Edited version of your written advice

Authorisation Number: 1012719184486

Ruling

Subject: FBT remote area housing assistance

Question 1

Would the exemption contained in section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to housing leased by the employer which is provided to employees to reside in?

Answer

Yes

Question 2

Does the 50% reduction in taxable value contained in subsection 60(2A) of the FBTAA apply to the rent paid by the employer in respect of accommodation leased by an employee?

Answer

Yes

Question 3

Does the 50% reduction in taxable value contained in subsection 60(2) of the FBTAA apply to any payments towards the interest component of an employee's home loan?

Answer

Yes

This ruling applies for the following periods

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

The scheme commences on

1 April 2015

Relevant facts and circumstances

The employer is endorsed as a public benevolent institution (PBI) for the purposes of the exemption contained in subsection 57A(1) of the FBTAA.

The employer is based in Location A and operates in Location A and the surrounding districts. The housing assistance is provided in relation to accommodation in Location A and surrounding districts.

Location A is listed as a remote location in the web product Fringe benefits tax - remote areas on the ato.gov.au website.

The employer operates in an industry where it is customary for employers to provide employees with housing.

The employer offers the following housing assistance to employees:

• if the employee does not own a home or leases a home the employer provides housing to that employee.

• if the employee is leasing a house the employer pays the employee's rent on their behalf.

• if the employee owns their home the employer makes a payment towards the interest incurred on the employee's home loan.

Housing assistance through the provision of housing, rental payment or payment towards a housing loan interest is provided to employees in respect of housing that is the employee's usual place of residence and where the employee's work duties are performed in the same remote area they reside in.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 Section 58ZC

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

Fringe Benefits Tax Assessment Act 1986 Section 60

Fringe Benefits Tax Assessment Act 1986 Subsection 60(2)

Fringe Benefits Tax Assessment Act 1986 Subsection 60(2A)

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1A)

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1B)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1)

Reasons for decision

Question 1

Would the exemption contained in section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to housing leased by the employer which is provided to employees to reside in?

Summary

Section 58ZC of the FBTAA applies to exempt housing benefits provided to employees by the employer.

Detailed reasoning

A remote area housing benefit is an exempt benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986.

A housing benefit qualifies as a remote area housing benefit if all of the following conditions (shared conditions) are satisfied:

1. For the whole of the tenancy period, the unit of accommodation is in a remote area (that is, it is not located in or adjacent to an eligible urban area).

2. For the whole of the tenancy period, the accommodation is occupied by a person who is your current employee, and the usual place of employment of the employee is in the remote area.

3. It would be concluded that it must be necessary for you to provide accommodation for employees or to arrange to provide such accommodation because:

• the nature of your business is such that employees are liable to move frequently from one residential location to another; or

• there is insufficient suitable residential accommodation otherwise available at or near the place or places where the employees are employed; or

• it is customary for employers in that industry to provide free or subsidised accommodation for employees.

4. The benefit was not provided to the employee under either:

• a non-arm's length arrangement,

• an arrangement that was entered into by any of the parties for the purpose, or partial purpose, to obtain the concession.

Firstly, the accommodation is being provided to a current employee and the location where the housing benefit is provided is situated in Location A and surrounding districts. The employee also works in Location A and surrounding districts. This is a remote area as stated in the web product Fringe benefits tax - remote areas www.ato.gov.au, therefore this condition is met.

A housing benefit arises when an employee is provided with the right to use a unit of accommodation and the lease or licence which grants that right exits at a time when the unit of accommodation is the usual place of residence. This is the case here as the housing will only be provided to an employee if the house will be used as their usual place of residence. However, if the right to use that unit of accommodation is not the employee's usual place of residence then the benefit is a residual benefit to which the exemption contained in subsection 47(5) of the FBTAA may apply.

Of the three limbs detailed in point 3 (above) only one is required to be satisfied in order to meet this criterion. There is no evidence to suggest that the employment involves employees moving frequently, nor is there any evidence to suggest that there is insufficient suitable accommodation available.

Therefore we need to look at whether it is customary for employers in that industry to provide free or subsidised accommodation for employees.

The issue of whether something is customary in an industry was addressed in Taxation Determination TD 94/97 Fringe benefits tax: what does the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees?. Paragraphs 2 and 3 state:

A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary.

In defining the employer's industry, this Office will accept categorisation based on any recognised industry classification system. Examples of these are the industry codes for business income used by this Office (listed in the company income tax return instructions), and Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.

Subsection 140(1A) of the FBTAA was inserted into the FBTAA in 2000 for the sole reason to give certain types of employers greater access to the exemption contained in section 58ZC of the FBTAA. As explained in paragraph 24 of Taxation Ruling TR 2003/5 Income tax and fringe benefits tax: public benevolent institutions a PBI is also a charitable institution and subsection 140(1B) of the FBTAA lists charitable institutions as one of these employer categories with greater access to the remote area housing exemption.

As the FBTAA (in respect of the section 58ZC of the FBTAA exemption) gives charitable institutions greater access to the remote area housing exemption, it can be accepted that it is common for their employees to be offered housing assistance as part of their employment package.

Based on the facts provided, the Commissioner accepts that it would be customary in the industry in which the employer operates for employers to provide employees with housing benefits.

Lastly, it is accepted that the employer does not provide fringe benefits to employees under a non-arm's length arrangement or for the purpose of obtaining the concession.

Therefore, as it has been established that the provisions in section 58ZCof the FBTAA have been satisfied the housing benefits provided by the employer to employees are considered to be exempt benefits. .

Note: This exemption does not extend to the provision of residential fuel (including electricity) provided in connection with the housing (refer to ATO ID 2004/276 Fringe Benefits Tax Exempt benefits: remote area housing and residential fuel). These are separate benefits where section 59 of the FBTAA would apply to reduce the taxable value by 50%.

Where free water is provided to an employee in accordance with a residential tenancy agreement between the employer and the employee, the water will form part of the housing benefit on which the remote area housing fringe benefit is based. Therefore, the provision of water in this instance is also exempt from FBT (refer to ATO ID 2005/158 Fringe Benefits Tax Exempt Benefits: remote area housing and water).

Question 2

Does the 50% reduction in taxable value contained in subsection 60(2A) of the FBTAA apply to the rent paid by the employer in respect of accommodation leased by an employee?

Summary

Subsection 60(2A) of the FBTAA will apply to reduce the taxable value of any fringe benefit relating to the payment of employee's housing rent by 50%.

Detailed reasoning

Section 60 of the FBTAA provides for a reduction in the taxable value of certain fringe benefits relating to remote area housing.

Subsection 60(2A) provides for a 50% reduction in taxable value for any remote area housing rent paid on behalf of an employee. This reduction will apply where:

• you provide an expense payment fringe benefit for rent accrued by your employee for a unit of accommodation,

• the employee used the unit of accommodation as their usual place of residence during part of the FBT year (the occupation period) when the rent accrued, and

• the shared conditions are met.

In this case the employer pays their employee's rent for accommodation in which they are residing in as their usual place of residence and this is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.

Furthermore, the shared conditions (discussed in Question 1) have been satisfied.

The employer will therefore be able to apply the 50% reduction in taxable value for any remote area housing rent paid on behalf of an employee under subsection 60(2A) of the FBTAA.

Question 3

Does the 50% reduction in taxable value contained in subsection 60(2) of the FBTAA apply to any payments towards the interest component of an employee's home loan?

Summary

Subsection 60(2) of the FBTAA applies to reduce the taxable value of any payments towards interest incurred on an employee's remote area housing loan by 50%.

Detailed reasoning

Subsection 60(2) of the FBTAA covers the concessions available for any employer payments towards interest incurred on an employee's remote area housing loan.

An employer is entitled to a 50% reduction on the taxable value of the housing loan interest expense payment where the following conditions are satisfied:

• you provide an expense payment fringe benefit for interest accrued by your employee on a remote area housing loan connected with a dwelling,

• that employee occupied or used the dwelling as their usual place of residence during part of the FBT year (the occupation period) when the interest accrued, and

• the shared conditions are met

Where a remote area housing loan is defined in subsection 142(1) of the FBTAA as:

• a housing loan relating to a dwelling that is situated in a remote area;

• where the employee is a current employee; and

• the usual place of employment is in a remote area.

In this case, the employer is making payments towards the interest incurred on their current employee's home loan, which is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA. The employee owns their main residence and it is located in a remote area.

It has also been established (see Question 1) that the shared conditions are satisfied.

Therefore as the conditions in subsection 60(2) of the FBTAA are met, the employer is entitled to reduce the taxable value of the remote area housing loan interest paid by 50%.

Note: Employer payments towards interest incurred on an employee's housing loan is required to be made directly into the loan account. A payment into a 'mortgage offset facility' account is not an 'expense payment fringe benefit' as per ATO ID 2002/614: Fringe Benefits Tax: Expense payment fringe benefit - payments made to a home mortgage offset facility account. Payments into a 'mortgage offset facility' account are considered to be salary and wages and therefore not fringe benefit payments.