Edited version of your written advice

Authorisation Number: 1012789876440

Ruling

Subject: Fringe benefits tax: living-away-from-home allowance

Question 1

Do the employees satisfy the requirements to be fly-in fly-out and drive-in drive-out employees in section 31E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Is the accommodation provided to the employees while they are working at the worksite an exempt benefit under subsection 47(5) of the FBTAA?

Answer

Yes

Question 3

Is the food allowance a living-away-from-home allowance (LAFHA) pursuant to subsection 30(1) of the FBTAA?

Answer

Yes

This ruling applies for the following periods:

1 April 2014 to 31 March 2015

1 April 2015 to 31 March 2016

1 April 2016 to 31 March 2017

1 April 2017 to 31 March 2018

1 April 2018 to 31 March 2019

The scheme commences on:

1 April 2014

Relevant facts and circumstances

Your operations are in a remote area.

The roads in and around the work site can be hazardous, especially after a long day of work.

Under a proposed arrangement employees will commute to and from the work site by personal vehicle at the beginning and end of their working roster.

The workforce is divided into two teams and each works a nine day roster.

For example:

• Crew A will work from Monday to Thursday on week one and Tuesday to Friday on week two

• Crew B will work from Tuesday to Friday on week one and Monday to Thursday on week two.

Food allowance

Employees will be provided with a food allowance to meet the additional cost of food whist they are working at the worksite.

The food allowance will be calculated with reference to the ATO's reasonable food guidelines as released by the Commissioner annually and the allowance be apportioned for the number of meals it is intended to cover and prorated for days worked during a 7 day period.

You will require the employee to complete a declaration in a form approved by the Commissioner before the declaration date.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 30(1)

Fringe Benefits Tax Assessment Act 1986 section 31A

Fringe Benefits Tax Assessment Act 1986 section 31E

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 subsection 47(7)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

1. Do the employees satisfy the requirements to be fly-in fly-out and drive-in drive-out employees in section 31E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

In general terms, section 31E was inserted into the FBTAA as part of the measures that were introduced to limit the concessional tax treatment of living-away-from-home allowances and related benefits to a 12 month period for benefits provided to employees who:

• maintain a home in Australia (at which they usually reside) for their immediate use and enjoyment at all times while living away from that home for their work; and

• have provided the relevant declaration to their employer.

However, the 12 month limit and the requirement to maintain a home in Australia do not apply where the employee satisfies the fly-in fly-out and drive-in drive-out requirements in section 31E of the FBTAA.

Section 31E of the FBTAA states:

The employee satisfies this section if:

(a) the employee, on a regular and rotational basis:

(i) works for a number of days and has a number of days off (but not the same days in consecutive weeks), and

(ii) on completion of the working days, travels from his or her usual place of employment to his or her normal residence and, on completion of the days off, returns to that usual place of employment, and

(b) the basis of work described in paragraph (a) is customary for employees performing similar duties in that industry, and

(c) it would be unreasonable to expect the employee to travel on a daily basis on work days between:

(i) his or her usual place of employment, and

(ii) his or her normal residence,

having regard to the location of those places, and

(d) it is reasonable to expect that the employee will resume living in his or her normal residence when the duties of that employment no longer require him or her to live away from it.

These requirements were summarised in paragraph 1.48 of the revised Explanatory Memorandum to Tax Law Amendment (2012 measures No. 4) Bill 2012 which stated:

1.48 The employee is considered to be working on a fly-in fly-out or drive-in drive-out (or equivalent) basis when:

• on a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks, such as a standard five day working week and weekend [Schedule 1, Part 1, item 1, subparagraph 31E(a)(i)];

• the employee returns to the employee's normal residence during the days off [Schedule 1, Part 1, item 1, subparagraph 31E(a)(ii)];

• it is customary in the industry in which the employee works for employees performing similar duties to work on a rotational basis and return home during days off; for example, miners - the work duties continue to be undertaken by other employees on a rotational basis while any particular employee is on days off [Schedule 1, Part 1, item 1, paragraph 31E(b)];

• it is unreasonable to expect the employee to travel to and from work and the normal residence on a daily basis given the locations of the employment and their home [Schedule 1, Part 1, item 1, paragraph 31E(c)]; and

• it is reasonable to expect that the employee will resume living at the normal residence when the employment duties no longer require them to live away from home [Schedule 1, Part 1, item 1, paragraph 31E(d)].

To determine whether these requirements are met it is necessary to consider the following questions:

(i) Does the employee on a regular and rotational basis work for a number of days and have a number of days off?

(ii) If the employee does work for a number of days and have a number of days off on a regular and rotational basis, are the days the same days in consecutive weeks?

(iii) Does the employee return to his or her normal residence during the days off?

(iv) Is it customary for employees performing similar duties in the particular industry to perform their duties on a rotational basis and return home during the days off?

(v) Is it unreasonable to expect the employee to travel to and from work and their normal residence on a daily basis, given the locations of the employment and their home?

(vi) Is it reasonable to expect that the employee will resume living at the normal residence when the employment duties no longer require him or her to live away from home?

(i) Does the employee on a regular and rotational basis work for a number of days and have a number of days off?

ATO Interpretative Decision ATO ID 2013/43 provides some guidance on the phrase 'regular and rotational basis'.

ATO ID 2013/43 states:

The meaning of 'regular and rotational basis' is not defined in the FBTAA. Therefore, it is relevant to consider the ordinary meanings of the terms 'regular' and 'rotational' in the context in which they are used in the FBTAA.

The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 (Macquarie Dictionary), defines 'regular' as:

usual; normal; customary; conforming in form or arrangement; characterised by fixed principle, uniform procedure, etc; recurring at fixed times; periodic; adhering to rule or procedure.

The word 'rotational' in the employment context is defined in the Cambridge Dictionaries Online as:

relating to a system in which the person who does a particular job is regularly changed: The shifts work on a rotational basis. Depending on the department, some recruits will participate in rotational placements.

Further guidance in relation to the meaning of the term 'irregular' is provided in Taxation ruling TR 2007/12 Fringe benefits tax: minor benefits in the context of the minor benefits exemption in section 58P of the FBTAA.

Paragraph 203 of TR 2007/12 refers to the Macquarie Dictionary meaning of 'irregular' as being 'not characterised by any fixed principle, method or rate'.

Paragraphs 24 to 129 of TR 2007/12 contain 13 examples that illustrate the application of the term 'irregular' in the context of section 58P. Examples 1 to 4 in paragraphs 24 to 64 in considering Christmas parties and/or gift indicate that a benefit provided every Christmas will be considered to be regularly provided. By contrast, benefits provided on an ad hoc basis are considered to be irregular.

In the situation being considered, the roster involves the employees working for eight days per fortnight in two different shifts.

• Employees in Crew A have four days off after working for four days in week one and two days off after working for four days in week two.

• Employees in Crew B have two days off after working for four days in week one and four days off after working for four days in week two.

As the employees work these shifts on an ongoing basis, it is agreed the employees work for a number of days, before having a number of days off on a regular basis.

It is also agreed that the shifts work on a rotational basis as the employees in Crew A have a four day break in week one and a two day break in week two, whereas the employees in Crew B have a two day break in week one and a four day break in week two. Additionally maintenance tasks that are not completed by one crew are completed by the other crew when they roster on for work. Therefore, the two crews operate on a rotational basis with one crew performing the duties on the days the other crew begins and ends their days off.

(ii) If the employee does work for a number of days and have a number of days off on a regular and rotational basis, are the days the same days in consecutive weeks?

In the situation being considered Saturday and Sunday are always off days. However, in some weeks the employees will also have Monday off, but in other weeks the employees will also have Friday off.

Guidance for considering whether this difference in the off days is sufficient to conclude that the days are not the same in consecutive weeks was provided in the ATO response to agenda item 7 of the National Tax Liaison Group FBT sub-committee meeting held on 14 February 2013.

The issue and background to the agenda item were as follows:

Issue

Guidance is sought from the ATO as to whether the requirements of paragraph 31E(a)(i) are satisfied where employees work on a 9-day rotational basis.

To this end we request guidance as to whether the phrase 'same days in consecutive weeks' refers to:

• the same consecutive days being taken off in each week (e.g. Saturday and Sunday in each week); or

• the same day being taken off in each week (e.g. Week 1 - Friday, Saturday and Sunday off, Week 2- Saturday and Sunday off and week 3 - Monday, Saturday and Sunday off, which results in Saturday and Sunday being the common days off in all 3 weeks).

• Alternatively, does paragraph 31E(a)(i) apply to both of the above scenarios?

Background

Under sub-section 31E(a), the fly-in fly-out and drive-in drive-out requirements are satisfied where employees on a regular and rotational basis work for a number of days and have a number of days off, but not the same days in consecutive weeks.

The other requirements outlined in section 31E are not in question.

The following is an example of an arrangement whereby employees are required to work a 9-day fortnight in the following pattern:

Week	Monday	Tuesday	Wed	Thurs	Friday	Saturday	Sunday
1	w	w	w	w	x	x	x
2	w	w	w	w	w	x	x
3	x	w	w	w	w	x	x
4	x	w	w	w	w	w	x
5	x	x

w = work day

x = day off

As is shown above, there is some overlap in days worked and days off over consecutive weeks.

All other requirements stated in section 31E are satisfied in this instance.

The revised Explanatory Memorandum (EM) to Tax Laws Amendment (2012 Measures No.4) Bill 2012 states that an employee is considered to be working on a fly-in fly-out or drive-in drive-out basis when:

'on a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks, such as a standard five day working week and weekend'.

The ATO response stated:

As set out in the table provided by CPA Australia a 9 day fortnight work pattern results in some days where a work day or a day off will be the same in consecutive weeks.

The ATO noted that new subparagraph 31E(a)(i) states, as is relevant for current purposes:

"The employee satisfies this section if:

(a) the employee, on a regular and rotational basis:

(i) works for a number of days and has a number of days off (but not the same days in consecutive weeks): and…."

The ATO agreed that the following statements at paragraph 1.48 in the Revised EM are also relevant to this discussion;

"The employee is considered to be working on a fly-in fly-out or drive-in drive-out (or equivalent) basis when:

•On a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks, such as a standard five day week and weekend."

The ATO also advised that it believed the policy is clear that the provisions were drafted to ensure employees who travelled between capital cities and/or were not genuinely in a FIFO/DIDO work arrangement could not access this concession.

In the scenario put forward, and as reflected in the table of days worked and days off under this 9 day roster, where an employee works for 4 days in one week and 5 days in the following week then they have not worked for the same days in consecutive weeks. Even though in weeks 1, 2 and 3 the employee has the weekend off in all 3 weeks, they do not work the same days in those consecutive weeks.

Accordingly, it is accepted that the work pattern of this 9 day fortnight is one where the employee works for a number of days and has a number of days off and they will not be the same days in consecutive weeks. An employee's work roster in such circumstances would satisfy subparagraph 31E(a)(i).

The ATO also noted that all of the other requirements of section 31E need to be satisfied. This includes that the basis for the work pattern discussed in this item must be customary for employees performing similar duties in that industry.

Further guidance is provided in the example in part 11.9 of Fringe benefits tax: a guide for employers which states:

Example

An employee works in the mining industry on a 7-day on, 7-day off roster. The employee works Sunday through to Saturday, and has the following Sunday through to Saturday off.

In this case, the employee is not working the same days in consecutive weeks because the employee is working every day in one week, then not working in the next, and is doing this on a rotational basis.

This is contrasted with an employee who works Monday through to Friday and has Saturday and Sunday off, and does the same in the next week. An employee in this instance is working the same days in each week - they are working on a consecutive basis, week after week.

In applying this guidance, it is accepted that the days on which the employees work will not be the same in consecutive weeks as in week one, the days worked are Monday to Thursday and in week two it is Tuesday to Friday.

(iii) Does the employee return to his or her normal residence during the days off?

The employees return to their normal residence on their days off.

(iv) Is it customary for employees performing similar duties in the particular industry to perform their duties on a rotational basis and return home during the days off?

The meaning of the phrase 'customary for employers in the industry' is discussed 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?

Paragraph 2 of TD 94/97 states:

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.

To illustrate the principle TD 94/97 provides the following example after paragraph 5:

Oil Driller Pty Ltd regularly employs expatriate technicians on secondment from the parent company in the United Kingdom. These employees are provided with return travel to their UK home for themselves and their families twice a year during their secondment. It is accepted that it is customary for employees of that type to be provided with such benefits, notwithstanding that industry employees generally do not receive similar benefits.

In considering the situation of your employees, the employees are engineers and technical staff who provide maintenance support. Given the necessity for these buildings to be maintained and operate each day of the week, it is accepted that it is customary for employees of that class or job description in the industry to work on a rotational basis.

Although employees in the class or job description who are employed by other employers in the industry may not be required to live away from home during their days on, this fact by itself does not mean it is not customary in the industry.

The situation of your employees can be compared to those in the example provided in TD 94/97. The situation in which your employees are employed is unique as the buildings are located in a remote area and it is not possible for the employees to commute between their normal residence and the work location on a daily basis. Further, the employees are not able to establish a normal residence near the employment location.

Consequently, in considering whether it is customary within the industry, it is necessary to disregard the practices of employers in the industry who operate in an area where it is possible for the employees to establish a normal residence within commuting distance of the employment location. By doing this, it is possible to accept that it is customary for employees in the class or job description within the industry to return home on their days off and live away from home on their days on.

(v) Is it unreasonable to expect the employee to travel to and from work and their normal residence on a daily basis, given the locations of the employment and their home?

Given the remote location in which the employees work, the hours of duty and the hazardous road conditions of the area it is unreasonable to expect the employees to travel to and from work and their normal residence on a daily basis.

(vi) Is it reasonable to expect that the employee will resume living at the normal residence when the employment duties no longer require him or her to live away from home?

In the circumstances it is reasonable to expect that the employees will resume living at their normal residence when their employment duties no longer require him or her to live away from home.

Conclusion

As all of the requirements are met, it is accepted that the employees satisfy the fly-in fly-out and drive-in drive-out requirements in section 31E of the FBTAA.

2. Is the accommodation provided to the employees while they are working at the worksite an exempt benefit under subsection 47(5) of the FBTAA?

The provision of accommodation to an employee will be a residual benefit under section 45 of the FBTAA where the unit of accommodation is not the employee's usual place of residence.

This residual benefit will be an exempt benefit when the requirements in subsection 47(5) of the FBTAA are met.

Subsection 47(5) of the FBTAA states:

Where

(a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and
(b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and
(ba) the employee satisfies: (i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and
(c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and
(d) any of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii); (iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii);

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

In considering the application of this exemption it is necessary to consider the following questions:

(i) Did a residual benefit arise from the lease or licence to use a unit of accommodation?

(ii) Is the unit of accommodation for the accommodation of family members?

(iii) Is the employee a fly-in fly-out and drive-in drive-out employee?

(iv) Is the accommodation provided while the employee is undertaking travel in the course of performing the duties of employment?

(v) Does subsection 47(7) apply to the travel between the place of employment and usual place of residence, or will the relevant declaration be provided?

(i) Did a residual benefit arise from the lease or licence to use a unit of accommodation?

A residual benefit will arise from the use of the unit of accommodation as it is not the employee's usual place of residence.

(ii) Is the unit of accommodation for the accommodation of family members?

The accommodation is provided to the employee who is a family member under the definition in subsection 136(1) of the FBTAA.

(iii) Is the employee a fly-in fly-out and drive-in drive-out employee?

As discussed above, the employee is a fly-in fly-out and drive-in drive-out employee.

(iv) Is the accommodation provided while the employee is undertaking travel in the course of performing the duties of employment?

During the period in which the accommodation is provided the employees are living away from home, rather than travelling.

(v) Does subsection 47(7) apply to the travel between the place of employment and usual place of residence, or will the relevant declaration be provided?

The relevant declaration will be provided.

Conclusion

As all of the requirements are met, the provision of accommodation to the employees will be an exempt benefit under subsection 47(5) of the FBTAA.

3. Is the food allowance a living-away-from-home allowance (LAFHA) pursuant to subsection 30(1) of the FBTAA?

Subsection 30(1) of the FBTAA sets out the circumstances in which an allowance will be a LAFHA.

Subsection 30(1) states:

Where:

(a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee, and

(b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:

(i) additional expenses (not being deductible expenses) incurred by the employee during a period, or

(ii) additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which the employee is subject, during a period,

by reason that the duties of that employment require the employee to live away from his or her normal residence,

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

In considering the application of this subsection to the allowance being paid it is necessary to consider the following questions:

(i) Is the allowance paid to cover additional expenses incurred by the employee and other additional disadvantages to which the employee is subject?

(ii) Are the additional expenses deductible expenses?

(iii) Do the additional expenses and disadvantages arise by reason that the duties of employment require the employee to live away from his or her normal residence?

In the circumstances it is agreed the food allowance is a LAFHA.

The valuation of the LAFHA

There are three different methods for valuing a LAFHA. The appropriate method depends upon whether the conditions in section 31 or 31A are met. If neither of these sections applies, the taxable value is calculated in accordance with section 31B.

Where the employee is a fly-in fly-out and drive-in drive-out employee the taxable value of the LAFHA will be determined in accordance with subsection 31A(2) provided the requirement that the employee has residential accommodation at or near his or her usual place of employment is met and the relevant declaration is provided.