Edited version of your private ruling

Authorisation Number: 1012527123213

Ruling

Subject: provision of accommodation

Question 1

Will the provision of accommodation to your employee be an exempt benefit pursuant to subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) for the following periods?

(a) 1 April 2012 to 30 September 2012

(b) 1 October 2012 to 30 September 2013

(c) 1 October 2013 to 31 March 2014.

Answer

(a) Yes

(b) Yes

(c) No.

This ruling applies for the following period

1 April 2012 - 31 March 2013

1 April 2013 - 31 March 2014.

The scheme commenced on

1 April 2007.

Relevant facts and circumstances

You have received a private ruling in relation to the provision of accommodation.

You provide boarding facilities that are supervised by various staff, including your employee.

Your employee is required to reside at the boarding facility to perform their duties of employment. For this purpose, you provide the employee with accommodation.

Your employee has an employment arrangement with you.

The employment arrangement was not varied nor renewed between 8 May and 30 September 2012.

The employment arrangement was extended for a further five years after 30 September 2012, and:

· the appointment is for a fixed duration

· it is an employment prerequisite that your employee resides in your facility

At the end of their employment contract with you, your employee must vacate their facility accommodation.

Your employee owns a private residence where the employee lived prior to commencing employment with you.

The residence has not been rented out and the employee visits and stays there at various times during the year.

Your employee has indicated the intention to resume living at the residence at the cessation of their employment with you.

Your employee has provided the required living-away-from-home declaration each fringe benefits tax year.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 31C

Fringe Benefits Tax Assessment Act 1986 section 31D

Fringe Benefits Tax Assessment Act 1986 section 31F

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Tax Laws Amendment (2012 Measures No. 4) Act 2012 item 26

Tax Laws Amendment (2012 Measures No. 4) Act 2012 item 27

Tax Laws Amendment (2012 Measures No. 4) Act 2012 item 28

Reasons for decision

Question 1

Will the provision of accommodation to your employee be an exempt benefit pursuant to subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) for the following periods?

(a) 1 April 2012 to 30 September 2012

(b) 1 October 2012 to 30 September 2013

(c) 1 October 2013 to 31 March 2014.

Detailed reasoning

(a) Will the provision of accommodation be an exempt benefit under subsection 47(5) of the FBTAA for the period 1 April 2012 to 30 September 2012?

In general terms subsection 47(5) of the FBTAA provides that the accommodation provided will be an exempt benefit where the employee is required to live away from their normal place of residence in order to perform their employment duties.

Subsection 47(5) was amended by Tax Laws Amendment (2012 Measures No. 4) Act 2012, (TLA Measures No. 4 Act 2012) which reformed the taxation treatment of living-away-from-home allowances and benefits. The amendments to subsection 47(5) apply from 1 October 2012. As your employee was provided with accommodation from 1 April 2012 it is relevant to consider subsection 47(5) as it was, prior to the amendments.

Subsection 47(5) stated:

(5) Where:

(a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment;

(b) the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;

(c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(d) either of the following conditions is satisfied:

(i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or license subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment;

(ii) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out:

(A) the employee's usual place of residence; and

(B) the place at which the employee actually resided while living away from his or her usual place of residence;

the benefit is an exempt benefit in relation to the year of tax.

Therefore, the provision of accommodation will be an exempt benefit under subsection 47(5), for the period 1 April 2012 to 30 September 2012, if the following conditions are satisfied:

1. the benefit is a residual benefit consisting of the provision of accommodation

2. the accommodation is provided as the employee is required to live away from their usual place of residence

3. the employee is not travelling while performing their employment duties, and

4. the employee provides a declaration in the approved form.

1. Is the benefit a residual benefit consisting of the provision of accommodation?

A residual benefit is defined in section 45 of the FBTAA to be a benefit that is not a benefit by virtue of any provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA. As the provision of accommodation does not fall within Divisions 2 to 11 of the FBTAA it will be a residual benefit.

2. Has the accommodation been provided to the employee as they are required to live away from their usual place of residence?

The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' to mean:

(a) a place at which the person resides; or

(b) a place at which the person has sleeping accommodation;

whether on a permanent or temporary basis and whether or not on a shared basis.

In the absence of a legislative reference it is relevant to refer to the ordinary meaning of 'usual'. The Macquarie Dictionary defines 'usual' to mean:

1. habitual or customary: his usual skill.
2. such as is commonly met with or observed in experience; ordinary: the usual January weather.
3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

Guidelines for determining an employee's usual place of residence are provided by Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030).

Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states:

As the decisions illustrate, the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e., the place where the employee is living at the time or some other place. A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for his employer at another locality, the employee would have continued to live at the former place. It would be relevant in reaching that view that there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality. This would be relevant even if the employee is living in temporary quarters close to a temporary job site.

Further discussion occurs at paragraphs 19 to 25. Paragraph 20 provides the following general rule:

Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live.

As an example of the application of this general rule paragraph 22 states:

Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence.

These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051. At paragraphs 55 and 56 Deputy President S A Forgie said:

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move.

In considering the factors referred to by the AAT the following factors indicate that your employee is living away from their usual place of residence:

· the employee resided at the previous residence prior to commencing employment duties with you

· the employee intends to return to live in this residence after their tenure with you has ceased

· the employee stays at the residence at various times throughout the year.

As your employee has maintained a connection with their previous place of residence and intends to return there to live, we consider that the employee is living away from the employee's usual place of residence.

3. Is the employee travelling while performing their employment duties?

Your employee is not travelling while performing employment duties.

4. Has the employee provided a declaration in the approved form before the declaration date?

You have advised that you have received the appropriate declarations for each FBT year.

Conclusion

As all the conditions above have been met the accommodation provided to your employee will be an exempt benefit under subsection 47(5) of the FBTAA for the period 1 April 2012 to 30 September 2012.

(b) Will the provision of accommodation be an exempt benefit under subsection 47(5) of the FBTAA for the period 1 October 2012 to 30 September 2013?

As discussed above subsection 47(5) of the FBTAA was amended by TLA Measures No. 4 Act 2012 and applies from 1 October 2012. The amended subsection 47(5) states:

(a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment;

(b) the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from his or her normal residence; and

(ba) the employee satisfies:

(i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or

(ii) section 31E (about fly-in fly-out and drive-in drive out requirements); and

(c) any accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(d) any of the following conditions is satisfied:

(i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or license subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment;

(ii) if the employee satisfies section 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii);

(iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii):

the benefit is an exempt benefit in relation to the year of tax.

Therefore, the provision of accommodation will be an exempt benefit under amended subsection 47(5) for the period 1 October 2012 to 30 September 2013, if the following conditions are satisfied:

1. the benefit is a residual benefit consisting of the provision of accommodation

2. the accommodation is provided as the employee is required to live away from their normal residence

3. the employee satisfies section 31C, and 31D

4. the employee is not travelling while performing their employment duties, and

5. the employee provides a declaration in the approved form.

1. Is the benefit a residual benefit consisting of the provision of accommodation?

As stated previously the provision of accommodation is a residual benefit.

2. Has the accommodation been provided to the employee as they are required to live away from their normal residence?

'Normal residence' is defined in subsection 136(1) of the FBTAA to mean:

(a) if the employee's usual place of residence is in Australia - the employee's usual place of residence; or

(b) otherwise -

(i) the employee's usual place of residence; or

(ii) the place in Australia where the employee usually resides when in Australia.

As discussed above we consider that your employee is living away from their usual place of residence.

3. Does the employee satisfy sections 31C and 31D?

Section 31C of the FBTAA requires an employee to maintain a home in Australia from which they are living away from, while section 31D of that Act provides access to the tax concessions for living-away-from-home allowances and benefits for a 12 month period.

Section 31C states:

The employee satisfies this section if:

(a) the place in Australia where the employee usually resides when in Australia:

(i) is a unit of accommodation in which the employee or the employee's spouse has an ownership interest (within the meaning of the Income Tax Assessment Act 1997); and

(ii) continues to be available for the employee's immediate use and enjoyment during the period that the duties of that employment require the employee to live away from it; and

(b) it is reasonable to expect that the employee will resume living at that place when that period ends.

Section 31D states:

SECTION 31D FIRST 12 MONTHS EMPLOYEE IS REQUIRED TO LIVE AWAY FROM HOME

31D(1)

The employee satisfies this section if the fringe benefit relates only to all or part of the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she usually resides when in Australia.

…

However, the transitional provisions contained in the TLA Measures No. 4 Act ('the transitional provisions') apply to affect the application of subsection 31C and 31D of the FBTAA as follows:

Part 3-Application and transitional provisions

26 Application of amendments

The amendments made by this Schedule apply in relation to an employee who, on or after 1 October 2012, lives away from his or her normal residence (whether a benefit provided for living away from that residence on or after that day was paid before, on or after that day).

27 Transitional-existing employment arrangements

(1) During the transitional period, disregard paragraph 31C(a) and section 31D of the Fringe Benefits Tax Assessment Act 1986 if:

(a) the employee is neither a temporary resident nor a foreign resident; and

(b) during the entire period

(i) starting at the Budget time; and

(ii) ending on 30 September 2012;

that employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed.

Paragraph 27(3) defines 'transitional period' as:

(a) starting on 1 October 2012; and

(b) ending at the earliest of:

(i) 30 June 2014; and

(ii) the time the eligible employment arrangement referred to in paragraph (1)(b) or (2)(b); and

(iii) the first time that eligible employment arrangement is varied in a material way or renewed.

28 Transitional - first 12 months for existing arrangements

(1) This item applies if, on 1 October 2012:

(a) an employee's duties of employment require the employee to live away from the place in Australia where he or she usually resides when in Australia; or

(b) the employee expects that his or her duties of employment will require him or her to resume living away from the place in Australia where he or she usually resides when in Australia.

(2) Treat the 12 month period referred to in subsection 31D(1) of the Fringe Benefits Tax Assessment Act 1986 as if it were the first 12 months on or after 1 October 2012 that the employee lives away from that place as so required.

In summarising, the transitional provisions allow section 31C and 31D of the FBTAA to be disregarded:

1. for the transitional period of 1 October 2012 and ending at the earliest of

2. 30 June 2014, or

the first time the eligible employment arrangement is varied in a material way or renewed, if the following conditions are satisfied:

1. on or after 1 October 2012 the employee lives away from their normal residence (whether a benefit provided for living away from that residence on or after that day was paid before, on or after that day)

2. the employee is neither a temporary resident or a foreign resident

3. during the period from Budget time to 30 September 2012 the employment was covered by an eligible employment arrangement that was neither materially varied nor renewed.

In your situation, the commencement of the employment arrangement of your employee was prior to Budget time. The arrangement was not renewed or varied between 8 May 2012 and 30 September 2012.

As your employee is neither a temporary resident or a foreign resident and has lived away from their normal residence on or after 1 October 2012 the requirements of sections 31C and 31D can be disregarded for the period up to when the employment was materially varied or renewed or, where there was no material change or renewal of the arrangement, to 30 June 2014.

You have advised that your employee was reappointed to their position after 1 October 2012 for a further period.

As your employee's employment arrangement has been renewed, section 31C of the FBTAA can be disregarded until the date of the renewal. However, the 12 month period stated in section 31D will apply to 30 September 2013.

4. Is the employee travelling while performing their employment duties?

Your employee is not travelling while performing their employment duties.

5. Has the employee provided a declaration in the approved form?

The final condition to be satisfied is that your employee provides you with a declaration form as described under section 31F of the FBTAA if they satisfy section 31C of the FBTAA.

Subsection 31F(1) of the FBTAA states:

The employee satisfies this section if the employee gives the employer a declaration, in a form approved by the Commissioner, purporting to set out:

(a) for a fringe benefit to which section 31 (about employees who maintain an Australian home) applies:

(i) the address of the place in Australia where the employee usually resides when in Australia; and

(ii) that section 31C is satisfied for that place; and

(iii) the address of each place where the employee actually resided during the period to which the benefit relates; or

….

31F(2)

The employee must give the employer the declaration before the declaration date for the year of tax during which the benefit was provided.

Therefore providing you obtain a declaration from your employee, setting out the requirements of section 31F of the FBTAA this condition will be met.

(c) Will the provision of accommodation be an exempt benefit under subsection 47(5) of the FBTAA for the period 1 October 2013 to 31 March 2014?

As discussed above, the provision of accommodation will be an exempt benefit under amended subsection 47(5) of the FBTAA if the following conditions are satisfied:

1. the benefit is a residual benefit consisting of the provision of accommodation

2. the accommodation is provided as the employee is required to live away from their normal residence

3. the employee satisfies sections 31C and 31D

4. the employee is not travelling while performing their employment duties, and

5. the employee provides a declaration in the approved form.

The conditions listed at points 1, 2 and 4 have been discussed above and are considered to be met. Therefore it is only necessary to consider the conditions listed at points 3 and 5.

3. Does the employee satisfy sections 31C and 31D?

As discussed above section 31C of the FBTAA requires an employee to maintain a home in Australia from which they are living away from.

Specifically:

· the employee or the employee's spouse must have an ownership interest in the accommodation

· the accommodation must continue to be available for the employee's immediate enjoyment during the period that they are required to live away from it, and

· the employee intends to resume living at their home when the period ends.

You have advised that your employee owns their residence, and resides there on a regular basis during the year. Your employee also intends to return to live in it when their term of employment with you has ended.

Therefore section 31C is satisfied.

Section 31D provides that the concessional treatment of the accommodation will only apply for the first 12 months that the employee is required to live away from the place where they usually reside.

In your situation the 12 month period applied from 1 October 2012 to 30 September 2013, therefore section 31D is not satisfied for the period 1 October 2013 to 31 March 2014.

As section 31D is not satisfied the provision of accommodation to your employee is not an exempt benefit under subsection 47(5) of the FBTAA for the period 1 October 2013 to 31 March 2014.