Edited version of private advice

Authorisation Number: 1051982062256

Date of advice: 3 June 2022

Ruling

Subject: Remote area housing benefit reduction

Question

For the purposes of accessing the remote area reduction of taxable value in subsection 60(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is it both customary and necessary for the Employer to provide housing assistance to your employees for the reasons listed in subsection 142(2E) of the FBTAA?

Answer

No.

This ruling applies for the following period:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The organisation is a Public Benevolent Institution (PBI). It is funded by government grants and generally pays market rates to its employees.

It has a main office in an urban area and a smaller office 300 km away, and hence it qualifies as a remote area by reason of its distance from the urban area and its relatively small size.

The Employer does not move employees frequently from one residential location to another.

There is sufficient accommodation in the remote area, although it is pretty expensive to rent but all the employees in the remote area do have suitable accommodation.

It is not known to be customary in this industry for the employer to provide free or subsidised housing to its employees.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 142(2E)

Fringe Benefits Tax Assessment Act 1986 subsection 60(2A)

Taxation Determination TD 94/97Fringe benefits tax: what does the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees?

Reasons for decision

The common conditions listed under subsection 142(2E) of the FBTAA apply where an employer provides remote area housing assistance in the form of the payment or reimbursement of rent.

In the Employer's circumstances, they are proposing to provide housing assistance to employees by either paying or reimbursing their rent. As such, subsection 142(2E) of the FBTAA applies to their situation.

The common conditions that need to be satisfied in order to access the remote area housing benefit reduction under subsection 60(2A) of the FBTAA are outlined in subsection 142(2E) of the FBTAA as follows:

(2E) 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.

The common conditions outlined in both paragraphs (a) and (b) need to be satisfied in order to access the remote area housing benefit reduction under subsection 60(2A) of the FBTAA (i.e. providing housing assistance to employees needs to be both customary within the industry and necessary due to one of the reasons listed in paragraph (b) to qualify for the reduction).

(a)   Is it customary for employers in the same industry to provide housing assistance to employees?

Whether or not it is customary for employers within a particular industry to provide housing assistance to their employees is a question of fact.

The relevant test is not whether it is customary in remote areas for employers to provide housing assistance to their employees, but whether it is customary within the relevant industry for employers to provide housing assistance to their employees.

Guidelines on what the phrase 'customary for employers in the industry' means, is provided in 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?

Paragraph 2 of TD 94/97 states:

A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary.

In applying this guidance to the information provided there is no evidence to suggest it is customary (or normal) for employers in the Employer's industry, to provide housing assistance to their employees.

It is not sufficient that other organisations operating in the same area normally provide housing assistance to their employees; it must be customary for Employers across the industry to provide housing assistance to their employees in order to meet the requirements of paragraph 142(2E)(a) of the FBTAA.

There has been no evidence to suggest that it is customary in the Employer's industry. Because of this, it is not considered customary for employers in the Employer's industry to provide housing assistance to employees under paragraph 142(2E)(a) of the FBTAA, therefore the remote area housing reduction does not apply. This is regardless of whether the conditions outlined in paragraph 142(2E)(b) are satisfied because in order to qualify for the reduction, the common conditions in both paragraphs (a) and (b) need to be satisfied.

However; for completeness purposes we have also considered whether you satisfy the conditions outlined in paragraph 142(2E)(b) of the FBTAA.

(b)   Can it be concluded that it is necessary for the Employer to provide housing assistance for their employees because:

(i)    the nature of their business is such that their employees are liable to be frequently required to change their places of residence;

We consider that employees in the same industry are unlikely to be required to move frequently from one residential location to another due to the nature of the business. It has also been included in the application that the Employer does not move employees frequently from one residential location to another. This requirement is therefore not met.

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

There appears to be sufficient suitable residential accommodation, other than residential accommodation provided by the Employer or on the Employer's behalf, available in the remote area. A search on the real estate website http://www.realestate.com.au reveals that there are numerous properties for sale in the remote area and numerous properties for rent. The Employer also said that there is sufficient accommodation in the remote area and that all the employees in the remote area do have suitable accommodation. This requirement is therefore not met.

(iii) it is customary for employers in your industry in which your employees work to provide housing assistance for their employees

As stated above, there is no evidence to suggest that it is customary for employers in the same industry to provide housing assistance to their employees. This requirement is therefore not met.

As none of the conditions outlined in paragraph 142(2E)(b) of the FBTAA have been satisfied, it is not necessary for you to provide housing assistance to your employees.

Conclusion

As the Employer has not been able to satisfy the common conditions outlined in both paragraphs (a) and (b) of subsection 142(2E) of the FBTAA, they are unable to access the remote area housing benefit reduction under subsection 60(2A) of the FBTAA (i.e. it has been concluded that it is not customary and necessary for the Employer to provide housing assistance to their employees).