Edited version of private advice

Authorisation Number: 1051907959394

Date of advice: 27 October 2021

Ruling

Subject: FBT - sale of a residential property

Issue 1

Benefits relating to sale of a residential property (subsection 58C(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA))

Question 1

Will paragraph 58C(2)(aa) of the FBTAA be satisfied in respect of the sale of Residential Property "A", where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale within 2 years of the new employment day?

Answer

No, paragraph 58C(2)(aa) of the FBTAA is not satisfied in respect of the sale of Residential Property "A", where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale within 2 years of the new employment day. No discretion is provided within section 58C to enable the Commissioner of Taxation to extend the 2-year requirement.

Question 2

If paragraph 58C(2)(aa) of the FBTAA is not able to be satisfied in respect of the sale of Residential Property "A", because Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day, can the Commissioner of Taxation's general power of administration (GPA) under section 3 of the FBTAA be used to allow the employer to treat the requirement in paragraph 58C(2)(aa) as being satisfied?

Answer

No, the Commissioner's GPA under section 3 of the FBTAA cannot be used to allow the employer to treat the requirement in paragraph 58C(2)(aa) of the FBTAA as being satisfied, in respect of the sale of Residential Property "A", because Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day. The GPA cannot be used where this would be inconsistent with the intended purposes or object of the law; therefore, an exercise of the GPA such as a Letter of Comfort cannot be issued.

Question 3

If paragraph 58C(2)(aa) of the FBTAA is not able to be satisfied in respect of the sale of Residential Property "A", because Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day, can the Commissioner of Taxation's remedial power (CRP) in section 370-5 of the Taxation Administration Act 1953 (TAA) be used to modify the operation of paragraph 58C(2)(aa) so the requirement is treated as being satisfied?

Answer

No, the Commissioner's CRP in section 370-5 of the TAA cannot be used to modify the operation of paragraph 58C(2)(aa) of the FBTAA, so the requirement in paragraph 58C(2)(aa) is treated as being satisfied, in respect of the sale of Residential Property "A", where Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day. The CRP cannot be used where this would be inconsistent with the intended purposes or object of the law.

Issue 2

Benefits relating to purchase of a residential property (subsection 58C(3) of the FBTAA)

Question 4

Will paragraph 58C(3)(ca) of the FBTAA be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day?

Answer

No, paragraph 58C(3)(ca) of the FBTAA is not satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day. No discretion is provided within section 58C to enable the Commissioner of Taxation to extend the 2-year requirement.

Question 5

If paragraph 58C(3)(ca) of the FBTAA is not able to be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, because Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day, can the Commissioner's GPA under section 3 of the FBTAA be used to allow the employer to treat the requirement in paragraph 58C(3)(ca) as being satisfied?

Answer

No, the Commissioner's GPA under section 3 of the FBTAA cannot be used to allow the employer to treat the requirement in paragraph 58C(3)(ca) of the FBTAA as being satisfied, in respect of the purchase of Residential Property "A", where Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale for Residential Property "B" within 2 years of the new employment day. The GPA cannot be used where this would be inconsistent with the intended purposes or object of the law; therefore, a Letter of Comfort cannot be issued.

Question 6

If paragraph 58C(3)(ca) of the FBTAA is not able to be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, because Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day, can the Commissioner's CRP in section 370-5 of the TAA be used to modify the operation of paragraph 58C(3)(ca) so the requirement is treated as being satisfied?

Answer

No, the Commissioner's CRP in section 370-5 of the TAA cannot be used to modify the operation of paragraph 58C(3)(ca) of the FBTAA, so the requirement paragraph 58C(3)(ca) is treated as being satisfied and therefore, the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day. The CRP cannot be used where this would be inconsistent with the intended purposes or object of the law

This ruling applies for the following periods:

1 April 20XX - 31 March 20XX

1 April 20XX - 31 March 20XX

1 April 20XX - 31 March 20XX

The scheme commences on:

X April 20XX

Relevant facts and circumstances

The employee accepted an offer of employment with an employer located in Australia (the employer) on xxxx.

The employee and their family were occupying their property in another country (Residential Property "A") as the main residence up until xxxx. The employee relocated to Australia on xxxx and was joined by their family shortly afterwards.

The employee commenced employment with the employer on xxxx in Australia.

Residential Property "A" was leased to tenants on xxxx through a property agent. Residential Property "A" continues to be occupied by the tenant.

The employee plans to sell the Residential Property "A" solely as a result of relocation. The employee also plans to acquire another dwelling (Residential Property "B") solely as a result of relocation within 4 years of the new employment day.

The employee instructed the property agent in the other country to value the property prior to marketing on xxxx and instructed them to proceed with marketing for sale on xxxx.

Due to the following circumstances, the sale of Residential Property "A" is hindered and consequently the 2-year time limit imposed by section 58C(3)(ca) FBTAA is not likely to be met: In xxxx as part of its response to COVID 19 the national government in the other country introduced legislation that extends the notice period of eviction of private tenants. In addition, a moratorium was introduced on all eviction notices. This was due to end on xxxx.

On xxxx the property agent in the other country was instructed to proceed with marketing Residential Property "A" for sale. They advised that because the property had been tenanted since the employee relocated to Australia, they would be unable to serve an eviction notice immediately, but they planned to do this and market the property from xxxx when government restrictions eased.

In xxxx, the national government in the other country extended its tenancy eviction reforms for the entire country. As a result, it was impossible to vacate and complete the sale of Residential Property "A" within 2 years of the new employment day, xxxx.

It is the employee's intention to sell the overseas residence as soon as possible, and to use the proceeds in their entirety to part-fund a deposit for a residential home in Australia. Given the requirement for six-months' notice of eviction, it is anticipated that it may take until xxxx to complete the sale.

The employer is considering reimbursing the employee for the stamp duty payable on the purchase of Residential Property "B" new residence, plus marketing and sales costs for Residential Property "A".

Relevant legislative provisions

Section 3 of the FBTAA

Section 58C of the FBTAA

Paragraph 58C(2)(aa) of the FBTAA

Paragraph 58C(3)(ca) of the FBTAA

Section 370-5 of the TAA

Reasons for decision

Question 1

Will paragraph 58C(2)(aa) of the FBTAA be satisfied in respect of the sale of Residential Property "A", where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale within 2 years of the new employment day?

Summary

Paragraph 58C(2)(aa) is not satisfied in respect of the sale of Residential Property "A" if the employee does not enter into a contract of sale within 2 years of the new employment day. No discretion is provided within section 58C to enable the Commissioner of Taxation to extend the 2-year requirement.

Detailed reasoning

Section 58C of the FBTAA exempts from FBT benefits which meet incidental costs incurred in the sale or purchase of a home by an employee who changes their usual place of residence in the course of employment or in order to commence employment.

This exemption does not apply unless the preconditions under subsection 58C(1) of the FBTAA are satisfied:

1.            The employee must have owned a home.

2.            The employee must sell that home solely because the employee is required to change their usual place of residence in order to perform the employment duties.

3.            At the time the employer notified the employee of the required change of location, the employee occupied the home as the usual place of residence.

Are the preconditions under subsection 58C(1) of the FBTAA satisfied?

The employee owns Residential Property "A" which is located in the other country.

The employee had to sell that home solely because the employee was required to change their usual place of residence in order to perform the employment duties. The change in usual place of residence was agreed upon as a practical necessity for the employee in order to effectively perform their employment duties (ATO Interpretive Decision 2013/8).

At the time the employer notified the employee of the required change of location, the employee occupied the home as the usual place of residence.

The preconditions under subsection 58C(1) of the FBTAA are considered to be satisfied, so that the exemptions under section 58C of the FBTAA for benefits relating to the payment of incidental costs associated with the sale of the employee's former home as well as the employee's acquisition of a new home as a result of the employee's relocation can now be considered.

Benefits relating to sale of a home, subsection 58C(2)

Subsection 58C(2) sets out specific conditions for costs in relation to the sale of the employee's home to be exempt benefits:

1.            The benefit must be either an expense payment benefit or residual benefit where the costs incurred by the employee are incidental to the sale of the property.

2.            The employee must have entered into a contract for the sale of the home within two years after the "new employment day", i.e., the day on which the employee commenced to perform the duties of that employment at the employee's new place of employment.

3.            In the case of an expense payment benefit, documentary evidence of the expenditure incurred by the employee must be supplied to the employer before the date on which the employer has to submit the fringe benefits tax return.

4.            The benefit must be provided under an arm's length arrangement.

Costs incidental to the sale of property

Section 141A of the FBTAA lists the type of costs which will be taken to be incidental to the sale or purchase of property. Unless an expense payment benefit or a residual benefit relates to such matters, it will not be exempt under section 58C of the FBTAA.

For the purposes of an expense payment benefit, costs will be taken as incidental to the sale or purchase of property only if they are in respect of the following matters:

-              stamp duty,

-              advertising,

-              legal services,

-              agent's services,

-              discharge of a mortgage,

-              expenses of borrowing,

- any similar matter.

The employer in this case, is considering reimbursing the employee's marketing and sales costs for Residential Property "A". These are expenses that fall within incidental costs for the purposes of section 141A so maybe exempt benefits if the requirements are satisfied.

Two-year time limit

Paragraph 58C(2)(aa) requires the employee to have entered into a contract to sell Residential Property "A" within two years after the day they commenced work at the new location.

The Minutes of the ATO FBT Subcommittee Meeting of 21 February 2002 noted at item 6 that the ATO agreed that the words "within two years" in section 58C of the FBTAA should be read as an end date or "sunset" provision for the last day on which the contract can be entered into.

The employee commenced employment with the employer on xxxx in Australia.

The employee instructed the property agent in the other country to value the property prior to marketing on xxxx; and instructed them to proceed with marketing for sale on xxxx.

In xxxx as part of its COVID 19 response the national government of the other country extended the notice period of eviction to private tenants to 6 months. In addition, a moratorium was introduced on all eviction notices. This was due to end on xxxx.

On xxxx the property agent in the other country was instructed to proceed with marketing Residential Property "A" for sale. They advised that because the property had been tenanted since the employee relocated to Australia, they would be unable to serve an eviction notice immediately, but they planned to do this and market the property from end Month when Government restrictions eased. In xxxx, the national government of the other country extended its tenancy eviction reforms until xxxx for the entirety of the country

The employee has not yet sold their property in the other country, but they plan to do so before the end of the xxxx calendar year. Strictly then, as the sale of the property has not yet occurred, the provision is not enlivened yet. However, once the sale occurs, it will clearly occur outside the two-year period provided in paragraph 58C(2)(aa), and the requirements for the concession in subsection 58C(2) will not be satisfied.

There is no discretion provided in section 58C to enable the Commissioner of Taxation to extend the 2-year requirement. Accordingly, any benefits provided would not be exempt from FBT when that requirement is not met.

Question 2

If paragraph 58C(2)(aa) of the FBTAA is not able to be satisfied in respect of the sale of Residential Property "A", because Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day, can the Commissioner of Taxation's general power of administration (GPA) under section 3 of the FBTAA be used to allow the employer to treat the requirement in paragraph 58C(2)(aa) as being satisfied?

Summary

The Commissioner's GPA under section 3 of the FBTAA cannot be used where this would be inconsistent with the intended purposes or object of the law. In these circumstances, an exercise of the GPA such as issuing a letter of comfort would be unauthorised. A letter of comfort, therefore, could not be issued.

Detailed reasoning

No discretion is provided within section 58C (or within another provision of the FBTAA) to enable the Commissioner of Taxation to extend the 2-year requirement in paragraph 58C(2)(aa).

Commissioner's general power of administration

There are a number of general administration provisions located within various taxation laws. As explained in Practice Statement Law Administration PS LA 2009/4 When a proposal requires an exercise of the Commissioner's powers of general administration, these provisions:

•                    place the power to conduct the day-to-day administration of those laws in the hands of the Commissioner.

•                    exist in order to assist the Commissioner to administer the taxation laws in accordance with Parliament's legislative intent.

These powers are referred to as the Commissioner's general power of administration of the tax law (GPA). The GPA in regard to FBT, is found in section 3 of the FBTAA.

As no discretion is provided within section 58C, the alternative of using the GPA can be considered. The specific solution of the use of a comfort letter arises for consideration in this regard.

Use of Comfort Letters

The use of comfort letters is considered to be advantageous in situations where: time is critical and the ATO will not be able to make a formally binding and enforceable decision in the time frame; or the ATO does not want to displace a widespread practice in relation to a specific tax treatment (pending legislative reform).

Comfort letters were described by former Deputy Commissioner Tim Dyce in the Large Business Stewardship Group 'Key Messages' on 29 March 2019:

... A comfort letter is the exercise of the Commissioner's general power of administration which is neither a confirmation that the law applies favourably to a taxpayer nor a protection from the application of the law generally. A comfort letter is not legally binding like a private ruling however the Commissioner will stand by them unless the circumstances upon which they are issued change. A comfort letter will not be issued in the following circumstances:

-               an assessment has been issued for the relevant income year

-               the matter is already subject to a review or audit

-               another solution is more appropriate

-               the risk level for the arrangement is other than low

-               the arrangements are novel and require more scrutiny from the ATO from a strategic perspective

-               it would involve an unreasonable diversion of resources from higher risk or priority issues

-               where the Commissioner has material concerns that he is not apprised of all relevant facts

-               it would be used to remedy defects or omissions in the law

-               it would be used to accept non-compliance with the law by a particular taxpayer.

The limits on the use of the GPA are further explained in PS LA 2009/4 Appendix B:

[1] The provisions do not authorise the Commissioner to administer the taxation laws inconsistently with their purpose or object, whether express or implied, or their plain meaning. They support the principle that the Commissioner must interpret and administer each Act to give effect to its intention as discerned from it as a whole, not, for example, by interpreting a particular section in isolation from the rest of the Act. The provisions must be interpreted having regard to the context in which they appear. ...

[11] ... what the Commissioner cannot do: exceed the authority conferred on him by the law ...

[16] ... Application of the general administration provisions in relation to a legislative provision should result in an administrative outcome which is consistent with the underlying policy intent sought from the provision.

[17] The Commissioner cannot use his GPA to accept non-compliance with the law. However, as part of his duty of good management, the Commissioner can decide not to undertake compliance action on a particular issue for prior years or periods on a particular issue that affects a class of taxpayers or industry group.

[18] In making his decision, the Commissioner will consider all of the circumstances, including:

-              estimated amount of revenue at risk

-              potential number of taxpayers affected

-              cost of identifying and pursuing non-compliance

-              extent to which some taxpayers have complied with the ATO view in respect of the issue, where known

-              whether the ATO has contributed to non-compliance

-              likely impact on future voluntary compliance by taxpayers if compliance action is not taken

-              relative priority of the compliance risk compared to other identified risks

-              strength of the ATO view on the issue, and

-              any proposed change of law affecting the issue including the proposed date of effect of any such change.

Can comfort letters be used to resolve these matters?

To satisfy the conditions in section 58C, paragraph 58C(2)(aa) requires the employee to have entered into a contract to sell their residence within two years after the day they commenced work at the new place of employment.

In this case, the provision expressly state a given time frame; this wording is clear; and there is no uncertainty or ambiguity as to the interpretation. As noted above there is agreement that the words "within two years" in section 58C of the FBTAA should be read as an end date or "sunset" provision for the last day on which the contract can be entered into.

Extending the stipulated time frame would therefore be considered to be inconsistent with what is intended. As indicated above, the GPA does not authorise the Commissioner to administer the provisions in a way that is inconsistent with their underlying purpose and object.

The GPA cannot be used to accept non-compliance with the law. However, where there is ambiguity and it has been determined that there is a wide-spread practice that the ATO is not seeking to displace (pending legislative reform), the Commissioner can decide not to undertake compliance action in relation to the class or group of taxpayers that are impacted.

That scenario is not relevant here due to the wording in regard to the time requirements being clear and unambiguous. Also, there are no indicators that a large number of taxpayers (i.e., a class or group) have been impacted by this issue.

It is also acknowledged, that the drafters of section 58C failed to foresee that the impacts of an event such a global pandemic could prevent the time requirements being satisfied. As noted above, the GPA also cannot be used to remedy an omission in the law.

It is concluded that the Commissioner would not be authorised to use the GPA to issue a letter of comfort where the time requirement in paragraph 58C(2)(aa) cannot be met due to COVID-19 impacts.

Question 3

If paragraph 58C(2)(aa) of the FBTAA is not able to be satisfied in respect of the sale of Residential Property "A", because Government implemented COVID-19 restrictions prevented the employee from entering into a contract of sale within 2 years of the new employment day, can the Commissioner of Taxation's CRP in section 370-5 of the TAA be used to modify the operation of paragraph 58C(2)(aa) so the requirement is treated as being satisfied?

Summary

The Commissioner's CRP cannot be used where this would be inconsistent with the intended purposes or object of the law. It also cannot be used to resolve issues that affect a particular individual. Accordingly, in the current case the CRP cannot be used to modify the operation of paragraph 58C(2)(aa) to enable the time requirement to be treated as being satisfied.

Detailed reasoning

It was determined above that the GPA cannot be used to resolve the current matter therefore, using the CRP may be considered. The CRP is found in section 370-5 of the TAA. As described on the ATO website at QC 51404 the CRP provides the Commissioner of Taxation with limited powers to modify the operation of tax law in circumstances where taxpayers will benefit, or at least be no worse off, as a result of the modification.

The CRP is a discretionary power. The Commissioner can use this power in limited circumstances where law change would otherwise be required to address instances where the law is not operating as intended by parliament. The CRP is used as a last resort when other options, such as administrative or interpretive approaches, are not adequate to resolve an issue.

The CRP may only be used to resolve general issues that arise for all taxpayers, or issues that impact a particular class of taxpayers. It can't be used to resolve specific issues affecting a particular individual. The CRP is not an alternative to objecting to a decision made by the Commissioner.

The CRP provides a streamlined process to create certainty for taxpayers. This facilitates the timelier resolution of unforeseen or unintended outcomes in tax and superannuation law than primary law change. It also allows legislative resources to be prioritised towards more significant changes.

The CRP may be applicable where the current law is producing unintended, negative impacts for taxpayers, or is creating excessive compliance costs. The CRP has legal limitations and any modifications made using the power must:

•                    not be inconsistent with the intended purpose or object of the law

•                    be reasonable, having regard to

-               the intended purpose or object of the law

-               whether the cost of compliance is disproportionate to that intended purpose or object

•                    have a negligible budget impact.

Application

To satisfy the conditions in section 58C, paragraph 58C(2)(aa) requires the employee to have entered into a contract to sell their residence within two years after the day they commenced work at the new place of employment. Can the CRP be used where the requirement is unable to be satisfied?

As outlined above, there are limitations on exercising the CRP including that the modification cannot be inconsistent with the intended purpose or object of the law. As already noted, it is considered that the wording of this provision is clear; the meaning is plain; and there is no uncertainty or ambiguity as to the interpretation. The intended purpose is to place a clear time limit on the employee meeting the requirements. The timeframe is expressly stated; and there is no discretion to extend the period.

Whilst a global pandemic may have been considered unforeseeable at the time of drafting; it is considered reasonable to assume that circumstances might arise that would prevent the two-year requirement being met. No provision was made to accommodate any such circumstances. In the current case the modification being sought, to allow the Commissioner to extend the two-year time requirement is considered to be inconsistent with the intended purpose or object of the law.

It has also been noted that the CRP is a mechanism that is designed to deal with systemic matters; it may only be used to resolve general issues that arise for all taxpayers, or issues that impact a particular class of taxpayers. There are no indicators that a large number of taxpayers (i.e., a class or group) have been impacted by this issue. The CRP cannot be used to modify the operation of the law for a particular taxpayer. Accordingly, it is not considered to be applicable in the current case.

Question 4

Will paragraph 58C(3)(ca) of the FBTAA be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, where Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day?

Summary

Paragraph 58C(3)(ca) of the FBTAA is not satisfied in respect of the purchase of Residential Property "B", if the employee does not enter into a contract of sale for Residential Property "A" within 2 years of the new employment day. No discretion is provided within section 58C to enable the Commissioner of Taxation to extend the 2-year requirement.

Detailed reasoning

Costs that are incidental to an employee buying a new property may be exempt under subsection 58C(3) of the FBTAA. These costs include stamp duty, legal fees, borrowing expenses; and associated utility costs such as telephone, gas, and electricity expenses.

In the current case the employer is considering reimbursing the employee for the stamp duty payable on the purchase of Residential Property "B'. These costs will be exempt where the following conditions are satisfied:

1.            The preconditions under subsection 58C(1) are satisfied.

2.            The benefit must be either an expense payment benefit or residual benefit where the costs incurred by the employee are incidental to the purchase costs and associated utility costs of the new residential property.

3.            The employee has purchased a new residential property.

4.            The employee's new residential property has been purchased solely because the employee is required to change their usual place of residence in order to perform the employment duties at the new place of employment.

5.            The employee must have entered into a contract for the purchase of the new residential property within 4 years of the employee commencing employment duties at the new place of employment.

6.            Where the employee holds another residential property at the time of commencing duties at the new location, that property must have been sold within two years after the new employment day.

7.            Immediately after the new residential property is purchased, the employee occupies it the home as their usual place of residence.

8.            In the case of an expense payment benefit, documentary evidence of the expenditure incurred by the employee must be supplied to the employer.

9.            The benefit must be provided under an arm's length arrangement.

Application

The requirements in regard to the sale of a residential property held at the time of commencing duties at the new location are set out in paragraph 58C(3)(ca). The provision requires the employee to have entered into a contract to sell Residential property "A" within two years after they commenced work at the new location, on xxxx.

As discussed above, Government restrictions imposed in response to the COVID-19 pandemic hindered the sale of the employee's home. As the sale of the property has not yet occurred, the provision is not enlivened yet. However, once the sale occurs, it will occur outside the two-year period specified in paragraph 58C(3)(ca), and the requirements in subsection 58C(3) will not be satisfied.

There is no discretion provided in section 58C to enable the Commissioner of Taxation to extend the two-year requirement. Accordingly, any benefits provided to the employee would not be exempt from FBT.

Question 5

If paragraph 58C(3)(ca) of the FBTAA is not able to be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, because Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day, can the Commissioner's GPA under section 3 of the FBTAA be used to allow the employer to treat the requirement in paragraph 58C(3)(ca) as being satisfied?

Summary

The Commissioner's GPA under section 3 of the FBTAA cannot be used where this would be inconsistent with the intended purposes or object of the law. In these circumstances, an exercise of the GPA such as issuing a letter of comfort would be unauthorised. A letter of comfort, therefore, should not be issued.

Detailed reasoning

As explained above in regard to Question 3 there are limits on the use of the GPA. As per PS LA 2009/4 Appendix B, these include that:

[1] The provisions do not authorise the Commissioner to administer the taxation laws inconsistently with their purpose or object, whether express or implied, or their plain meaning. They support the principle that the Commissioner must interpret and administer each Act to give effect to its intention as discerned from it as a whole, not, for example, by interpreting a particular section in isolation from the rest of the Act. The provisions must be interpreted having regard to the context in which they appear.

[11] ... what the Commissioner cannot do: exceed the authority conferred on him by the law ...

[16] ... Application of the general administration provisions in relation to a legislative provision should result in an administrative outcome which is consistent with the underlying policy intent sought from the provision.

[17] The Commissioner cannot use his GPA to accept non-compliance with the law. However, as part of his duty of good management, the Commissioner can decide not to undertake compliance action on a particular issue for prior years or periods on a particular issue that affects a class of taxpayers or industry group.

Where an employee held a residence at the time of commencing employment duties at the new location, paragraph 58C(3)(ca) requires the employee to have entered into a contract to sell that residence within two years after the day they commenced work at the new place of employment. It is considered that the meaning of this wording is clear; and that there is no uncertainty or ambiguity as to the interpretation.

Extending the stipulated time frame beyond what is expressly stated would be considered to be inconsistent with what is intended. As indicated above, the GPA does not authorise the Commissioner to administer the provisions in a way that is inconsistent with their underlying purpose and object. As also discussed above, the GPA cannot be used to accept non-compliance with the law; or to remedy an omission in the law. There are no wide-spread practices that the ATO is not seeking to displace (pending legislative reform. There are no indicators that a class or group of taxpayers are impacted by this or by any unintended consequences in relation to the way the provision operates.

It is concluded that the Commissioner would not be authorised to use the GPA to issue a letter of comfort where the time requirement in paragraph 58C(3)(ca) cannot be met due to COVID-19 impacts.

Question 6

If paragraph 58C(3)(ca) of the FBTAA is not able to be satisfied, so that the benefits in respect of the purchase of Residential Property "B" are exempt from FBT, because Government implemented COVID-19 restrictions prevent the employee from entering into a contract of sale for Residential Property "A" within 2 years of the new employment day, can the Commissioner's CRP in section 370-5 of the TAA be used to modify the operation of paragraph 58C(3)(ca) so the requirement is treated as being satisfied?

Summary

The Commissioner's CRP cannot be used where this would be inconsistent with the intended purposes or object of the law. It also cannot be used to resolve issues that affect a particular individual. Accordingly, in the current case, the CRP cannot be used to modify the operation of paragraph 58C(3)(ca) to enable the time requirement to be treated as being satisfied.

Detailed reasoning

Where an employee held a residence at the time of commencing employment duties at the new location, paragraph 58C(3)(ca) requires the employee to have entered into a contract to sell that residence within two years after the day they commenced work at the new place of employment. Can the CRP be used where the requirement is unable to be satisfied?

As explained above in regard to Question 4, the CRP is found in section 370-5 of the TAA and provides the Commissioner of Taxation with limited powers to modify the operation of tax law in circumstances where taxpayers will benefit, or at least be no worse off, as a result of the modification. There are limitations on exercising the CRP including that the modification cannot be inconsistent with the intended purpose or object of the law. The CRP is intended to address systemic issues and cannot be used to modify the operation of the law for a particular taxpayer.

As discussed above, it is considered that the wording of this provision is clear; the meaning is plain; and there is no uncertainty or ambiguity as to the interpretation. The intended purpose is to place a clear time limit on the employee meeting the requirements. The timeframe is expressly stated; and there is no discretion to extend the period. There are also no indicators that a class or group of taxpayers have been impacted by this issue. Accordingly, the CRP is not considered to be applicable in the current case.