Edited version of your private ruling

Authorisation Number: 1012594398720

Ruling

Subject: Reimbursement of relocation expenses

Question 1

Is the reimbursement of accommodation expenses incurred by the employee while relocating exempt from fringe benefits tax (FBT)?

Answer

Yes

Question 2

Is the reimbursement of meal expenses incurred by the employee when relocating exempt from FBT?

Answer

Yes

Question 3

Is the reimbursement of furniture expenses incurred by the employee while relocating exempt from FBT?

Answer

No

Question 4

Is the reimbursement of motor vehicle and transport expenses incurred by the employee while relocating exempt from FBT?

Answer

Yes

Question 5

Is the reimbursement of storage expenses incurred by the employee while relocating exempt from FBT?

Answer

Yes

This ruling applies for the following periods:

1 April 2012 - 31 March 2013

The scheme commences on:

1 April 2012

Relevant facts and circumstances

The employee commenced employment with the employer in another State to where they originally resided in.

The employee is required to be physically present at their new job location to undertake their employment duties.

The employment is permanent and on an on-going basis.

The distance between the employee's previous residence and their new residence is significant.

The employee's relocation took a few days, and they commenced their employment shortly after in early 2013.

The employee relocated with their family.

The employer will reimburse the relocation expenses incurred by the employee.

The employee and their family incurred the following expenses during their relocation:

• Accommodation expenses

• Meal expenses

• Furniture expenses - furniture that has been purchased not leased.

• Motor vehicle transport

• Removalist costs

The employer will provide benefits on an arms-length basis.

The employer has requested that the employee provide documentary evidence in support of the employee's expenditure. The employee has provided the employer with evidence of actual costs incurred.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 section 58B

Fringe Benefits Tax Assessment Act 1986 section 58F

Fringe Benefits Tax Assessment Act 1986 section 61C

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 section 143A

Income Tax Assessment Act 1997 subdivision 900-E

Reasons for decision

Section 58F of the FBTAA exempts certain benefits provided to an employee during their relocation between their former place of residence and their new place of residence. To qualify for the exemption the following conditions must be satisfied:

1) A car, expense payment, property or residual benefit is provided.

2) The benefit is in respect of relocation transport.

3) Where an expense payment benefit is provided:

a. transport costs are not in respect of car expenses reimbursed on a cents per kilometre basis, and

b. documentary evidence is provided to the employer.

Expense payment benefit

Section 20 of the FBTAA specifies an 'expense payment benefit' as:

Where a person (in this section referred to as the 'provider'):

a) makes a payment in discharge, in whole or in part, of an obligation of another person in this section referred to as the 'recipient') to pay an amount to a third person in respect of expenditure by the recipient; or

b) reimburses another person (in this section also referred to as the 'recipient'), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

The employer will reimburse the accommodation costs of the employee and their family during the relocation period. This is considered to be an expense payment benefit under section 20 of the FBTAA.

Relocation transport

Under section 143A of the FBTAA a benefit is in respect of 'relocation transport' where the following conditions are satisfied:

(1) The benefit is a car, expense payment, property or residual benefit.

(2) Transport, accommodation or meals for family members is provided.

(3) The transport is provided solely because the employee is required to live away from his or her usual place of residence to perform employment duties.

(4) The transport is provided to enable a family member to take up residence at the new or former usual place of residence.

(5) Where the transport is in respect of a spouse or child of the employee this must not be concurrent with a business trip of the employee if the family member's travel would have been deductible.

(6) The transport must not be for an employee undertaking travel in the course of performing employment duties.

(7) Where the employee changes his or her usual place of residence the benefit is provided under an arm's length arrangement.

In this case, the benefit is an expense payment under section 20 of the FBTAA because it is a reimbursement paid to the employee for accommodation costs during their relocation.

Before commencing employment the employee's usual place of residence was in another State in Australia. Although, the employer does not stipulate in the employment contracts that employees must live away from their usual place of residence, it is a matter of practicality that the employee in this case, takes up residence in in another State due to the nature of their employment duties. The employee is required to be physically present to undertake their employment duties and would be unable to travel from one State to another State every day.

Consequently, the transport is required to enable the employee to take up residence in their new usual place of residence to commence their duties. There is no indication that the employee moved residences for any other reason. The employee was also not traveling in the course of performing their employment duties as they had not commenced employment.

It is considered that the benefit is provided in relation to relocation transport.

Documentary evidence

'Documentary evidence' is defined in subsection 136(1) of the FBTAA to mean a document that would be written evidence of the expense as prescribed in Subdivision 900-E of the Income Tax Assessment Act 1997 (ITAA 1997) if the expense were a work expense and Division 900 applied to the person.

Practice Statement Law Administration PS LA 2005/7 Substantiation of deductions claimed by individual taxpayers for work and car expenses incurred in the course of earning non-business and non-investment income provides further guidance on what is included in documentary evidence and states at paragraph 10:

Subsections 900-115(2) and 900-120(2) of Subdivision 900-E of the ITAA require a taxpayer to obtain a document from the supplier of the relevant goods or services, except in special circumstance referred to elsewhere in Subdivision 900-E of the ITAA 1997. These subsections specify that the document must set out:

a) the name or business name of the supplier

b) the amount of the expense, expressed in the currency in which it was incurred - or the cost of the asset

c) the nature of the goods or services - or asset

d) the day the expense was incurred - or asset was acquired, and

e) the day it is made out.

Where the details of (c) and (d) are missing from the document, subsection 900-115(3) operates to allow the taxpayer to write the missing details regarding the nature of the goods or services on the document before they lodge their tax return. It also provides for the taxpayer to use alternate reasonable evidence, such as a bank statement, to show when the amount was paid. Separately relief may be available under Subdivision 900-H of the ITAA1997 where the requirements of Subdivision 900-E of the ITA 1997 have not been met.

In this case, the expense payment benefit will be for the reimbursement of actual costs incurred by the employee for accommodation. The employee has provided their employer with evidence of actual costs incurred.

Conclusion

In consideration of the above, the reimbursement of accommodation expenses that were incurred while the employee was relocating is an exempt benefit and will not be subject to fringe benefits tax.

Question 2

Section 58F of the FBTAA exempts certain benefits provided during an employee's relocation. To qualify for the exemption the following conditions must be satisfied:

(1) A car, expense payment, property or residual benefit is provided.

(2) The benefit is in respect of relocation transport.

(3) Where an expense payment benefit is provided:

(a) transport costs are not in respect of car expenses reimbursed on a cents per kilometre basis, and

(b) documentary evidence is provided to the employer.

In this case, the employee incurred meal expenses during the relocation from the employee's former place of residence to the employee's new place of residence.

Expense payment benefit

The employer will reimburse meal expenses during the relocation. This is considered to be an expense payment benefit under section 20 of the FBTAA.

Relocation transport

Under section 143A of the FBTAA a benefit is in respect of relocation transport where the following conditions are satisfied:

(1) The benefit is a car, expense payment, property or residual benefit.

(2) Transport, accommodation or meals for family members is provided.

(3) The transport is provided solely because the employee is required to live away from his or her usual place of residence to perform employment duties.

(4) The transport is provided to enable a family member to take up residence at the new or former usual place of residence.

(5) Where the transport is in respect of a spouse or child of the employee this must not be concurrent with a business trip of the employee if the family member's travel would have been deductible.

(6) The transport must not be for an employee undertaking travel in the course of performing employment duties.

(7) Where the employee changes his or her usual place of residence the benefit is provided under an arm's length arrangement.

In this case, the benefit is the reimbursement of meal expenses incurred during the employee's relocation from one State to another State.

The above conditions are satisfied as the meal expenses are reimbursed by the employee to enable the employee and his family to take up residence in a new locality. The sole reason for the transport was so the employee could undertake their new employment duties, there is no indication that the employee moved for any other reason.

The benefit is in relation to 'relocation transport' above.

Documentary evidence

Documentary evidence must satisfy the requirements in subdivision 900-E in the ITAA 1997 for the exemption to apply.

The employer has requested documentary evidence and the employee has provided evidence of meal expenses incurred.

Conclusion

In consideration of the above, the reimbursement of meal expenses that were incurred while the employee was relocating is an exempt benefit and will not be subject to fringe benefits tax.

Question 3

Section 20 of the FBTAA provides that the reimbursement of expenses incurred by an employee is considered to be an 'expense payment benefit'. In this case, the employer has indicated they will reimburse its employee's furniture expenses incurred as a result of relocating.

Section 61C of the FBTAA, reduces the taxable value of expenses payment benefits and residual benefits provided in respect of household goods (held under a lease or licence) for use in temporary accommodation for an employee and their family.

From the information provided, the employee purchased new furniture, and the furniture was not held under a lease or licence. Therefore, section 61C of the FBTAA does not have any affect in reducing the taxable value of the benefit.

The reimbursement will be subject to the provisions in Division 5 of the FBTAA which relate to expense payment fringe benefits.

Question 4

Section 58F exempts from fringe benefits tax 'benefits in respect of relocation transport'. To qualify for the exemption the following conditions must be satisfied:

(1) A car, expense payment, property or residual benefit is provided.

(2) The benefit is in respect of relocation transport.

(3) Where an expense payment benefit is provided:

(a) transport costs are not in respect of car expenses reimbursed on a cents per kilometre basis, and

(b) documentary evidence is provided to the employer.

Expense payment benefit

In this case, the employer will reimburse the expenses incurred by the employee on motor vehicle and transport costs incurred between the employee's former residence and their new residence.

The reimbursement is an expense payment benefit.

Relocation transport

The requirements for a benefit to be treated as a benefit in respect of relocation transport are specified in section 143A of the FBTAA. In summary the requirements are:

(1) The benefit is a car, expense payment, property or residual benefit.

(2) Transport, accommodation or meals for family members is provided.

(3) The transport is provided solely because the employee is required to live away from his or her usual place of residence to perform employment duties.

(4) The transport is provided to enable a family member to take up residence at the new or former usual place of residence.

(5) Where the transport is in respect of a spouse or child of the employee this must not be concurrent with a business trip of the employee if the family member's travel would have been deductible.

(6) The transport must not be for an employee undertaking travel in the course of performing employment duties.

(7) Where the employee changes his or her usual place of residence the benefit is provided under an arm's length arrangement.

In this case, the above conditions are satisfied as the transport expenses are reimbursed by the employer to enable the employee and his family to take up residence in a new locality. The sole reason for the transport was so the employee could undertake their new employment duties, there is no indication that the employee moved for any other reason.

Transport costs

Exemption under section 58F of the FBTAA only relates to expense payment benefits not calculated under a cents per kilometre basis. In this case, the employer has a record of the actual expenses incurred by the employee. It is the reimbursement of these expenses that would be covered by the exemption.

Documentary evidence

Documentary evidence must satisfy the requirements in subdivision 900-E in the ITAA 1997 for the exemption to apply.

The employer has requested documentary evidence and the employee has provided evidence of actual motor vehicle expenses incurred.

Conclusion

In consideration of the above, the reimbursement of motor vehicle expenses that were incurred while the employee was relocating is an exempt benefit.

Question 5

Section 58B of the FBTAA provides an exemption for benefits provided for the removals and storage of household effects as a result of relocation.

The conditions for exemption are where:

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

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

(b) the removal or storage 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;

(c) the removal or storage is required to enable a family member to:

(i) if subparagraph (b)(i) applies - take up residence, or to continue to reside, 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 (b)(ii) applies - take up residence at the employee's usual place of residence; or
(iii) if subparagraph (b)(iii) applies - take up residence, or to continue to reside, at the employee's new usual place of residence;

(d) if subparagraph (b)(iii) applies:

(i) the removal takes place, or the storage commences to be provided, within 12 months after the day on which the employee commenced to perform the duties of that employment at the employee's new place of employment; and
(ii) the benefit is not provided under a non-arm's length arrangement;

(e) if subparagraph (a)(i) applies - documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date; and

(f) the removal or storage was not provided in connection with travel undertaken by the employee in the course of performing the duties of that employment;

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

Expense payment

The employer will reimburse the costs associated with transporting the employee's furniture from their previous place of residence to their new place of residence.

This is considered to be an expense payment benefit.

Solely required

The removal or storage is incurred solely because the employee is required to live away from home (or return from living away from home) or because the employee is required to change their usual place of residence, in order to perform the duties of their employment.

ATO Interpretive Decision ATO ID 2013/8 Fringe benefits tax: Employee required to change usual place of residence in order to perform duties of employment, considers instances where the employer does not specify that an employee needs to change their usual place of residence but nevertheless the duties of their employment make it necessary. The following factors were considered relevant when there is considerable distance between the employee's usual place of residence (former residence) and their new place of employment:

• the distance between the employee's usual place of residence and their new place of employment;

• the employee is not permitted to perform their new duties of employment from the former place of employment;

• the employer will not provide transport for the employee to commute between their usual place of residence and the new place of employment; and

• the employee is required to be on call at certain times and must sign on for duty within two hours of being contacted by their employer.

In this case, the employer has indicated that the employment contracts do not specify that the employee must change their usual place of residence to the new job location. However, due to the nature of the employee's duties they are required to be physically present in the new job location to undertake their duties. Further, there is a considerable distance between the employee's previous residence and their new job location and it would be impractical for the employee to travel to work from their previous residence every day.

In consideration of the above, it is evident that the employee has incurred removalist costs solely because they are required to change their usual place of residence to undertake their new employment duties.

Take up residence at new usual place of residence

The term 'usual place of residence' is not a defined term in the FBTAA. However, the term 'place of residence' in relation to a person, is defined in subsection 136(1) as:

a) a place at which the person resides; or

b) a place at which the person has sleeping accommodation'

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

In this case, we consider that the employee has changed their usual place of residence to another State and this is where the employee will permanently reside with their family.

12 month limitation & arms-length benefit

The storage or removal must take place within 12 months of the employee commencing their employment.

The employee commenced employment in early 2013. Relocation occurred during the week before commencement of employment. It is considered that this is within the 12 month limitation period. Further, the employer has advised all their benefits are made on an arms-length basis.

Documentary evidence

Documentary evidence will need to satisfy the requirements in subdivision 900-E of the ITAA 1997 for this provision to apply.

The employer has requested documentary evidence and the employee has provided their employer with evidence of actual costs incurred.

Travel in the course of employment

The removalist's costs are not reimbursed for travel in the course of employment but for the employee to change their usual place of residence in order to commence employment.

Not provided in the course of performing employment duties

The employee did not travel in connection with employment duties, as they were relocating to commence employment.

Conclusion

In consideration of the above, the reimbursement of removalist costs that were incurred while the employee was relocating is an exempt benefit.