Edited version of your written advice

Authorisation Number: 1013069380017

Date of advice: 18 August 2016

Ruling

Subject: Exempt benefits - live-in residential care workers

Question 1

Will the X dwellings situated on the Rulee's property, independently or collectively, satisfy the definition of 'residential premises' in subsection 58(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 2

Are accommodation, meals, and food or drink provided by the Rulee to the Employee exempt benefits under section 58 of the FBTAA?

Answer

No

This ruling applies for the following periods:

Fringe benefits tax year ending 31 March 2016

Fringe benefits tax year ending 31 March 2017

Fringe benefits tax year ending 31 March 2018

The scheme commences on:

2016

Relevant facts and circumstances

The Rulee is a non-profit association that is registered as a charity with the Australian Charities and Not-for-profits Commission under various entity subtypes.

The Rulee operates a program for people who have been affected by circumstances that affect their ability to live balanced and constructive lives (the Participants). The goal for Participants is to become self-sufficient, which usually includes obtaining meaningful employment.

During the program the Participants live at the Rulee's property. There are X living quarters situated in close proximity on the property:

• The Employee's house, which accommodates Y people (the Employee, their spouse and children); and

• The Participants' house, which accommodates Y people.

The Employee's house includes a common dining facility for shared use by the Employee, their family, and the Participants

The accommodation arrangements are designed to enable the Participants to be materially involved in the lives of the Employee's family. The intention behind the program is to offer the support of a fostering situation whilst ensuring that the arrangement is appropriately tailored to the demographic of the Participants.

The Employee is required by the Rulee to live on the Rulee's property to perform their employment duties, which principally include:

• Assuming responsibility for the Participants while on the Rulee's premises and in the program,

• Enabling the Participants to become self-sufficient and achieve their goals.

• Mentoring the Participants

• Acting as a leader and role model for the Participants on-site,

• Coordinating program activities undertaken by the Participants on-site.

• Organising Participants off-site volunteering at community projects.

• Accompanying Participants to off-site locations.

• Facilitating the preparation of meals for the Participants,

• Conducting all meals, and morning and afternoon tea each day with the Participants,

• Fostering interaction between the Employee's family and the Participants,

• Purchasing all food, toiletries and other requirements for the Participants jointly with purchases required for her/his family.

The Employee has some managerial tasks including managing other employees and volunteers, and developing the program, however, they are incidental when compared (on any measure eg time and importance) to their principal activities of caring for the Participants.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 58

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(a)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58(1)(a)(i)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58(1)(a)(ii)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58(1)(a)(iii)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58(1)(a)(iv)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(b)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(c)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(d)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(e)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(f)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(g)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(1)(h)

Fringe Benefits Tax Assessment Act 1986 subsection 58(2)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(2)(a)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(2)(b)

Fringe Benefits Tax Assessment Act 1986 paragraph 58(2)(c)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Summary

The two dwellings situated on the Rulee's property do not satisfy the definition of 'residential premises' in subsection 58(2) of the FBTAA as:

• two houses, used collectively, do not satisfy the definition of 'a house or hostel', and

• neither house, independently, is used for the required purpose - providing 'residential accommodation' to both the Participants and the Employee.

Detailed reasoning

Subsection 58(2) of the FBTAA, in section 58, provides a definition of the term 'residential premises' and states:

'In this section:

"residential premises" means a house or hostel used exclusively for the provision of residential accommodation to:

(a) elderly persons or disadvantaged persons and children of elderly persons or disadvantaged persons;

(b) persons the duties of whose employment consist of, or consist principally of, caring for persons referred to in paragraph (a); and

(c) spouses and children of persons referred to in paragraph (b).'

The ordinary meaning of the terms 'residential', 'premises' and 'residential premises' have a long history of use as wide and general terms. However, the definition in subsection 58(2) of the FBTAA, is provided specifically for the purposes of section 58, the 'live-in residential care worker's FBT exemption. For this purpose, subsection 58(2) narrows the ordinary meaning of 'residential premises' in relation to:

• the applicable premises - 'a house or hostel', and

• the use of the premises - exclusively for providing residential accommodation to the specified persons.

Clause 58 of the Explanatory Memorandum to the Fringe Benefits Tax Assessment Bill 1986 states:

'it is a requirement for the exemption that the particular house or hostel be used exclusively for the provision of residential accommodation to disadvantaged persons and the live-in care workers (and their families).'

As such, for the purpose of the 'live-in residential care workers' exemption, the particular house or hostel must be used exclusively to provide 'residential accommodation' to both the disadvantaged persons and the employees (and certain family members living with them).

What is providing residential accommodation?

The term 'residential accommodation' is not defined in the FBTAA so its ordinary meaning applies. The Macquarie Dictionary, 2013, 6th edn, The Macquarie Library Pty Ltd, NSW (The Macquarie Dictionary) provides the following definitions:

Residential:

1. of or relating to residence or residences.

2. adapted or used for residence.

3. (or a hotel, etc. catering for guest who stay permanently or for extended periods

Accommodation:

1. the act of accommodating.

2. the state or process of being accommodated; adaption.

6.  lodging, or food and lodging,

Lodging:

1.  accommodation in a house, especially in rooms for hire.

2.  a place of abode, especially a temporary one.

3. (plural) a room or rooms hired for residence in another's house.

The Full Federal Court in Marana Holdings Pty Ltd v Commissioner of Taxation 2004 ATC 5068; (2004) 141 FCR 299 discussed the meaning of the term 'residential accommodation', quoting the following explanation from Urdd Gobaith Cymru v Commissioners of Customs and Excise [1997] V & DR 273 [at 13]:

"...`a residence' clearly implies a building with a significant degree of permanence of occupation. However the word loses that clear meaning when used as an adjective. In ordinary English `residential accommodation' merely signifies lodging, sleeping or overnight accommodation…"

As such, providing residential accommodation involves providing a place to live for a period of time, a residence or dwelling, which must include sleeping accommodation.

In the circumstances of this case, two houses situated on the Rulee's property are used as living quarters, the Participants' house and the Employee's house. Sleeping accommodation is provided to the Employee and his family in the Employee's house, and is provided to the Participants in the Participants' house.

As such, neither the Employee's house nor the Participants' house are used for providing 'residential accommodation' to both the Employee and the Participants as the Employee and the Participants do not sleep in the same house.

The definition in subsection 58(2) of the FBTAA, in specifying 'a house or hostel', in the singular, is not satisfied by two houses used collectively.

Therefore, the two dwellings situated on the Rulee's property do not satisfy the definition of 'residential premises' in subsection 58(2) of the FBTAA as:

• two houses, used collectively, do not satisfy the definition of 'a house or hostel', and

• neither house, independently, is used for the required purpose - providing 'residential accommodation' to both the Participants and the Employee.

Question 2

Summary

Accommodation, meals, or other food or drink provided by the Rulee to the Employee (or his spouse or children) are not exempt benefits under section 58 as the Employee and the Participants are not living in the same house.

Detailed reasoning

Section 58 of the FBTAA sets out the circumstances where benefits provided in relation to live-in residential care workers will be exempt benefits. Where paragraphs 58(1)(a) to (d) of the FBTAA apply, any of the following benefits provided to the employee (or any spouse or child of the employee that resides with the employee) are exempt:

• accommodation;

• residential fuel in connection with that accommodation;

• meals consumed at home; and

• other food or drink.

The employer - paragraph 58(1)(a) of the FBTAA

Paragraph 58(1)(a) of the FBTAA applies where two requirements are satisfied. Firstly, the employer of the employee must be:

• a government body - subparagraph 58(1)(a)(i); or

• a registered religious institution - subparagraph 58(1)(a)(ii); or

• a company that is registered under the Australian Charities and Not-for-profits Commission Act 2012 [ACNC Act], and is not an entity with a purpose of 'advancing religion' - subparagraph 58(1)(a)(iii); or

• a non-profit company that is not an ACNC type of entity - subparagraph 58(1)(a)(iv).

Taxation Ruling TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions (paragraphs 4 and 5) explain that an 'institution' is an establishment, organisation or association, instituted for the promotion of some object or purpose, especially of public or general utility; and is a 'religious institution' if it is instituted for religious purposes.

The Rulee is an incorporated association that is registered with the ACNC under various entity subtypes, including the subtype 'advancing religion', which signifies an entity with a purpose of advancing religion. As such subparagraph 58(1)(a)(ii) of the FBTAA applies.

Secondly, paragraph 58(1)(a) of the FBTAA requires that the employer's activities consist of, or include, caring for elderly or disadvantaged persons.

The FBTAA does not define 'caring' or 'caring for', nor does it stipulate what activities constitute 'caring for' elderly or disadvantaged persons. The Macquarie Dictionary provides the following definitions:

Care: 1.  worry; anxiety; concern. 2.  a cause of worry, anxiety, distress, etc..3.  serious attention; solicitude; heed; caution. 4.  protection; charge. 5.  an object of concern or attention.

Cared, caring: 6.  to be troubled; to be affected emotionally. 7.  to be concerned or solicitous; have thought or regard.

Care for: …c.  to look after; make provision for.

Given the broad nature of the terms, under paragraph 58(1)(a) of the FBTAA any activity involved in looking after, or providing for elderly or disadvantaged persons will constitute 'caring for' those persons.

Subsection 136(1) of the FBTAA defines the term 'disadvantaged person' to include a person in 'necessitous circumstances'. Taxation Ruling TR 2000/9 Income tax: necessitous circumstances funds (TR 2000/9) explains:

9. A person is in necessitous circumstances where his or her financial resources are insufficient to obtain all that is necessary, not only for a bare existence, but for a modest standard of living in the Australian community…

12. Necessitous circumstances do not extend to needs generally. Accordingly, the needs of the sick, incapacitated, aged, etc., do not, on their own, constitute necessitous circumstances. However, it may be that a person's non-financial need causes financial necessity.

As detailed in the facts, the Rulee's program activities 'look after' and 'provide for' the Participants. The information provided does not discuss the Participants' financial position; however, they have been affected by other non-financial circumstances, leading to the Rulee's decision to accept them as participants in the program. Further, one of the primary objectives of the Participants whilst participating in the program is gaining meaningful employment.

It is the Commissioner's view that the Participants are in necessitous circumstances as discussed in TR 2000/9, and are disadvantaged persons as defined in subsection 136(1) of the FBTAA. Further, the activities carried out by the Rulee consist of, or include, caring for disadvantaged persons.

As such, under the arrangement detailed in the facts both requirements are satisfied and paragraph 58(1)(a) of the FBTAA applies.

Paragraph 58(1)(b) of the FBTAA - the employee's duties of employment

Paragraph 58(1)(b) of the FBTAA applies where, during a period, the employee's employment duties 'consist of, or consist principally of,' caring for disadvantaged persons, and any children living with the disadvantaged persons (subparagraph 58(1)(b)(ii)).

The Rulee employs the Employee, who is the relevant employee for the purposes of paragraph 58(1)(b) of the FBTAA.

The Macquarie Dictionary defines the word 'principally' to mean 'chiefly' or 'mainly'. Therefore, although the Employee's principle or main duties must be caring for, looking after or making provision for the Participants; the Employee's duties may include, to a lesser extent, duties and activities that are not caring for the Participants.

As detailed in the facts, the Rulee considers the principal duties of the Employee to be 'enabling the Participants to become self-sufficient, and to achieve their goals', which includes substantial activities that directly provide for the Participants needs, or are 'looking after' the Participants. Although, the Employee is required to perform some administrative and managerial tasks, the Rulee employs the Employee, primarily, to assume responsibility for the Participants, as an extension to the Employee's family.

Under the arrangement detailed in the facts, paragraph 58(1(b) of the FBTAA applies.

Paragraphs 58(1)(c) and (d) of the FBTAA - the living arrangements

Paragraph 58(1)(c) of the FBTAA applies where, during a period and in the performance of the employee's employment duties;

'the employee lives, together with elderly persons or disadvantaged persons, in residential premises of the employer.'

The words 'lives', or 'live', and 'together', or 'together with' are not defined for the purposes of the FBTAA and so take their ordinary meaning. The Macquarie Dictionary provides the following definitions:

Live: … 6. to dwell or reside.

Reside: 1.  to dwell permanently or for a considerable time

Together: 1. into or in one gathering, company, mass, place, or body

Together with: in addition to.

As discussed under question 1, for the purposes of section 58, including paragraph 58(1)(c), 'residential premises' means 'a house or hostel', used exclusively for providing residential accommodation to both the persons receiving care and the employees providing that care (and certain family members living with them).

As detailed in the facts, two buildings situated on the Rulee's property are used as living quarters, the Employee's house and the Participants' house. The Employee's house is used to provide sleeping accommodation and other living facilities to the Employee and his family. The Participants' house is used to provide sleeping accommodation and other living facilities to the Participants.

It is the Commissioner's view that living, or residing in a place, permanently or for a considerable time, includes staying overnight in that place. As such:

• the Employee does not live, together with the Participants, in the Employee's house; and

• the Employee does not live, together with the Participants, in the Participants' house.

Further, as determined in question 1, neither the Employee's house nor the Participants' house is 'residential premises' for the purposes of paragraph 58(1)(c) of the FBTAA.

Paragraph 58(1)(c) does not apply to the Rulee's circumstances, as detailed in the facts, as:

• the Employee does not live in 'residential premises' of the Rulee, and

• the Employee does not live, 'together with' the Participants.

Paragraph 58(1)(d) of the FBTAA applies where:

'the fact that the person lives in those premises is directly related to the provision, in the course of the performance of the duties of the employment of the employee, of care to the elderly persons or disadvantaged persons living in those premises'

Paragraph 58(1)(d) of the FBTAA relies on the fact, established under paragraph 58(1)(c), that the employee and the persons receiving care both live in the 'residential premises of the employer'.

As discussed above, under the circumstances of this case, this is not a fact of the arrangement. As such, paragraph 58(1)(d) does not apply.

As the Rulee's circumstances do not satisfy the circumstances required for section 58 of the FBTAA to apply, accommodation, meals, or other food or drink provided by the Rulee to the Employee (or their spouse or children) are not exempt benefits under that section.