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Ruling

Subject: Living away from home allowance

Question 1

Will the Commissioner treat the allowance paid by the employer to the employee as a living-away-from-home allowance pursuant to section 30 of the Fringe Benefits Tax Assessment Act 1986?

Answer: Yes

Question 2

If the answer to Question 1 is yes, will the taxable value of the allowance be reduced to nil pursuant to section 31 of the Fringe Benefits Tax Assessment Act 1986?

Answer: Yes

This ruling applies for the following periods:

1 July 2011 to 30 June 2012

The scheme commences on:

24 October 2011

Relevant facts and circumstances

The employer has offices spread throughout Australia and has the flexibility to allow employees to work from their homes especially in the state that employees' usual place of residences are located.

Your employee is required to live away from his/her usual place of residence in order to take up the employment. You offer the employee to temporarily move from his/her usual place of residence to another state where your Head Office is located.

The employee was not previously employed by the organisation before being appointed to this temporary fixed term appointment.

The employee will be paid an allowance to compensate for additional expense of the rental accommodation incurred by the employee during the period.

There is no salary sacrifice agreement in relation to the living-away-from-home-allowance (LAFHA) with the employee.

The employee provided a living-away-from-home declaration to the employer stating that his/her usual place of residence. The employer retains the declarations with its fringe benefits tax records.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 21

Fringe Benefits Tax Assessment Act 1986 Section 30

Fringe Benefits Tax Assessment Act 1986 Section 31

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1), and

Income Tax Assessment Act 1997 Subsection 8-1(2)

Reasons for decision

Question 1

The allowance paid to the employee is a LAFHA benefits under section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as it can be concluded that it has been paid to the employee to compensate her for additional accommodation expenses he/she has incurred because he/she is required to live away from his/her usual place of residence in order to perform his/her duties of employment.

The allowance paid to the employee will be a LAFHA if it is reasonable to conclude that the allowance that he/she is being paid is in the nature of compensation for additional expenses incurred because the employee is required to live away from his/her usual place of residence in order to perform the duties of his/her employment.

The allowance currently being paid to the employee is to cover his/her addition expenses for accommodation whilst he/she is employed. He/She is required to live in another state in order to undertake his/her duties of employment. Therefore, the location of thier usual place of residence must be determined.

Employees who move in order to undertake a position of limited duration and who intend to return to the old locality at the end of that employment will generally be considered to be living away from their usual place of residence.

It is considered that the allowance is being paid to compensate for additional (non-deductible) expenses incurred by the employee because the employee is required to live away from the employee's usual place of residence in order to perform the duties of his/her employment.

These additional expenses will be non-deductible pursuant to paragraph 8-1(2) of the Income Tax Assessment Act 1997 on the basis that they are of a private or domestic nature.

Consequently the allowance is a LAFHA for the purpose of subsection 30(1) of the FBTAA.

Question 2

Subsection 31(a) of the FBTAA allows the taxable value of a LAFHA fringe benefit to be reduced by:

o any exempt accommodation component and

o any exempt food component

It is only necessary to consider the exempt accommodation component as the information that you have provided indicates that the proposed allowance will be paid exclusively in respect of accommodation.

The exempt accommodation component is so much of the allowance for additional expenses that might reasonably be expected to be incurred by the employee in respect of accommodation.

According to "Fringe Benefits Tax: A Guide for Employers" that there are no strict guidelines concerning how the amount of reasonable accommodation costs should be calculated. Factors that can be taken into account include:

· whether the employee is accompanied by family members whilst living away from home;

· the employees current living standards; and

· the position held by the employee in the workplace.

The employee's level of position and the amount of allowance being paid represents the accommodation costs in the area.

In these particular circumstances the allowance you are paying to the employee in respect of accommodation is reasonable. The employee provided LAFHA declarations to the employer by the relevant declaration dates. The allowance you are paying the employee's accommodation expenses is an exempt benefit under section 21 of the FBTAA.

Therefore, you will be able to reduce the taxable value of the allowance to nil.