Edited version of your written advice

Authorisation Number: 1013086746906

Date of advice: 12 September 2016

Ruling

Subject: Fringe benefits tax - Exempt benefits - Other exempt benefits - Remote area housing benefits

Question 1

Is the provision of the caretaker's house to your employee an exempt remote area housing benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 2

Is the housing benefit excluded from pay-as-you-go withholding reporting requirements in Division 16 of the Taxation Administration Act 1953?

Answer

Yes

This ruling applies for the following period:

Fringe Benefits Tax Year ending 31 March 2016

The scheme commences on:

1 November 2015

Relevant facts and circumstances

The Employer is registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC), is income tax exempt and has fringe benefits tax (FBT) rebate status.

The Employer is located at regional Town and employs a caretaker (the Employee). From the second quarter of the 2015-16 income year, the Employer has provided a house on the premises for use by the Employee. The Employee pays rent which is substantially below the market value of renting a similar house in the similar area.

The subsidised residential accommodation is provided on-site for the Employee in order to provide an increased measure of security out-of-hours. Living on-site has enabled quicker response to security events as the Employee is not required to travel a distance to premises from their home, and ensures the Employee has a better understanding of site security at all times.

Special terms in the residential tenancy agreement require the tenant, the Employee, to act in a caretaker role out-of-hours including:

a. Carrying out security procedure/notifications for the premises and grounds (if required).

b. The routine and non-routine opening and closing of the premises and grounds.

c. Preventing trespass on the premises or grounds and in some cases, ensuring that unauthorised parking of vehicles does not occur.

d. Responding when the alarm system is set off and arranging for the system to be re-set.

e. Carrying out necessary procedures/notifications in the event of fire, flood, breaking and entering, accident or major damage.

During the whole of the tenancy period, the Employee's usual place of employment was the premises.

The benefit was provided to the Employee under an arms-length arrangement.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 5E(2)

Fringe Benefits Tax Assessment Act 1986 section 57A

Fringe Benefits Tax Assessment Act 1986 section 58

Fringe Benefits Tax Assessment Act 1986 subsection 58ZC(1)

Fringe Benefits Tax Assessment Act 1986 subsection 58ZC(2)

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

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

Fringe Benefits Tax Assessment Act 1986 paragraph 58ZC(2)(d)

Fringe Benefits Tax Assessment Act 1986 paragraph 58ZC(2)(e)

Fringe Benefits Tax Assessment Act 1986 section 135P

Fringe Benefits Tax Assessment Act 1986 section 135Q

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 subsection 140(1)

Fringe Benefits Tax Assessment Act 1986 subsection 140(1A)

Taxation Administration Act 1953 section 16-153

Taxation Administration Act 1953 section 16-155

Taxation Administration Act 1953 section 16-160

Taxation Administration Act 1953 section 16-170

Reasons for decision

Question 1

Summary

The provision of a house in a regional Town to the caretaker (the Employee), as described in the facts, is an exempt remote area housing benefit as all the requirements of subsection 58ZC(2) of the Fringe Benefits Tax Administration Act 1986 (FBTAA) are satisfied.

As such, the housing benefit is not subject to FBT.

Detailed reasoning

Housing benefits

A housing benefit arises where an employee is provided with the right to use a unit of accommodation, and the lease or licence which grants that right exists at a time when that unit of accommodation is the usual place of residence of the employee (section 25 of the FBTAA).

The term 'unit of accommodation' is defined, for FBT purposes, in subsection 136(1) of the FBTAA and includes 'a house'.

Your provision of the right to use the house to the Employee as their usual place of residence constitutes provision of a housing benefit.

Remote area housing benefits

Under subsection 58ZC(1) of the FBTAA, a housing benefit that is a 'remote area housing benefit' is an exempt benefit. An exempt benefit is not a fringe benefit (subsection 136(1) of the FBTAA), and as such, is not subject to FBT.

Under subsection 58ZC(2) of the FBTAA four requirements must be satisfied for a housing benefit to be a 'remote area housing benefit'

Accommodation must be located in a remote area

Paragraph 58ZC(2)(a) of the FBTAA requires that for the whole of the tenancy period the unit of accommodation was not at a location in, or adjacent to, an eligible urban area. Where a location is not 'in, or adjacent to, an eligible urban area', it is a remote area.

The parameters defining 'eligible urban area' and 'adjacent to an eligible urban area are set out in subsection 140(1) of the FBTAA. This section applies for most employers, however, subsection 140(1A), extends the general parameters, and is used where housing benefits are provided to employees of the following types of employer:

• a public hospital

• a government body where the duties of the employee are exclusively performed in, or in connection with, a public hospital or a non-profit hospital

• a hospital carried on by a non-profit society or a non-profit association

• a charitable institution

• a public ambulance service, or

• a police service.

Assistance for determining if a location is in a remote area is provided on the ATO website in the document Fringe benefits tax - remote areas (search at www.ato.gov.au using the quick code QC 25906), which contains two lists.

List 2 in Fringe benefits tax - remote areas is an alphabetical list of eligible urban, remote and non-remote areas for subsection 140(1A) and the employers listed above when providing housing benefits to their employees. The regional Town is included in List 2 as a remote area for FBT purposes.

As stated in the facts, you are a registered charity and are entitled to use List 2 of Fringe benefits tax - remote areas in relation to the housing benefit provided to the Employee.

You have provided the housing benefit since 1 November 2015. From this time, the relevant unit of accommodation has been the house at the premises in the regional Town.

As Fringe benefits tax - remote areas specifies the regional Town is a remote area, it is 'not at a location in, or adjacent to, an eligible urban area, and paragraph 58ZC(2)(a) of the FBTAA is satisfied.

The usual place of employment is the remote area

Paragraph 58ZC(b) of the FBTAA, requires that for the whole of the tenancy period the accommodation was occupied by a person who was a current employee of the employer and the usual place of employment of the employee was in the remote area.

As detailed in the facts, since commencement of the tenancy from the second quarter of the 2015-16 income year, the house on the premises in the regional Town has been occupied by the Employee. Throughout this time, the Employee was a current employee and their usual place of employment was at the premises in the regional Town.

As such, paragraph 58ZC(2)(b) is satisfied.

Provision of accommodation is necessary

Paragraph 58ZC(2)(d) of the FBTAA requires that it was necessary for the employer to provide residential accommodation for the employee because:

(i) the nature of the employer's business was such that employees were likely to be frequently required to change their places of residence; or

(ii) there was not, at or near the place or places at which the employees of the employer were employed, sufficient suitable residential accommodation for those employees (other than residential accommodation provided by or on behalf of the employer),or

(iii) it is customary for employers in the employer's industry to provide free or subsidised residential accommodation for employees.

In relation to subparagraph 58ZC(2)(d)(iii) of the FBTAA, 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 employee? (TD 94/97) explains:

2. 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.

Miscellaneous Taxation Ruling MT 2025 Fringe benefits tax: Guidelines for Valuation of Housing Fringe Benefits discusses employee caretakers at paragraphs 42 to 50. In paragraph 42, the ruling explains that employee caretakers are provided with a wide variety of different types of accommodation, including houses within the grounds.

It is accepted that it is normal practice for your industry to provide caretakers with free or subsidised accommodation on-site and paragraph 58ZC(2)(d) of the FBTAA is satisfied.

The arrangement is bona fide

Paragraph 58ZC(2)(e) of the FBTAA requires that the recipients overall housing right was not granted:

(i) under a non-arm's length arrangement, or

(ii) for purposes that include enabling the employer to obtain the remote area housing benefit exemption in section 58ZC of the FBTAA.

The facts state that the housing benefit arrangement provided by you to the Employee, was made at arms-length. It is accepted that although an employment relationship exists between you and your Employee, both parties acted in their own self-interest in relation to the housing benefit arrangement and were not subject to any pressure or duress from the other party.

Further, we accept that the housing benefit was not provided to enable you to obtain the remote area housing benefit exemption, and paragraph 58ZC(2)(e) is satisfied.

As all of the requirements of subsection 58ZC(2) of the FBTAA are satisfied under the housing benefit arrangement described in the facts, the housing benefit is a remote area housing benefit, and is an exempt benefit under subsection 58ZC(1) that is not subject to FBT.

Question 2

Summary

The remote area housing benefit you provide is an exempt benefit and is excluded from pay-as-you-go withholding reporting requirements.

It is an exempt benefit and because it is not exempt under section 57A or section 58 of the FBTAA, the amount is excluded in:

• determining whether the Employee has a 'reportable fringe benefits amount',

• working out the size of the Employee's 'reportable fringe benefits amount' if one exists, or

• any pay-as-you-go (PAYG) reporting obligations under Division 16 of the Taxation Administration Act 1953 (TAA).

Note section 57A deals with exempt benefits provided by Public Benevolent Institutions, Heath Promotion Charities, some Hospitals and Public Ambulances and section 58 deals with exempt benefits provided for live in residential care workers.

Detailed reasoning

An employer's PAYG withholding obligations are set out in Division 16 of the TAA. Sections 16-153, 16-155, 16-160 and 16-170 of the TAA set out various reporting requirement that may apply where an employee has a 'reportable fringe benefits amount'.

Whether an employee has a 'reportable fringe benefits amount' for a year of income, and the size of that amount, is determined under two sections of the FBTAA:

• Section 135Q of the FBTAA only applies to benefits exempted under sections 57A or 58, and

• Section 135P of the FBTAA applies in all other cases.

Section 135P of the FBTAA provides that an employee's 'reportable fringe benefits amount' for an income year is dependent on their 'individual fringe benefits amount' for the FBT year. The 'individual fringe benefits amount' is:

'the sum of the employee's share of the taxable value of each fringe benefit that relates to the year of tax and is provided in respect of employment other than an excluded fringe benefit.' (subsection 5E(2)).

Exempt benefits are specifically excluded from the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. As such, exempt benefits are not included when adding the 'taxable value of each fringe benefit' to calculate an employee's 'individual fringe benefits amount', or in relation to a 'reportable fringe benefits amount' under section 135P.

As determined in question 1, the housing benefit provided by you is a remote area housing benefit and is an exempt benefit under section 58ZC of the FBTAA.

As the exempt housing benefit is not exempt because of either section 57A or section 58 of the FBTAA, it is excluded from PAYG withholding reporting requirements.