Edited version of private advice

Authorisation Number: 1051500564108

All legislative references refer are to the Fringe Benefits Tax Assessment Act 1986 ('FBTAA') unless otherwise specified.

Date of advice: 23 May 2019

Ruling

Subject: Fringe benefits tax - remote area housing benefits and expense payment benefits

Question 1

If Town A is recognised as a remote area pursuant to subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 ('FBTAA'), will Company X ('the Company') satisfy the necessary criteria required for the purposes of accessing the Fringe Benefits Tax ('FBT') concessions available under sections 58ZC, 59, 60, 60A, and 61 of the FBTAA?

Answer

Yes

This ruling applies for the following periods:

• Year ending 31 March 20WW
• Year ending 31 March 20WX
• Year ending 31 March 20WY
• Year ending 31 March 20WZ

The scheme commences on:

1 April 2019

Relevant facts and circumstances

    1.        Company X ('the Company') is an Australian company operating primarily in a rural manufacturing industry.

    2.        Town A is a town in a remote area of Australia situated closely to Town B being a town categorised as remote published on the list of remote areas in NSW on the ATO website, and is the location of one of the manufacturing facilities currently owned by the Company.

    3.        Given the remote nature of Town A's location, employees working at the Town A's manufacturing facilities typically fall within the following categories:

a)    employees ordinarily resident in the Town A/B area and has taken a role at the manufacturing facility

b)    employees relocated to the Town A/B area for reasons unrelated to the Company employment and have subsequently accepted a role at the manufacturing facility

c)    employees who have returned to the Town A/B area to take on a role at the manufacturing facility, who immediately prior to accepting the role were residing outside the Town A/B area (but have previously resided in the area)

d)    employees who previously resided outside the Town A/B area who have relocated to the area in order to fulfil a role at the manufacturing facility.

    4.        The Company state that they experience difficulty in attracting and retaining employees, as it contends that its competitors in the region are likely to be offering remuneration packages which include remote-area related benefits.

    5.        The Company is intending to revise its policies to include the following remote area benefits to employees, subject to confirmation of the concessional Fringe Benefits Tax ('FBT') treatment available:

a)    Remote area housing

Eligible employees to be provided with accommodation assistance in the form of one of the following (where the associated accommodation/dwelling is the employee's usual place of residence):

                                1.        residential accommodation owned or leased by the Company in the Town A/B area

                                2.        reimbursement for interest costs associated with employee's residential housing loan interest relating to accommodation located in the Town A/B area

                                3.        reimbursement of employee's residential rent expenses relating to a unit of accommodation in the Town A/B area

                                4.        reimbursement of employee's expenditure in respect of remote area residential property that includes an interest in land in the Town A/B area.

b)    Remote area residential fuel provided in relation to:

                                1.        a dwelling connected to a remote area housing loan

                                2.        accommodation connected with remote area housing rent

                                3.        a remote area housing benefit.

c)    Remote area holiday transport fringe benefits.

    6.        The employees to whom the remote area-related benefits are proposed to be provided will be current employees of the Company at the time of the provision of the benefit, and will carry out their employment duties in Town A.

    7.        Any fringe benefits which are the subject of this application will be provided due to the employment relationship between the Company and the employee.

    8.        The applicant submits that the proposed arrangements are not intended to enable the Company to obtain the benefit of the application of subsection 60(2) or 60(2A) of the FBTAA, nor are they intended to be provided under a non-arm's length arrangement.

    9.        The Company is allowing the employees to enter into effective salary sacrifice arrangements in relation to these benefits.

  10.        The applicant submits that in relation to sections 58ZC, 60(2), 60(2A) and 60(4) they believe that the following conditions common to each of those sections will be satisfied:

a)    The recipient employee occupied or used the relevant dwelling(s) as his or her usual place of residence.

b)    The recipient's employee's usual place of employment will be in a remote area (ie Town A).

c)    The benefit in question was not provided under a non-arm's length arrangement or for the purpose of the Company obtaining a benefit under section 60 of the FBTAA.

Assumptions

• The proposed arrangements are only provided to current employees who occupy or use the relevant dwelling as their usual place of residence.
• The proposed arrangements are not provided under a non-arm's length arrangement, or an arrangement for the purpose or purposes of enabling the Company to obtain the benefit of any relevant section of the FBTAA.
• It is customary in the Company's rural manufacturing industry for employers to provide remote area fringe benefits to attract and retain various classes of employees at remote locations where the industry's operations occur.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20
Fringe Benefits Tax Assessment Act 1986 section 58ZC
Fringe Benefits Tax Assessment Act 1986 section 59
Fringe Benefits Tax Assessment Act 1986 subsection 59(1)
Fringe Benefits Tax Assessment Act 1986 subsection 59(2)
Fringe Benefits Tax Assessment Act 1986 subsection 59(3)
Fringe Benefits Tax Assessment Act 1986 section 60
Fringe Benefits Tax Assessment Act 1986 subsection 60(2)
Fringe Benefits Tax Assessment Act 1986 subsection 60(2A)
Fringe Benefits Tax Assessment Act 1986 subsection 60(4)
Fringe Benefits Tax Assessment Act 1986 section 60A
Fringe Benefits Tax Assessment Act 1986 section 61
Fringe Benefits Tax Assessment Act 1986 section 62
Fringe Benefits Tax Assessment Act 1986 subsection 136(1)
Fringe Benefits Tax Assessment Act 1986 section 140
Fringe Benefits Tax Assessment Act 1986 subsection 140(1)
Fringe Benefits Tax Assessment Act 1986 subsection 142(1)
Fringe Benefits Tax Assessment Act 1986 subsection 142(1A)
Fringe Benefits Tax Assessment Act 1986 subsection 142(2C)
Fringe Benefits Tax Assessment Act 1986 subsection 142(2E)
Fringe Benefits Tax Assessment Act 1986 section 143
Fringe Benefits Tax Assessment Act 1986 subsection 143(1)
Income Tax Assessment Act 1936 section 26AAAB
Income Tax Assessment Act 1936 schedule 2

Question 1

If Town A is recognised as a remote area pursuant to subsection 140(1) of the FBTAA, will Company X ('the Company') satisfy the necessary criteria required for the purposes of accessing the FBT concessions available in relation to the benefits that it proposes to provide to its employees under sections 58ZC, 59, 60, 60A and 61 of the FBTAA?

Summary

Yes. Town A is considered to be a remote area due to its close proximity to Town B (Town B being a town categorised as remote published on the list of remote areas in Australia on the ATO website), and the Company will satisfy the necessary criteria required to access the FBT concessions in relation to the benefits that it proposes to provide to its employees available under sections 58ZC, 59, 60, 60A and 61 of the FBTAA.

Detailed reasoning

I.              Section 58ZC Exempt Benefits - Remote Area Housing Benefits

Nature of the housing assistance proposed to be provided by the Company: Employees provided with residential accommodation owned or leased by the Company in the Town A/B area.

A benefit provided by an employer in relation to housing is a 'remote area housing benefit' which is an 'exempt benefit' under section 58ZC, provided certain conditions are satisfied.

Section 58ZC provides:

58ZC(1) Remote area housing benefits to be exempt.

A housing benefit that is a remote area housing benefit is an exempt benefit.

58ZC(2) What constitutes remote housing benefit

A housing benefit in relation to an employer for a year of tax and for a unit of accommodation, being a benefit provided to an employee of the employer in respect of the employee's employment, is a remote area housing benefit if:

a)  during the whole of the tenancy period, the unit of accommodation was located in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and

b)  during the whole of the tenancy period, the recipient was a current employee of the employer and the usual place of employment of the recipient was not at a location in, or adjacent to, an eligible urban area; and

c)  (Repealed by No 77 of 2005)

d)  It would be concluded that it was necessary for the employer, during the year of tax, to provide, or to arrange for the provision of, residential accommodation for employees of the employer because:

(i) the nature of the employer's business was such that employees of the employer were liable 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 industry in which the recipient was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned; and

e)  The recipients overall housing right was not granted to the recipient under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section.

Subsection 58ZC(1) - A housing benefit that is a remote area housing benefit

Subsection 58ZC(1) provides that a housing benefit that is a remote area housing benefit is an exempt benefit.

A 'housing benefit' is defined in subsection 136(1) to mean a benefit referred to in section 25. Section 25 defines that benefit as where a person grants a housing right to another person.

A 'housing right' in relation to a person is defined in subsection 136(1) to mean a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence.

Accordingly, a housing right arises where a lease or licence granted to a person to occupy or use a unit of accommodation subsists at a time when the unit of accommodation is the person's usual place of residence.

A 'unit of accommodation' is defined in subsection 136(1) to include (amongst other things) accommodation in a house, flat or home unit, or any living quarters.

Application to the Company: The Company intends to provide certain employees with residential accommodation owned or leased by the Company in the Town A/B area. This provision of housing assistance will only be provided to current employees and is to be used as the employee's usual place of residence. Accordingly, a housing benefit will be provided. The criteria of subsection 58ZC(2) will need to be satisfied for it to be a remote area housing benefit.

Subsection 58ZC(2) - What constitutes remote area housing benefit

Housing benefits provided to employees may be exempted under subsection 58ZC(1) as a 'remote area housing benefit' provided the conditions in subsection 58ZC(2) are satisfied.

(a) Accommodation must be located in a remote area

The term 'remote area' is not defined in the FBTAA. Instead, the FBTAA has a definition of 'eligible urban area' in section 140. A place is in a remote area if it is not in or adjacent to an eligible urban area.

Subsection 140(1) provides:

140(1)

In this act

(a)  a reference to an eligible urban area is a reference to:

(i) an area that:

(A) is situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and

(B) is an urban centre with a census population of not less than 28,000; and

(ii) an area that:

(A) is not situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and

(B) is an urban centre with a census population of not less than 14,000; and

(b)  a reference to a location that is adjacent to an eligible urban area is a reference to a location that, as at the date of commencement of this section:

(i) was situated less than 40 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000; or

(ii) was situated less than 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of not less than 130,000.

The accommodation must be in a location which is considered to be in a remote area, that is, the accommodation must not be in or adjacent to an eligible urban area, for the purposes of subsection 140(1).

Subsection 140(1) sets out what is an 'eligible urban area' and what is a location that is 'adjacent to an eligible area'.

Paragraph 140(1)(a) provides that an 'eligible urban area' is a reference to an area that is an urban centre with a census population of not less than 14,000 (or 28,000 for an urban centre located in Zone A or B in Schedule 2 to the ITAA 1936 for income tax purposes).

Paragraph 140(1)(b) defines a location that is 'adjacent to an eligible urban area' to include one that is (i) situated less than 40km from an urban centre with a census population of less than 130,000; or (ii) situated less than 100 km from an urban centre with a census population of 130,000 or more.

Under this provision, an area will be treated as remote where it is at least 40 kilometres from an eligible urban centre with a population of 14,000 or more (or 28,000 for an area located in either Zones A or B for income tax purposes) and at least 100 kilometres from an eligible urban centre with a population of 130,000 or more.

All population figures are based on the 1981 census population figures.

Application to the Company: Town A is situated more than 40km from the centre point of an eligible urban area, and is not situated in either Zones A or B for income tax purposes. The closest eligible urban area with a 1981 census population of 14,000 to less than 130,000[1] which is more than 100 km from Town A.

In addition, Town B is categorised as a remote area published on the list of remote areas in Australia on the ATO website[2]. Town A is not specifically listed; however it is situated closely to Town B (and as stated more than 100 km from the the closest eligible urban area with a 1981 census population of 14,000 to less than 130,000).

For these reasons, we accept Town A and Town B to be remote areas for FBT purposes, in accordance with section 140.

Paragraph 58ZC(1)(a) is satisfied as the accommodation provided will be located in the 'Town A/B', which is a remote area.

(b) During the whole of the tenancy period, the recipient must be a current employee

The exemption is only available if the benefit is provided to a current employee of the employer - not a former or future employee - for the whole of the tenancy period. Further, the employees' usual place of employment must not be at a location in or adjacent to an eligible urban area during that period.

Application to the Company: On the basis that the proposed benefit will only to be provided to current employees of the Company undertaking duties in Town A, which is not a location in or adjacent to an eligible urban area, this provision is satisfied.

(d) Provision of accommodation is necessary

It must be necessary for the employer to provide residential accommodation to employees for any of the reasons provided in paragraph 58ZC(2)(d).

It must be considered whether the Company satisfies subparagraph (iii), which provides that it is 'customary' in the employer's industry to provide free or subsidised housing to employees.

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 employees?, at paragraph 2, provides that 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.

Application to the Company: The assumption underlying this ruling is that it is customary in the Company's rural manufacturing industry for employers to provide employees with remote area fringe benefits. It is therefore accepted that it is customary, and therefore necessary, for the Company to provide residential accommodation to employees who work in Town A.

(e) The arrangement must be at arm's length and not for the purposes of the employer obtaining a benefit

Under paragraph 58Z(2)(e), the arrangement under which the accommodation is provided must be an arm's length arrangement and must not be provided under an arrangement for the purposes of obtaining the concessions provided by section 58ZC.

Application to the Company: The assumption underlying this ruling is that the proposed arrangements are not provided under a non-arm's length arrangement, or an arrangement for the purpose or purposes of enabling the Company to obtain the benefit of any relevant section of the FBTAA. It is therefore accepted that the benefit will be provided at arm's length and not for the purpose of enabling the Company to obtain a benefit, but rather to attract and retain talent in a remote area.

Accordingly, the requirements of paragraph 58Z(2)(e) are satisfied.

Section 58ZC conclusion: The Company satisfies the provisions of section 58ZC in relation to the housing benefit it proposes to provide to its employees.

II.            Section 60 - Reduction of Taxable Value - Remote Area Housing

The effect of section 60 is to reduce by 50% the taxable value of certain types of benefits relating to the provision of housing assistance to employees in remote areas.

Subsection 60(2) of the FBTAA - Interest on a loan

Nature of housing assistance: The Company reimburses employees for interest incurred on the employee's home loan in relation to their usual place of residence located in the Town A/B area.

Subsection 60(2) provides a reduction of 50% of the taxable value of the fringe benefit in respect of a loan provided to an employee to purchase a dwelling located in a remote area and used as their usual place of residence.

To qualify for the reduction, the conditions of subsection 60(2) must be satisfied.

Subsection 60(2) provides:

60(2) [Recipient of expense payment benefit]

Where:

(a)  the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;

(b)  the recipients expenditure is in respect of interest in respect of a remote area housing loan connected with a dwelling;

(c)  the recipient occupied or used the dwelling as his or her usual place of residence during (in this section referred to as the "occupation period") during which the interest accrued; and

(d)  the fringe benefit was not provided under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of that amount as relates to the occupation period.

(a) The recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer

An 'expense payment fringe benefit' is defined in subsection 136(1) to mean a fringe benefit that is an expense payment benefit. An 'expense payment benefit' is defined in subsection 136(1) to mean a benefit referred to in section 20.

Section 20 sets out the circumstances in which an expense payment benefit will be taken to be provided:

20 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.

An expense payment benefit may arise in either of two ways. The first is where an employer pays a third party in satisfaction of expenses incurred by an employee; the second is where an employer reimburses an employee for expenses incurred by the employee.

An expense payment fringe benefit will therefore arise at the time an employer reimburses an employee in respect of an amount of expenditure incurred by the employee.

Application to the Company: An expense payment benefit will arise when the Company reimburses the interest expenditure incurred by employees on the remote area housing loans. Given the reimbursement will only be given to current employees, paragraph 60(2)(a) is satisfied as the recipient of the expense payment fringe benefit will be a current employee of the Company.

(b) The recipient's expenditure is in respect of interest for a remote area housing loan connected with a dwelling.

Subsection 136(1) defines a 'dwelling' as a unit of accommodation constituted by, or contained in a building, being a unit that consists, in whole or in substantial part, of residential accommodation.

Subsection 142(1) - What constitutes a remote area housing loan

Subsection 142(1) sets out the criteria that must be satisfied for a loan to be considered a 'remote area housing loan connected with a dwelling'.

Subsection 142(1) provides:

142(1) [Remote area housing loan]

In this Act, a reference, in relation to a year of tax in relation to an employee of an employer, to a remote area housing loan connected with a dwelling is a reference to a housing loan relating to the dwelling where:

a) during the whole of the period (in this subsection referred to as the "occupation period") in the year of tax when the employee occupied or used the dwelling as his or her usual place of residence:

(i) the dwelling was situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and

(ii) the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area;

(b) the common conditions set out in subsection (2E) are satisfied in relation to the occupation period; and

(c) (Omitted by No 95 of 1988)

(d) the loan was not made to the employee pursuant to:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60.

Application to the Company:

(a)  On the basis that current employees of the Company will occupy or use the dwelling in the Town A/B area, as their usual place of residence, the provisions of sub-paragraphs 142(1)(a)(i) and (ii) are satisfied.

(b)  The common conditions set out in subsection 142(2E) are satisfied - see analysis below.

(d)  The assumption underlying this ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement. In addition, the loan made to the employee was by an arm's length financial institution. As such, it is accepted that the benefit is not provided for the purpose of enabling the Company to obtain a benefit but rather to attract and retain talent in remote areas.

Paragraph 142(1)(b)

Paragraph 142(1)(b) requires the common conditions contained in subsection 142(2E) to be satisfied in relation to the occupation period.

Subsection 142(2E) provides:

142(2E) [Common conditions]

For the purposes of the application of this section to a fringe benefit in relation to a year of tax in relation to an employee of an employer, the common conditions in relation to a particular period or in relation to a particular time are as follows:

(a)  it is customary for employers in the industry in which the employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees;

(b)  it would be concluded that it was necessary for the employer, during the year of tax, to provide or arrange for the provision of housing assistance for employees of the employer because:

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

(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 industry in which the employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees.

Application to the Company: The relevant expenditure to be reimbursed by the Company will be the interest for remote area housing loans incurred by certain current employees. As covered in the analysis of section 58ZC, it is accepted as an underlying assumption of this ruling that the provision of these benefits is customary in the Company's rural manufacturing industry. Therefore, the Company will satisfy the conditions in subsection 142(2E).

Accordingly, the Company will satisfy the conditions in subsection 142(1), and will therefore satisfy paragraph 60(2)(b).

(c) The recipient occupied or used the dwelling as his or her usual place of residence during an occupation period during which the interest accrued

Paragraph 142(1)(c) requires that the recipient occupied or used the dwelling as his or her usual place of residence during an occupation period during which the interest accrued.

Application to the Company: The assumption underlying this ruling is that remote area housing benefits are only provided to current employees who occupy or use the relevant dwelling as their usual place of residence. Accordingly the Company will satisfy paragraph 142(1)(c).

(d) The loan was made at arm's-length and not for the purposes of the employer obtaining a benefit

Paragraph 142(1)(d) requires that the loan be made to the employee at arm's length, and not under an arrangement for the purpose or purposes of enabling the employer to obtain the benefit of section 60 of the FBTAA.

Application to the Company: The assumption underlying this ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement, or an arrangement for the purpose or purposes of enabling the Company to obtain the benefit of any relevant section of the FBTAA. In addition the loan made to the employee was by an arm's length financial institution. As such, it is accepted that the benefit is not provided for the purpose of enabling the Company to obtain a benefit but rather to attract and retain talent in remote areas.

Subsection 60(2) Conclusion: The Company has satisfied the provisions of subsection 60(2) in relation to the housing benefit it proposes to provide to its employees.

Subsection 60(2A) - Recipient of remote area housing rent

Nature of housing benefit: The Company reimburses employees for expenses associated with residential rent in the Town A/B area.

Subsection 60(2A) provides a reduction of 50% of the taxable value of the fringe benefit.

Subsection 60(2A) provides:

(a) the recipient of the relevant expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;

(b) the recipient's expenditure is in respect of remote area housing rent connected with a unit of accommodation;

(c) the recipient occupied or used the unit of accommodation as his or her usual place of residence during the period the rent accrued; and

(d) the fringe benefit was not provided under:

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

(ii) under an arrangement that was entered into by any of the parties to the arrangement to enable the employer to obtain the benefit of the application of the subsection.

the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of the recipients expenditure as relates to the occupation period.

(a)  An expense payment fringe benefit of an employee

An expense payment fringe benefit has previously been discussed in the analysis of subsection 60(2).

Application to the Company: An expense payment benefit will arise when the Company reimburses the rent expenditure incurred by employees on the remote area housing. Given the reimbursement will only be given to current employees, this section is satisfied as the recipient of the expense payment fringe benefit will be a current employee of the Company.

(b) Expenditure on remote area housing rent connected with a unit of accommodation

Subsection 136(1) defines a 'unit of accommodation' as an accommodation in a house, flat or home unit.

Subsection 142(1A) sets out the requirements for the existence of 'remote area housing rent connected with a unit of accommodation'.

Subsection 142(1A)

Subsection 142(1A) provides:

In this Act, a reference, in relation to a year of tax in relation to an employee of an employer, to remote area housing rent connected with a unit of accommodation is a reference to rent or other consideration payable in respect of the subsistence of a lease or licence in respect of the unit of accommodation where:

(a) during the whole of the period (in this subsection referred to as the ''occupation period'') in the year of tax when the employee occupied or used the unit of accommodation as his or her usual place of residence:

(i) the unit of accommodation was situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and

(ii) the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area;

(b) the common conditions set out in subsection (2E) are satisfied in relation to the occupation period; and

(c) (Omitted by No 95 of 1988)

(d) the lease or licence was not granted under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60.

Application to the Company:

(a)  The Company's current employees will satisfy the provisions of subparagraphs 142(1A)(a)(i) and (ii) provided they occupy or use the relevant unit of accommodation during the occupation period as their usual place of residence in a remote area, being the Town A/B area.

(b)  As discussed previously in the analysis of sections 58ZC, it is accepted as an underlying assumption of this ruling that it is customary for employers in the Company's rural manufacturing industry to provide housing assistance to employees. The Company has met the common conditions set out in subsection 142(2E), as already discussed in the analysis of subsection 60(2).

(d)  As already discussed, the assumption underlying the ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement. It is accepted that the benefit is not provided for the purpose of enabling the Company to obtain a benefit but rather to attract and retain talent in remote areas.

Application to the Company: This condition will be satisfied at the time the Company reimburses employees for the rent expenses incurred by the employees on housing rent associated with their remote area housing.

(c) The recipient occupied or used the dwelling as his or her usual place of residence

Application to the Company: It is accepted as per the assumption underlying this ruling that the dwelling will be the usual place of residence of the employees.

(d) The expense payment benefit was made at arm's-length and not for the purposes of the employer obtaining a benefit

Application to the Company: The assumption underlying the ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement. It is accepted that the benefit is not provided for the purposes of enabling the Company to obtain a benefit but rather to attract and retain talent in remote areas.

Subsection 60(2A) Conclusion: The Company has satisfied the provisions of subsection 60(2A).

Subsection 60(4) of the FBTAA - Expense payment fringe benefit in respect of remote area residential property

Nature of housing assistance: The Company reimburses employees for expenditure in respect of remote area residential property.

Subsection 60(4) provides that a payment for the acquisition of an interest in land (residential property) or the construction/renovation of a building on land located in a remote area and used by an employee as his or her usual place of residence is subject to a 50% reduction.

Subsection 60(4) provides that where:

(a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and

(b) the recipient's expenditure is in respect of remote area residential property.

the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

(a) The recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer

Application to the Company: As previously covered in the analysis of subsection 60(2), this condition will be satisfied as the recipient of an expense payment fringe benefit will be a current employee of the Company.

(b) The recipient's expenditure is in respect of remote area residential property

A 'remote area residential property,' is a reference to property that consists of an estate or interest in land as set out under subsection 142(2C).

Subsection 142(2C)

Subsection 142(2C) provides rules for determining eligibility for the subsection 60(4) reduction in taxable value. This subsection sets out the criteria which determine when the recipient's expenditure is in respect of remote area residential property.

Subsection 142(2C) provides:

In this Act, a reference, in relation to an expense payment fringe benefit in relation to a year of tax in relation to an employee of an employer, to recipients expenditure in respect of remote area residential property is a reference to recipients expenditure that is incurred wholly:

a) to enable the employee to acquire an estate or interest in land on which a dwelling was subsequently to be constructed or to acquire an estate or interest in land and construct, or complete the construction of, a dwelling on the land;

(b) to enable the employee to construct, or complete the construction of, a dwelling on land in which the employee holds an estate or interest;

(c) to enable the employee to acquire an estate or interest in land on which there is a dwelling; or

(d) to enable the employee to extend a dwelling, being a dwelling constructed on land in which the employee holds an estate or interest, by adding a room or part of a room to the dwelling, as the case may be;

where:

(e) if paragraph (a) or (b) applies:

(i) at the time the recipients expenditure was incurred, the employee proposed to occupy or use the dwelling as his or her usual place of residence; and

(ii) the Commissioner is satisfied that the employee has pursued sustained reasonable efforts to:

(A) commence the construction, or commence the completion of the construction, of the building constituting or containing the dwelling within 6 months after the time the recipients expenditure was incurred; and

(B) occupy or use the dwelling concerned as his or her usual place of residence within 18 months after the time the recipients expenditure was incurred;

(f) if paragraph (c) or (d) applies - as soon as reasonably practicable after the time the recipients expenditure was incurred, the dwelling concerned was occupied or used by the employee as his or her usual place of residence;

(g) at the time the recipients expenditure was incurred:

(i) the land was situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and

(ii) the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area;

(h) the common conditions set out in subsection (2E) are satisfied in relation to the time the recipients expenditure was incurred; and

(j) the fringe benefit was not provided to the employee under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60 or Division 14Aof Part III.

Application to the Company:

The Company has stated that it intends to reimburse employees for expenditure which may be incurred under any of the paragraphs 142(2C)(a), (b), (c) or (d).

Where paragraphs 142(2C)(a) or (b) apply, the provisions of paragraph 142(2C)(e) will need to be addressed:

(i)    Provided employees of the Company propose to occupy or use the dwelling constructed on the land purchased as their usual place of residence, at the time the expenditure was incurred, this condition will be satisfied.

(ii)   Provided also that the Commissioner is satisfied that employees of the Company commence construction of the dwelling within 6 months and occupy or use the dwelling within the required 18 month period of purchase, this condition will be satisfied.

Where paragraphs 142(2C)(c) or (d) apply, and it can be shown that the employees of the Company occupied the dwelling as their usual place of residence, as soon as is reasonably practicable after the expenditure is incurred, paragraph 142(2C)(f) will be satisfied.

The condition in paragraph 142(2C)(g) will be satisfied provided that at the time the expenditure is incurred, the land was located in a remote area (the Town A/B area), and the employee was a current employee of the Company in a location that is a remote area (the Town A/B area).

As discussed previously in the analysis of sections 60(2), the common conditions set out in subsection 142(2E) are satisfied. Accordingly, paragraph 142(2C)(h) is thereby satisfied.

As already discussed, the assumption underlying this ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement, or for the purpose of enabling the Company to obtain a benefit of any relevant section of the FBTAA. It is accepted that the expense payment fringe benefit is not to be provided to employees of the Company pursuant to this condition. Accordingly, paragraph 142(2C)(j) is satisfied.

Subsection 60(4) Conclusion: The Company should be in a position to satisfy the provisions of subsection 60(4), if they are able to demonstrate that they satisfy the criteria in paragraph 142(2C).

III.           Section 59 - Reduction Of Taxable Value - Remote Area Residential Fuel

The effect of section 59 is to reduce the taxable value of certain types of benefits relating to the provision of residential fuel to employees in remote areas.

Residential fuel is defined in subsection 136(1) of the FBTAA as any form of fuel (including electricity) for use for domestic purposes.

Where electricity, gas and other fuel is supplied or paid for by the employer in relation to a remote area housing benefit, the taxable value of the fuel benefit may be reduced by 50% (after taking account of the reduction for certain in-house benefits under section 62).

To qualify for a reduction under section 59, a number of requirements must be met. The primary requirement is that the recipient concerned is also the recipient of a remote area housing benefit as defined in subsection 58ZC(2).

Subsection 59(1) - Remote Area Residential Fuel

Subsection 59(1) provides:

If

(a) residential fuel is for use:

(i) in connection with the recipients unit of accommodation; and

(ii) during the subsistence of the recipients overall housing right;

in relation to a remote area housing benefit, in relation to an employer in relation to a year of tax; and

(b) any of the following conditions are satisfied:

(i) the recipients expenditure in relation to an expense payment fringe benefit in relation to the employer in relation to the year of tax or a subsequent year of tax is in respect of the supply of that residential fuel;

(ii) the recipients property in relation to a property fringe benefit in relation to the employer in relation to the year of tax is that residential fuel;

(iii) the recipients benefit in relation to a residual fringe benefit in relation to the employer in relation to the year of tax is the benefit of the consumption of that residential fuel;

the amount that, apart from this subsection and section 62, would be the taxable value of the fringe benefit referred to in paragraph (b) in relation to the year of tax is reduced by 50%.

Application to the Company:

(a) Residential fuel used in connection with unit of accommodation

On the basis that the residential fuel will be used in connection with an employee's unit of accommodation in relation to a remote area (ie in the Town A/B area) housing benefit, provided by the Company, this provision will be satisfied.

(b) Expenditure relating to an expense payment fringe benefit, a property fringe benefit, or a residual fringe benefit in respect of residential fuel

The Company will be providing an expense payment benefit at the time of reimbursing employees for their expenditure in relation to the cost of electricity, gas or other residential fuel. Accordingly, condition (i) of this provision is satisfied

Subsection 59(1) Conclusion: The Company satisfies the provision of subsection 59(1).

Subsection 59(2) - Recipient obliged to repay remote area housing loan

Subsection 59(2) provides:

Where:

a) any of the following conditions are satisfied:

(i) the recipients expenditure in relation to an expense payment fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is in respect of the supply of residential fuel;

(ii) the recipients property in relation to a property fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is residential fuel;

(iii) the recipients benefit in relation to a residual fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is the benefit of the consumption of residential fuel;

b)    the residential fuel is for use in connection with a dwelling during a period in the year of tax or, in a case to which subparagraph (a)(i) applies, a preceding year of tax, when the recipient of the fringe benefit occupied or used the dwelling as his or her usual place of residence and was under an obligation to repay the whole or a part of a remote area housing loan connected with the dwelling; and

c)    the fringe benefit was not provided under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

the amount that, but for this subsection and section 62, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

Application to the Company:

(a) Expenditure relating to an expense payment fringe benefit, a property fringe benefit, or a residual fringe benefit in respect of residential fuel

The Company will provide an expense payment fringe benefit under the proposed arrangement to reimburse employees for the whole or part of the cost of electricity, gas or other residential fuel.

Accordingly, condition (i) of this provision is satisfied.

(b) Residential fuel used in connection with a remote area dwelling

Provided the residential fuel is used in connection with a dwelling that an employee of the Company occupies or uses as their usual place of residence, and is under an obligation to repay the whole or part of a remote area housing loan, connected with the dwelling, then this condition will be met.

Additionally, the definition of a remote area housing loan has already been considered in the analysis of subsection 142(1) which formed part of the subsection 60(2) analysis, and it was considered that housing benefits were provided as remote area housing loans.

(c) The reimbursement of residential fuel arrangement was made at arm's-length

The assumption underlying the ruling is that the remote housing assistance will not be provided under a non-arm's length arrangement. It is accepted that the benefit is not provided for the purpose of enabling the Company to obtain a benefit but rather to attract and retain talent in a remote area.

Subsection 59(2) conclusion: The Company satisfies the provisions of subsection 59(2).

Subsection 59(3) - Accommodation connected with remote area housing rent

Remote area housing rent connected with a unit of accommodation has already been defined in the analysis provided on subsection 142(1A), which formed part of the subsection 60(2A) analysis. Broadly, it is the payment or reimbursement of rent to an employee that relates to a unit of accommodation located in a remote area and used by the employee as their usual place of residence.

Subsection 59(3) provides:

Where

(a) any of the following conditions are satisfied:

(i) the recipients expenditure in relation to an expense payment fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is in respect of the supply of residential fuel;

(ii) the recipients property in relation to a property fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is residential fuel;

(iii) the recipients benefit in relation to a residual fringe benefit in relation to an employer in relation to an employee in relation to a year of tax is the benefit of the consumption of residential fuel;

(b) the residential fuel is for use in connection with a unit of accommodation during a period in the year of tax or, in a case to which subparagraph (a)(i) applies, in a preceding year of tax, during which:

(i) the recipient of the fringe benefit occupied or used the unit of accommodation as his or her usual place of residence; and

(ii) remote area housing rent connected with the unit of accommodation accrued; and

(c) the fringe benefit was not provided under:

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

(ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

the amount that, but for this subsection and section 62, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

Application to the Company:

(a)  Expenditure relating to an expense payment fringe benefit, a property fringe benefit, or a residual fringe benefit in respect of remote area housing rent

The Company will provide an expense payment fringe benefit under the proposed arrangement to reimburse employees for the whole or part of the cost of electricity, gas or other residential fuel. Accordingly, condition (i) of this provision will be satisfied.

(b) The recipient expenditure is in respect of housing rent in connection with a unit of accommodation

Provided the residential fuel is used in connection with a dwelling that an employee of the Company occupies or uses as their usual place of residence, and remote area rent accrued in connection with the dwelling, then this condition will be met.

Additionally, the definition of remote area housing rent connected to a unit of accommodation has already been considered in the analysis of subsection 142(1A) which formed part of the subsection 60(2A) analysis, and it was considered that housing benefits were provided when the Company reimbursed employees for rent expenses associated with their remote area housing.

(c) The reimbursement of residential fuel arrangement was made at arm's-length

As previously discussed, in the section 58ZC analysis, the assumption underlying the ruling is that the expense payment benefit will not be provided under a non-arm's length arrangement, or for the purpose of enabling the Company to obtain the benefit of any relevant section of the FBTAA. It is accepted that the provision of the benefits will be at arm's length, and not entered into for the purposes of gaining a benefit under subsection 59(3).

Subsection 59(3) Conclusion: The Company satisfies the provisions of subsection 59(3)

IV.          Section 60A - Reduction of Taxable Value - Remote Area Holiday Transport Fringe Benefits subject to a ceiling.

Section 61 - Reduction of Taxable Value - Remote Area Holiday Transport Fringe Benefits not subject to a ceiling.

Employees working in remote areas may be reimbursed for the costs of, or may be provided with, transport in connection with extended recreation leave of more than three days.

Section 60A and section 61 provide a reduction in the taxable value of fringe benefits where transport, accommodation or meals are provided to an employee or family members in connection with having a holiday of not less than three days.

To obtain the reduction in the taxable value of fringe benefits under sections 60A and 61, the Company must satisfy the conditions of Remote Area Holiday Transport under section 143.

Subsection 143(1) - Remote area holiday transport

Subsection 143(1) provides:

For the purposes of this Act:

(a) the recipients expenditure in relation to an expense payment fringe benefit;

(aa) the recipients property in relation to a property fringe benefit; or

(b) the recipients benefit in relation to a residual fringe benefit;

in relation to an employer, in relation to an employee, in relation to a year of tax shall be taken to be in respect of remote area holiday transport if:

(c) in the case of an expense payment fringe benefit - the recipients expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport;

(ca) in the case of a property benefit - the recipients property consists of meals in connection with transport;

(d) in the case of a residual fringe benefit - the recipients benefit consists of:

(i) the provision of transport or accommodation in connection with transport; or

(ii) the receipt of an allowance in respect of the cost of obtaining transport, or of obtaining meals or accommodation in connection with transport;

(e) the transport, accommodation or meals is for a family member;

(f) apart from temporary absences, the employee performs the duties of his or her employment at a place in a State or internal Territory but not at a location in, or adjacent to, an eligible urban area;

(g) the transport is provided wholly or principally to enable the family member to have a holiday for a period of not less than 3 days;

(h) if the transport is for the employee:

(i) the transport is provided while the employee is on recreation leave, being recreation leave of not less than 3 working days; and

(ii) at the completion of that recreation leave, the employee resumes the duties of that employment at the place referred to in paragraph (f);

(j) either of the following subparagraphs applies:

(i) the transport is between:

(A) a place at or near the place referred to in paragraph (f); and

(B) another place;

(ii) the transport is for the spouse, or a child, of the employee, being a spouse or a child of the employee who does not live with the employee at or near the place referred to in paragraph (f), and the transport is between:

(A) a place where the spouse or child, as the case may be, meets the employee; and

(B) another place;

(ja) if the transport is for the spouse, or a child, of the employee - the transport is not provided to enable the spouse or child to accompany the employee:

(i) while the employee is undertaking travel in the course of performing the duties of his or her employment; and

(ii) where the circumstances referred to in subsection 26-30(2) of the Income Tax Assessment Act 1997 do not apply; and

(k) either of the following conditions is satisfied:

(i) the benefit is provided pursuant to the provisions of an industrial instrument relating to the employment of the employee;

(ii) it is customary for employers in the industry in which the employee is employed to provide benefits of the same kind as the benefit provided to the recipient and to provide such benefits in similar circumstances to those that applied in relation to the provision of the benefit to the recipient.

Application to the Company:

(c)  This condition will be satisfied as the Company have stated that they intend to pay for, or reimburse, the costs associated with transport or meals or accommodation in connection with the remote area holiday transport.

(a)  This condition will be satisfied where the Company either pays or reimburses costs in relation to the transport, accommodation or meals of family members.

a.    This condition will be satisfied as the Company have stated that all employees eligible for remote area holiday transport will perform their duties of employment in the Town A/B area (being a remote area).

(b)  This condition is satisfied as the Company have stated that the remote area holiday transport is to be provided to a family member, to enable them to have a holiday of not less than three days.

(c)  This condition will be satisfied as the Company have stated that the remote area holiday transport is to be provided while the employee is on recreational leave for a period of not less than 3 days, and at the completion of the recreational leave, the employee will resume duties of employment as per paragraph (f), and the transport is intended to allow the employee to travel between the Town A/B area and another location.

(j) Condition (i) will be satisfied as the transport is intended to allow the employee to travel between the Town A/B area and another location.

Condition (ii) will also be satisfied, as the Company have stated that where the transport is provided to a family member, it will be provided to enable them to travel between a place where they meet the employee and another location.

(ja)(i) and (ii) On the basis that the Company will have satisfied paragraph (g) above, this condition will also be satisfied.

(k)(ii) The assumption of this ruling is that it is customary in the Company's rural manufacturing industry for employers to provide remote area fringe benefits to attract and retain employees at remote locations where their manufacturing operations occur. It is accepted that this condition is satisfied.

Subsection 143(1) conclusion: The Company satisfies the provisions of subsection 143(1)

[1] https://www.ato.gov.au/General/fringe-benefits-tax-(fbt)/in-detail/exemptions-and-concessions/FBT---remote-areas/

[2] Ibid.