Edited version of private advice

Authorisation Number: 1012682296491

Ruling

Subject: Fringe Benefits Tax

Issue 1

Reimbursement of relocation expenses

Question 1

Are relocation expenses reimbursed by the employer to an employee considered exempt under the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Answer

Yes

This ruling applies for the following period

1 April 2014 - 31 March 2015

The scheme commences on:

Issue 2

Reimbursement of interview expenses

Question 1

a) Is the reimbursement by an employer of plane fares, or bus travel or taxi travel, and accommodation, associated with attending a job interview incurred by an individual who is, or who becomes, an employee considered exempt under the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

b) Is the reimbursement by an employee on a cents per kilometre basis for travel associated with attending a job interview incurred by an individual who is, or who becomes, an employee exempt under the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Answer

a) Yes

b) No

This ruling applies for the following period

1 April 2014 - 31 March 2019

The scheme commences on

The scheme has commenced

Relevant facts and circumstances

Issue 1

Reimbursement of relocation expenses

Facts

An offer of employment was made to the employee.

At the time the offer was made the employee was residing abroad and was a resident of another country.

The employer agreed to reimburse the employee his relocation expenses up to $X as per their Management Directive.

The new employee paid for flights for themself and their family to move to Australia to take up the position.

The employee commenced employment during 20XX.

The removal took place or the storage commenced within 12 months after the employee commenced employment.

Other expenses incurred were relocation of household goods and the family pet.

When the employee commenced employment they asked for reimbursement of these expenses.

The employee was reimbursed as requested and paid directly into their bank account.

The expenses were reimbursed in 20YY.

The employee provided to the employer full tax invoices and receipts for these expenses.

Issue 2

Reimbursement of interview expenses

Facts

The employer. at its discretion, may reimburse out of pocket expenses, including the cheapest economy airfare with a low cost airline, if an applicant is required to travel significant distances in order to attend a job interview.

Receipts are required in respect to all travel related interview expense claims.

Reimbursement of taxi fares to and from the airport may also be offered at the relevant Manager's discretion.

The employer may also reimburse the cost of accommodation should the applicant need to stay overnight to attend the interview.

The employer may also reimburse the travel to and from a job interview on a cents per kilometre basis where the individual uses their own car to travel to and from the interview.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1),

Fringe Benefits Tax Assessment Act 1986 Section 20,

Fringe Benefits Tax Assessment Act 1986 Subsection 58F

Fringe Benefits Tax Assessment Act 1986 Subsection 58B.

Fringe Benefits Tax Assessment Act 1986 Subsection 58B(2)

Fringe Benefits Tax Assessment Act 1986 Subsection 58A

Fringe Benefits Tax Assessment Act 1986 Subsection 58A(c)(i)

Fringe Benefits Tax Assessment Act 1986 Subsection 143D

Fringe Benefits Tax Assessment Act 1986 Subsection 143A

Fringe Benefits Tax Assessment Act 1986 Subsection 61E

Reasons for decision

Issue 1

Reimbursement of relocation expenses

Question 1

Summary:

Yes the relocation expenses that were reimbursed to an employee are exempt under the FBTAA 1986.

Detailed reasoning:

Under the FBTAA 1986, a fringe benefit is a benefit provided in respect of employment.

Subsection 136(1) of the FBTAA 1986 defines the term 'employment', in relation to a person, to mean 'the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee'.

Subsection 136(1) also defines the term 'employee' to include a current employee, a future employee or a former employee.

Based on the facts provided in this case, it is considered that the employee in question is an employee for Fringe Benefits Tax (FBT) purposes. Therefore, the FBT law applies to benefits, if any, provided by the employer to the employee in respect of their employment.

Flights

An expense payment benefit arises under section 20 of the FBTAA where an employer pays or reimburses expenses incurred by an employee. A reimbursement giving rise to an expense payment benefit is excluded from the amount subject to PAYG withholding.

The employer's reimbursement to the employee for the airfare expense they incurred is considered to be an expense payment benefit pursuant to section 20 of the FBTAA 1986.

Under section 58F of the FBTAA, 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. It states that:

58F 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;

(i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and

(ii) 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;

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

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.

Declaration date is defined in subsection 136(1) of the FBTAA as the date of lodgement of the FBT return or such later date as allowed by the Commissioner.

The facts indicate that the conditions in subsection 58F of the FBTAA 1986 will be met:

• it is an expense payment benefit provided in respect of the employees employment in the 2015 FBT year;

• the benefit is provided for the expenses incurred in moving to Australia to take up an employment position;

• the benefit will not be provided in respect of the particular car expenditure; and the documentary evidence of the expense has been provided to the employer before the lodgement of the 2015 FBT return.

Therefore, the expense payment benefit in relation to the reimbursement of flight expenses will be an exempt benefit pursuant to subsection 58F of the FBTAA 1986.

Household Goods and pets

Subsection 58B of the FBTAA 1986 exempts from fringe benefits tax, benefits which meet removal and storage costs incurred by an employee who moves from one locality to another in the course of employment or in order to commence new employment. A benefit is only exempt under subsection 58B if it satisfies a number of conditions. These conditions are set out below:-

(1) The underlying benefit provided, whether as an expense payment benefit or a residual benefit, is the "removal or storage of household effects of the employee". For the purposes of this section, subsection 58B(2) states that household effects means tangible property kept primarily for the personal use of family members. Household effects means tangible property kept primarily for the personal use of family members. The property, which need not be owned by a family member, includes pets, gas and electricity as set out in the definition of "tangible property" at subsection 136(1) of the ITAA 1997.Where household effects are removed or stored, any benefits in respect of transport, packing, unpacking or insurance of those effects in connection with the removal or storage are also eligible for the exemption as outlined in subsection 58B(2) of the FBTAA 1986.

(2) The removal or storage of the household effects must have been required solely because the employee is required to:

(a) live away from his or her usual place of residence in order to perform employment duties

(b) return to his or her usual place of residence at the end of a period during which the employee lived away from that place in order to perform employment duties, or

(c) change his or her usual place of residence in order to perform employment duties.

(3) Where the employee is required to live away from, or change, his or her usual place of residence ((a) and (c) above), the removal or storage must be necessary to enable the employee (or family member) to take up residence, or to continue to reside, at the new locality. This requirement would be met where household effects are moved to the new locality at the commencement of the relocated employment or where they are removed from a temporary residence at the new locality to another residence at the new locality. Where the employee is required to return to his or her usual place of residence at the end of a period during which he lived away from that place ((b) above), the removal or storage must be necessary to enable the employee (or family member) to resume residence at the usual place of residence.

(4) Where the employee changes his or her usual place of residence ((c) above), the benefit is only exempt if it is provided under an arm's length arrangement and if the removal or storage occurs within 12 months from the day the employee commences employment at the new locality.

(5) In the case of an expense payment benefit, documentary evidence of the expenditure incurred by the employee must be given to the employer before the date the employer has to furnish a fringe benefits return for the year.

(6) The exemption under subsection 58B of the FBTAA 1986 does not apply where the employee is undertaking travel in the course of performing employment duties. The "otherwise deductible" rules may apply where benefits are provided to an employee in such circumstances.

The benefits provided to the employee:

• Are expense payment benefits

• Is the removal or storage of household effects

• Are provided because the employee is required to change their usual place of residence in order to perform the duties of employment.

• The benefit has been provided under an arm's length arrangement and the removal or storage has occurred within 12 months from the day the employee commenced employment at the new locality.

• Documentary evidence of the expenditure incurred by the employee has been given to the employer before they lodged their 20YY return.

• The employee is not undertaking travel in the course of their employment related duties.

As the benefits provided to your employee satisfies all these conditions it is an exempt benefit. An exempt benefit does not give rise to a taxable fringe benefits amount.

Issue 2

Question 1a

Reimbursement of Interview expenses

Summary:

Yes the expenses associated with attending an interview that were reimbursed to an employee, or to an applicant who becomes an employee, are exempt under the FBTAA 1986.

Detailed reasoning

As explained at Issue 1, Question 1, in order for a benefit to be subject to FBT, it must be provided to an employee. Therefore, the consideration of whether the reimbursement of an expense associated with attending an interview is subject to FBT is only applicable where the applicant is an existing employee or becomes an employee of that employer.

Subsection 58A of the FBTAA provides that a benefit that meets the costs of travelling to an interview or selection test, in connection with an application for employment with a new employer or a promotion or transfer with an existing employer, is an exempt benefit. It states that:

58A  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 an employment interview or selection test; and

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

(i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and

(ii) 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;

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

Section 143D of the FBTAA defines what is meant by an employment interview and section test. It states:

143D  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 of an employer in respect of his or her employment:

(i) a car benefit relating to a particular car where the recipients expenditure 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 the employee; and

(c)  the transport is required solely because the employee is required to attend an interview or selection test in connection with an application by the employee for:

(i) employment

(ii) promotion; or

(iii) job transfer; and

(d) the benefit is provided under an arm's length arrangement;

the benefit shall be taken to be in respect of an employment interview or selection test..

If the employer reimburses a current employee or an applicant who becomes an employee for the out of pocket airfare expenses, bus fares, taxi fares or accommodation associated with attending an interview, it is considered to be an expense payment benefit pursuant to section 20 of the FBTAA. The facts indicate that the conditions in section 58A will be met:

• it will be an expense payment benefit provided in respect of the employee's employment in that FBT year;

• the benefit will be provided for the expenses incurred in respect of attending an employment interview;

• the benefit will not be provided in respect of the particular car expenditure; and

• the documentary evidence of the expense will be provided to the employer.

Therefore, the expense payment benefit in relation to the reimbursement of interview expenses will be an exempt benefit pursuant to section 58A of the FBTAA.

Question 1b

Reimbursement of Interview expenses on a cents per kilometre basis

Summary

No, reimbursement of a cents per kilometre basis of car expenses to attend a job interview by the employer is not exempt from FBT.

Detailed Reasoning

Paragraph 58A(c)(i) excludes from the exemption for the reimbursement of travel to attend an interview the reimbursement on a cents per kilometre basis of car expenses. Therefore, where the employer reimburses an employee, or an applicant who becomes an employee, to travel to a job interview in their own car on a cents per kilometre basis, it is not exempt from FBT.

Although the exemption does not apply, the employer may be able to apply a reduction in taxable value of the fringe benefit in accordance with section 61E of the FBTAA. The reduction in taxable value available under section 61E is explained in our web product Fringe Benefits Tax: A guide for employers, at 19.3 (http://law.ato.gov.au/atolaw/view.htm?DocID=SAV%2FFBTGEMP%2F00020) as follows:

19.3 Transport reductions

Employment interviews and selection tests - transport by employee's car

You may reduce the taxable value of an expense payment fringe benefit where an employee:

• Travels in their own car solely for the purpose of attending an interview or selection test connected with an application for a new job or for promotion, or transfer in employment, and

• It is reimburses on cents per kilometre basis for the car expenses incurred.

However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction in taxable value is conditional on you obtaining a signed Employment interview or selection test declaration - transport in employee's car in a form approved by the Commissioner of Taxation (refer to Declarations).