:

· a place at which the person resides; or

· a place at which the person has sleeping accommodation;

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

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 of MT 2030 refer to various decisions of Taxation Boards of Review relating to the former 51A of the 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.

Paragraph 20 of MT 2030 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.

As an example of the application of this general rule paragraph 22 of MT 2030 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.

The following facts indicate that the employee's usual place of residence is in their country of origin:

They are a citizen of that country.

Their permanent employment position is in that country.

They has been in Australia on a temporary 457 visa for a period of four years. If granted a second 457 visa, it is still their intention to return to that country at the end of their appointment.

The majority of their investments are in that country.

Therefore, it is accepted that the employee will be required to live away from their usual place of residence in order to perform their duties of employment if granted a second temporary subclass 457 visa. Hence the employee will be living away from their usual place of residence for the purpose of applying section 30 of the FBTAA.