Edited version of your written advice

Authorisation Number: 1012988843445

Date of advice: 23 March 2016

Ruling

Subject: Exempt Fringe Benefits Tax (FBT) under sections 58F, 143A and 142A of the Fringe Benefits Tax Assessment Act 1986

Question 1

Where the employer pays the costs for a permanent residency visa for an employee, would the benefit be exempt from Fringe Benefits Tax (FBT) under sections 58F, 143A and 142A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 2

Where the employer pays the costs for a permanent residency visa for an employee, would the benefit be exempt from FBT under section 58AA of the FBTAA?

Answer

No.

This ruling applies for the following periods:

01 April 2015 - 31 March 2016

The scheme commences on:

01 April 2015

Relevant facts and circumstances

The employee re-located with his family to Australia on a Temporary Resident Visa.

The employee is applying for a permanent residency visa. The application process requires the employee to be in Australia for a period of 2 years prior to application.

Prior to accepting the offer of employment, and as a condition of the employee relocating to Australia, it was agreed between the employer and the employee, that should the employee be eligible to apply for permanent residency, the employer would pay the immigration agent and associated costs on his behalf when the time arose. The condition that the employer would pay these costs was an influential component of the employee's decision to accept the employment and relocate to Australia.

The employee commenced investigating the application process for the permanent residency visa with the application being lodged as soon as permissible.

The employer states the payment of the cost of the employee's visa application by the employer is an expense payment benefit in accordance with section 20 of the FBTAA.

There is no current travel required in respect of the permanent residency visa application.

A relocation consultant was not employed by the employer or the employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Subsection 20(a)

Fringe Benefits Tax Assessment Act 1986 Section 58AA

Fringe Benefits Tax Assessment Act 1986 Subsection 58AA(1)

Fringe Benefits Tax Assessment Act 1986 Section 58F

Fringe Benefits Tax Assessment Act 1986 Subsection 58F(a)

Fringe Benefits Tax Assessment Act 1986 Subsection 58F(b)

Fringe Benefits Tax Assessment Act 1986 Subsection 58F(c)

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 142A

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

Fringe Benefits Tax Assessment Act 1986 Section 143A

Fringe Benefits Tax Assessment Act 1986 Paragraph 143A(a)(ii)

Reasons for decision

Question 1

Summary

As the employee is already living in Australia, the benefit is not provided in respect of the provision of transport and accordingly not provided in respect of relocation transport.

Therefore, costs incurred by the employer on behalf of the employee, in respect of applying for a permanent residency visa, are not exempt for fringe benefits tax purposes by virtue of section 58F and 142A of the FBTAA.

Detailed reasoning

Transport provided to an employee and family members as a consequence of an employee being required to relocate his/her usual place of residence to perform employment duties are an exempt benefit under section 58F which states:

Exempt benefits--relocation transport

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.

The benefit is exempt if it fulfils the conditions in subsection 58F(a), (b) and (c).

Condition 1: An expense payment benefit (subsection 58F(a))

With reference to subsection 136(1), section 20 defines "expense payment benefit" as:

Expense payment benefits

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.

With regards to the employer's circumstances the employer is the provider. The employer is making a payment in discharge of the visa expenses to a third party in respect of the employee. The expense payment benefit therefore satisfies subsection 20(a).

Therefore, Condition 1 is satisfied

Condition 2: the benefit is in respect of relocation transport (subsection 58F(b))

The circumstances in which a benefit will be treated as a benefit 'in respect of relocation transport' are specified in section 143A. Broadly, such benefits are transport, meals or accommodation provided to an employee who is required to live away from, or change, their usual place of residence in order to perform the duties of their employment.

Paragraph 143A(a)(ii) stipulates that relocation costs include an expense payment benefit where the recipients expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport.

Transport is not defined in the FBTAA but by virtue of subsection 142A(1) expenditure by an employee on accident insurance, airport or departure tax, a passport, a visa, a vaccination or any similar matter 'in connection with transport' is taken to be 'in respect of the provision of, or to consist of, transport'.

The Explanatory Memorandum to the Tax Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 ("the EM") which introduced section 143A discusses the intended meaning of "benefit in respect of relocation transport":

The circumstances in which a benefit will be treated as a "benefit in respect of relocation transport" are specified in proposed section 143A. Broadly, such a benefit is one that is provided to an employee who moves from one locality to another in the course of employment or in order to commence new employment where the benefit meets travel costs (i.e., transport costs and accommodation and meals en route) incurred by the employee (or a family member) for the purpose of taking up residence in the locality of the new work place.

The EM makes it clear that a benefit in respect of relocation transport is intended to cover costs incurred for the purpose of an employee taking up residence in the locality of a new work place. Therefore, the words "in connection with" in subsection 142A(1) should be read such that only visa application costs that are incurred for the purpose of an employee taking up residence in the locality of a new work place will be "in connection with transport".

Conclusion

Whilst the employer and the employee agreed that the costs associated with their visa and immigration to Australia for work purposes would be paid by the employer, the employee's application for a visa to remain in Australia was made at the time the employee was already living in Australia. The visa application costs were not incurred for the purpose of the employee taking up residence in a new locality of a new work place.

Therefore the costs are not "in connection with transport" for the purposes of subsection 142A(1) or "in respect of the provision of transport" for the purposes of paragraph 143A(a)(ii).

Accordingly, the benefit is not provided "in respect of relocation transport" and therefore is not an exempt benefit under section 58F as condition 2 is not satisfied.

Question 2

Summary

The costs incurred by the employer on behalf of an employee in respect of applying for a permanent residency visa are not exempt for fringe benefits tax purposes by the operation of section 58AA.

Detailed reasoning

Section 58AA - Exempt Benefits - Engagement of Relocation Consultant

Broadly, section 58AA provides an FBT exemption for benefits in respect of the engagement of a relocation consultant to assist with the relocation of an employee (and her or his family), where the employee is required to relocate in order to fulfil her or his employment duties.

The conditions to be satisfied before a benefit is exempt under section 58AA are set out in subsection 58AA(1). They are as follows:

(a) the benefit is in respect of the engagement of a relocation consultant; and

(b) the engagement of the relocation consultant is required solely because the employee is required to live away from her or his usual place of residence to perform her or his employment duties, the employee is required to return to her or his usual place of residence (either to continue to perform those duties or because those duties have ceased) or the employee is required to change her or his usual place of residence to perform those duties; and

(c) the relocation consultant is engaged to help a family member; and

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

In the absence of the exemption, a fringe benefits tax liability may arise if the employer engages a relocation consultant to help settle the employee or his or her family when the employee is required to move from his or her usual place of residence to perform new employment duties. In such case, an expense payment fringe benefit would arise if the employer pays or reimburses the employee in respect of the relocation consultant's fee. Alternatively, a residual fringe benefit may arise if the employer engages the relocation consultant directly.

Conclusion

Neither the employer nor the employee engaged the services of a relocation consultant.

Accordingly, the expense benefit does not consist of the engagement of a relocation consultant and therefore is not an exempt benefit under section 58AA.