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Ruling

Subject:

Question 1.

Is the employee required to change his usual place of residence; for the purposes of sections 58AA, 58B and 58C of the FBTAA?

Answer

Yes.

Question 2

If the answer to question 1 is yes, does section 58AA of the FBTAA apply in respect of payments made by the employer in respect of expenses the employee incurred on a relocation consultant?

Answer

Yes.

Question 3

If the answer to question 1 is yes, does section 58B of the FBTAA apply in respect of payments made by the employer in respect of expenses the employee incurred on the removal and storage of household effects?

Answer

Yes.

Question 4

If the answer to question 1 is yes, does section 58C of the FBTAA apply in respect of payments made by the employer in respect of the sale of the employee's home in Location A and acquisition of their new home?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2012

The scheme commences on:

1 April 2011.

Relevant facts and circumstances

The employer is proposing to recruit an employee who currently resides in Location A which is over 100 kilometres from Location B.

The employee currently works for another company on a Fly-in, Fly-out (FIFO) roster departing from the Airport at Location B and travelling to site. The position with the employer is not FIFO would require the employee to work in Location B and commute on a daily basis.

The employer is concerned that a daily commute from Location A to Location A is inconsistent with its safety ethos given the risks associated with fatigue, general well-being and work-life balance. As a result the employer will make it a requirement of accepted the position that the employee relocate to a safe and reasonable commuting distance.

The employee proposes to assist the relocation by either reimbursing or paying directly the following expenses related to relocation . All dealings in relation to the provisions of these benefits will be dealt with entirely on an arms-length basis.

Relocation consultancy fees

The employer will pay for up to 20 hours for professional relocation services. The employee will be paying the fees directly to the relocation consultant and they will obtain all documentary evidence before the declaration date.

Removal and storage of household effects

The employer will pay for the removal of household effects from Location A to Location B as well as pay for storage of these effects for a period of up to four weeks.

All removal and storage will be within 12 months of the date the employee will begin duties at the new place of employment. The employer will pay the storage provider directly and will obtain all documentary evidence before the declaration date.

Home sale and purchase expenses

The employer will pay expenses associated with selling of the home in Location A provided it is sold within 2 years from the day the employee commences work in Location B. In addition they will pay expenses associated with buying a new home in Location B provided it is purchased within 2 years from the day the commences work in Location B.

The employer will not reimburse any expenditure until the employee has sold the home in Location A nor will they reimburse any expenditure until the employee has purchased a home in Location B.

The list of approved expenses that the employer will reimburse was provided.

All documentary evidence of the employee's expenditure will be obtained before the declaration date.

Relevant legislative provisions

FBTAA section 20

FBTAA section 58AA

FBTAA section 58B

FBTAA section 58C

Reasons for decision

Question 1

Is the employee required to change his usual place of residence; for the purposes of sections 58AA, 58B and 58C of the FBTAA?

Summary

The employee is required to change the usual place of residence to perform the duties of employment as the changing of residence is a condition of accepting the position.

Detailed reasoning

Sections 58AA, 58B and 58C of the FBTAA all related to the relocation of an employee and to apply an employee has to be required to live-away-from-home to perform the duties of their employment or be required to change their usual place of residence to perform the duties of their employment. In this case we have been asked to look at is whether the employee will be required to change the usual place of residence to perform the duties of employment.

To begin with the employee is changing employers so this will result in a change of employment premises. With the old employer the employee was employed in a FIFO position where the employee travelled from Location A to Location B then would fly to the work location staying on site then returning on days off.

The new position is based in Location B and will require a daily commute between home and work.

The employer does not want the employee to commute between Location A and Location B on a daily basis and will made it a condition that if the employee accepts the position they must relocate to Location B.

Therefore if the employee accepts the position there will be a requirement to change the usual place of residence to perform the duties of employment.

In addition there is no evidence to suggest that the employee would have relocated if they had not accepted the position so it is accepted that the sole reason for relocating is the change in employment.

Question 2

Does section 58AA of the FBTAA apply in respect of payments made by the employer in respect of expenses the employee incurred on a relocation consultant?

Summary

Section 58AA of the FBTAA will apply in respect of expenses incurred by engaging a relocation consultant.

Detailed reasoning

Section 58AA of the FBTAA provides a fringe benefits tax (FBT) exemption for costs associated with the engagement of the relocation consultant where an employee is required solely to change their usual place of residence to perform the duties of their employment.

For the exemption to apply the following conditions must also be satisfied:

· the engagement of the relocation consultant must be an expense payment or residual benefit

· the engagement of the relocation consultant must be in respect of the employment of your employee

· the benefit is provided under an arm's length arrangement

· if the benefit is an expense payment benefit - documentary evidence is provided to you before the date your employee declarations are due.

In this case the employer will pay for up to 20 hours for professional relocation services, will pay the fees directly to the relocation consultant and will ensure they obtain all documentary evidence before the declaration date.

Based on this information it is accepted that the required conditions will be satisfied and section 58AA will apply to the cost of engaging a relocation consultant.

However it should be noted that the expenses themselves have not been determined. This exemption does not cover expenses a relocation consultant pays on behalf of an employee or their family member, it only covers the consultant's fees themselves.

Question 3

Does section 58B of the FBTAA apply in respect of payments made by the employer in respect of expenses the employee incurred on the removal and storage of household effects?

Summary

Section 58B of the FBTAA will apply for the costs and removal of the employee's household effects from Location A to Location B.

Detailed reasoning

Section 58B of the FBTAA provides a FBT exemption for costs associated with the removal and storage of household effects where an employee is required solely to change their usual place of residence to perform the duties of their employment.

For the exemption to apply the removal must take place, or the storage commences, not more than 12 months after the employee begins employment-related duties at the new location (which in this case will be date the employee commences work for the employer in Location B).

The exemption includes the costs of removal, storage, packing, unpacking and insurance of household effects (including pets) kept primarily for the personal use of the employee or family.

The employer will pay for the removal of household effects from Location A to Location B as well as pay for storage of these effects for a period of up to four weeks.

All removal and storage will be within 12 months of the date the employee will begin the duties at the new place of employment. The employer will pay the storage provider directly and will obtain all documentary evidence before the declaration date.

Therefore the conditions of section 58B of the FBTAA will apply to the costs associated with the removal and storage of the household effects from Location A to Location B.

Question 4

Does section 58C of the FBTAA apply in respect of payments made by the employer in respect of the sale of the employee's home in Location A and acquisition of their new home?

Summary

In respect of the payment of the expenses listed in the facts of this ruling that relate to the sale if the home in Location A and the purchase of the new home in Location B, section 58C of the FBTAA will apply to exempt these payments.

Detailed reasoning

Section 58C of the FBTAA provides a FBT exemption for costs that are incidental to the sale and/or purchase of a home where an employee is required solely to change their usual place of residence to perform the duties of their employment.

The exemption is split into two parts the first is to do with the sale of the home at the old locality and the second part is to do with the purchase of a home at the new locality.

Costs incidental to the sale and/or purchase of a house are stamp duty, advertising, legal fees, agent commission, discharge of a mortgage, expenses of borrowing or any similar capital expenses.

In addition Costs associated with the connection or reconnection of gas, electricity and telephone services to the new home are also exempt.

The exemption applies to the home that is sold only if:

· the sale is made solely because the employee changed their usual place of residence in order to carry out employment-related duties

· the house was owned when you notified the employee of the change to the new locality

· the house was the employee's usual place of residence, and

· the sale contract was made within two years of commencing duty at the new locality.

The exemption applies to the home that is purchased only if:

· the employee owned a home at the former locality

· the purchase was made solely because of the relocation to another job locality

· the new home was occupied as the employee's usual place of residence, and

· the contract to purchase was made within four years of commencing duty at the new location.

Several other requirements must be satisfied for the exemption to apply, namely:

· the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption

· where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure

· in the case of telephone connections, the employee must have had a telephone connected at the former residence.

In this case the employer will not reimburse any expenditure until the employee has sold the home in Location A nor will they reimburse any expenditure until the employee has purchased a home in Location B.

The list of approved expenses that the employer will reimburse are all expenses covered by this exemption : In addition all documentary evidence of the employee's expenditure will be obtained before the declaration date.

Therefore the conditions of this exemption as they relate to both the home in Location A and the new home in Location B will be satisfied and the exemption will apply.