Edited version of your written advice

Authorisation Number: 1012883660202

Date of advice: 2 October 2015

Ruling

Subject: Fringe benefits tax - remote area housing benefits

Question 1

Is the reimbursement of an employee's rent or mortgage payments a remote area housing benefit?

Answer

No

Question 2

If the answer to question 1 is no, will the reduction of taxable value that applies to the reimbursement of remote area housing rent or interest for a remote area housing loan apply to the reimbursement of an employee's rent or mortgage payments?

Answer

No

This ruling applies for the following periods

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

The scheme commenced on

1 April 2015

Relevant facts

You are a public benevolent institution that has been endorsed as a registered charity by the Australian Charities and Not-for-profits Commission (ACNC).

Your place of operations is in an Australian city.

You provide housing assistance to your employees by way of compensation for rent or mortgage payments. Employees present rent agreements or mortgage statements for reimbursement.

The employee's usual place of residence is in an Australian City.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 25

Fringe Benefits Tax Assessment Act 1986 Section 58ZC

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 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 140

Fringe Benefits Tax Assessment Act 1986 Subsection 140(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1A)

Reasons for decision

There are several concessions which can apply to reduce the fringe benefits tax liability of employers located in a remote area who provide housing assistance to their employees. The concessions include:

• an exemption from fringe benefits tax if the assistance is provided as a housing benefit to an employee who works and lives in a remote area;

• a 50% reduction in the taxable value of an expense payment fringe benefit which arises from the payment or reimbursement of interest that arises from a remote area housing loan connected with a dwelling that is the employee's usual place of residence; and

• a 50% reduction in the taxable value of an expense payment fringe benefit which arises from the payment or reimbursement of rent that is remote area housing rent connected with a dwelling that is the employee's usual place of residence.

In your application, you requested a private ruling as to whether any of these concessions apply to the housing assistance that you provide to your employees by way of compensation for rent or mortgage payments.

1. Is the reimbursement of an employee's rent or mortgage payments a remote area housing benefit?

For the reimbursement to be a remote area housing benefit it must be a housing benefit.

Housing benefits are discussed in section 25 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA);

The subsistence during the whole or part of a year of tax of a housing right granted by a person (in this section referred to as the provider) to another person (in this section referred to as the recipient) shall be taken to constitute a benefit provided by the provider to the recipient in respect of the year of tax.

A housing right is defined in subsection 136(1) of the FBTAA as follows:

in relation to a person, means a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence.

You do not provide your employees with a lease or licence to occupy or use a unit of accommodation. Your employees obtain their own accommodation and you then compensate them for rent or mortgage payments.

Therefore, the reimbursement of the rent or mortgage is not a housing benefit and will not be an exempt remote area housing benefit.

2. If the answer to question 1 is no, will the reduction of taxable value that applies to the reimbursement of remote area housing rent or interest for a remote area housing loan apply to the reimbursement of an employee's rent or mortgage payments?

Section 20 of the FBTAA advises:

Where a person (in this section referred to as the provider):

(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b) reimburses another person (in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

You reimburse your employees for rent or mortgage payments. The reimbursements are considered to be expense payment fringe benefits under paragraph 20(b) of the FBTAA.

Section 60 of the FBTAA provides a 50% reduction in the taxable value of several benefits that arise from the provision of remote area housing assistance that is not a remote area housing benefit.

For the purposes of this ruling, the relevant subsections to consider are:

• subsection 60(2) which applies to expense payment fringe benefits where the recipients expenditure is in respect of interest that relates to a remote area housing loan connected with a dwelling that is the recipient's usual place of residence; and

• subsection 60(2A) which applies to expense payment fringe benefits where the recipients expenditure is in respect of remote area housing rent connected with a unit of accommodation that is the recipient's usual place of residence.

Subsection 142(1) of the FBTAA defines remote area housing loan. Subsection 142(1A) of the FBTAA defines remote area housing rent connected with a unit of accommodation. Both of these definitions require the dwelling and the usual place of employment of the employee to be in a remote area.

Section 140 of the FBTAA defines the areas that are remote. It contains two definitions. The first in subsection 140(1) applies to most benefits. It does not however apply when considering housing benefits provided by certain employers, such as a registered charity.

Guidance as to the locations to which these definitions apply is provided in Fringe benefits tax - remote areas which is available on our website at www.ato.gov.au.

The publication contains two lists. As you are a registered charity, list 1 will be applicable if you provide housing assistance that is not a housing benefit and list 2 will be applicable if you provide a housing benefit.

As the benefits being considered are not a housing benefit, the relevant list to use is list 1. For the purposes of list 1, the Australian city is not a remote area. Therefore, the concessions in subsections 60(2) and 60(2A) will not apply as the dwelling and usual place of employment are not in a remote area.

However, it should be noted that the Australian city is a remote area where list 2 is used. Therefore, if you provide a housing benefit to an employee who works and lives in this Australian city, both the dwelling and the usual place of employment will be treated as being in a remote area for the purposes of determining whether the housing benefit is a remote area housing benefit.