Edited version of private advice

Authorisation Number: 1012617882014

Ruling

Subject: Fringe Benefits Tax

Question 1

For the purposes of subsection 47(7) of the Fringe Benefits Tax Assessment Act 1986, is the employees' usual place of employment in a location which is not in, or adjacent to, an eligible urban area?

Answer

Yes, except for when they are working in that area that is less than 100 kilometres from the eligible urban area.

Question 2

For the purposes of sections 60A and 61 of the Fringe Benefits Tax Assessment Act 1986, do employees perform their duties of employment in a location which is not in, or adjacent to, an eligible urban area?

Answer

Yes, except for when they are working in that area that is less than 100 kilometres from the eligible urban area.

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

The scheme commences on:

Income year beginning 1 July 2012

Relevant facts and circumstances

You are building a structure that covers a vast area.

Construction has been split into several geographic stages, with work crews set up for the various activities required. You have provided details of the location, distance and start and finish dates for those stages.

Each morning employees are required to report into a depot to go through certain procedures. There is more than one depot being used depending on the stage of construction. You have provided the location of those depots.

After a brief meeting, the work crews will progress to various parts of the construction site to conduct their work activities. Within each stage, employees will be travelling along the construction site.

You have provided details of the nature of your employees' duties of employment at the construction site.

As construction involves crossing over government and private land holdings, the work areas are often accessible only by easements and access roads.

You have employed people through employment contracts which will be fixed for their tenure on the project. While you always attempt to utilise local employees, the majority of the work force are from other parts of Australia and are required to live away from home.

Employees are accommodated in the following manner:

• The majority of employees reside in camp with food and accommodation provided.

• Some employees are provided with a living away from home allowance (LAFHA) and reside in surrounding around the areas.

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

While there are no formal restrictions for employees out of hours, there is no significant amount of time available for recreation as a result of the working hours, travel time and location.

The working hours are xx hours a week, six days a week, on a four weeks on and one week off cycle. On their week off, where required, the employees are provided with transport benefits to return to their normal place of residence.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 47(7),

Fringe Benefits Tax Assessment Act 1986 section 60A,

Fringe Benefits Tax Assessment Act 1986 section 61,

Fringe Benefits Tax Assessment Act 1986 section 140 and

Fringe Benefits Tax Assessment Act 1986 subsection 143(1).

Reasons for decision

Question 1

Summary

For those employees working on particular stages, the usual place of employment is at a location which is not in, or adjacent to, an eligible urban area. However, for employees not working on those stages, the usual place of employment will for the most part be at a location adjacent to an eligible urban area.

Detailed reasoning

The provision of residual benefits commonly known as 'fly-in fly-out' transport may be exempt benefits under subsection 47(7) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where all of the conditions for that exemption are met.

The first requirement, in accordance with paragraph 47(7)(a) of the FBTAA is as follows:

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 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…

In relation to locations that are not in Zone A or B for income tax purposes, a location in a State or Territory is not in or adjacent to, an eligible urban area if it is located

• at least 40 kilometres from a town with a census population between 14,000 and to less than 130,000, or

• at least 100 kilometres from a town with a census population of 130,000 or more.

The population figures must be based on the 1981 census.

Where an employer provides fringe benefits the FBT payable on those benefits is determined in a year of tax, i.e. 1 April to 31 March. The definition of fringe benefit excludes a benefit that is an exempt benefit in relation to a year of tax. Therefore, the term 'period of employment' in subsection 47(7) of the FBTAA refers to the period that the employee is employed within the relevant year of tax.

Additionally, the structure of subsection 47(7) of the FBTAA indicates that its application must be considered at the point in time when the benefit was provided. According to the subsection:

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

The 'transport referred to in paragraph 47(7)(d)' is

…transport on a regular basis in connection with the travel referred to in subparagraph (c)(ii)…

The 'travel referred to in subparagraph (c)(ii)' is travel

…from that usual place of employment to his or her usual place of residence and, on completion of days off, returns from his or her usual place of residence to that usual place of employment…

'That usual place of employment' is the place referred to in paragraph 47(7)(a).

The 'usual place of employment' of the employee will be the employee's usual place of employment during the year of tax and at the time he or she is provided with the benefit.

The term 'usual place of employment' is not defined within the FBTAA. Some guidance as to what is meant by 'place of employment' can be found in the definition of 'primary place of employment' in subsection 136(1) of the FBTAA.

From that definition we can establish that an employee's place of employment is:

• business or associated premises of the employer or an associate of the employer and

• the employee performs his or her duties of employment there.

Based on the definition in subsection 136(1) of the FBTAA 'associated premises' of the employer includes premises otherwise under its control.

The meaning of the term premises is addressed in paragraph 26 of Taxation Ruling TR 2000/4 which states:

The term 'premises' is not defined in the FBTAA and, therefore, it must be given its ordinary meaning. The word "premises" has a long history of use as a wide and general word referring to land or land and buildings' (per Burchett J in FC of T v. Reynolds Australia Alumina Ltd & Ors (1987) 19 ATR 598, at 617; 87 ATC 5018, at 5033; (1987) 77 ALR 543, at 559; (1987) 18 FCR 29, at 49).

The meaning of usual in relation to where an employee works has been considered in cases dealing with workers' compensation law. Although the meaning of the terms 'usually carries out the work' and 'usually worked' were considered within a particular statutory context, they do provide some guidance in relation to usual place of employment.

In Hanns v Greyhound Pioneer Australia Ltd [2006] ACTSC 5; (2006) 196 FLR 361; [2006] ALMD 6556, the court had to decide what was meant by the place at which a worker 'usually carries out the work' for the purposes of the Workers Compensation Act 1951 (ACT).

The respondent had argued that it meant where the employee worked 'more often than not', but the court said 'usually' meant habitual or customary. The court said that customary, frequent or regular use does not imply a quantitative test and that if it was intended to quantify the time spent in each place, the legislature could have provided that. The court looked at the structure of the provision itself and found that it did not support a quantitative test.

In Ferguson v WorkCover Queensland [2013] QSC 78, the court was required to determine where an applicant 'usually worked'. It concluded that the expression means 'where the worker habitually or customarily works, or works in a regular manner'. It said it is not to be determined by deciding where the worker spent the majority of his work time. The court also concluded that it was possible to 'usually work' in two states if a worker habitually or customarily works in both.

In building the structure you have access to the land on which it is located therefore they are your associated premises. Your employees' duties of employment involve the building of the structure.

Whilst it may be argued that the whole of the structure is your employees' usual place of employment, there are several factors which suggest that it is not. Those factors are as follows:

• an employee's usual place of employment must be considered within the FBT year and at the point in time when the benefit was provided

• the distance covered by the whole of the structure is vast

• its construction is in stages so that parts of the structure may not have existed at the time when a benefit was provided to the employee and

• within a stage, the location at which employees work varies as they move around.

In addition to this under subsection 47(7) the transport provided to the employee must be from or to the usual place of employment which is at a location not in, or adjacent to, an eligible urban area. If the whole structure is the usual place of employment then there will be no exempt benefits as the structure is at a location adjacent to an eligible urban area.

This outcome is contrary to the intention of the legislation. The Explanatory Memorandum to the FBTAA states that

the concession in 47(7) …extends to employees who work in "remote area"…or an oil rig or other installation at sea who are provided with residential accommodation at or near the work site and the employee's place of residence…

When your employees work on that part of the structure that is more than 100 kilometres from the relevant urban area, the nearest eligible urban area based on the 1981 census, the exemption is intended to cover the transport provided to them. If the whole of the structure is the usual place of residence, then even when they are working in such a location the benefit provided to them will not be exempt.

Taking into account the nature of the structure and the work being undertaken, the possibility that employees may have more than one usual place of employment and the intent of the legislation it is concluded that your employees' usual place of employment is the place at which they are performing the duties of their employment at the time that they are provided with the benefit.

For those employees working on particular stages when provided with the benefit, the usual place of employment is at a location which is not in, or adjacent to, an eligible urban area. For each of these stages, all of the structure and the relevant depot are at a location greater than 100 kilometres from the closest eligible urban area.

However, for employees not working on those stages when provided with the benefit, the usual place of employment will for the most part be at a location adjacent to an eligible urban area as the majority of structure in that stage and the depot is less than 100 kilometres from the closest eligible urban area.

Question 2

Summary

The employees working on particular stages perform the duties of their employment at a place in a State that is not adjacent to an eligible urban area. However, for employees not working on those stages employees will for the most part be performing the duties of employment at a place in a State that is a location adjacent to an eligible urban area.

Detailed reasoning

There are a number of conditions that must be satisfied for the remote area holiday transport concessions in sections 60A and 61 of the FBTAA to apply. Both sections refer to the provision of remote area holiday transport.

Section 143 of the FBTAA sets out how an expense payment, property or residual benefit shall be taken to be in respect of remote area holiday transport. One requirement is in paragraph 143(1)(f) of the FBTAA, it states:

…apart from temporary absences, the employee performs the duties of his or her employment at a place in a State or internal Territory but not at a location in, or adjacent to, an eligible urban area…

It is considered that this requirement is similar to the requirement of paragraph 47(7) of the FBTAA. Therefore you need to consider where the employees are performing the duties of their employment at the time that they are provided with the relevant benefit.

The employees working on particular stages perform the duties of their employment at a place in a State that is not adjacent to an eligible urban area. This is because those areas are at a location greater than 100 kilometres from the closest eligible urban area.

However, for employees not working on those stages, they will for the most part be performing the duties of their employment at a place in a State that is a location adjacent to an eligible urban area as most of the location is less than 100 kilometres from the nearest eligible urban area.