Edited version of your private ruling

Authorisation Number: 1012626666924

Ruling

Subject: Fringe benefits tax

Question 1

In relation to example one, does the otherwise deductible rule apply such that FBT is not payable on flights, accommodation and meals provided to the non-resident individual assigned to the Australian Branch?

(a) Flights

(b) Accommodation

(c) Meals

Answer

(a) Not applicable, exempt benefit

(b) No

(c) No

Question 2

In relation to example two, does the otherwise deductible rule apply such that FBT is not payable on flights, accommodation and meals provided to the non-resident individual assigned to the Australian Branch?

(a) Relocation flights

(b) Home visit flights

(c) Accommodation

(d) Meals

Answer

(a) Not applicable, exempt benefits

(b) No, other reduction may be available

(c) No

(d) No

Question 3

In relation to example three, does the otherwise deductible rule apply such that FBT is not payable on flights, accommodation and meals provided to the non-resident individual assigned to the Australian Branch?

(a) Relocation flights

(b) Spouse visit flights

(c) Accommodation

(d) Meals

Answer

(a) Not applicable, exempt benefits

(b) No, other reduction may be available

(c) No

(d) No

Question 4

In relation to example four, does the otherwise deductible rule apply such that FBT is not payable on flights, accommodation and meals provided to the non-resident individual assigned to the Australian Branch?

(a) Flights

i) Early July to mid-August the same year

ii) Mid-September to late September the same year

iii) Early November to mid-November the same year

iv) Late November late December the same year

v) Four days in January

(b) Accommodation

i) For the period early July to mid-August the same year

ii) For the period mid-September to late September the same year

iii) For the period early November to mid-November the same year

iv) For the period late November to late December the same year

v) For the period mid-January to late January the same year

(c) Meals

i) For the period early July to mid-August the same year

ii) For the period mid-September to late September the same year

iii) For the period early November to mid-November the same year

iv) For the period late November to late December the same year

v) For the period four days in January

Answer

(a) Flights

i) Not applicable, exempt

ii) Yes

iii) Yes

iv) Not applicable, exempt

v) Yes

(b) Accommodation

i) No

ii) Yes

iii) Yes

iv) No

v) Yes

(c) Meals

i) No

ii) Yes

iii) Yes

iv) No

v) Yes

Question 5

In relation to example five, does the otherwise deductible rule apply such that FBT is not payable on flights, accommodation and meals provided to the non-resident individual assigned to the Australian Branch?

(a) Flights

i) For the period mid-August to mid-December the same year

ii) For the shorter trips taken between May and June the following year

(b) Accommodation

i) For the period mid-August to mid-December the same year

ii) For the shorter trips taken between May and June the following year

(c) Meals

i) For the period mid-August to mid-December the same year

ii) For the shorter trips taken between May and June the following year

Answer

(a) Flights

i) Not applicable, exempt benefits

ii) Yes

(b) Accommodation

i) No

ii) Yes

(c) Meals

i) No

ii) Yes

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

The scheme commences on

1 April 2012

Relevant facts and circumstances

An overseas company has a registered branch in Australia.

The company seconded various employees to the Australian branch on short term on temporary visas, typically a 457 Visa, although some on short-term business visas.

Given these employees come to Australia on a short term ad hoc basis they remain paid from the overseas payroll. The salary is re-charged to the Australian branch.

The employees work on projects. Typically to engage on a project there are several processes before the project is awarded. Accordingly, employees may be involved in working on the original submission, any further submissions and final design where the company is successful in winning the project.

Where the client demands that employees are on-site for a particular project, or where the proposal has a quick turnaround which requires the company to work closely with a firm in Australia, the company would be required to send employees to the site on a temporary duty basis.

Employees would stay in Australia for various periods of time depending on the project requirements. Most employees would only be in Australia for a month or two for each phase of the project proposal process. In some cases employees who work on one phase may also work on the later phases and return to Australia to work on those later phases. In these cases employees may have been present in Australia in total for up to six months. However, given the time delays between each stage of the project any one stay in Australia would have generally been for 30 days or less.

The assignment locations will vary as they are dependent on the location of the particular client project in Australia. However, two recent assignments were both in a large city. The locations are generally in non-remote locations, but may be in more remote locations in the future depending on the project.

Travel for work purposes is inherent in the employees' role with this is evidenced by the following:

• Within industry, firms rely heavily on work-sharing between offices to balance the workload. Consequently it is essential to the performance of duties of employment that employees are willing to travel to undertake their role.

• Whilst not specifically mentioned within the employee's employment contract, it is understood within the industry that some travel might be required depending on their project assignments. Some employees travel more than others depending upon an employee's particular expertise.

• Employees often have no choice about the requirement to travel as part of their duties. The company has been required to make a number of layoffs. If the employee was not able to participate in the Australian project and its required travel, they may have been terminated in the home country due to lack of projects there for them to work on, unless they could be assigned to another project elsewhere.

• Additionally where the project timelines are very tight, the company would communicate to employees expectations around working overtime in respect of the project.

In relation to the employees' family situations:

• While in Australia the employees maintain their homes in the home country and their families do not accompany them to Australia.

• Employees would however be eligible to return home to visit their family. The frequency of visits allowed is based on the project cost and timeframes.

• The company generally would not consider home leave for an employee for any project assignment that was shorter than two months in duration.

• Occasionally however, rather than flying an employee home for a visit, the employee will choose to fly a spouse/significant other to Australia to visit them. In this case, the cost of the spouse flight is offset against the employee's entitlement for trips home with any excess paid by the employee.

In relation to accommodation:

• The company covers the cost of the employees' meals and accommodation whilst in Australia either by way of direct provision or by expense reimbursement.

• Most commonly the company will locate and provide the accommodation without providing any choice of accommodation to employees.

• For assignments lasting a few weeks employees would typically stay in a hotel near the work site. The type of accommodation will vary based on affordability and what is available near the location of the work site.

• If the project is going to last for longer than a month employees might be provided with a furnished apartment near the work site as that is the cheaper option to a hotel for that length of time. In some instances this would be shared accommodation.

• Where employees are going home for a short period of time (e.g. one week) their accommodation may be maintained for them (e.g. furnished apartment). However, for a longer period then another employee would use the rooms or the accommodation would not be maintained. Upon return the employee would be provided with new accommodation.

Employees may have to stay in shared accommodation whilst in Australia and will often be required to work long hours. They are subject to various policies and procedures including the policy governing employees' use of alcohol whilst working.

Employees are only reimbursed the out of pocket expenses of moving limited personal items to Australia.

When the employee returns to the home country, the employee goes back to his or her home office, unless he or she is assigned to another project that might require travel within the home country or to another country. However, typically the assignee would just return to work in his or her home office upon return from an assignment in Australia.

The company has requested that the Commissioner rule on the following specific factual examples:

Example 1 - employee comes on single assignment to Australia

• An overseas employee was assigned to Australia from June to September the same year. During this time the employee worked on a client project and then returned to work in the home country.

Example 2 - employee comes on single assignment to Australia, returning home for one personal trip

• An overseas employee was assigned to Australia from August to December the same year. During this time the employee worked on a client project and then returned to work in the home country.

• During the assignment period, the employee returned once to the home country on a trip to visit family and performed some work there, before returning to Australia until the end of their assignment.

Example 3 - Employee comes on single assignment to Australia and spouse visits in Australia

• The employee arrived in Australia in June to work on a project in Australia.

• The employee's spouse came to Australia to visit the employee for a few weeks during the employee's time in Australia and then returned to the home country. The company covered the cost of the spouse's flight in lieu of the employee returning to the home country while working in Australia.

• The employee then returned to the home country in August the same year.

Example 4 - Employee travels to Australia on a number of occasions as dictated by project needs

• An overseas employee was assigned to Australia and arrived in July.

• The employee worked in Australia until mid-August the same year when the employee returned to the home country.

• The employee worked in the home country and then returned to Australia for a short trip from mid-September until late September the same year when the employee returned to work in the home country.

• The employee then returned to Australia on early November until mid-November the same year when the employee returned to work in the home country.

• The employee returned to Australia on late November until late December the same year when the employee returned to work in the home country.

• The employee returned to Australia for the final time for four days when the employee's involvement in the project ended and returned to work in the home country permanently.

Example 5 - employee travels to Australia on a number of occasions in order to pursue new work on behalf of the company

• An overseas employee came to Australia working on business trips as follows:

• 8 days in May

• 2 days in June

• 3 days in July

• The employee was then assigned to Australia from mid-August to mid-December the same year. During this time the employee worked on a client project. The employee returned to the home country mid-December and worked in the home country office in January the following.

• Over the following months the employee made additional short business trips back to Australia (returning each time to work in the home country) to continue working as needed on business development for HDR in pursuit of work.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 section 21A

Fringe Benefits Tax Assessment Act 1986 section 21

Fringe Benefits Tax Assessment Act 1986 section 24

Fringe Benefits Tax Assessment Act 1986 section 31C

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 41

Fringe Benefits Tax Assessment Act 1986 section 43

Fringe Benefits Tax Assessment Act 1986 subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 section 47A

Fringe Benefits Tax Assessment Act 1986 section 61A

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 section 143A

Income Tax Assessment Act 1997 section 8-1

Taxation Administration Act 1953 section 12-35 of schedule 1

The US Convention [1983] ATS Article 15

Reasons for decision

Question 1

Summary

The benefits in respect of flights provided to the non-resident individual (employee) are exempt under section 58F of the Fringe Benefits Tax Assessment Act (FBTAA).

The benefits in respect of accommodation and meals are fringe benefits. The taxable value the fringe benefits cannot be reduced by applying the otherwise deductible rule such that no fringe benefits tax (FBT) is payable.

Detailed reasoning

Fringe benefit

In order to determine whether the company can apply the otherwise deductible rule we need to firstly determine whether the provision of flights, accommodation and meals are fringe benefits.

The definition of a benefit is broad and includes any right, privilege, service or facility.

A benefit will be a fringe benefit as defined in subsection 136(1) of the FBTAA if it has been provided to an employee or an associate of an employee, in respect of the employee's employment by

• an employer

• an associate of an employer or

• a third party under an arrangement with an employer.

Additionally, the benefit is not excluded on the basis that it is an exempt benefit.

The definition of an employee and the definition of an employer in subsection 136(1) of the FBTAA are based on the payment or liability to pay salary or wages:

current employee means a person who receives, or is entitled to receive salary or wages…

current employer means a person…who pays, or is liable to pay, salary or wages…

Salary or wages is defined in subsection 136(1) to mean

(a) a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income…

Section 12-35 of schedule 1 to the TAA is one of those provisions. It says:

An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

The non-resident individuals are paid from the overseas payroll whilst they are in Australia. Their salary is re-charged to registered branch in Australia. The Australian branch also covers the non-resident individual's accommodation and meal expenses either by way of direct provision or by expense reimbursement.

Any obligation to withhold by the company is dependent on the operation of the relevant Double Tax Agreement (DTA).

Based on that agreement the company has an obligation to withhold. Consequently, the non-resident individual falls within the definition of an employee and the company falls within the definition of an employer.

As the company either provides the flights, accommodation and meals or reimburses the employee for expenses he or she incurs for accommodation and meals, it is providing a benefit. It is accepted that these benefits are provided in respect of the employee's employment as there is a material connection with his or her employment.

Therefore benefits provided in respect of flights, accommodation and meals will be fringe benefits unless they are excluded on the basis that they are exempt benefits.

Flights

In example one, the employee was provided with flights, either by way of expense payment or residual benefit, to Australia and upon return to the home country at the end of the assignment.

The provision of expense payment or residual benefits that are in respect of relocation transport are exempt benefits in accordance with section 58F of the FBTAA.

A benefit in respect of relocation transport is defined in section 143A of the FBTAA as follows:

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 an employee, in respect of 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 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 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.

We have established that the employee was provided with an expense payment or residual benefit in respect of his or her employment in respect of the provision of flights.

An employee is included in the definition of family member in subsection 136(1) of the FBTAA.

The main issue that needs to be considered therefore is whether the employee was living away from his or her usual place of residence or was travelling in the course of performing the duties of that employment.

Some guidance is provided in Miscellaneous Taxation Ruling MT 2030 where it addresses the issue of the distinction between travelling and living away from home allowances. Paragraphs 35 to 43 of MT2030 outline various factors that may be considered in making the distinction.

Paragraph 38 of MT 2030 states the following:

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 actually 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.

Paragraphs 39 to 41 of MT2030 refer to length of time that the employee is away from home:

Travelling allowances are often paid for comparatively short periods, exceptions being allowances where the employment is inherently itinerant in nature or where travelling is regular incident of the occupation…

…The nature of the 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.

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 employee in example one is in Australia for approximately 88 days and worked on a client project. Employees are expected to come to Australia on a temporary duty basis:

• where the client demands that employees are on-site for a particular project, or

• where the proposal has a quick turnaround which requires the company to work closely with a partner firm in Australia.

The employee therefore is not considered to be travelling in the course of performing his or her duties of employment but is living away from his or her usual place of residence whilst in Australia.

Therefore, the expense payment or residual benefit provided in relation to the flight undertaken by the employee to come to Australia and the return flight to the home country at the end of the period of assignment is considered to be in respect of relocation transport.

Consequently, the residual benefit or expense payment benefit is an exempt benefit under section 58F of the FBTAA and is excluded from the definition of a fringe benefit. Please note that it is assumed that the employer has obtained documentary evidence of the expenditure incurred by the employee in the case of an expense payment benefit.

Accommodation

The employee is also provided with accommodation either by way of expense payment benefit or residual benefit.

The provision of accommodation or reimbursement of the employee's accommodation expenses will not be exempt under either section 21 or 47(5) of the ITAA. This is because the employee does not satisfy section 31C of the FBTAA about maintaining an Australian home.

Sections 20A and 47A of the FBTAA may also be considered in relation to the benefits in respect of accommodation. Section 20A of the FBTAA provides that an expense payment benefit that is covered by a No-private-use declaration - expense payment benefits is an exempt benefit.

A condition of this exemption is that the expense payment benefit that arises from the reimbursement of expenditure is wholly employment related and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In such instances, the employer is able to make an annual declaration. The declaration must cover all expense payment benefits provided to employees where the employer is able to state that the benefits were provided only for employment-related purposes and that there was no private portion.

A similar exemption exists in section 47A of the FBTAA for residual benefits that arise from the use of the property that is subject to a consistently enforced prohibition on private use and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In order to determine whether section 20A or 47A would apply it is necessary to determine whether the employee would be entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) had the company not provided the benefits.

The general deduction provisions allow a deduction for all losses and outgoings to the extent which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining

assessable income or, in other words, of an income-producing expense

(Lunney v. FC of T; (1958) 100 CLR 478 (Lunney's case)),

• there must be a nexus between the outgoing and the assessable income so

that the outgoing is incidental and relevant to the gaining of assessable

income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

• it is necessary to determine the connection between the particular outgoing

and the operations or activities by which the taxpayer most directly gains or

produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v.

FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

Expenditure on the daily necessities of life (for example, accommodation, food and drink) is generally not deductible as it is not incurred in gaining or producing assessable income and is also considered to be private or domestic in nature.

An exception to this would be if the employee was undertaking work related travel and are required to stay away overnight. However as mentioned above we have determined that the employee was not travelling. Consequently, the employee would not be entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997.

There can be situations where the cost of accommodation may be deductible even where an employee is not travelling, such as in the Roads and Traffic Authority (NSW) v. Federal Commissioner of Taxation (1993) 43FCR 223; (1993) 26 ATR 76; (1993) 93 ATC 4508 (RTA case).

However the RTA Case has no application in this situation. The facts are sufficiently different as to distinguish it from the facts in the RTA case and ATOID 2001/120 and the situations addressed in Taxation Determination TD 93/230 and Taxation Determination TD 96/7.

• The employees are not required to live at remote locations in Australia.

• The employer has not been forced to set up accommodation for the employees because there are no alternatives.

• The living conditions are more than the basic conditions of a camp site.

• Although the employer may choose the accommodation for the employees, theoretically the employees could find alternative accommodation if they so wished.

• Theoretically and in practice, family or friends could visit the accommodation at which the employees live.

Therefore since the employee would not be entitled to claim a deduction, section 20A in the case of an expense payment benefit or 47A in the case of a residual benefit will not apply. Consequently, the provision of the accommodation is a fringe benefit.

Meals

The provision of a meal is a property benefit and the reimbursement of meal expenses incurred by the employee is an expense payment benefit.

As with accommodation, the provision of an expense payment benefit in relation to food will not be an exempt benefit under section 20A of the FBTAA. Had HDR International not provided the benefit, the employee would not have been able to claim a deduction under section 8-1 of the ITAA as the meal expenses are private in nature.

The provision of a property benefit, being the actual meal, may be an exempt benefit under section 41 if it is consumed by the employee on a working day and on the company's business premises. The provision of food apart from this would not be exempt.

Since section 20A in the case of an expense payment benefit will not apply and section 41 would only apply in limited circumstances, the provision of meals will be a fringe benefit.

Taxable value

The company is required to determine the taxable value of the fringe benefits provided to the employee in respect of accommodation and food.

As previously mentioned where the otherwise deductible rule applies, the calculation of the taxable value of the fringe benefit is reduced by the hypothetical income tax deduction to which the employee would have been entitled had the employee incurred the expense.

We have already determined that the employee would not be entitled to claim an income tax deduction for the cost of accommodation and food therefore the taxable value of the fringe benefits cannot be reduced such that no FBT is payable.

Question 2

Summary

The benefits in respect of flights provided to the non-resident individual at the commencement and end of his or her assignment in Australia are exempt under section 58F of the FBTAA.

Benefits in respect of the flights between Australia and the home country to visit family are fringe benefits and the taxable value of those fringe benefits may be reduced in accordance with section 61A of the FBTAA

The benefits in respect of accommodation and meals are fringe benefits. The taxable value the fringe benefits cannot be reduced by applying the otherwise deductible rule.

Detailed reasoning

Please refer to the reasons for decision for question one in conjunction with the following.

The employee in example two is in Australia for approximately 81 days, which includes a trip to visit family in the home country, and worked on a client project. Employees are expected to come to Australia on a temporary duty basis:

• where the client demands that employees are on-site for a particular project, or

• where the proposal has a quick turnaround which requires the company to work closely with a partner firm in Australia.

The employee therefore is not considered to be travelling in the course of performing his or her duties of employment but is living away from his or her usual place of residence whilst in Australia.

Flights

As with example one, the provision of an expense payment or residual benefit in relation to the initial flight to Australia and the flight at the end of the assignment back to the home country is exempt.

The benefits provided in respect of the flights between Australia and the home country to visit family, are not exempt benefits and therefore are fringe benefits.

The taxable value of those fringe benefits may be reduced in accordance with section 61A of the FBTAA. Under that section:

• The fringe benefits arising from holiday travel must be provided in accordance with an award or industry custom to employees posted overseas.

• The travel must be in connection with leave of more than three days.

• The reduction in taxable value may vary in amount, depending on whether the travel is to the employee's home country or to some other destination.

• Benefits eligible for the reduction are those that arise from providing transport and, where appropriate, meals and accommodation in connection with that transport.

• If the holiday travel benefit is in the form of a reimbursement of the employee's expenses, the employer must obtain documentary evidence of the expenses by the time its FBT return is required to be lodged.

As the travel is to the home country, a 50% discount may apply to the actual cost of travel, even if the cost exceeds the benchmark travel amount as determined under subsection 143(3) of the FBTAA.

Accommodation and meals

In relation to benefits in respect of accommodation and meals please see the reasons for decision for question one.

Question 3

Summary

The benefits in respect of flights provided to the non-resident individual at the commencement and end of his or her assignment in Australia are exempt under section 58F of the FBTAA.

Benefits in respect of the flights between Australia and the home country for the non-resident individual's spouse are fringe benefits and the taxable value of those fringe benefits may be reduced in accordance with section 61A of the FBTAA

The benefits in respect of accommodation and meals are fringe benefits. The taxable value the fringe benefits cannot be reduced by applying the otherwise deductible rule.

Detailed reasoning

Please refer to the reasons for decision for question one in conjunction with the following.

The employee in example three is in Australia for approximately 44 days and worked on a client project. Employees are expected to come to Australia on a temporary duty basis:

• where the client demands that employees are on-site for a particular project, or

• where the proposal has a quick turnaround which requires the company to work closely with a partner firm in Australia.

The employee therefore is not considered to be travelling in the course of performing his or her duties of employment but is living away from his or her usual place of residence whilst in Australia.

Flights

As with example one, the provision of an expense payment or residual benefit in relation to the initial flight to Australia and the flight at the end of the assignment back to the home country is exempt.

The concession in section 61A of the FBTAA may apply to the taxable value of fringe benefits by way of the provision of flights between the home country and Australia to the employee's spouse. The taxable value may be reduced if all of the relevant conditions are satisfied.

Accommodation and meals

In relation to accommodation and meals see the reasons for decision for question one.

Question 4

Summary

The non-resident individual is considered to be living away from his or her usual place of residence during the periods July to August and November to December, therefore the provision of benefits in relation to the flight to Australia and return flight to the home country are exempt under section 58F of the FBTAA.

The benefits in respect of accommodation and meals provided during these periods are fringe benefits. The taxable value of such fringe benefits cannot be reduced in accordance with the otherwise deductible rule.

The non-resident individual is considered to be travelling in the course of performing the duties of his or her employment for the trips in September, November and January. The provision of benefits in relation to the flights to and from Australia and accommodation will be exempt benefits under either section 21A or 47A of the FBTAA.

The provision benefits in respect of meals during these periods are fringe benefits and the taxable value may be reduced in accordance with the otherwise deductible rule.

Detailed reasoning

Please refer to the reasons for decision for question one in conjunction with the following.

• July to August

• November to December

During these two trips the employee is in Australia for approximately 49 days and 33 days. He worked on a client project. Employees are expected to come to Australia on a temporary duty basis:

• where the client demands that employees are on-site for a particular project, or

• where the proposal has a quick turnaround which requires the company to work closely with a partner firm in Australia.

For the two periods the employee therefore is not considered to be travelling in the course of performing his duties of employment but is living away from his usual place of residence whilst in Australia.

• September

• November

• January

During these three short trips the employee is still working on the project but is in Australia for less than 21 days. Given the short period of time that the employee is here during each trip we accept that the employee is travelling in the course of performing the duties of his employment.

Flights

In relation to the periods July to August and November to December, the provisions of residual or expense payment benefits in respect of the flight to Australia and back to the home country at the end of the period are exempt benefits under section 58F of the FBTAA.

In relation to the shorter trips because the employee is considered to be travelling in the course of performing the duties of his employment, the cost of the flight to Australia and back to the home country would be otherwise deductible.

Consequently section 21A or 47A of the FBTAA will apply to the provision of the benefits in respect of the flights to and from Australia on the basis that the company has made an annual declaration to cover the expense payment or residual benefits provided to the employee stating that they were provided only for employment-related purposes and that there was no private portion.

Where section 21A or 47A of the FBTAA apply the benefits are excluded from the definition of a fringe benefit on the basis that they are exempt benefits.

Accommodation

In relation to accommodation for the periods July to August and November to December, please see the reasons for decision for question one.

In relation to accommodation for the short trips in September, November and January, please see the reasons for decision above in relation to flights for the same periods.

Meals

In relation to meals for the periods July to August and November to December, please see the reasons for decision for question one.

In relation to meals for the short trips in September, November and January, the provision of expense payment or property benefits will be fringe benefits.

The taxable value of any expense payment fringe benefits will be calculated in accordance with section 20 of the FBTAA and the taxable value of any property fringe benefits is calculated in accordance with section 43 of the FBTAA.

As the employee is travelling in the course of performing the duties of his employment, if the employee had incurred the cost of meals the employee would have been entitled to claim an income tax deduction.

Consequently, the taxable value of the expense payment fringe benefits may be reduced under section 24 of the FBTAA and the taxable value of property fringe benefits may be reduced under section 44 of the FBTAA.

Question 5

Summary

The non-resident individual is considered to be living away from his or her usual place of residence during the period mid-August to mid-December the same year, therefore the provision of benefits in relation to the flight to Australia and return flight to the home country are exempt under section 58F of the FBTAA.

The benefits in respect of accommodation and meals provided during this period are fringe benefits. The taxable value of such fringe benefits cannot be reduced in accordance with the otherwise deductible rule.

The non-resident individual is considered to be travelling in the course of performing the duties of his or her employment during the short trips between May and June the following year.

The provision of benefits in relation to the flights to and from Australia and accommodation will be exempt benefits under either section 21A or 47A of the FBTAA.

The provision benefits in respect of meals during these periods are fringe benefits and the taxable value may be reduced in accordance with the otherwise deductible rule.

Detailed reasoning

Please refer to the reasons for decision for question one in conjunction with the following.

For the trip from mid-August to mid- December the employee is in Australia for approximately 129 days. He or she worked on a client project. Employees are expected to come to Australia on a temporary duty basis:

• where the client demands that employees are on-site for a particular project, or

• where the proposal has a quick turnaround which requires the company to work closely with a partner firm in Australia.

For this period the employee therefore is not considered to be travelling in the course of performing his or her duties of employment but is living away from his or her usual place of residence whilst in Australia.

During most of the short trips between May and June the following year the employee was working on business development for pursuit of work. The employee was in the Australia for less than 21 days on each trip. The employee is considered to be travelling in the course of performing his or her duties of employment.

Flights

In relation to the relocation flights for mid-August to mid-December please see the reasons for decision for question one.

In relation to the flights for the short trips please see the reasons for decision for question four in relation to the flights for the shorter trips.

Accommodation

In relation to the accommodation for the period mid-August to mid-December please see the reasons for decision for question one.

In relation to the accommodation in relation to the short trips please see the reasons for decision for question four in relation to the accommodation for the shorter trips.

Meals

In relation to the meals for the period mid-August to mid-December please see the reasons for decision for question one.

In relation to meals for the short trips please see the reasons for decision for question four in relation to meals for the shorter trips.