Edited version of your written advice

Authorisation Number: 1051234596878

Date of advice: 13 June 2017

Ruling

Question 1

Are the meal and incidental allowances paid to the employee for the travel days listed in Table 1 a travel allowance where each trip did not exceed 21 days?

Answer

Yes.

Question 2

Are the meal and incidental allowances paid to the employee for the period 16 November 2014 to 24 December 2014 (a period over 21 days), a travel allowance when all other trips for the employee did not exceed 21 days and had a similar pattern of travel to that in Table 1?

Answer

Yes.

This ruling applies for the following periods

1 April 2014 to 31 March 2015

1 April 2015 to 31 March 2016

1 April 2016 to 31 March 2017

The scheme commenced on

1 April 2014

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.

You are a government department.

Your employee was permanently employed since April 2015 to the current period.

The employee is required to work from two locations. You require the employee to regularly travel between these two locations.

The employee is not accompanied by family members when working at the new location.

The employee has temporary accommodation at the new location

The accommodation may vary from one period to the next depending on the availability of suitable accommodation.

You then require the employee to mainly operate from the one location. Therefore, the employee is then relocated with family to this new location.

Since re-locating to this new location, the employee does not regularly travel between this new location and the old location for work purposes.

Prior to the employee’s current position, the employee was acting in another position whereby the employee was required to work from two locations.

The employee owns the principal place of residence for about 8 years. The employee has resided there with family since moving to the new location.

The employee and family (except for one member) have permanently re-located to the new location.

The employee has listed the family house for sale.

The employee intends to purchase a property at the new location after the sale of the house.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 30(1)

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Detailed reasoning

The allowance provided to your employee will either be assessable as a travel allowance or subject to fringe benefit tax as a living away from home allowance (LAFHA) depending on whether the employee is travelling in the course of performing their job or living away from home.

A bona-fide travel allowance (includes accommodation, meals and incidentals) is paid when an employee is travelling in the course of performing their duties. It is generally paid for shorter periods (less than 22 days), the employee’s family usually do not accompany them, and it does not involve a change of job location.

A LAFHA as set out in subsection 30(1) of the FBTAA exists where it is reasonable to conclude from all the surrounding circumstances that the allowance is in the nature of compensation to the employee for additional expenses incurred (or additional expenses incurred and other disadvantages suffered) because the employee is required to live away from their usual place of residence in order to perform the duties of employment.

An employee is regarded as living away from their usual place of residence if they are required by their employer to perform employment-related duties temporarily in a different locality. An employee would have continued to live at their usual place of abode if they did not have to change residence in order to work temporarily for their employer at another locality. The presumption is an employee will usually reside close to their employer’s premises and if they are living way from home, then they will return to their former place.

The distinction between situations where an employee is travelling or living away from home is discussed in paragraphs 35 to 43 of Miscellaneous Taxation Ruling MT 2030: Fringe Benefits Tax: living-away-from-home-allowance benefits (MT 2030). The criteria discussed include:

● the nature of the job

● change in job location

● whether the employee is accompanied by dependants, and

● the length of time spent away from home.

The factors set out in MT 2030 that may indicate an employee is travelling in the course of performing their duties of employment include:

● no change of job location

● allowance paid when employee moves frequently from place to place

● allowance paid for short periods

● employee is generally not accompanied by their spouse or family, and

● the nature of accommodation is on a short term basis.

In applying these factors to your situation:

● employee was employed as a manager

● employee lives and works in one location

● employee is required to travel between two locations on 26 occasions during an 11 month period

● period of time spent away from home is between 3 to 5 days

● employee is not accompanied by their family, and

● accommodation is temporary and varies from time to time.

As a number of travel factors are present, it is accepted that the allowance is a travel allowance paid because the employee is travelling in the course of their duties as manager. In particular, the allowance is paid for short periods while the employee moves frequently from place to place, the employee has a family that does not accompany them and the accommodation is temporary.

The travel allowance is assessable in the hands of the employee. The employee can claim an income tax deduction against the taxable allowance for the employment related expenses incurred (expended) under the positive limbs of section 8-1 Income Tax Assessment Act 1997 (the negative limbs do not apply). Furthermore, the employee must be able to substantiate the expense incurred and retain the relevant receipts and documentation.

Question 2

Detailed reasoning

The distinction between a travel allowance and a LAFHA are discussed above.

The following applies when considering the factors set out in MT 2030 to your case for travel between 16 November and 24 December 2014:

● employee was employed as an acting project manager

● employee lives and works in one location

● employee is required to travel between two locations

● employee has a pattern of frequent travel for periods of 3 to 5 days

● period of time spent away from home is 22 days

● employee is not accompanied by their family, and

● accommodation is temporary and varies from time to time.

Where an employee is travelling for short time periods, travels regularly and other travel factors are present, an isolated episode of travel extending beyond 21 days is still considered to be travel in the course of performing their duties.

Additionally, the period covered does not involve a change of job location, the employee is not accompanied by their family, the accommodation is temporary and varies from time to time. Therefore, due to the overall travel pattern and the nature of duties performed, this is accepted as a travel allowance.