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Ruling

Subject: Fringe Benefits Tax (FBT)

Employees required to change their usual place of residence in order to perform duties of employment.

Question 1

Will the requirements of paragraph 143A(c)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) be satisfied in respect of the provision of transport interstate of an employee who has been promoted to an interstate position?

Answer

Yes

Question 2

Will the requirements of subparagraph 58B(1)(b)(iii) of the FBTAA be satisfied in respect of the removal and storage of the household effects of an employee who chooses to change his Home Base to another State on his acceptance of a promotion interstate?

Answer

Yes

Question 3

Will the requirements of paragraph 58C(1)(b) of the FBTAA be satisfied in respect of the sale of the ownership of residence "A" of an employee who chooses to change his Home Base from "A" to "B" on his acceptance of a promotion to a position in "B"?

Answer

Yes

Question 4

Will the requirements of paragraph 58C(3)(b) of the FBTAA be satisfied in respect the purchase of the ownership of a "B" residence by an employee who chooses to change his Home Base from "A" to "B" on his acceptance of a promotion to a position in "B"?

Answer

Yes

Question 5

Will the requirements of paragraph 61C(1)(b) of the FBTAA be satisfied in respect of temporary accommodation in "B" occupied by an employee who chooses to change his Home Base from "A" to "B" on his acceptance of a promotion to a position in "B"?

Answer

Yes

Question 6

Will the requirements of paragraph 61C(1)(b) of the FBTAA be satisfied in respect of temporary accommodation in "B" occupied by an employee who chooses to change his Home Base from "A" to "B" on his acceptance of a promotion to a position in "B"?

Answer

Yes

This ruling applies for the following period

1 April 2012 to 31 March 2013

The scheme commenced on

1 April 2012

Relevant facts

The employer has entered into an Enterprise Bargaining Agreement, which governs the terms of employment for the employer's employees.

Under the EBA:

· the employer will not direct employees to transfer to another home base.

· The employer may, on occasion, offer reasonable costs to encourage employees to transfer bases.

· At times, the employer may need an employee to relocate from their home-base on a temporary transfer of not more than x days.

· An employee, when transferring from one home base to another at their request, will bear all expenses associated with that transfer.

The 'Home Base' is the base to which an employee is permanently assigned and will be nominated in writing by the employer. The Home base of certain employees is a principal factor in the EBA.

The Home Base is referenced in the EBA with regard to when travelling allowances are paid, when transport and other benefits are provided, the commencement of duties, the location of the employee for standby duties, the state based legislation impacting leave and other work entitlements and other various elements of the EBA.

An employee was recently successful in gaining promotion. The relevant promotion position has a Home Base in City B.

The employee's existing Home Base is in City A.

The location of the employee's place of residence or domicile is not specified or proclaimed by the employer, however, in most cases it can be expected that the employee will reside at or near the employee's Home Base.

The employee owns a home in City A which is the employee's usual place of residence.

The employee will be required to permanently change the employee's Home Base from City A to City B in order to take up the position on promotion.

The employee will sell the employee's home in City A on the employee's relocation to City B.

The employee will purchase the ownership of a home in City B as the employee's usual place of residence on the employee's relocation to City B.

The employee will occupy temporary accommodation in City A and also in City B sometime during the period of relocation from City A to City B.

The employer and the employee propose to enter into a salary sacrifice arrangement (SSA) whereby the employer will reimburse the costs incurred by the employee in respect of the following:

1. Travel costs to City B - travel costs for employee and family members including accommodation and meals to break the journey, and accident insurance.

2. Removal and storage of household goods -removal, storage, packing and unpacking and insurance costs.

3. Costs of sale and acquisition of new premises - costs of sale of employee's residence in City A and costs associated with acquiring a new home (stamp duty and legal costs) in City B and cost of connecting gas, electricity and telephone in City B.

4. Temporary accommodation - in both City A and City B.

Any reimbursement to the employee made by the employer under the terms of the above SSA will meet the requirements of section 20 of the Fringe Benefits Tax Assessment Act 1986 in relation to expense payment benefits.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 58B

Fringe Benefits Tax Assessment Act 1986 Subparagraph 58B(1)(a)(i)

Fringe Benefits Tax Assessment Act 1986 Subparagraph 58B(1)(b)(iii)

Fringe Benefits Tax Assessment Act 1986 Section 58C

Fringe Benefits Tax Assessment Act 1986 Sub-subparagraph 58C(1)(a)(i)(A)

Fringe Benefits Tax Assessment Act 1986 Paragraph 58C(1)(b)

Fringe Benefits Tax Assessment Act 1986 Subparagraph 58C(2)(a)(i)

Fringe Benefits Tax Assessment Act 1986 Subsection 58C(3)

Fringe Benefits Tax Assessment Act 1986 Sub-subparagraph 58C(3)(a)(i)(A)

Fringe Benefits Tax Assessment Act 1986 Paragraph 58C(3)(b)

Fringe Benefits Tax Assessment Act 1986 Subparagraph 58C(3)(e)(i)

Fringe Benefits Tax Assessment Act 1986 Section 58F

Fringe Benefits Tax Assessment Act 1986 Section 61C

Fringe Benefits Tax Assessment Act 1986 Sub-subparagraph 61C(1)(a)(i)(A)

Fringe Benefits Tax Assessment Act 1986 Paragraph 61C(1)(b)

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Subparagraph 141(2)(a)(i)

Fringe Benefits Tax Assessment Act 1986 Section 143A

Fringe Benefits Tax Assessment Act 1986 Subparagraph 143A(a)(ii)

Fringe Benefits Tax Assessment Act 1986 Paragraph 143A(c)(iii)

Reasons for decision

Question 1

Detailed reasoning

1. Section 143A of the FBTAA sets out what is meant by the term 'relocation transport' for the purposes of the exemption of various benefits in respect of 'relocation transport' afforded under section 58F of the FBTAA. Section 143A of the FBTAA states:

143A RELOCATION TRANSPORT

For the purposes of this Act, where:

(a) any of the following benefits is provided in, or in respect of, a year of tax to an employee, or to an associate of the employee, in respect of the employment of the employee:

(i) ...

(ii) an expense payment benefit where the recipients expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport;

(iii) ...

(iv) ...

(b) ...

(c) the transport is required solely because:

(i) ...

(ii) ...

(iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment;

2. Neither of the terms 'required' or 'solely' are defined in the FBTAA so both those terms will take their natural meaning in the context in which they are used. The Macquarie Dictionary, Multimedia Version 5.0.0.0, 01/10/01, provides the following definitions:

require

(verb required, requiring)

verb (t)

1. to have need of; need: he requires medical care.

2. ...

3. ...

4. to impose need or occasion for; make necessary or indispensable: the work required infinite patience

5. ...

6. to place under an obligation or necessity.

solely

adverb

1. as the only one or ones: solely responsible.

3. Paragraph 143A(c)(iii) of the FBTAA examines (as relevant here) whether the necessity for the transport arises solely because the employee is required to change the employee's usual place of residence in order to perform employment duties.

4. It is considered that paragraph 143A(c)(iii) of the FBTAA does not require an examination of the degree of choice that the employee may have had in accepting to perform the relevant employment duties.

5. It is also considered that paragraph 143A(c)(iii) of the FBTAA, conversely, does not require an examination of the extent of any incentives that an employer may provide for the employee to accept to perform the relevant employment duties.

6. Therefore, it is further considered that paragraph 143A(c)(iii) of the FBTAA examines only whether the following conditions are satisfied:

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment; and

(b) Is the sole reason the transport is required is because the employee has to change the employee's usual place of residence.

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment?

7. 'Place of residence' is defined in subsection 136(1) of the FBTAA as including a place where a person resides on a permanent or temporary basis (and whether or not on a shared basis).

8. There is no definition in the FBTAA of the expression 'usual place of residence', however, it considered that the expression should be taken as referring to the customary or habitual place of residence of the relevant individual. Accordingly, an individual can only have one usual place of residence at any given time. It is also considered that it is expected that, generally, an employee's usual place of residence will be near where that employee is permanently employed.

9. Albeit, paragraph 143A(c)(iii) of the FBTAA examines whether it is 'required' that the employee changes the employee's usual place of residence, it is considered that the term 'required' used in this context does not mean that the change of usual place of residence necessarily be one that is 'compulsory' but, rather, that the change be one that is 'necessary' in the given circumstances.

10. There may have been no absolute obligation for the employee, in this case, to change the employee's usual place of residence from City A to City B. Nonetheless, given that the employee's 'Home Base' on accepting the promotion is now in City B, it is accepted that the overriding practical considerations necessary to perform the new employment duties make it necessary for the employee to change the employee's usual place of residence.

11. This condition is satisfied.

(b) Is the transport required solely because the employee needs to change the employee's usual place of residence?

12. In this case the relevant expense payment benefits arise under fulfilment of the terms of the relevant SSA between the employee and employer.

13. However, paragraph 143A(c)(iii) of the FBTAA does not examine the reasons why the benefit arising from the reimbursement of the relevant transport costs is being provided but rather why the underlying transport itself is required.

14. It has been determined above, at paragraph 10, that the employee needs to change the employee's usual place of residence in order to perform the employee's duties of employment from City B.

15. Therefore, in the absence of any evidence to the contrary, it is accepted that the transport in this particular case is required solely because the employee needs to change the employee's usual place of residence in order to take up the position in City B.

16. This condition is satisfied.

Conclusion on whether the requirements of paragraph 143A(c)(iii) of the FBTAA are satisfied

17. All the necessary requirements of paragraph 143A(c)(iii) of the FBTAA are satisfied in this particular case.

Question 2

Detailed reasoning

1. Section 58B of the FBTAA exempts benefits in relation to the removal and storage of household effects as a result of relocation. Section 58B of the FBTAA states:

SECTION 58B EXEMPT BENEFITS - REMOVALS AND STORAGE OF HOUSEHOLD EFFECTS AS A RESULT OF RELOCATION

58B(1) [Conditions for exemption]

Where:

(a) either of the following benefits is provided in, or in respect of, a year of tax in respect of the employment of an employee:

(i) an expense payment benefit where the recipients expenditure is in respect of the removal or storage of household effects of the employee;

(ii) ...

(b) the removal or storage is required solely because:

(i) ...

(ii) ...

(iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment;

2. Therefore, subparagraph 58B(1)(b)(iii) of the FBTAA examines (as relevant here) whether the necessity for the removal or storage arises solely because the employee is required to relocate the employee's usual place of residence in order to perform employment duties.

3. It is considered that subparagraph 58B(1)(b)(iii) of the FBTAA does not require an examination of the degree of choice that the employee may have had in accepting to perform the relevant employment duties.

4. It is also considered that subparagraph 58B(1)(b)(iii) of the FBTAA, conversely, does not require an examination of the extent of any incentives that an employer may provide for the employee to accept to perform the relevant employment duties.

5. Therefore, it is further considered that subparagraph 58B(1)(b)(iii) of the FBTAA examines only whether the following conditions are satisfied:

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment; and

(b) Is the sole reason the removal or storage is required is because the employee has to change the employee's usual place of residence.

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment?

6. For similar reasons as used above, at paragraph 10 of Question 1, it is concluded that overriding practical considerations makes it necessary for the employee to change the employee's usual place of residence from City A to City B.

7. This condition is satisfied.

(b) Is the removal or storage required solely because the employee needs to change the employee's usual place of residence?

8. In this case the relevant expense payment benefits will arise under fulfilment of the terms of the relevant SSA between the employee and employer.

9. However, subparagraph 58B(1)(b)(iii) of the FBTAA does not examine the reasons why the benefit arising from the reimbursement of the removal or storage costs is being provided but rather why the underlying removal or storage itself is required.

10. It has been determined above, at paragraph 6, that the employee needs to change the employee's usual place of residence in order to perform the employee's duties of employment from City B.

11. Therefore, in the absence of any evidence to the contrary, it is accepted that the removal or storage in this particular case is required solely because the employee needs to change the employee's usual place of residence.

12. This condition is satisfied.

Conclusion on whether the requirements of subparagraph 58B(1)(b)(iii) of the FBTAA are satisfied

13. All the necessary requirements of subparagraph 58B(1)(b)(iii) of the FBTAA are satisfied in this particular case.

Question 3

Detailed reasoning

1. Section 58C of the FBTAA exempts certain expense payment benefits and residual benefits in relation to the sale or acquisition of a dwelling as a result of relocation. Subsection 58C(1) of the FBTAA states:

SECTION 58C EXEMPT BENEFITS - SALE OR ACQUISITION OF DWELLING AS A RESULT OF RELOCATION

58C(1) [Pre-condition for application of exemption]

Where:

(a) during a particular period (in this subsection called the ``former home holding period''), an employee of an employer, or an associate of an employee of an employer, holds:

(i) a prescribed interest in land on which:

(A) there is a building constituting or containing a dwelling;

(B) ...

(ii) ...

(iii) ...

(b) the employee or associate sells, or proposes to sell, the interest or right solely because the employee is required to change his or her usual place of residence in order to perform the duties of his or her employment;

58C(2) [Sale of property]

Where:

(a) either of the following benefits is provided in respect of that employment of the employee in, or in respect of, a year of tax:

(i) an expense payment benefit where the recipients expenditure is incidental to the sale of that interest or right;

(ii) ...

2. Subparagraph 141(2)(a)(i) of the FBTAA states that a 'prescribed interest' includes the circumstances where 'a person acquires, holds or held an estate in fee simple in land or a stratum unit or 2 or more persons acquire, hold or held such an estate in land or in a stratum unit as joint tenants or tenants in common'.

3. Therefore, paragraph 58C(1)(b) of the FBTAA examines (as relevant here) whether the necessity for the sale of the interest arises solely because the employee is required to relocate the employee's usual place of residence in order to perform employment duties.

4. It is considered that paragraph 58C(1)(b) of the FBTAA does not require an examination of the degree of choice that the employee may have had in accepting to perform the relevant employment duties.

5. It is also considered that paragraph 58C(1)(b) of the FBTAA, conversely, does not require an examination of the extent of any incentives that an employer may provide for the employee to accept to perform the relevant employment duties.

6. Therefore, it is further considered that paragraph 58C(1)(b) of the FBTAA examines only whether the following conditions are satisfied:

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment; and

(b) Is the sole reason the sale of the interest is required is because the employee has to change the employee's usual place of residence.

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment?

7. For similar reasons as used above, at paragraph 10 of Question 1, it is concluded that overriding practical considerations makes it necessary for the employee to change the employee's usual place of residence from City A to City B.

8. This condition is satisfied.

(b) Is the sale of the interest required solely because the employee needs to change the employee's usual place of residence?

9. In this case the relevant expense payment benefits will arise under fulfilment of the terms of the relevant SSA between the employee and employer.

10. However, paragraph 58C(1)(b) of the FBTAA does not examine the reasons why the benefit arising from the reimbursement of relevant costs in respect of the sale of the interest is being provided but rather why the underlying sale of the interest itself is required.

11. It has been determined above, at paragraph 7, that the employee needs to change the employee's usual place of residence in order to perform the employee's duties of employment from City B.

12. Therefore, in the absence of any evidence to the contrary, it is accepted that the sale of the interest in this particular case is required solely because the employee needs to change the employee's usual place of residence.

13. This condition is satisfied.

Conclusion on whether the requirements of paragraph 58C(1)(b) of the FBTAA are satisfied

14. All the necessary requirements of paragraph 58C(1)(b) of the FBTAA are satisfied in this particular case.

Question 4

Detailed reasoning

1. As stated above, at paragraph 1 of Question 3, section 58C of the FBTAA exempts certain expense payment benefits and residual benefits in relation to the sale or acquisition of a dwelling as a result of relocation. Subsection 58C(3) of the FBTAA states:

58C(3) [Acquisition of property]

Where:

(a) at a particular time, the employee or an associate of the employee acquires:

(i) a prescribed interest in land on which:

(A) there is a building constituting or containing another dwelling;

(B) ...

(ii) ...

(iii) ...

(b) the employee or associate acquires the interest or right solely because the employee is required to change his or her usual place of residence in order to perform the duties of that employment at the employee's new place of employment;

(c) ...

(ca) ...

(d) ...

(e) any of the following benefits is provided in respect of that employment of the employee in, or in respect of, a year of tax:

(i) an expense payment benefit where the recipients expenditure is incidental to the acquisition of that interest or right;

(ii) ...

2. Therefore, paragraph 58C(3)(b) of the FBTAA examines (as relevant here) whether the necessity for the acquisition of the interest arises solely because the employee is required to relocate the employee's usual place of residence in order to perform employment duties.

3. It is considered that paragraph 58C(3)(b) of the FBTAA does not require an examination of the degree of choice that the employee may have had in accepting to perform the relevant employment duties.

4. It is also considered that paragraph 58C(3)(b) of the FBTAA, conversely, does not require an examination of the extent of any incentives that an employer may provide for the employee to accept to perform the relevant employment duties.

5. Therefore, it is further considered that paragraph 58C(3)(b) of the FBTAA examines only whether the following conditions are satisfied:

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment; and

(b) Is the sole reason the acquisition of the interest is required is because the employee has to change the employee's usual place of residence.

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment?

6. For similar reasons as used above, at paragraph 10 of Question 1, it is concluded that overriding practical considerations makes it necessary for the employee to change the employee's usual place of residence from City A to City B.

7. This condition is satisfied.

(b) Is the acquisition of the interest required solely because the employee needs to change the employee's usual place of residence?

8. In this case the relevant expense payment benefits will arise under fulfilment of the terms of the relevant SSA between the employee and employer.

9. However, paragraph 58C(3)(b) of the FBTAA does not examine the reasons why the benefit arising from the reimbursement of the relevant costs in respect of the acquisition of the interest is being provided but rather why the underlying acquisition of the interest itself is required.

10. It has been determined above, at paragraph 6, that the employee needs to change the employee's usual place of residence in order to perform the employee's duties of employment from City B.

11. Therefore, in the absence of any evidence to the contrary, it is accepted that the acquisition of the interest in this particular case is required solely because the employee needs to change the employee's usual place of residence.

12. This condition is satisfied.

Conclusion on whether the requirements of paragraph 58C(3)(b) of the FBTAA are satisfied

13. All the necessary requirements of paragraph 58C(3)(b) of the FBTAA are satisfied in this particular case.

Question 5

Detailed reasoning

1. Section 61C of the FBTAA provides for the reduction of the taxable values of various expense payment fringe benefits and residual fringe benefits in respect of temporary accommodation relating to relocation. Section 61C of the FBTAA states:

SECTION 61C REDUCTION OF TAXABLE VALUE - TEMPORARY ACCOMMODATION RELATING TO RELOCATION

61C(1) [Conditions for application of reduction]

Where:

(a) any of the following fringe benefits is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer:

(i) an expense payment fringe benefit where the recipients expenditure is in respect of:

(A) a lease or licence in respect of a unit of accommodation occupied or used for the temporary accommodation of family members; or

(B) ...

(b) the temporary accommodation is required solely because the employee is required to change his or her usual place of residence in order to perform the duties of that employment;

2. Therefore, paragraph 61C(1)(b) of the FBTAA examines (as relevant here) whether the necessity for the temporary accommodation arises solely because the employee is required to relocate the employee's usual place of residence in order to perform employment duties.

3. It is considered that paragraph 61C(1)(b) of the FBTAA does not require an examination of the degree of choice that the employee may have had in accepting to perform the relevant employment duties.

4. It is also considered that paragraph 61C(1)(b) of the FBTAA, conversely, does not require an examination of the extent of any incentives that an employer may provide for the employee to accept to perform the relevant employment duties.

5. Therefore, it is further considered that paragraph 61C(1)(b) of the FBTAA examines only whether the following conditions are satisfied:

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment; and

(b) Is the sole reason the temporary accommodation is required is because the employee has to change the employee's usual place of residence.

(a) Is the employee required to change the employee's usual place of residence in order to perform the employee's duties of employment?

6. For similar reasons as used above, at paragraph 10 of Question 1, it is concluded that overriding practical considerations makes it necessary for the employee to change the employee's usual place of residence from City A to City B.

7. This condition is satisfied.

(b) Is the temporary accommodation required solely because the employee needs to change the employee's usual place of residence?

8. In this case the relevant expense payment benefit will arise under fulfilment of the terms of the relevant SSA between the employee and employer.

9. However, paragraph 61C(1)(b) of the FBTAA does not examine the reasons why the reimbursement of the relevant temporary accommodation costs is being provided but rather why the underlying temporary accommodation is required.

10. It has been determined above, at paragraph 6, that the employee needs to change the employee's usual place of residence in order to perform the employee's duties of employment from City B.

11. Therefore, in the absence of any evidence to the contrary, it is accepted that in this particular case the temporary accommodation is required solely because the employee needs to change the employee's usual place of residence from City A to City B.

12. This condition is satisfied.

Conclusion on whether the requirements of paragraph 61C(1)(b) of the FBTAA are satisfied

13. All the necessary requirements of paragraph 61C(1)(b) of the FBTAA are satisfied in respect of the temporary accommodation in City B.

Question 6

Detailed reasoning

1. As stated above, at paragraph 1 of Question 5, section 61C of the FBTAA provides for the reduction of the taxable values of various expense payment fringe benefits and residual fringe benefits in respect of temporary accommodation relating to relocation.

2. As also stated previously, at paragraph 2 of Question 5, paragraph 61C(1)(b) of the FBTAA examines (as relevant here) whether the necessity for the temporary accommodation arises solely because the employee is required to relocate the employee's usual place of residence in order to perform employment duties.

3. For similar reasons it was determined above at paragraph 13 of Question 4 that all the necessary requirements of paragraph 61C(1)(b) of the FBTAA are satisfied in respect of the temporary accommodation in City B, it is concluded that all the necessary requirements of paragraph 61C(1)(b) of the FBTAA are also satisfied in respect of the temporary accommodation in City A.

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