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Ruling

Subject: Exempt accommodation expense payment

Question 1

Does the employee have a usual place of residence in A whilst being seconded to B?

Answer

Yes

Question 2

Will the reimbursement of the employee's rental expense for the property occupied in B be an exempt benefit under section 21 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

1 April 2012 to 31 March 2015.

The scheme commenced in:

2012 Fringe benefits tax year

Relevant facts and circumstances

This ruling is based on the facts in the description of the scheme that is set out below if your circumstances are materially different from these facts, the ruling has no effect and you cannot rely upon it. The fact sheet has more information about relying on your private ruling.

The employee is originally from B.

The employee moved from B to A and resided in A before he was seconded to D for a three-year term.

The employee has made A his home.

The employee have properties in A.

The employee regards one of his properties to be his home in A.

The employee's household goods were put into storage. All properties are rented out.

The employee applied for the job in B and was successful in attaining that position.

The contract of secondment to B states the secondment is for three years subject to extension or reduction of time away from A.

The second posting to B will be for a three year period.

The employee total remuneration package is worth $XX per annum and includes both cash salary and non-cash benefits, in the form of fringe benefits.

The employer will reimburse the employee $X per week for additional rental expense incurred by the employee on secondment to B

A living away from home declaration will be provided to the employer before the employer lodges his FBT return.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 21

Fringe Benefits Tax Assessment Act 1986 Section 30

Reasons for decision

Question 1

Summary

The employee's 'usual place of residence' is in A whilst he was posted to B.

Detailed reasoning

For the purposes of working out whether an employee is living away from his home, the employer requires the employee to live away from his 'usual place of residence', so that the employee can perform his employment duties for a temporary period, with the intention of returning to his usual place of residence at the end of his temporary move.

Amongst other criteria, the employee must provide a LAFHA declaration to the employer stating that he is required to live away from his usual place of residence (address provided) to perform employment duties for a certain fixed period at the actual place of residence (new address where the employee currently resides).

The employee lives in A and his employer sent him to D for his first secondment.

The employee acquired a property whilst residing in A. The employer sent the employee to D for a three-year term. The employee's household goods were put away in storage in A.

He acquired another property in A whilst in D and the employee regards this property to be his home when he returned to A.

'Place of residence' is defined in subsection 136(1) of the FBTAA, means where a person eats and sleeps, whether on a permanent or temporary basis.

The normal meaning of 'usual' as an adjective, generally means 'most often', therefore 'usual place of residence' is where a person resides most of the time.

Whilst he was in D all properties in A were rented out. The employee has retained a continuity of association with A, including his permanent employment position.

In these circumstances, the employee's usual place of residence is A, because if he did not have to go to D or to B, he would have continued to reside and work in A, as that is where the employee lived for six years prior to his first secondment to D.

The employee has established his home to be in A. He was required by his employer to move to another location.

He returned to A from D for a short period before getting a second posting to B by applying for a position in B. The employer encouraged him to apply and he was successful in getting this position.

The employee intends to return to A on completion of his temporary assignment to B. This will be reflected in the second LAFH declaration provided by the employee and given to the employer, by the date of lodgement of the employer's FBT return in the next FBT year.

The LAFH declaration would allow the employer to treat the benefit as exempt under section 21 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), as long as all the criteria are fulfilled.

Therefore, A is the employee's usual place of residence and he will be living away from his usual place of residence.

Question 2

Summary

All the criteria for section 21 of the FBTAA has been fulfilled, therefore the reimbursement of the employee's accommodation expense, will be an exempt benefit.

Detailed reasoning

A reimbursement of an employee's expenditure is an expense payment benefit under Section 20 of the FBTAA. That is the benefit to the employee.

Section 21 of the FBTAA has 5 conditions that have to be fulfilled before the accommodation expense being reimbursed will be an exempt benefit.

The conditions under section 21 of the FBTAA are addressed below:

Expense payment benefit

The reimbursement of the employee's additional accommodation expenditure in B will be an expense payment benefit as outlined in section 20 of the FBTAA. The expense payment(s) benefits will occur in each FBT year that runs from 1 April to 31 March. The employer currently employs the employee and the expense payment benefits(s) have arisen because of the employee's employment. This criterion is satisfied.

Expenditure is in respect of eligible family members

The employee incurs additional accommodation expenditure. This cost is to accommodate the employee in B. 'Eligible family members' are defined in subsection 136(1) of the FBTAA, which includes, the employee sent to another location, his spouse and child, as long as the spouse (and/or child) reside with him at the new location and they lived with the employee at the employee's usual place of residence. This criterion is satisfied.

Accommodation is not provided while employee travelling on business.

The employer is sending the employee to B for three years. In accordance with the Commissioner's interpretation on LAFHA as outlined in MT 2030 Fringe Benefits Tax: living-away-from-home allowance benefits, a distinction is made between travelling allowance and LAFHA. If the period away from home is less than 21 days it will be concluded that the allowance is a travelling allowance.

A travelling allowance is paid because the employee is travelling in the course of performing his or her job and is included in his or her assessable income. Generally, where an employee is travelling on business on behalf of an employer, the expenses of travel are incidental to the proper carrying out of the employment function and do not have the character of being private or domestic expenses. The employee does not change job locations but simply travels in order to carry out the requirements of the job. Generally, family will not travel with him.

Alternatively, where the employer pays an allowance, because the employer requires his employee to move and take up temporary residence at a new locality, away from his usual place of residence, in order to carry out employment duties at the new workplace, the allowance will be a living away from home allowance. This is subject to the FBT legislation and the allowance is not included in the employee's assessable income. There is a change of job location and an actual change of residence to a place at or near that location.

The employee is sent away for a short time for at least three years and therefore the employee has to live away from his usual place of residence to perform employment duties and is not travelling in the course of performing the duties of the employment. This criterion is satisfied.

Employee required by employer to live away from home.

The employee's usual place of residence is not B but resides in A, where the employee has his residence. The employee was required by his employer to move from A to B. He will be in B for a fixed term to carry out employment duties with the intention of returning to A after the secondment period. The employee is incurring additional accommodation expense in B, which the employer will reimburse. Therefore, the employee is living away from home and the temporary accommodation in B was required solely for that purpose. This criterion is satisfied.

Declaration re: usual place of residence

The employee will give the employer a declaration (in the approved form) before the date of lodgement of the employer's FBT return. The declaration includes the employee's address of his 'usual place of residence' and the address of where he actually resides, during the period the employee is living away from his 'usual place of residence' (dates). This criterion is satisfied.

Conclusion

All the conditions in section 21 of the FBTAA have been satisfied.

The employer can reimburse the employee for the additional accommodation costs incurred by the employee during the FBT year, because he had to live away from his usual place of residence for a temporary period.