Edited version of your private ruling

Authorisation Number: 1012444257443

Ruling

Subject: Fringe Benefits Tax: Remote Area Holiday Transport

Question 1

Would the proposed reimbursements of flight expenses incurred by the employees constitute exempt benefits under the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following period:

01 April 2013 to 31 March 2016

The scheme commences on:

On or after 01 April 2013

Relevant facts and circumstances

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

The employees reside in a remote part of Australia.

The employer states that it is common practice for companies in that area to provide residential employees with flights to their home city (within Australia).

The employer proposes to provide holiday transport to its employees as follows:

The employer would allow the employee to purchase the flight/s. Upon provision of the receipt, the employer would reimburse the employee (via salary sacrifice arrangement) either up to the value of a dollar amount per annum or a set number of flights (e.g. 2 per annum).

These benefits will be provided in respect of the employment of the employees.

The employer is aware that as per section 61 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), under an award or industry custom, an employee working in a remote area may be reimbursed for the costs of travelling from (or may be provided with transport from) the remote area for the purpose of having a holiday and, similarly, back to the remote area after the holiday.

The employer understands that the taxable value of the fringe benefits arising from the transport, accommodation and meals may be reduced by 50% if:

· the employee travels from the work locality to the town where they lived before being engaged to work at that locality

· the employee travels to the capital city of the state or territory in which the workplace is located (for this purpose

· and the following requirements must also be satisfied:

o the holiday is of three working days or more

o where the benefit is an expense payment fringe benefit, you are provided with proof of the expenditure - that is, originals or copies of receipts or invoices - or a Remote area holiday transport declaration in a form approved by the Commissioner

Notwithstanding the above, the employer is seeking to establish whether the flights provided to the employee fitting the criteria above (rather than the 50% reduction in taxable value under section 61 FBTAA) can be fully exempt from FBT based on the fact that it is a customary benefit.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986, Section 20

Fringe Benefits Tax Assessment Act 1986, Section 61

Reasons for decision

Question 1

The word 'benefit' is very broadly defined in subsection 136(1) FBTAA. It includes any right, privilege, service or facility.

The proposed reimbursements of the employees' expenses in respect of the flights in the circumstances described in your ruling application will come within the definition of the term 'benefit' as stated above.

A 'fringe benefit' is defined in subsection 136(1) of the FBTAA:

in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a)     provided at any time during the year of tax; or

(b)     provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c)     the employer; or

(d)     an associate of the employer; or

(e)...

in respect of the employment of the employee, but does not include:

(f)...

(g)    a benefit that is an exempt benefit in relation to the year of tax; ...

As the reimbursements are provided to the employees in respect of their employment, the provision of the reimbursements will give rise to fringe benefits unless they fall within the exemption provisions in the FBTAA.

The FBTAA exempts a number of benefits from fringe benefits tax. It does not contain any provisions to exempt the reimbursements of the employees' expenses in relation to the holiday transport flights in the circumstances as described in your ruling request.

As the proposed reimbursements will not be exempt benefits, they cannot be excluded from the definition of a fringe benefit.

Notwithstanding the fact the reimbursements of part or all of the costs of the holiday transport flights are customary/common practice the reimbursements will not constitute exempt benefits but will give rise to fringe benefits as defined in subsection 136(1) FBTAA.