Edited version of your private ruling

Authorisation Number: 1012588459896

Ruling

Subject: Fringe benefits tax - residual fringe benefits

Question 1

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside in the camp accommodation?

Answer

No

Question 2

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside unaccompanied in the motel accommodation?

Answer

No

Question 3

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside with their families in the motel accommodation?

Answer

Yes

Question 4

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who receive a living-away-from-home allowance?

Answer

Yes

This ruling applies for the following periods:

For a number of FBT years commencing in the FBT year 1 April 2014 to 31 March 2015

The scheme commences on:

In the relevant FBT year

Relevant facts and circumstances

You will commence work on a project located in a remote area.

The worksite

The worksite is more than 40 kilometres from the closest eligible urban area with a census population less than 130,000.

The worksite is in an area that is not serviced by utilities.

There is one main access to the worksite.

Employees

You will require that the employees live near the worksite.

You will employee people through employment contracts which will be fixed for the duration of their tenure on the project.

While working on the project you will provide some employees (the relevant employees) with accommodation in a camp, in a motel or will provide some employee with a living-away-from-home allowance (LAFHA).

The relevant employees will all maintain a usual place of residence at a location in a different State or Territory from the worksite.

Employees staying in the camp accommodation

You will provide the camp accommodation and food to these employees.

The camp is less than 30 kilometres by road to the worksite.

The employees residing in the camp accommodation will work on a fly-in fly-out (FIFO) roster.

The employees reside at the camp accommodation during the days they work and return to their usual places of residence for their days off.

You provide the employees with flights from their usual places of residence to the worksite, from the worksite to their usual places of residence after their days of work and from their usual places of residence back to the worksite after their days off, on a recurring basis for the duration of their work on the project (the rotational flights).

The employees will have a rest day during their period of working days.

The employees are not accompanied by their families.

The camp accommodation has relatively basic amenities, with bedding, toilet and shower facilities and a fridge. The dining and laundry facilities are communal.

Employees staying in motel accommodation

Some employees will stay in motel accommodation.

You will provide the accommodation and food to these employees.

The motel is run by a third party provider.

The motel is less than 55 kilometres by road to the worksite.

The motel accommodation has relatively basic amenities, with bedding, toilet and shower facilities and a fridge. The dining and laundry facilities are communal.

The employees will reside in the motel accommodation instead of the camp because either;

• the camp does not have the capacity to house all of your employees (these employees will stay unaccompanied by their families), or

• they will be accompanied by their family who cannot stay with them in the camp location

Unaccompanied employees.

The unaccompanied employees who stay in the motel will work on the same rotating FIFO roster as the employees staying in the camp.

The employees reside at the motel for the days they work and return to their usual places of residence for their days off.

You provide the employees with rotational flights to complete this roster.

The employees have a rest day during their period of working days.

Employees accompanied by their family

The employees who stay in motel with their families work the same rotating FIFO roster as the other employees at the motel and camp.

However, these employees do not return to their usual places of residence for days off but stay at the motel.

These employees stay at the motel for a period of 12 months before you provide them with a return flight to their usual places of residences for a period of recreational leave. After their period of leave, you provide the employee with flights to return to the worksite.

You provide the annual rotating flights for the period that the employee is employed on the project.

The employees have a rest day during their period of working days.

Employees provided with a living-away-from-home allowance (LAFHA)

Some employees will not be provided with accommodation in the camp or motel but will instead be provided with a LAFHA to pay for their food and accommodation.

These employees will choose and arrange their own accommodation.

The employees receiving a LAFHA will work on the same rotating FIFO roster as the employees staying in the camp and the unaccompanied employees staying at the motel.

The employees reside at their accommodation during the days they work and return to their usual places of residence for their days off.

You provide the employees with rotational flights to complete this roster.

The employees have a rest day during their period of working days.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 subsection 47(7)

Fringe Benefits Tax Assessment Act 1986 section 52

Fringe Benefits Tax Assessment Act 1986 section 58F

Fringe Benefits Tax Assessment Act 1986 subsection 140(1)

Fringe Benefits Tax Assessment Act 1986 subsection 140(2)

Fringe Benefits Tax Assessment Act 1986 subsection 140(3)

Fringe Benefits Tax Assessment Act 1986 section 143A

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside in the camp accommodation?

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a 'fringe benefit':

fringe benefit, 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) …

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

…

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

…

'Benefit' in this context is also defined in subsection 136(1) of the FBTAA as follows:

Benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a) an arrangement for or in relation to:

(i) the performance of work (including work of a professional nature), whether with or without the provision of property;

(ii) the provision of, or the use of facilities for, entertainment, recreation or instruction; or

(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;

(b) a contract of insurance; or

(c) an arrangement for or in relation to the lending of money.

When you provide the rotational flights to your employees you provide them with a benefit. The benefits will be fringe benefits if they are not exempt benefits.

In order to determine whether you will have a fringe benefits tax liability arising from the provision of the rotational flights it is necessary to initially consider the type of benefit that is provided. The FBTAA is divided into 13 types of benefits and each type has its own valuation rules.

Section 45 of the FBTAA defines residual benefits as:

45 Residual benefits

A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive).

The provision of the rotational flights are a benefit that does not fall within one of the specific categories of benefits in Subdivision A of Divisions 2 to 11 of the FBTAA and therefore, according to section 45 of the FBTAA, the provision of the rotational flights constitutes a residual benefit.

Residual benefits can be exempt in certain scenarios and therefore not considered to be fringe benefits. Fly-in fly-out transport provided as a residual fringe benefit to employees who work in remote areas in Australia, overseas, on oil rigs or other installations at sea can be exempt where the conditions of subsection 47(7) of the FBTAA are satisfied. Subsection 47(7) states:

47(7)

Where, during a period of employment with an employer:

(a) an employee's usual place of employment is:

(i) on an oil rig, or other installation, at sea; or

(ii) at a location in a State or internal Territory but not in, or adjacent to, an eligible urban area; or

(iii) at a remote location that is not in a State or internal Territory; and

(b) the employee is provided with residential accommodation, at or near that usual place of employment, by:

(i) the employer; or

(ii) an associate of the employer; or

(iii) a person (in this subparagraph referred to as the arranger) other than the employer under an arrangement between:

(A) the employer or an associate of the employer; and

(B) the arranger or another person; and

(c) the employee, on a regular basis:

(i) works for a number of days and has a number of days off; and

(ii) on completion of the working days, travels from that usual place of employment to his or her usual place of residence and, on completion of the days off, returns from his or her usual place of residence to that usual place of employment; and

(d) the employee is provided with transport on a regular basis in connection with the travel referred to in subparagraph (c)(ii) and that transport is provided by:

(i) the employer; or

(ii) an associate of the employer; or

(iii) a person (in this subparagraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement between:

(A) the employer or an associate of the employer; and

(B) the arranger or another person; and

(e) it would be unreasonable to expect the employee to travel on a daily basis on work days between:

(i) that usual place of employment; and

(ii) the location of the employee's usual place of residence;

having regard to the location of those places;

the residual benefit constituted by the provision of the transport referred to in paragraph (d) is an exempt benefit.

Chapter 20 of Fringe benefits tax - a guide for employers (FBT guide for employers) (NAT 1054) summarises the requirements of subsection 47(7):

Transport you provide to employees who work in remote areas in Australia or overseas, or on oil rigs or other installations at sea

This arrangement, commonly known as 'fly-in fly-out' transport, is exempt where all of the following apply:

• an employee's usual place of employment is at a remote location in Australia or overseas, or on oil rigs or other installations at sea

• employees are provided with accommodation at or near the worksite on working days

• on a regular basis the employee works for a number of days followed by a number of days off, returning to their usual place of residence on their days off

• you provide the employee with transport between their usual place of residence and their place of employment

• having regard to the location of the two places, it would be unreasonable to expect the employee to travel to and from work on a daily basis.

Therefore, in order to determine whether the flights provided to your employees are exempt under subsection 47(7) each of the above conditions must be considered in turn.

1. Is the employees' usual place of employment at a remote location in Australia or overseas, or on an oil rig or other installation at sea?

Paragraph 47(7)(a) requires that the employee's usual place of employment is either:

• on an oil rig, or other installation, at sea

• at a location in a State or internal Territory but not in, or adjacent to, an eligible urban area, or

• at a remote location that is not in a State or internal Territory .

Your employees' usual place of employment is in a location in a State or internal Territory.

Therefore, to satisfy paragraph 47(7)(a) of the FBTAA, the worksite must be a location that is not in, or adjacent to, an eligible urban area.

Paragraph 140(1)(a) defines what is an 'eligible urban area' as follows:

(1) In this Act

(a) a reference to an eligible urban area is a reference to:

(i) an area that:

(A) is situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and

(B) is an urban centre with a census population of not less than 28,000; and

(ii) an area that:

(A) is not situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and

(B) is an urban centre with a census population of not less than 14,000; and

Subsection 140(3) of the FBTAA defines 'urban centre' as:

urban centre means an area that is described as an urban centre or bounded locality in the results of the Census of Population and Housing taken by the Australian Statistician in the document entitled "Persons and Dwellings in Local Government Areas and Urban Centres".

ATO fact sheet Fringe benefits tax - remote areas, provides lists of towns that are in eligible urban areas according to these criteria. You are not one of the employers listed in subsection 140(1B) of the FBTAA and so list one is to be applied to your circumstances.

The location of the worksite is not listed as an eligible urban area and therefore, the employees' usual place of employment is not a location that is in an eligible urban area.

Therefore, in order to satisfy the requirements of paragraph 47(7)(a) the worksite must be a location that is not 'adjacent' to an eligible urban area.

Paragraph 140(1)(b) sets out the criteria for a location to be considered adjacent to an eligible urban area. Paragraph 140(1)(b) states:

(b) a reference to a location that is adjacent to an eligible urban area is a reference to a location that, as at the date of commencement of this section:

(i) was situated less than 40 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000; or

(ii) was situated less than 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of not less than 130,000.

Subsection 140(3) of the FBTAA defines 'census population' as;

census population, in relation to an urban centre, means the census count on an actual location basis of the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australia Statistician in the document entitled "Persons and Dwellings in Local Government Areas and Urban Centres".

The census population of the closest eligible urban area according to the subsection 140(3) definition is less than 130,000. Therefore, the worksite will be a location that is not adjacent to an eligible urban area if it is more than 40 kilometres, by the shortest practicable surface route, from the centre point of the closest eligible urban area.

Is the worksite more than 40 kilometres, by the shortest practicable surface route, from the centre point of the closest eligible urban area?

The shortest practicable surface route for the purposes of the exemption is defined in subsection 140(2) of the FBTAA:

(2) For the purposes of this section, the distance, by the shortest practicable surface route, between a location (in this subsection referred to as the tested location) and the centre point of an eligible urban area is:

(a) where there is only one location within the eligible urban area from which distances between the eligible urban area and other places are usually measured - the distance, by the shortest practicable surface route, between the tested location and that location; and

(b) where there are 2 or more locations within the eligible urban area from which distances between parts of the eligible urban area and other places are usually measured - the distance, by the shortest practicable surface route, between the tested location and the one of those locations that is in the principal one of those parts.

(2A) In applying subsection (2), if the shortest practicable surface route between the tested location and the location mentioned in that subsection includes a route by water, the distance between those locations is taken to be the amount worked out using the following formula:

(total kilometres of the surface route that are by water X 2) + total kilometres of the surface route that are by land

(3) In this section:

…

surface route means a route other than an air route.

Taxation Ruling TR 94/27 Income Tax: zone rebate for residents of isolated areas (TR 94/27) discusses what is meant by a 'practicable surface route' in the context of the 'shortest practicable surface route' test contained in subsection 79A(3D) of the Income Tax Assessment Act 1936 (ITAA 1936). Given the similarities in wording in the relevant sections the guidance provided by TR 94/97 can be applied in the context of subsection 140(2) of the FBTAA.

TR 94/27 states:

Practicable route

21. The question may arise whether particular types of travel routes are 'practicable' in terms of the 'shortest practicable surface route' requirement in paragraph 79A(3D)(a).

…

Water Routes

24. If a water route is wholly or partly the generally adopted method of travelling to and from a population centre, that route, to that extent, is the practicable route. It is not reasonable, however, to treat a water route as being practicable if it is not readily negotiable, in terms of water conditions or distance. It might be a practicable route, however, even though it is not readily negotiable, if there is a regular passenger service available.

25. If there is a practicable water route, the fact that one or more of the residents of a particular area choose to fly rather than use the water route, does not make a point in that area a point within a special area.

The shortest practicable surface route to the worksite is not the route that includes travel by water.

In relation to road routes and measuring distance, TR 94/27 states:

Road Routes

22. In the vast majority of cases, road routes are the shortest practicable surface routes to and from population centres. If the road is reasonably well defined, whether it is a sealed highway or a major or minor access road (public or private), and if it is normally used by zone residents to travel between a point in a zone and the relevant population centre, the distance by that road determines whether an individual who resided at that point is eligible for the special area zone rebate.

23. The fact that the road in question may occasionally be impassable as a result of floods, etc., does not mean that it is not a practicable route. However, a road that is regularly impassable for a significant part of the year is not a practicable route.

…

30. The shortest practicable surface route is not intended to include rough tracks or other little used roads if there is another route that is normally used. However, a route that is wholly or partly across water is the shortest practicable surface route if that is the generally adopted method of surface transport.

The worksite is more than 40 kilometres by road travel from the closest eligible urban area with a census population of less than 130,000. Therefore the worksite and the employees' usual place of employment is at a location in Australia but nor in or adjacent to an eligible urban area and the requirements of paragraph 47(7)(a) of the FBTAA are satisfied.

2. Are the employees are provided with accommodation at or near the worksite on working days?

You will provide the employees with accommodation in a camp.

The camp is less than 30 kilometres by road to the worksite.

The accommodation at the camp is considered to be at a location near the worksite.

The employees are therefore provided with accommodation near the worksite on their working days.

3. On a regular basis, do the employees work for a number of days followed by a number of days off, returning to their usual place of residence on their days off?

The employees work at the worksite for a number of days before having a number of days off. The employees return to their usual places of residence for their days off.

The employees will have a rest day during their period of working days.

Taxation Determination TD 94/96 Fringe benefits tax: can the exemption for 'fly-in fly-out' transport in subsection 47(7) of the Fringe Benefits Tax Assessment Act 1986 apply, where the employees take a rest day during their time at the work site? (TD 94/96) discusses the effect of employees taking a rest day during their period of work on satisfying this criterion. TD 94/96 states:

Where the other conditions of subsection 47(7) are met, this Office will accept that the break in the working days does not affect the availability of the exemption for the transport of the employees to and from their usual place of residence.

Example

Builder Pty Ltd operates a construction site at a remote locality. Employees are transported from their homes in the capital city to work for three weeks at the site, after which they are returned to their home for one week's leave. The applicable Mines Regulations specify that employees must take one day off after working 13 consecutive days. The fact that employees have this day off will not jeopardise the exemption available under subsection 47(7).

It can therefore be concluded that given the remoteness of the worksite and the hours of work the employees perform, the fact that the employees have a rest day during their days working at the site, does not affect this criteria. The employees are considered to work for a number of days followed by a number of days off and return to their usual place of residence on their days off.

4. Do you provide the employees with transport between their usual place of residence and their place of employment?

The employees all have a usual place of residence elsewhere than the camp accommodation. You provide the employees with flights to their usual places of residence at the end of each their period of working days and then from their usual places of residence back to their place of employment after their days off.

5. Having regard to the location of the employees' usual places of residence and their places of employment, would it be unreasonable to expect the employees to travel to and from work on a daily basis?

The employees' place of employment is at a remote location in a specific State or Territory. The relevant employees all have a usual place of residence in other States or Territories. It would be unreasonable to expect the employees to travel from any of these locations as their usual places of residence, to the worksite on a daily basis.

Conclusion

As all of the requirements of subsection 47(7) of the FBTAA are met the provision of the flights would be an exempt benefit and therefore you will not incur a fringe benefits tax liability for the rotational flights provided to your employees who reside in the camp accommodation.

Question 2

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside unaccompanied in the motel accommodation?

This scenario is the same as question 1, however instead of staying in the camp accommodation during their working days the employees are provided with accommodation at a motel.

The employees will not be accompanied by their families and will work on a rotating fly-in fly-out roster working for a number of days at the worksite and then returning to their usual place of residence for a number of days off. You will provide the employees with the rotational flights required to complete this roster.

Therefore the only difference between this scenario and the scenario in question 1, is the location of the employees accommodation and as such if the requirement contained in paragraph 47(7)(b) of the FBTAA remains satisfied, the benefits provided will be exempt under subsection 47(7) of the FBTAA.

Are the employees are provided with accommodation at or near the worksite on working days?

The motel is run by a third party provider.

The motel is less than 55 kilometres by road to the worksite.

The accommodation is considered to be at a location near the worksite.

Conclusion

As the other requirements of subsection 47(7) of the FBTAA remain satisfied, it is considered that the conditions of the exemption are met and the provision of the rotational flights will be an exempt benefit. Therefore you will not incur a fringe benefits tax liability for the rotational flights provided to your employees who reside unaccompanied in the motel and work on a FIFO roster.

Question 3

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who reside with their families in the motel accommodation?

In addition to the employees who stay in the motel accommodation due to there being no capacity for them to stay at the camp, other employees are provided with accommodation at the motel to enable their families to stay with them.

The employees accompanied by their families are provided with accommodation in the motel for 12 months at a time. They work on the same rotating roster as the employees discussed above at questions 1 and question 2, however during their days off they are not provided with a flight back to their usual place of residence. During their days 'off' they remain at the motel but do not work. After a period of 12 months you provide the employees with a flight back to their normal residences for a holiday period and then a return flight back to the worksite.

Fly-in fly-out transport (subsection 4(7)

As discussed above, the provision of each of the flights to an employee will be a residual benefit which can be exempt if it meets the requirements of subsection 47(7) of the FBTAA.

Paragraph 47(7)(c) requires that in order to qualify for the exemption the employee must on a regular basis work for a number of days and have a number of days off and on completion of the working days, travel from their usual place of employment to their usual place of residence and on completion of the days off, return from their usual place of residence to their usual place of employment.

The employees' roster is such that they have a rest day during their working days. As discussed in question 1 above, TD 94/96 provides authority to conclude that the rest day during the working days does not affect the availability of the exemption. However, during the number of days off that the employees have at the completion of the working days, the employees stay at the motel accommodation. Therefore on the completion of their working days the employees do not travel from their usual place of employment to their usual places of residence.

Summary - subsection 47(7)

As the requirements of paragraph 47(7)(c) are not met and the benefits are not exempt under subsection 47(7).

Relocation transport (section 58F)

The provision of flights as residual benefits can also be exempt in certain circumstances under section 58F of the FBTAA.

Section 58F provides an exemption for the costs of relocation where an employee is required to live away from home or relocate in order to perform the duties of their employment. Section 58F states:

58F Exempt benefits - relocation transport

Where:

(a) a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer;

(b) the benefit is in respect of relocation transport; and

(c) in the case of an expense payment benefit:

…

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

The FBT guide for employers summarises at chapter 20:

Where an employee is required to live away from home, or is required to relocate their usual place of residence, in order to perform employment-related duties, the costs of providing relocation transport (and any meals and accommodation en route) to the employee (and family members) are exempt benefits. The exemption also applies where the employee is returning to their usual place of residence after working at another location.

In summarising, the section 58F exemption will apply if the following conditions are satisfied:

1. the employee is provided with a car benefit, an expense payment benefit, a property benefit or a residual benefit

2. the benefit is provided in respect of relocation transport

3. in the case of an expense payment benefit, the additional requirements of subsection 58F(c) are met.

The benefits in question are residual benefits and therefore the third condition above does not need to be considered.

1. Will the employee be provided with a car benefit, an expense payment benefit, a property benefit or a residual benefit?

As discussed above, the provision of each of the flights to the employees will be a residual fringe benefit.

2. Will the benefit provided in respect of relocation transport?

Section 143A of the FBTAA sets out the definition of relocation transport for the purposes of this exemption. Section 143A 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) a car benefit relating to a particular car where the application or availability of the car is in respect of the provision of transport;

(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) a property benefit where the recipients property consists of meals in connection with transport;

(iv) a residual benefit where the recipients benefit consists of the provision of transport or accommodation in connection with transport;

(b) the transport, meals or accommodation is for a family member;

(c) the transport is required solely because:

(i) the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;

(ii) the employee, having lived away from his or her usual place of residence in order to perform the duties of that employment, is required to return to his or her usual place of residence:

(A) in order to perform those duties; or

(B) because the employee has ceased to perform those duties; or

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

(d) the transport is provided to enable a family member to:

(i) if subparagraph (c)(i) applies - take up residence at or near the place where the employee performs the duties of that employment while living away from his or her usual place of residence;

(ii) if subparagraph (c)(ii) applies - take up residence at the employee's usual place of residence; or

(iii) if subparagraph (c)(iii) applies - take up residence at the employee's new usual place of residence;

(e) if the transport is for the spouse, or a child, of the employee - the transport is not provided to enable the spouse or child to accompany the employee:

(i) while the employee is undertaking travel in the course of performing the duties of that employment; and

(ii) where the circumstances referred to in subsection 26-30(2) of the Income Tax Assessment Act 1997 do not apply; and

(f) if the transport is for the employee - the transport is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(g) if subparagraph (c)(iii) applies - the benefit is not provided under a non-arm's length arrangement;

the benefit shall be taken to be in respect of relocation transport.

Each paragraph of section 143A contains a requirement that must be met in order for the transport to be considered relocation transport and the benefit therefore to be exempt under section 58F.

Paragraph 143A(a)

Paragraph 143A(a) requires that the benefit provided is one of the listed benefits in subparagraphs 143A(a)(i) to 143A(a)(iv). The benefits provided are in respect of the employees' employment and are residual benefits where the benefit consists of the provision of transport (subparagraph 143A(a)(iv)).

Paragraph 143A(b)

Paragraph 143A(b) requires that the transport is for a family member.

'Family member' in this context is defined in subsection 136(1) of the FBTAA as follows:

family member, in relation to a benefit provided to an employee, or to an associate of an employee, in respect of the employment of the employee, means:

(a) the employee;

(b) the spouse of the employee; or

(c) a child of the employee.

The transport provided as a benefit in this case is the flights provided to the employee. Therefore the transport is for a family member.

Paragraph 143A(c)

Paragraph 143A(c) states that the transport is required solely for one of the following reasons:

(i) the employee is required to live away from their usual place of residence in order to perform the duties of that employment

(ii) the employee, having lived away from their usual place of employment, is required to return to their usual place of residence

(A) in order to perform those duties; or

(B) because the employee has ceased to perform those duties

(iii) the employee is required to change their usual place of residence in order to perform the duties of that employment

The employees all have a usual place of residence away from their usual place of employment that they return to at the end of each 12 months and at the end of their appointment on the project. Therefore the employees have not changed their usual places of employment but are living away from their usual places of employment and subparagraphs 143A(c)(i) and 143A(c)(ii) are the relevant reasons to be considered.

The term 'solely' is not defined in the FBTAA and so it takes on its ordinary meaning.

The Macquarie dictionary (The Macquarie Dictionary online 2014) (Macquarie Dictionary), defines solely as:

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

2. exclusively or only: plants found solely in the tropics.

3. wholly; merely.

Therefore, in order to meet the requirement of paragraph 143A(c) each of the flights must be provided for only one reason and the reason must be one of the reasons listed in subparagraphs 143A(c)(i) to 143A(c)(iii).

You will provide four types of flights to these employees:

1. the first flight from their usual residences to the worksite

2. flights returning the employees from the worksite to their normal residences for a period of recreational leave after 12 months of rotational work staying at the motel

3. flights returning the employees from their recreational leave to the worksite to commence another 12 month period of work staying at the motel

4. the final flight returning the employee from the motel to their normal residences after the cessation of their work on the project.

The flights referred to in numbers 2 and 3 above are not provided solely for any of the purposes listed in subparagraphs 143A(c)(i) to 143A(c)(iii). These flights have a dual purpose of flying the employee back to their usual residence for a period of recreational leave and returning them to the work location. At the end of each 12 month period the employees have not ceased to perform their duties, they are simply on a period of recreational leave. Therefore, the flights back to their usual places of residence are not provided because the employees have ceased to perform their employment duties and similarly the return flights back to work after the period of leave are not provided solely because the employee is required to live away from their usual place of residence - the employees would have already been living away from their usual places of residence and the flights are provided in order to return the employees from a period of recreational leave. In addition, the employees are not returning to their usual places of residence to perform the duties of their employment.

The first and final flights referred to in numbers 1 and 4 above comparatively are considered to be provided solely for one of the reasons listed in subparagraphs 143A(c)(i) to 143A(c)(iii). The first flight is provided solely because the employee is required to live away from their usual place of residence in order to perform the duties of their employment (subparagraph 143A(c)(i)) and the final flight is provided solely because the employee having lived away from their usual place of residence in order to perform the duties of their employment, is required to return to their usual place of residence because they have ceased to perform their employment duties (subparagraph 143A(c)(iii)).

Therefore, only the first and final flights meet the requirements of paragraph 143A(c) and can potentially be exempt.

Paragraph 143A(d)

As concluded above subparagraph 143(c)(i) applies to the first flight and subparagraph 143A(c)(iii) applies to the final flight.

Paragraph 143A(d) requires that the transport is provided to enable a family member to:

• take up residence at or near the place where the employee performs the duties of that employment while living away from their usual place of residence ( where subparagraph 143A(c)(i) applies)

• take up residence at their usual place of residence (where subparagraph 143(c)(ii) applies)

As concluded above the employee is a 'family member' for the purposes of the exemption.

The first flight is provided to enable the employee to take up residence near the place where they perform the duties of their employment while living away from their usual place of residence, and the final flight is provided to enable the employee to take up residence at their usual place of residence where the employee is required to return to their usual place of residence because they have ceased to perform the duties of their employment that required them to live away from their usual place of residence. Therefore the requirements of paragraph 143A(d) are met for the first and final flights.

Paragraph 143A(e)

You have only asked about transport provided to the employee. Therefore this requirement does not need to be considered for the purposes of the question posed.

Paragraph 143A(f)

Paragraph 143A(f) requires that transport for the employee is not provided while the employee is undertaking travel in the course of performing the duties of their employment.

Are your employees travelling in the course of their employment?

Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) provides guidelines to assist in determining whether an employee is travelling in the course of performing the duties of their employment. The criteria are set out in paragraphs 37- 43 of MT 230 and include:

• the nature of the job;

• the length of time the allowance is paid for, and

• whether the employee is accompanied by their spouse or family.

The first criterion is discussed in paragraphs 37 and 38 of MT 2030 which state:

37. Unlike living-away-from-home allowances, there is generally no change of employment location in relation to the payment of travelling allowances…

38. A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. In the former case, there is a change of job location and an actual change of residence to a place at or near that location. In the latter, the employee does not change job locations but simply travels in order to carry out the requirements of the job.

The relevant employees have normal residences away from the worksite location. The employees' duties of employment start after their arrival at the worksite location. Your employees travel to the worksite to begin their work and in doing so change their residence to be at that job location. This is compared with beginning their employment duties at a usual place of employment at their usual place of residence and travelling on work to the worksite. Consideration of these facts in the context of the first criterion of MT2030 indicates that the employees are not travelling in the course of performing their jobs.

The second criterion is the length of time the allowance is paid for. This criterion is discussed in paragraphs 39 to 41 of MT 2030 which state:

39. Travelling allowances are often paid for comparatively short periods, exceptions being allowances paid where the employment is inherently itinerant in nature or where travelling is a regular incident of the occupation, e.g., commercial travellers, travelling entertainers, etc. Academics studying on sabbatical leave have also been held to be travelling in the course of their employment rather than living away from home and thus could receive a travelling allowance over an extended period of time.

40. The nature of an allowance is not to be determined by reference solely to the period for which it is paid. As mentioned, a travelling allowance might be paid to a commercial traveller almost continuously throughout the year whereas another employee may receive a living-away-from-home allowance only for a month or so.

41. There will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from-home allowance. For longer periods, it will be necessary to determine the nature of the allowance with the guidance provided by this Ruling.

The employees work away for longer than the 21 day guideline provided in paragraph 41 of MT2030 which usually indicates that the employee is not travelling in the course of their employment

The third criterion listed in MT 2030 is whether the employee is accompanied by their spouse or family and is discussed in paragraphs 42 and 43 of MT 2030, which state:

42. An employee travelling in the course of employment ordinarily would not be accompanied by his or her spouse and family. On the other hand, it is more common for the spouse and children of an employee who has temporarily changed job locations and is living away from the usual place of residence to have his or her family living at the new location.

43. That is not to say that an unaccompanied employee should always be treated as travelling and an accompanied one regarded as living away from home. While those factors might be indicative of the nature of the employee's absence, the tests for determining the purpose of an allowance are as previously explained. To illustrate the point, an employee who lives during the working week in the country town where his permanent job is located but who travels perhaps several hundred kilometres to live during weekends with his wife and children in the family home located in another town would be, during the week, living away from home. So, too, would a married public servant based in a capital city who is seconded for six months to carry out a special task interstate in circumstances where his family stays behind in the family home. It is not where the family is that determines the nature of the allowance but where the employee is in relation to the usual place of residence and whether, on the facts, the employee can be said to be travelling on the job or living away from home.

The employees in question will be accompanied by their families. This usually indicates that the employees are not travelling in the course of performing their duties of employment. Paragraph 43 states that where the family is not wholly determinative but whether on the facts the employee can be said to be travelling on the job or living away from home. Consideration of all of the guidelines provided by MT 2030 indicates that your employees are not travelling in the course of their employment but are living away from their usual place of residence.

The recent case of Fox v Federal Commissioner of Taxation [2013] AATA 471 (Fox) considered the difference between travelling to work and travelling on work. Fox concerned a taxpayer who worked as a truck driver on a drive in, drive out roster. He drove from Adelaide to Port Augusta before his first shift and returned to Adelaide after his last shift. In travelling to Port Augusta, the taxpayer travelled in his own vehicle and was not reimbursed for the fuel. The taxpayer's usual place of residence remained in Adelaide. The Court held in this case that the taxpayer was travelling to work in Port Augusta as opposed to travelling on work:

19. In addition to the deductibility of the cost of meals when considered normally, a similar consideration can arise in the case of the cost of travel to and from work. In Lunney v The Commissioner of Taxation, the High Court held that expenses incurred by taxpayers in travelling day by day from their homes to their places of employment and back again are generally not deductible. The question then arises, in the case of an employee, whether the expenses are incurred in travelling to work or in travelling on work. Mr Cole submitted that Mr Fox's case was an example of someone travelling to work at a considerable distance away from his home. Mr Fox chose to work in Port Augusta and to take motel accommodation for the times he worked there. It was a choice that he made, but he is not entitled to a deduction for the expenses involved. The expenses are incurred in the same way as the costs in travelling to and from work.

Considering the criteria outlined in MT 2030 and the recent decision in Fox, it is considered that your employees are not travelling in the course of their employment.

Paragraph 143A(g)

Subparagraph 143A(c)(iii) does not apply therefore consideration of the requirement contained in paragraph 143A(g) is not necessary.

Summary - section 58F

As all of the relevant requirements are satisfied in relation to the first and final flights, the benefits provided by those flights are considered to be provided in respect of relocation transport.

As concluded above, the other conditions of section 58F are met and therefore the residual benefits that arise in relation to the provision of the first and final flights only will be exempt under section 58F of the FBTAA. The flights to and from the employees usual place of residence relating to their periods of leave after 12 months work are not provided in respect of relocation transport and therefore are not exempt under section 58F.

No other exemptions apply to exempt the provision of the flights that do not meet the requirements of section 58F from being a fringe benefit. Therefore, the provision of the remaining flights (other than the first and last flight) are residual fringe benefits.

Otherwise deductible rule

The taxable value of a residual fringe benefit can be reduced in certain circumstances by the use of the otherwise deductible rule contained in section 52 of the FBTAA.

Section 52 of the FBTAA states:

52 Reduction of taxable value - otherwise deductible rule

(1) Where:

(a) the recipient of a residual fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and

(b) if the recipient had, at the comparison time, incurred and paid unreimbursed expenditure (in this subsection called the gross expenditure), in respect of the provision of the recipients benefit, equal to the amount that, but for this subsection and Division 14 and the recipients contribution, would be the taxable value of the residual fringe benefit in relation to the year of tax - a once-only deduction (in this subsection called the gross deduction) would, or would if not for section 82A of the Income Tax Assessment Act 1936, and Divisions 28 and 900 of the Income Tax Assessment Act 1997, have been allowable to the recipient under either of those Acts in respect of the gross expenditure; and

(ba) the amount (in this subsection called the notional deduction calculated in accordance with the formula

GD - RD

…

exceeds nil; and

…

The recipient gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, in respect of the recipients benefit; and

…

the taxable value, but for Division 14, of the residual fringe benefit in relation to the year of tax is the amount calculated in accordance with the formula:

TV - ND

Taxation Ruling TR 2001/2 Fringe benefits tax: the operation of the new fringe benefits tax gross-up formula to apply from 1 April 2000 (TR 2001/2) summaries the operation of the otherwise deductible rule. TR 2001/2 states:

The taxable value of certain fringe benefits may be reduced to the extent that the employee would have been able to claim an income tax deduction had the employee themselves incurred the expense. The otherwise deductible rule applies to reduce the taxable value of either an airline transport fringe benefit, a board fringe benefit, an expense payment fringe benefit, a loan fringe benefit, a property fringe benefit or a residual fringe benefit. The taxable value is reduced by the hypothetical income tax deduction to which the employee would have been entitled had the employee incurred the expense…

Therefore, in order to determine whether you will have a fringe benefits tax liability in relation to the flights, it must be determined whether your employees would have been entitled to claim a once only income tax deduction for the costs of the flights had they incurred the expenses themselves.

Would your employees have been entitled to claim a once only deduction for the costs of the rotational flights had they incurred the expense themselves?

The Income Tax Assessment Act 1997 ( ITAA 1997) stipulates in what circumstances an individual can claim an income tax deduction in their individual tax return for a relevant work related expense. The general rules about deductions are found in section 8-1 of the ITAA 1997 as follows:

8-1 General deductions

(1) You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.

(2) However, you cannot deduct a loss or outgoing under this section to the extent that:

(a) it is a loss or outgoing of capital, or of a capital nature; or

(b) it is a loss or outgoing of a private or domestic nature; or

(c) it is incurred in relation to gaining or producing your *exempt income or your *non-assessable non-exempt income; or

(d) a provision of this Act prevent you from deducting it.

MT 2030 confirms that when an employee is travelling in the course of their employment as opposed to travelling to and from work, the costs of the travel can be deductible to the employee:

36. When an employee is travelling on business on behalf of an employer, 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. As it was stated in Case No. B 84, 2 TBRD 390, "…where the employment actually involves the duty of travelling and therefore staying away from home, the extra expenses of living at hotels, etc., together with costs of conveyance, etc., are deductible as, to that extent, they cease to be of a private or domestic nature."

Whether your employees are travelling in the course of their employment has been considered above in relation to the paragraph 143A(f) requirement for the section 58F exemption. It has been concluded that during the flights in question the employees are not travelling in the course of their employment with you but travelling to and from work.

Courts have typically held that the costs incurred in travelling to and from work are generally not deductible. The established case law authority on the deductibility of travel expenses was affirmed in the cases of Lunney and Hayley v FC of T (1958) 100 CLR 47 (Lunney) and is explained in Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment (IT 112). Paragraphs 2 to 5 of IT 112 state:

2. The decision of the Full Court of the High Court in the appeals of Lunney and Hayley v FC of T (1958) 100 CLR 478 affirmed a long-standing line of decisions that fares paid by taxpayers to enable them to go day by day to their regular place of employment or business and back to their home are not deductible against the assessable income earned by them from their employment or business.

3. In Lunney and Hayley the taxpayers were a ship's joiner and a dentist respectively. Neither taxpayer carried on income-producing activities at his home. Lunney had only one employment and he reported at the commencement and completion of each day's work to his employer's office at the waterfront from which he travelled (at his employer's expense) to various parts of the port of Sydney to carry out his work. He travelled daily by bus from his suburban residence to the city to report for work and to return home after work. Hayley carried on his profession from rooms in the city of Sydney and he travelled daily by train from his suburban residence to the city and return to pursue his professional practice.

4. Dixon C.J., Williams, Kitto and Taylor JJ. (with McTiernan J. dissenting) decided that the fares in each instance were not deductible under s.51. Williams, Kitto and Taylor JJ. Said, at pages 498 and 499 -

"It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income. Whether or not it should be so characterised depends upon considerations which are concerned more with the essential character of the expenditure itself than with the fact that unless it is incurred an employee or a person pursuing a professional practice will not even begin to engage in these activities from which their respective incomes are derived."

5. In Lunney's case their Honours took the view that the expenditures were properly characterised as personal or living expenses rather than business expenses or expenses incurred in, or in the course of, earning assessable income. They said, at page 501 -

"Expenditure of this character is not by any process of reasoning a business expense; indeed, it possesses no attribute whatever capable of giving it the colour of a business expense. Nor can it be said to be incurred in gaining or producing a taxpayer's assessable income or incurred in carrying on a business for the purpose of gaining or producing his income; at the most it may be said to be a necessary consequence of living in one place and working in another. And even if it were possible - and we think it is not - to say that its essential purpose is to enable a taxpayer to derive his assessable income there would still be no warrant for saying, in the language of s.51, that it was 'incurred in gaining or producing the assessable income' or 'necessarily incurred in carrying on a business for the purpose of gaining or producing such income."'

IT 112 also discusses the application of Lunney to other cases:

21. From this review of authorities, the following guidelines are considered to have emerged:-

(a) cases comparable with Lunney and Hayley;

(i) In the case of the great majority of employees and of people pursuing a profession or other ordinary vocation, expenses of travelling - whether by public transport or by use of their own motor vehicles - in habitually going from home to a regular place of employment or business are not deductible. No general change in the settled approach is warranted to the longstanding line of decisions that the essential character of the expenditure in such cases is a personal or living expense rather than an expense incurred in, or in the course of, gaining assessable income. These journeys are made by such a taxpayer on the way to his employment and in returning from it. They are not made in the course of his employment or in the performance of his duties.

While the proposition in Lunney has remained the general authority regarding the deductibility of travel expenses, other cases have extended its application in certain circumstances. In FC of T v. Genys (1987) 17 FCR 495; 87 ATC 4875; (1987) 19 ATR 356 (Genys), Northrop J stated at 4878:

However, the general proposition laid down in Lunney, notwithstanding that it remains good law, is not exhaustive. In Garrett v. F.C. of T. 82 ATC 4060, the Supreme Court of New South Wales constituted by Lusher J. held that it had no application to the following situations:

(a) where the taxpayer keeps necessary equipment or instruments at his home which he needs for the purpose of performing his work, and by reason of its bulk, such equipment needs to be transported by vehicle from the home to his place or places of work and where the equipment is used at home;

(b) where the taxpayer incurs expenses for travel between two places of business or work; and

(c) where the employment can be construed as having commenced at the time of leaving home.

A fourth situation, not enunciated in Garrett, is where the taxpayer travels between home and shifting places of work , i.e. an itinerant occupation.

It is important to note in regards to these case law exceptions that the decisions are not intended to extend the general principles of the law. As identified by IT 112:

22. The guidelines outlined in paragraph 21 above are not intended to be an exhaustive statement of the principles to be applied to all cases likely to arise in relation to travelling expenses between a taxpayer's residence and his place of employment or business but merely a statement of the principles which are considered to have emerged from the decided cases in relation to this matter. Essentially, as recognised by Dr Gerber in 79 ATC Case L49, 23 CTBR(NS) Case 56 (one of the "air pilot" cases), the Supreme Court decisions have been decided on their own peculiar facts and they should be followed in other cases only where similar circumstances obtain. They should not be regarded as altering existing policy in the normal case of travel between home and employment.

None of the exceptions identified in Genys and discussed in IT 112 are relevant to your circumstances. Therefore the general proposition stands that the travel is travel from home to work and is not deductible.

You have submitted that Taxation Determination TD 93/230 Income tax and fringe benefits tax: is a camping allowance assessable under section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) or under Division 6 of the Income Tax Assessment Act 1936 (ITAA)? (TD 93/230) provides authority for the deductibility of the flights provided.

TD 93/230 states:

1. A camping allowance which is paid as compensation for the additional expenses (and other disadvantages) incurred by an employee while living away from his or her usual place of residence will generally be assessable as a living-away-from-home allowance under section 30 of the FBTAA.

2. However, that part of a camping allowance which is paid to cover additional expenses which are 'deductible expenses' under the ITAA is not a living-away-from-home allowance under section 30 of the FBTAA. …

3. …

4. In determining the taxation treatment of a camping allowance it is important to determine whether the expenses it is intended to cover are deductible under section 51 of the ITAA36 or section 8-1 of the ITAA97. These sections will only allow such expenses to be deductible where the nexus between the expense and the employment is strong enough to overcome the negative limb of that section (ie. That the expense is not of a private, domestic or capital nature).

5. Hill J. in Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 recently considered a camping allowance where the allowance was found not to be a living-away-from-home allowance as the expenses would have been deductible under section 51 of the ITAA had they been incurred by the employee. The factors taken into account by Hill J. in determining whether section 51 would have applied to the expenses in that case included:

(a) the employee was required by the employer, as an incident of their employment, to live close by their work;

(b) the employee was only living away from home for relatively short periods of time;

(c) the employee did not choose to live at the places where the camp sites were located; and

(d) the employee had a permanent home elsewhere.

The case referred to in TD93/230 is Roads and Traffic Authority of NSW v Federal Commissioner of Taxation 26 ATR 76; 93 ATC 4508 (RTA). Food and accommodation expenses incurred while away from home are generally considered to be living expenses of a private or domestic nature and therefore not deductible (FC of T v Cooper 91 ATC 4396; (1991) 29 FCR 177 (Cooper); Federal Commissioner of Taxation v Toms 20 ATR 466; 89 ATC 4373 (Toms)), except where the employee is travelling in the course of their employment. RTA provides authority that food and accommodation expenses can also be deductible where the factual situation is comparable to the situation considered by the Federal Court in RTA.

Hill J in his judgement referred to the decision of the Full Federal Court in Cooper before stating at ATC 4521:

Wilcox J, who dissented in Cooper, was of the view that there was a close connection between the outgoings of the taxpayer and his employment as a footballer. However, in referring to living-away-from-home expenses, his Honour said (at ATC pp 4404-4405; FCR 187-188):

``Take the instance of a taxpayer visiting another city for business purposes. The taxpayer incurs expenditure for meals at his or her hotel. On one view, the essential character of the expenditure is the sustenance of the taxpayer. Such a purpose has no connection with the derivation of assessable income; other than in the broad sense - irrelevant because it is applicable to everyone - that one must eat to live and, therefore, to work and to earn assessable income. However, the expenditure may also be characterised as being the cost of sustenance incurred by the taxpayer because of his or her absence from home on business. The difference between the two characterisations is that the latter takes account of the occasion of the expenditure. When this characterisation is adopted, a work-connection immediately appears and a deduction is granted.''

With respect, the same is true in the present case. Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.

Hill J then distinguished the situation being considered from that which existed in Toms. At ATC 4522 Hill J stated:

The facts of the present case are quite different. First, each of the persons deemed hypothetically to have incurred the expenditure are employees. They are not carrying on their own business. Second, they are required, as an incident of their employment, by their employer and for the purposes of the employer to live close by their work site for relatively short periods of time. No question arises of their choosing to live in these places. Each of the persons in question has a permanent house in which he lives when not in camp. None of the employees spend inordinate periods of time in the camps so that the camp becomes their home. Their house is retained and the employees in question travel home at weekends. They do not remain in the camps. The costs in question here are an incident of the employment. The costs in Toms were not.

The recent case of Hancox v Federal Commissioner of Taxation [2013] FCA 735 (Hancox) provides further guidance about the application of RTA. Hancox considered both whether the employee was travelling in the course of his employment and whether the expenses were deductible in accordance with the RTA decision.

In Hancox the employee had a permanent place of residence in SA and was employed on a permanent full time basis in Port Hedland, WA on a fly-in fly-out basis. The employer flew the employee into and out of Port Hedland every four weeks and paid the employee an allowance while he lived in temporary accommodation in Port Hedland in lieu of providing him with food and board. In the relevant income tax year, the applicant included the allowance in his assessable income and claimed deductions for work related travel expenses. The taxpayer appealed to the Federal Court against a decision made by the Commissioner in relation to the allowance and deductions.

At paragraph 8 Basanko J discussed the interaction between the deductibility of the expenses and the classification of the allowance:

8. If the allowance of $18,000 fell within the terms of the above subsection [LAFHA provisions of subsection 30(1) of the FBTAA], then two matters followed. First, the allowance or benefit would be neither assessable income or exempt income of the applicant (s 23L of the Income Tax Assessment Act 1936 (Cth) "ITAA 1936"). In other words, it would not be part of the applicant's assessable income by virtue of s 15-2 of the Income Tax Assessment Act 1997 (Cth) ("ITAA 1997"). Secondly, and as part of the decision that the allowance fell within the terms of s 30(1) of the FBTAA, the claimed expenses of $36,124 would not be deductible expenses within s 30(1) of the FBTAA and would not be deductible expenses within s 8-1 of the ITAA 1997. That second matter follows because it is clear in this case (and not in dispute) that the allowance of $18,000 is in the nature of compensation to the applicant for the additional expenses of $36,124. The respondent and then the Tribunal found that the allowance of $18,000 fell within the terms of s 30(1) of the FBTAA.

The taxpayer submitted that the allowance was not a LAFHA but formed part of his assessable income by reason of section 15-2 of the ITAA 1997, that the expenses were deductible expenses within section 8-1 of the ITAA 1997 and that the allowance was compensation for these expenses and not a s30(1) LAFHA.

Basanko J summarised the relevant case law before concluding that the situation was distinguishable from the RTA case, the expenses were not deductible expenses and that the allowance was a LAFHA:

50 … There are two factual matters which distinguish The Roads and Traffic Authority of New South Wales v Commissioner of Taxation from this case. First and importantly, in that case the employees were required to live in the camp. In this case, the applicant chose to live in South Australia and to travel (and stay) in Port Hedland for the purpose of his employment. Secondly, the additional expenses in that case were relatively modest additional costs of food "beyond the cost of living in [the employees'] own homes and perhaps other expenses caused to them by camping". In this case, the "additional expenses" are the cost of accommodation and food and sustenance.

51 I briefly restate the main facts. The applicant is an electrician by occupation. He was employed by Downer EDI as a leading hand maintenance electrician at or near Port Hedland. The applicant's usual place of residence was in South Australia. He paid his airfares from Adelaide to Perth and Downer EDI paid for his travel from Perth to Port Hedland. The applicant incurred losses and outgoings for accommodation and food and sustenance while staying in temporary accommodation in Port Hedland.

52 The cases to which I have referred strongly suggest that the losses or outgoings in relation to accommodation (i.e., in this case rent) and food and sustenance were not incurred in the course of gaining or producing assessable income. As far as accommodation is concerned, Federal Commissioner of Taxation v Charlton is directly on point. Like the taxpayer in that case, the applicant chose to reside so far away from his place of employment that he incurred accommodation as well as travelling expenses. Like the travelling expenses, the accommodation expenses are not deductible. As far as food and sustenance is concerned, although the deductibility of expenditure on food can pose difficult questions, I do not think it does in this case. The income producing activities of the applicant were those associated with his work as an electrician. To adopt the approach of Lockhart J in Commissioner of Taxation v Cooper, the applicant was employed to perform the functions of a leading hand maintenance electrician at Downer EDI's Port Hedland site, not to consume food and drink. The decision in The Roads and Traffic Authority of New South Wales v Commissioner of Taxation is distinguishable. The food expenditure in that case was the additional cost of food by reason of living in the camp and the employees had no choice but to live away from home. In this case, the applicant could have had his usual place of residence in Port Hedland.

53 The application of the test of whether the occasion of the expenditure on accommodation and food and sustenance is to be found in the applicant's activities as a leading hand maintenance electrician leads to the same result. The occasion of the expenditure is the applicant's choice to live in South Australia rather than in Port Hedland.

54 In my opinion, the expenses of $36,124 were not incurred in gaining or producing the applicant's assessable income and were not deductible expenses within s 8-1(1)(a) of the ITAA 1997. It is not necessary for me to consider whether the expenses were of a private nature within s 8-1(2)(b) (Handley v The Commissioner of Taxation of the Commonwealth of Australia (1981) 148 CLR 182; Commissioner of Taxation v Cooper). As the expenses were not within s 8-1(1)(a), they were not "deductible expenses" within s 30(1) of the FBTAA. The allowance of $18,000 fell within s 30(1) and the Tribunal did not err in so concluding.

Considering the further guidance provided by Hancox, it is considered that your employees' situation, as the taxpayer's was in Hancox, is distinguishable from the RTA decision. Your employees are employed to work on this project. Similarly to what was concluded at paragraph 53 of Hancox, the occasion of the expenditure would be your employees' choice to live in their home locations rather than nearby the worksite and as such, the expenses are not incurred in gaining or producing assessable income and therefore, are not deductible expenses. Had your employees incurred the expenses of the flights themselves they would not have been entitled to an income tax deduction for the costs and therefore the costs are not otherwise deductible in accordance with section 52 of the FBTAA.

Summary

The employees are not travelling in the course of their employment. None of the situations discussed in Genys are applicable to your employees circumstances and your employees' situations are not analogous with the factual situation in RTA and therefore the proposition identified in RTA cannot be applied. Therefore, had your employees incurred the expenses of the flights themselves they would not have been entitled to an income tax deduction for the costs and therefore the costs are not otherwise deductible in accordance with section 52 of the FBTAA.

Conclusion

When you provide the rotational flights to your employees you provide them with a residual benefit in accordance with section 45 of the FBTAA.

The requirements of paragraph 47(7)(c) of the FBTAA will not be met and therefore the benefits will not be exempt from being fringe benefits under subsection 47(7) of the FBTAA.

The benefit provided by the first and final flights will be exempt from being fringe benefits under section 58F of the FBTAA, however the requirements of section 58F will not be met in relation to the benefits arising from the provision of the remaining flights.

No other exemptions apply to exempt the benefits arising from the provision of the remaining flights as being fringe benefits and therefore the remaining flights will be residual fringe benefits.

The taxable value of the residual fringe benefits arising from the provision of the remaining flights will not be able to be reduced by the use of the otherwise deductible rule contained in section 52 of the FBTAA. Therefore you will incur a fringe benefits tax liability for the residual fringe benefits arising from the provision of all of the rotational flights except for the first and final flight for each employee.

Question 4

Will you incur a fringe benefits tax liability for the rotational flights provided to your employees who receive a living-away-from-home allowance?

Instead of providing some employees with accommodation in either the camp or motel, you provide them with a living-away-from-home allowance (LAFHA) for their food and accommodation. These employees choose and arrange their own accommodation.

These employees work on the same rotational FIFO basis as the employees who stay at the camp and who stay unaccompanied at the motel.

Refer to question 1 above. The same reasoning can be applied to conclude that the provision of the rotational flights to your employees who receive a LAFHA is a residual benefit which will be a fringe benefit if it is not an exempt benefit.

The exemption contained in subsection 47(7) of the FBTAA requires that the employee is provided with residential accommodation (47(7)(b)). These employees are not provided with residential accommodation but are provided with an allowance for the cost of food and accommodation and they arrange their own accommodation. Therefore the benefit in relation to the flights provided to these employees will not be exempt under subsection 47(7) of the FBTAA.

Refer to the discussion at question 3 above regarding the relocation transport exemption contained in section 58F.

The criteria set out in paragraphs 37-43 of MT 2030 considered above, can be similarly applied to the employees receiving the LAFHA to conclude that they are not travelling in the course of performing the duties of their employment. The fact that these employees are not accompanied by their families does not change the fact that they are not travelling in the course of their employment. The circumstances of these employees align with the examples of unaccompanied employees who are living away from home discussed in paragraph 43 of MT 2030 and on the facts it is considered that the employees are not travelling, but living away from home.

Further, you will be paying these employees a LAFHA which indicates that you do not consider that these employees will be travelling in the course of their employment but consider they will be living away from home.

The same reasoning as applied in question 3 above can therefore be applied to conclude that the first and final flights at the commencement and cessation of the employees' employment will be exempt under section 58F of the FBTAA. The first flight is provided solely because the employee is required to live away from their usual place of residence in order to perform the duties of their employment (143A(c)(i)) and the final flight is provided solely because the employee, having lived away from their usual place of residence in order to perform the duties of their employment, is required to return to their usual place of residence because the employee has ceased to perform those duties (143A(c)(ii))). The flights to and from the employees' usual place of residence after the employees working days and days off at their usual place of residence are provided wholly, or at least in part, for the employee to have recreational leave at their usual places of residence. These flights are not provided solely for any of the purposes listed in subparagraphs 143A(c)(i) to 143A(c)(iii) of the FBTAA and as such are not considered to be benefits provided in respect of relocation transport (failing paragraph 143A(c)). Therefore only the benefits provided by the provision of the first and final flights will be exempt under section 58F.

No other exemptions apply to exempt the provision of the remaining flights from being fringe benefits. Therefore, the provision of the remaining flights are residual fringe benefits.

Refer to the discussion of the otherwise deductible rule at question 3 above.

As discussed the costs of travelling to and from work are generally not deductible however the costs of travelling on work can be deductible.

As discussed above you will pay these employees a LAFHA on the basis that they are living away from their usual places of residence and we agree that when your employees travel on a rotational basis of a number of days at the worksite and a number of days at their usual places of residence, they are not travelling in the course of their employment but are living away from their usual places of residence. Therefore, as identified in Lunney and confirmed in IT 112 the costs of such travel are not considered to be deductible to the employee.

None of the exceptions identified in Genys and discussed in IT 112 are relevant to your employees' circumstances. Therefore the general proposition stands that the travel is home to work travel and is not deductible. For the same reasons as discussed in question 3 above, the present circumstances are distinguishable from the RTA case in accordance with the decision in Hancox and TD 93/230 is not considered applicable authority to conclude that the remaining flights are deductible.

Conclusion

The residual benefits arising from the provision of the first and final flight provided to the employees that receive the LAFHA will be exempt under section 58F of the FBTAA. The remaining flights, provided between the commencement and cessation of the employees' employment, will be residual fringe benefits and the taxable value of those fringe benefits cannot be reduced by the otherwise deductible rule.