Edited version of your written advice

Authorisation Number: 1012916016052

Date of advice: 3 December 2015

Ruling

Subject: Meals and Accommodation provided to internationally-based employees

Question

Is Fringe Benefits Tax (FBT) payable by an Australian-based company of a multi-national corporation (MNC) on meals and accommodation provided to internationally-based employees of the MNC who travel to Australia to work on assignments?

Answer

No.

The period to which this ruling applies

1 April 2015 to 31 March 2018

Date in which the scheme commences

1 April 2015

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The multi-national corporation (MNC) is a global consulting company that is headquartered offshore with numerous delivery centres located around the world. Its clients are typically large national or, multi-national companies in the private sector.

Nature of Employment

The MNC has a variety of projects with different work structures. Where consulting projects are concerned, most of the work is performed by employees based out of Australia. For other projects, a proportion of the work is done at onsite location (at the MNC's Australian office location or client office location) while the rest of the work is executed by teams based in global delivery centres across the world.

The structure of arrangements in terms of when the MNC's employees come to Australia for up to three months is detailed in the table below:

Employee Meal and Accommodation Arrangements

Most of the employees are provided with a Corporate Credit Card to take care of the expenses while travelling on business. The employees can use the Corporate Credit Card or personal card for paying accommodation and meals.

Where the MNC's employees who work on short-term assignments in Australia pay for their meals using a Corporate Credit Card, these meals are not consumed on the MNC's business premises.

Whilst the actual cost of accommodation incurred is reimbursed to the employees, the meals are reimbursed based on a standard rate (for people travelling from Country A) or the actual cost (for people travelling from other regions). The employees must prepare expense reports to claim the reimbursement of accommodation and meals.

The accommodation provided to the employees is usually in the form of a hotel (or equivalent) in Australia. The Australian-based company of the MNC maintains a list of hotel accommodation (or equivalent) where employees can book their accommodation taking into account the cost and convenience.

Summary of Relevant Facts and Circumstances

This ruling relates to the MNC's employees who travel to Australia under the following criteria:

• Employees do not spend more than three months away from their usual place of residence.

• Employees are either a resident of Australia for tax purposes or a non-resident earning Australian source income.

• Employees earn income whilst working, which is subject to Australian tax.

• Employees are required to travel in the course of their employment.

• Employees typically retain a permanent home in their Home Country.

• Employees are required to work for the entire period they are travelling away from home.

• Employees have no intention to stay longer in Australia.

• Employees are reimbursed their actual accommodation costs by the Australian-based company of the MNC which is arranged by the employee using a prescribed list of hotel accommodation that is as close as practically possible to the relevant location.

• Employees have accommodation costs related to the work while travelling away from home that are in addition to the costs of their normal home.

• Employees are reimbursed for meals at a standard rate (for Company A nationals) and actual cost of meals (other nationals).

• Employees have company-specific knowledge developed elsewhere which needs to be bought to Australia.

• Employees are highly-skilled professionals in certain industries that are in short supply in Australia.

• Payroll and social security continue to run in the Home Country and there is no change in the Home Country benefits (for Visitor Visa (Subclass 600) and Temporary Work (Short Stay Activity) Visa (Subclass 400)), except for employees on the Temporary Work (Skilled) Visa (Subclass 457), who transfer to the Australian payroll.

• For Temporary Work (Short Stay Activity) Visa (Subclass 400) employees, a shadow payroll will be operated in Australia to remit taxes and social insurances, as applicable.

• Employees who travel to Australia for Visitor Visa (Subclass 600) and Temporary Work (Short Stay Activity) Visa (Subclass 400) are unaccompanied by family members.

Assumption

The relevant employees who are the subject of this ruling are subject to income tax in Australia, and Pay As You Go (PAYG) withholding is required. Therefore, it is assumed that these employees are employees of the Australian arm of the MNC for the purposes of the Fringe Benefits Tax Assessment Act 1986.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 20A

Fringe Benefits Tax Assessment Act 1986 Section 24

Fringe Benefits Tax Assessment Act 1986 Section 40

Fringe Benefits Tax Assessment Act 1986 Section 41

Fringe Benefits Tax Assessment Act 1986 Section 44

Fringe Benefits Tax Assessment Act 1986 Section 45

Fringe Benefits Tax Assessment Act 1986 Subsection 47(5)

Fringe Benefits Tax Assessment Act 1986 Section 47A

Fringe Benefits Tax Assessment Act 1986 Section 52

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 148(1)

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Question

Is Fringe Benefits Tax (FBT) payable by an Australian-based company of a multi-national corporation (MNC) on meals and accommodation provided to employees who work on short term assignments in Australia?

Summary

The Australian-based company of the MNC is not liable to pay FBT on meals and accommodation provided to employees who work on short term assignments in Australia.

Detailed reasoning

In order to determine whether the Australian-based company of the MNC is liable to FBT in respect of meals and accommodation provided to the MNC's employees who travel to Australia to work on short-term assignments, it is necessary to firstly consider whether the provision of meals and accommodation to such employees constitutes a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which holds that the following conditions must be satisfied:

1. A benefit is provided at any time during the year of tax.

2. The benefit is provided to an employee or an associate of the employee.

3. The benefit is provided by:

a. their employer; or

b. an associate of the employer; or

c. a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or

d. a third party other than the employer or an associate of the employer, if the employer or an associate of the employer:

i. participates in or facilitates the provision or receipt of the benefit; or

ii. participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

4. The benefit is provided in respect of the employment of the employee.

5. The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1) of the FBTAA.

A discussion is provided below in respect of whether each element or condition of the definition of a fringe benefit is satisfied.

A benefit is provided

Subsection 136(1) of the FBTAA provides a broad definition of a 'benefit' as including:

any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a) an arrangement for or in relation to:

(i) the performance of work (including work of a professional nature), whether with or without the provision of property; …

Based on the facts, the MNC provides most employees with a Corporate Credit Card to pay for meals and accommodation when travelling on business. Alternatively, where employees of the MNC pay for meals and accommodation out of their personal funds while travelling on business, the MNC will reimburse employees for those meal and accommodation expenses.

The provision by the Australian arm of the MNC of meals and accommodation to its employees - where meal and accommodation expenses are either paid for through an employee's use of a Corporate Credit Card or are reimbursed to employees - falls within the definition of a 'benefit' as defined in subsection 136(1) of the FBTAA.

As such, the first condition (i.e. the provision of a 'benefit') of the definition of a 'fringe benefit' - as defined in subsection 136(1) of the FBTAA - would be satisfied.

The benefit is provided to an employee or an associate of the employee

An 'employee' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employee.

For the purposes of this Private Ruling, it is assumed that the MNC's internationally-based employees who travel to Australia to work for a short term are employees of the Australian arm of the MNC for the purposes of the FBTAA.

Therefore, as the benefit (the provision of meals and accommodation) is provided to employees of the Australian arm of the MNC, the second condition (i.e. a benefit is provided to an employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided by an employer, an associate of the employer or a third party

'Employer' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer.

For the purposes of this Private Ruling, it is assumed that - irrespective of the class of work visa - internationally-based employees of the MNC travelling to Australia are employed by the Australian arm of the MNC for the purposes of the FBTAA. As such, the benefit is provided by the MNC's Australian-based company.

Therefore, the third condition (i.e. a benefit is provided by an employer) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided in respect of the employment of the employee

As per subsection 136(1) of the FBTAA, 'in respect of' in relation to the employment of an employee includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee:

• whether or not the benefit also relates to some other matter or thing

• whether the employment is past, present or future

• whether or not the benefit is surplus to the recipient's requirements

• whether or not the benefit is also provided to another person

• whether or not the benefit is offset by any inconvenience or disadvantage

• whether or not the benefit is provided or used, or required to be provided or used, in connection with any employment

• whether or not the provision of the benefit is in the nature of income, and

• whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee.

In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 (Knowles), the full Federal Court - in examining the meaning of 'in respect of' an employee's employment - held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment', though noted that 'what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment'.

Based on the facts, the connection between the meal and accommodation benefits received by the MNC's employees while travelling to Australia for business and their employment is material and sufficient, and not merely causal.

As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is not specifically excluded from the definition of a fringe benefit

With respect to paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA, the relevant paragraph to consider is paragraph (g) which provides that an exempt benefit will not be a fringe benefit.

In considering whether the meal and accommodation benefits provided by the MNC fall within any of the exempt benefits listed in Part III of the FBTAA, it is necessary to initially determine the types of fringe benefits that are applicable under the FBTAA, as identified in the table below.

The respective, relevant exemptions that apply to property fringe benefits, residual fringe benefits and expense payment fringe benefits are discussed individually below.

Exempt Property Fringe Benefits

The relevant provision in respect of exempt property fringe benefits is section 41 of the FBTAA.

Subsection 41(1) of the FBTAA states:

Where:

(a) a property benefit is provided to a current employee of an employer in respect of his or her employment; and

(b) the property is provided to, and consumed by, the employee on a working day and on business premises of:

(i) the employer; or

(ii) if the employer is a company, of the employer or of a company that is related to the employer;

the benefit is an exempt benefit.

Based on the facts provided, in circumstances where employees of the MNC who work on short-term assignments in Australia pay for their meals using a Corporate Credit Card, these meals are not consumed on the MNC's business premises. Therefore, as paragraph 41(1)(b) of the FBTAA would not be satisfied, an exemption under section 41 of the FBTAA would not apply in respect of meals provided through an employee's use of a Corporate Credit Card.

Exempt Residual Fringe Benefits

The relevant provisions in respect of exempt residual fringe benefits include subsection 47(5) of the FBTAA and section 47A of the FBTAA.

Subsection 47(5) of the FBTAA

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.

Hence, for subsection 47(5) of the FBTAA to apply, the following conditions must be satisfied:

• accommodation is leased or licensed to an employee

• accommodation is required solely because the duties of employment require the employee to live away from home

• the employee maintains a home in Australia or works on a fly-in fly-out (FIFO)/drive-in drive-out (DIDO) basis (this element applies from 1 October 2012)

• accommodation is not provided while the employee is undertaking business travel, and

• the employee provides the employer with a declaration unless provided in connection with a FIFO transport arrangement.

With respect to determining whether an accommodation benefit is provided to an employee of the MNC who is travelling for business, or whether that employee is required to live away from home, the principles encapsulated in Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) serve as guidance. In particular, paragraphs 37 to 43 of MT 2030 outline various factors that may be considered in distinguishing between 'travelling for business' and 'living away from home'. Based on the facts provided and in line with the principles embodied in MT 2030, the Commissioner considers the MNC's employees (those that are the subject of this private ruling) to be travelling in the course of performing their duties of employment. The Commissioner's view in this regard is on the basis of the following:

1. The MNC's internationally-based employees that work on a project in Australia on a work visa for a period of up to three months do not change their employment location. The employment location for the employees remains in their home country. The itinerant nature of the employees' work requires that these employees travel in order to carry out the requirements of their job/the particular project.

2. During the periods that the MNC's internationally-based employees work in Australia on a short-term basis, the employees typically retain their usual place of residence in their home country, and their spouse/family (if any) does not accompany them to Australia. The nature of the accommodation whilst in Australia is characteristically short-term (i.e. hotels), and is as close as practically possible to the employee's work place in Australia.

3. The Commissioner accepts that the period that the MNC's internationally-based employees are in Australia can be considered a short period of time. The following factors are considered relevant in establishing this conclusion:

• the nature of the MNC's business in providing global consulting, outsourcing and other services

• the nature of the duties performed by employees regularly involves performing those duties at another locality

• travelling is a regular incident of their occupation, and

• their business travels (in terms of the employees that are the subject of this private ruling) typically do not exceed three months.

Conclusion in respect of subsection 47(5) of the FBTAA

An exemption under subsection 47(5) of the FBTAA would not apply as, based on the facts, the MNC's internationally-based employees working in Australia for a short term:

• do not maintain a home in Australia or work on a FIFO/DIDO basis, and

• are provided with accommodation while undertaking employment duties.

Section 47A of the FBTAA

Section 47A of the FBTAA provides the following:

47A(1)  [Exempt benefit]  

A residual fringe benefit that is covered by a no-private-use declaration is an exempt benefit.

47A(2)  [No-private-use declaration]  

An employer may make a no-private-use declaration that covers all the employer's residual fringe benefits for an FBT year that are covered by a consistently enforced policy in relation to the use of the property that is the subject of the benefit that would result in the taxable value of the benefit being nil.

47A(3)  [Form of declaration]  

The declaration must be in a form approved in writing by the Commissioner and be made by the declaration date.

A consequence of making a 'no-private-use' declaration is that the employer is not required to obtain specific declarations from employees for any fringe benefit covered by the declaration.

The declaration must be in a form approved by the Commissioner and be given by the declaration date, which is defined in section 136(1) of the FBTAA as the date the employer lodges the FBT return for the relevant FBT year or such later date as allowed by the Commissioner.

The condition in section 47A of the FBTAA would be met if, for example, the benefits were used only for employment-related purposes so that the taxable value of the benefit would be reduced to nil under the 'Otherwise Deductible Rule' (ODR).

Under the ODR in section 52 of the FBTAA (pertaining to residual fringe benefits), the taxable value of a residual fringe benefit is reduced to nil/reduced by the amount that an employee of the MNC would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the accommodation benefit.

The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year.

For an employer (in this case, the Australian arm of the MNC) to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee of the MNC who has travelled to Australia to work for no more than three months would have had to incur the accommodation expense solely relating to the performance of their employment-related duties and that expense would have to be wholly deductible to that employee for income tax purposes.

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing incurred in gaining or producing assessable income. However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997.

For any deduction to be allowable under section 8-1 of the ITAA 1997, an employee must be able to demonstrate that there is a real and direct connection between an outgoing (in this case, the accommodation expense) and the gaining of assessable income, so that the outgoing is incidental and relevant to the actual activities that gain assessable income.

The extent to which accommodation expenses would be an allowable income tax deduction if incurred by an employee of the Australian-based company of the MNC is determined under the general deduction provisions in section 8-1 of the ITAA 1997. An expense is deductible under section 8-1 of the ITAA 1997 when the essential character is that of an income-producing expense. As stated in Taxation Ruling TR 95/33 Income tax: subsection 51(1) - relevance of subjective purpose, motive or intention in determining the deductibility of losses and outgoings, the essential character of an expense is a question of fact to be determined by an objective analysis of all the surrounding circumstances.

The 'essential character' test was applied in FC of T v Cooper 91 ATC 4415, where Hill J stated:

Food and drink are ordinarily private matters, and the essential character of food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those of work-related entertainment or entertainment incurred while away from home.

Further, the deductibility of meal expenses where an employee is required by the circumstances of their employment to live temporarily away from home was considered by the Federal Court in Roads and Traffic Authority of New South Wales v. Federal Commissioner of Taxation (1993) 43 FCR 223; 93 ATC 4508; (1993) 26 ATR 76 (RTA case). Hill J stated (at FCR 240; ATC 4521; ATR 92):    

Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.

The RTA case was discussed in paragraph of Tax Determination TD 93/230 Income tax and fringe benefits tax: is a camping allowance assessable under section 30 of the Fringe Benefits Tax Assessment Act 1986 or under Division 6 of the Income Tax Assessment Act 1997, which stated that the following factors were taken into account by Hill J in determining whether expenses incurred by an employee were in respect of gaining assessable income:

(a) the employee was required by the employer, as an incident of their employment, to live close by their work

(b) the employee was only living away from home for relatively short periods of time

(c) the employee did not choose to live at the places where the camp sites were located, and

(d) the employee had a permanent home elsewhere.

Furthermore, paragraph 4 of Taxation Determination TD 96/7 Fringe Benefits Tax: is fringe benefits tax payable on meals and accommodation provided to employees who work at remote construction sites, where the accommodation is not the usual place of residence of the employee? (TD 96/7) provides guidance as to whether the ODR applies to reduce the taxable values of meals provided to employees who are not travelling for work purposes. The following factors are stated as being relevant for consideration:

(a) Is the assignee required to live close by work?

(b) Does the assignee have a permanent residence away from the work site?

(c) Does the assignee live away from home for a relatively short period of time?

(d) Does the assignee have any choice as to the location of the accommodation provided?

These factors are examined below in light of the MNC's scheme for the purposes of this private ruling.

(a) Is the employee required to live close by work?

The purpose of certain internationally-based employees of the MNC travelling to Australia for a period of up to three months is to meet the MNC's short-term resource requirements on specific projects located in Australia. Employees are required to move from their overseas homes to Australia to work in the MNC's Australian offices (or the relevant client's office) and consequently live close to the particular work location for the duration of the short-term assignment as it is not practical for the employees to travel to and from Australia on a daily basis.

(b) Has the employee a permanent residence away from the work site?

The MNC's employees come to Australia for up to three months on a sponsored business visa to work. These employees only come to Australia temporarily and are not accompanied by their families. Employees of the MNC maintain their overseas residence to which they return upon completion of their project work in Australia.

(c) Does the employee live away from home for a relatively short period of time?

Paragraph 41 of MT 2030 provides a practical general 21-day rule that can be used to determine whether an employee is travelling or living away from home. In providing this 21-day rule, paragraph 41 of MT 2030 states that the rule is to be used in circumstances where it is not possible to conclude whether the employee is travelling or living away from home.

In applying this guideline, the fact that the MNC's employees are in Australia for more than 21 days (most commonly for a period of six to eight weeks, though no longer than three months) is not sufficient to conclude that the cost of the accommodation will not be deductible. As stated in Boral Resources (WA) Limited v DFC of T 98 ATC 2158 and Minproc Engineers Limited v DFC of T 98 ATC 2170, the 21-day rule in MT 2030 is 'purely an administrative guide rather than a set rule.'

(d) Does the employee have a choice as to the location of the accommodation provided?

When travelling to Australia to work on short-term projects for a maximum of three months, employees of the MNC can only choose their accommodation based on a prescribed list of hotel accommodation maintained by the Australian-based company of the MNC, having consideration for cost and convenience.

Based on the above analysis, it can be said that the 'essential character' of an accommodation expense - had it been incurred by an internationally-based employee of the MNC who has come to work in Australia for a short term - is that of an income-producing expense. Such an expense would have been incurred to gain assessable income. Therefore, had an internationally-based employee of the MNC incurred and paid unreimbursed expenditure in respect of their short-term accommodation while working in Australia, they would have been entitled to claim such an expense as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997. It follows that the ODR in section 52 of the FBTAA would apply such that the Australian-based company of the MNC would be able to reduce the taxable value of the residual fringe benefit by the amount that an internationally-based employee of the MNC would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the accommodation benefit.

Conclusion in respect of section 47A of the FBTAA

The Commissioner considers that - in circumstances where the Australian-based company of the MNC makes a 'no-private-use' declaration by the declaration due date each FBT year, where such a declaration covers all of its residual fringe benefits (accommodation expenses paid for through an employee's use of a Corporate Credit Card) for the FBT year which are covered by a consistently enforced policy in relation to the provision of accommodation to internationally-based employees - the exemption under section 47A of the FBTAA would apply to render such accommodation benefits an exempt benefit.

Exempt Expense Payment Fringe Benefits

The relevant provision in respect of exempt expense payment fringe benefits is section 20A of the FBTAA.

Similarly to section 47A of the FBTAA as stipulated above (pertaining to residual fringe benefits), section 20A of the FBTAA exempts an expense payment fringe benefit that is covered by a 'no-private-use' declaration.

An expense payment fringe benefit is exempt if three conditions are satisfied:

1. the employer has made a declaration (the 'no-private-use' declaration) covering all the expense payment fringe benefits for the FBT year for which the employer will only pay or reimburse such an amount as would result in the taxable value of the benefit being nil. In other words, the employer will reimburse or pay only employment-related expenses (this would result in the ODR reducing the taxable value of the benefit to nil)

2. the declaration is in a form approved in writing by the Commissioner, and

3. the declaration is made before the 'declaration date'. The 'declaration date' is the date of lodgment of the FBT return for a particular year.

This exemption is aimed at circumstances where an employer pays or reimburses only business expenses - in this case, the employer is able to provide an annual declaration stating that the benefits provided during the FBT year were only for employment-related purposes. Where the abovementioned conditions of section 20A of the FBTAA are satisfied, the benefits covered by the declaration are exempt benefits and the employer would not be required to obtain declarations from employees (which would otherwise be required under the ODR) in respect of the benefits covered by the 'no-private-use' declaration.

Under the ODR in section 24 of the FBTAA (pertaining to expense payment fringe benefits), the taxable value of an expense payment fringe benefit (reimbursement of meal and accommodation expenses) is reduced to nil/reduced by the amount that an employee of the MNC would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the meals and accommodation benefit.

The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year.

For an employer (such as the Australian-based company of the MNC) to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee of the MNC who has travelled to Australia to work for no more than three months would have had to incur the meal and accommodation expenses solely relating to the performance of their employment-related duties, and those expenses would have to be wholly deductible to that employee for income tax purposes (pursuant to section 8-1 of the ITAA 1997).

For the same reasons as discussed above (in relation to exempt residual fringe benefits), the 'essential character' of meal and accommodation expenses - had they been incurred by an internationally-based employee of the MNC who has come to work in Australia for a short term (where the expenses were paid out of the employee's personal funds) - is that of an income-producing expense. Such expenses would have been incurred to gain assessable income. Therefore, had an internationally-based employee of the MNC incurred and paid unreimbursed expenditure in respect of their meals and accommodation while working in Australia for a short term, they would have been entitled to claim such expenses as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997. It follows that the ODR in section 24 of the FBTAA would apply such that the Australian-based company of the MNC would be able to reduce the taxable value of the expense payment fringe benefits by the amount that an internationally-based employee of the MNC would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the meals and accommodation benefit.

Conclusion in respect of section 20A of the FBTAA

The Commissioner considers that - in circumstances where the Australian-based company of the MNC makes a 'no-private-use' declaration by the declaration due date each FBT year, where such a declaration covers all of its expense payment fringe benefits (reimbursement of meal and accommodation expenses) for the FBT year - the exemption under section 20A of the FBTAA would apply to render such meal and accommodation benefits an exempt benefit.

Therefore, with respect to the provision of residual fringe benefits (accommodation expenses paid for using a Corporate Credit Card) and expense payment fringe benefits (reimbursement of an employee's meal and accommodation expenses), the fifth condition (i.e. the benefit provided is not specifically excluded) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA would not be satisfied in circumstances where the Australian-based company of the MNC makes a 'no-private-use' declaration pursuant to sections 20A and 47A of the FBTAA.

Conversely, this fifth condition would be satisfied if the Australian-based company of the MNC chooses not to make a 'no-private-use' declaration each FBT year in relation to the relevant residual fringe benefits and expense payment fringe benefits. The FBT implications (if any) of such circumstances are discussed under the heading below entitled 'Otherwise Deductible Rule'.

It is noted here that a 'no-private-use' declaration is not available in circumstances where meals are provided through an employee's use of a Corporate Credit Card (i.e. a property fringe benefit). As such, given the relevant provision for exempt property fringe benefits (section 41 of the FBTAA) does not apply as explained above, the fifth condition of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA would also not be satisfied in circumstances where meals are provided through an employee's use of a Corporate Credit Card. However, the sub-heading below entitled 'Otherwise Deductible Rule' discusses the FBT implications of the ODR in such circumstances.

Otherwise Deductible Rule

If the Australian-based company of the MNC does not make a 'no-private-use declaration' pursuant to sections 20A (for residual fringe benefits (accommodation provided through an employee's use of a Corporate Credit Card)) or 47A (for expense payment fringe benefits (reimbursement of meal and accommodation expenses)) of the FBTAA, the provision of such benefits by the MNC will not be exempt. Further, as discussed above, the provision of meals through the employee's use of a Corporate Credit Card also will not be exempt.

As such, the provision of meal and accommodation benefits in these circumstances will be a 'fringe benefit' as defined in subsection 136(1) of the FBTAA.

However, in such circumstances, the ODR rule may still apply to reduce the taxable value of the associated fringe benefits to nil/by the amount that an employee of the MNC (its Australian-based company) would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the relevant fringe benefits.

The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year.

The above-mentioned ODR is stipulated in sections 24 (in respect of expense payment fringe benefits), 44 (in respect of property fringe benefits) and 52 (in respect of residual fringe benefits) of the FBTAA.

For the Australian-based company of the MNC to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee who has travelled to Australia to work for no more than three months would have had to incur the relevant expense solely relating to the performance of their employment-related duties and that expense would have to be wholly deductible to that employee for income tax purposes.

The heading above entitled 'The benefit is not specifically excluded from the definition of a fringe benefit' included a discussion on the applicability of the ODR specifically in relation to residual fringe benefits and expense payment fringe benefits. It was considered that the 'essential character' of such meal and accommodation expenses - had they been incurred by an internationally-based employee of the MNC who has come to work in Australia for a short term (where the expenses were paid out of the employee's personal funds) - is that of an income-producing expense. Such expenses would have been incurred to gain assessable income. Therefore, had an internationally-based employee of the MNC incurred and paid unreimbursed expenditure in respect of their meals and accommodation while working in Australia for a short term, they would have been entitled to claim such expenses as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997.

It follows that the ODR in sections 24 and 52 of the FBTAA would apply such that the Australian-based company of the MNC would be able to reduce the taxable value of the residual/expense payment fringe benefits by the amount that an internationally-based employee of the MNC would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the relevant meals and accommodation benefit.

On the same basis, the ODR in section 44 of the FBTAA would also apply in respect of property fringe benefits (in circumstances where meals are provided through an employee's use of a Corporate Credit Card).

Therefore, where the above meal and accommodation benefits are provided/funded by the Australian-based company of the MNC, the taxable value of those meal and accommodation benefits may be reduced to nil using the ODR, provided an 'Otherwise Deductible' declaration is obtained from the employee.

Conclusion

Meal and accommodation benefits provided by the Australia-based company of the MNC to internationally-based employees of the MNC who have come to work in Australia for a period of no more than three months are not subject to FBT on the following basis:

Residual fringe benefits (accommodation provided through employee's use of a Corporate Credit Card) and expense payment fringe benefits (reimbursement of meals/accommodation expenses)

• Where the Australian-based company of the MNC makes a 'no-private-use' declaration pursuant to sections 20A and 47A of the FBTAA in respect of the provision of residual fringe benefits (accommodation provided through an employee's use of a Corporate Credit Card) and expense payment fringe benefits (the reimbursement of an employee's meal and accommodation expenses), these benefits would not satisfy the definition of a 'fringe benefit' under subsection 136(1) of the FBTAA as they constitute an exempt benefit.

• Alternatively, if the Australian-based company of the MNC does not make a 'no-private-use' declaration pursuant to sections 20A and 47A of the FBTAA, then the associated meal and accommodation benefit would constitute a 'fringe benefit' as defined in subsection 136(1) of the FBTAA. However, the taxable value of the benefit can be reduced to nil using the ODR under sections 24 and 52 of the FBTAA provided an 'Otherwise Deductible' declaration is obtained from the applicable employee.

Property fringe benefits (meals provided through employee's use of a Corporate Credit Card)

• As the property fringe benefit exemption under section 41 of the FBTAA does not apply, the associated meal benefit would constitute a 'fringe benefit' as defined in subsection 136(1) of the FBTAA. However, the Australian-based company of the MNC can reduce the taxable value of the benefit to nil using the ODR under section 44 of the FBTAA provided an 'Otherwise Deductible' declaration is obtained from the applicable employee.