Edited version of your private ruling

Authorisation Number: 1012603622380

Ruling

Subject: Taxable value of LAFH fringe benefits reduced under the RTA principle

Question 1

Can the taxable value of board meals provided to employees who reside in the accommodation provided, be reduced to nil under section 37 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Question 2

Can the taxable value of the accommodation provided to employees be reduced to nil under section 52 of the FBTAA?

Answer

Yes, where the exemption under subsection 47(7) of the FBTAA does not apply.

Question 3

Can the taxable value of the transport benefits provided to employees on a rostered working day, be reduced to nil under section 52 of the FBTAA between the accommodation provided and the project sites?

Answer

Yes.

Question 4

Can the taxable value of the flight transport benefits provided to employees to enable them to travel to and from the project site, be reduced to nil under section 52 of the FBTAA?

Answer

No.

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

The scheme commences on:

1 April 2011.

Relevant facts and circumstances

The employer has been awarded construction contracts for projects.

X is the first point of entry for most non-local employees.

X is an 'eligible urban area' as defined in subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). E is located 'adjacent' to X. Therefore E and X are not a 'remote area' for fringe benefits tax or income tax purposes.

The project site has limited facilities and infrastructure available, dense bush lands and no roads.

The employees work on a rostered basis.

The accommodation and other amenities are provided for the employees to use, whilst rostered on.

The employer provides the employees with meals, accommodation and transport in connection with their work.

Whilst rostered on, employees are generally given no choice regarding:

• when and where their daily meals will be provided;

• the type or location accommodation, in which they stay while on the project sites; or

• the type of transport they are provided to enable them to travel to and from the accommodation and project sites.

The employer provides living-away-from home fringe benefits to their employees as part of the terms of their employment and no contribution is required from employees.

There is no suitable accommodation facilities available for all employees that the employer needs to work on the projects. As a consequence the employer provides temporary accommodation for its employees.

All employees have a usual place of residence which they have the option of returning to after periods being rostered on and after their employment assignment is finished.

Employees are not able to choose the type or location of the accommodation in which they reside. All employees generally must reside in the accommodation facilities provided.

Employees cannot be accompanied by their family members. Visitors are prohibited.

Transport provided to employees

The employer provides employees with transportation to and from the accommodation provided and the project site (work location).

Flights

At the completion of their rostered periods on, the employees have a choice to either return to their home location or travel to another location.

For employees who choose to travel back to their home location at the completion of their rostered on periods, the employer provides commercial economy class air tickets.

Employees who choose to travel to another location following a rostered on period are provided with a flight of an equivalent or lower value to that of a flight to their home location.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 31C

Fringe Benefits Tax Assessment Act 1986 Section 31D

Fringe Benefits Tax Assessment Act 1986 Section 31E

Fringe Benefits Tax Assessment Act 1986 Section 35

Fringe Benefits Tax Assessment Act 1986 Section 36

Fringe Benefits Tax Assessment Act 1986 Section 37

Fringe Benefits Tax Assessment Act 1986 Section 45

Fringe Benefits Tax Assessment Act 1986 Section 50

Fringe Benefits Tax Assessment Act 1986 Section 51

Fringe Benefits Tax Assessment Act 1986 Section 47(5)

Fringe Benefits Tax Assessment Act 1986 Section 47(7)

Fringe Benefits Tax Assessment Act 1986 Section 52

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 15-2

Reasons for decision

Question 1

Any reduction of the taxable value of the board fringe benefit calculated under section 36 of the FBTAA would come under the otherwise deductible rule (ODR) in accordance with section 37 of the FBTAA.

If the specific occasion or circumstances in which the board fringe benefits are provided is such that the meal expenses would have been income tax deductible, had the employees incurred these expenses, then the taxable value of the board fringe benefit provided would be reduced to nil under the ODR provisions.

This is a hypothetical question regarding the income tax deductibility of the expense incurred in the hands of the employee.

In this case, the meals provided meet the criteria in section 35 of the FBTAA and therefore are board fringe benefits. The ODR in section 37 applies to reduce the taxable value of the board fringe benefit to nil, for the provision of meals at both camp sites, as the principles in Roads and Traffic Authority of NSW v FC of T 93 ATC 4508; 26 ATR 76 (the RTA case) are satisfied.

Question 2

If an employee(s) meets the requirements under subsection 47(5) of the FBTAA, then the exemption applies.

If the exemption applies the benefit it is not a fringe benefit, hence there is no taxable value of the accommodation in the camps, to be reduced by ODR.

However, in circumstances where the exemption does not apply, the otherwise deductible rule can apply, where the principles in the RTA case are satisfied. Therefore, due to the location of the camps and the conditions of employment, if the employee had incurred additional expenses on accommodation, these expenses would be deductible under section 8-1 of the ITAA 1997, and the taxable value of the camp accommodation is reduced to nil.

Question 3

Subsection 47(7) of the FBTAA does not apply to these employees as they are not working in a remote area as defined in subsection 140(1) of the FBTAA. Therefore, we need to examine the ODR under section 52 of the FBTAA to ascertain whether this private expense can be turned into a deductible work related expense, if the employee had incurred this expense.

The principles in the RTA can apply to transport (travel expense) but only in the circumstances/factors outlined in the RTA case.

Lunney v FC of T and Hayley v FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166 cases are the authority on income tax deductibility of transport costs between an employee's home and work place. In this regard, subsequent taxation rulings issued by the Commissioner on the deductibility of home to work travel follow the general rule outlined in Lunney's case, that travel between home and work is private unless one of the limited exceptions, or the principles in the RTA case apply.

In the scenarios stated in question 3, taking into account the employment conditions and the principles in the RTA case, if the employee had incurred the additional transport costs, the transport expenditure costs are deductible. Hence the ODR under section 52 of the FBTAA will reduce the taxable value of the benefit to nil.

Question 4

Most employees will be fly-in fly-out employees that meet the criteria in section 31E of the FBTAA but the fringe benefits in relation to travel will not be exempt under subsection 47(7) of the FBTAA.

Hence we have to consider the application of the ODR under section 52 of the FBTAA for the three transport questions mentioned in question 4.

In question three, we concluded, the travel in the situations outlined in them, was otherwise deductible. In question 4(a) we arrive at the same conclusion. If the employee had incurred additional travel expenses of the bus service described, it would be deductible under section 8-1 of the ITAA 1997.

However, flights provided to employees to travel to and from their usual place of residence (home location), or to another location (not their home location) and the airport will not be income tax deductible. In respect of this travel the RTA principles will not apply and the Lunney principles will deny a tax deduction, as the employees are simply travelling to and from work.

Further, in the circumstances outlined in questions 4(b) and (c), the RTA principles do not apply as there is insufficient connection between the cost of the economic airfare and the employment from which assessable income is earned. Hence these flights are not income tax deductible under section 8-1 of the ITAA 1997, as the travel expense is caught under the negative limb as a private expense.

Transport benefits outlined in questions 4(b) and (c) will not be reduced by the ODR in section 52 of the FBTAA. However, the transport provided in the situation outlined in question 4(a) will be otherwise deductible.