Edited version of private advice

Authorisation Number: 1052003329604

Date of advice: 11 July 2022

Ruling

Subject: FBT - FIFO/DIDO arrangements and living-away-from-home-allowance

Question 1

Will employees working under a Fly-In Fly-Out ("FIFO") or Drive-In Drive Out ("DIDO") arrangement satisfy the requirements set out in section 31E of the Fringe Benefits Tax Assessment Act 1986 ("FBTAA")?

Answer

Yes

Question 2

Will accommodation provided by employees working under a FIFO or DIDO arrangement be exempt under subsection 47(5) of the FBTAA?

Answer

Yes

Question 3

Will the meals provided to the Company A employees be a property benefit under section 63 of the FBTAA and have a net taxable value of nil?

Answer

Yes

Question 4

Will the food allowance provided by Company A to the employees have a nil taxable value under subsection 30(1) of the FBTAA?

Answer

Yes

This ruling applies for the following period:

FBT year ending 31 March 2022

FBT year ending 31 March 2023

FBT year ending 31 March 2024

FBT year ending 31 March 2025

FBT year ending 31 March 2026

FBT year ending 31 March 2027

The scheme commences on:

FBT year commencing on 1 April 2021

Relevant facts and circumstances

Company A owns and operates the production facilities within Australia. A operates in a specialised, niche industry. While there are staff members in non-regional areas, the vast majority of employees are based in areas designated as remote for FBT purposes being in close proximity to the company's assets.

The employer is expanding its existing facilities. The closest towns nearest to the construction site are classified as "remote" for FBT purposes. The construction will be both permanent and temporary infrastructure needed for the operation of the site. Temporary infrastructure required during the construction phase includes accommodation camps for the construction workforce.

The design and construction of the project will be carried out by Company B, the contractor appointed by Company A. Companies A and B are not related parties.

Construction of the site will be undertaken on a 24/7, 365 days per year basis until complete. It is expected that the site will be completed in the calendar year of 20XX. Once construction is complete, the site will become part of the greater project and owned and operated by company A.

Company B will engage a significant construction workforce over the life of the project. Company A will, however, directly employ a small onsite workforce performing assurance and monitoring of the works undertaken by company B.

Company A employees who are based on site will be accommodated on site at no cost to the employees. They will be placed in temporary accommodation camps that are being purpose built for the workforce.

The nearest regional townships are classified as 'remote' for FBT purposes. None of these townships are appropriate for housing Company A employees on a rotational basis due to either the lack of capacity or difficulty of access. The ingress and egress for the site is not built for regular public use and is constructed for the site's use only.

Due to the size and nature of the project, construction of employee accommodation is ongoing. Whilst accommodation is being constructed, some employees may reside in other towns near the site and transition into the accommodation once construction is complete.

Employees will also have access to an onsite mess hall in which they will be provided with food whilst they are working onsite. The mess hall will be operated by company B. To access the mess hall, employees will have an amount of $X per meal deducted from their salary after-tax. Simultaneously, Company A will also pay the employees a meal allowance equal to the amount deducted to cover their additional food costs while living away from home.

The employees will complete a declaration in an approved form.

Arrangements with the Company A's employees

The small onsite workforce directly employed by Company A on the site is made up of various categories of employees performing roles that are necessary for construction.

All employees covered by this ruling will work on a rotational roster, with employees working for a predetermined number of days and having a number of days off, but not the same days in consecutive weeks. The roster assigned to each individual employee will vary between employee categories, dependent on the site's operational needs and the employees' travel arrangements. For example, some rotations may be aligned to a schedule of chartered flights in and out.

In all cases the rosters will be structured in such a way that there is at least one rotation of each employee category working on the site at any given time i.e., there will be coverage 7 days a week. In addition, there will be overlap between each rotation, effectively allowing for a handover of duties. The employees who are being replaced return to their usual place of residence.

To accommodate the operational needs of the project and as a reflection of the remoteness of the location of the site, employees will, depending on their usual place of residence, operate on either a FIFO or DIDO basis.

An example of a potential roster would be as follow:

Example 1: 8 days on, 6 days off basis. Employees with a changeover day of Wednesday would work Wednesday through Wednesday (inclusive) and have the following Thursday through Tuesday off.

The project is expected to be completed by 20XX, and at that stage Company A's operational needs for having employees on site on the basis outlined above will cease. Employees are not permitted to reside permanently at the site and will move back to their normal place of residence when their duties no longer require them to live away.

Provision of Meals to Company A's employees

Company A will provide employees with food while they are at work, via access to the mess hall operated by Company B. In order to access the mess hall, the employees will make a contribution to Company A of $X per meal deducted from their post-tax salary, which will help cover the cost of the meals.

Company A is charged an amount + GST for accommodation and meals per person per day. There are three meals provided a day. The total amount per day may vary due the varying number of employees that work on the site.

In addition, Company A will provide employees with a food allowance to meet the additional cost of food whilst they are working on the site. Per the assignment contracts with these employees, this allowance is designed to cover only the additional cost of food incurred in connection with the requirement to live away from home as part of their role.

Relevant legislative provisions

Section 25 ofthe Fringe Benefits Assessment Act 1986

Subsection 30(1) of the Fringe Benefits Assessment Act 1986

Section 31A of the Fringe Benefits Assessment Act 1986

Subsection 31A(1)(a) of the Fringe Benefits Assessment Act 1986

Subsection 31A(1)(b) of the Fringe Benefits Assessment Act 1986

Subsection 31A(1)(c) of the Fringe Benefits Assessment Act 1986

Subsection 31A(2)(a) of the Fringe Benefits Assessment Act 1986

Subsection 31A(2)(b) of the Fringe Benefits Assessment Act 1986

Subsection 31E(c) of the Fringe Benefits Assessment Act 1986

Subsection 31E(d) of the Fringe Benefits Assessment Act 1986

Subparagraph 31E(a)(1) of the Fringe Benefits Assessment Act 1986

Section 31G of the Fringe Benefits Assessment Act 1986

Section 31H of the Fringe Benefits Assessment Act 1986

Section 40 of the Fringe Benefits Assessment Act 1986

Section 41 of the Fringe Benefits Assessment Act 1986

Section 45 of the Fringe Benefits Assessment Act 1986

Section 47 of the Fringe Benefits Assessment Act 1986

Subsection 47(5) of the Fringe Benefits Assessment Act 1986

Section 63 of the Fringe Benefits Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Assessment Act 1986

Reasons for decision

Question 1

Summary

Company A's employees working under a FIFO or DIDO arrangement will satisfy the FIFO and DIDO requirements set out in section 31E of the FBTAA.

Detailed reasoning

Section 31E of the FBTAA establishes the criteria that must be met for an arrangement to be considered a FIFO or DIDO. Section 31E of the FBTAA states:

the employee satisfies this section if:

(1)           the employee, on a regular and rotational basis:

(a)           works for a number of days and has a number of days off (but not the same days in consecutive weeks); and

(b)           on completion of the working days, travels from his or her usual place of employment to his or her normal residence and, on completion of the days off, returns to that usual place of employment; and

(2)           the basis of work described in paragraph (a) is customary for employees performing similar duties in that industry; and

(3)           it would be unreasonable to expect the employee to travel on a daily basis on workdays between:

(a)           his or her usual place of employment; and

(b)           his or her normal residence

having regard to the location of those places; and

(4)           it is reasonable to expect that the employee will resume living in his or her normal residence when the duties of that employment no longer require him or her to live away from it.

These requirements are further explored below.

a) Regular and rotational

The employees who are working for on the site will continue (until the project completion), to work on a regular and rotational basis as required by Section 31E. As the FBTAA does not define 'regular and rotational basis', the ordinary meanings of the terms are used in the context of the FBTAA.

The Macquarie Dictionary defines 'regular' as "usual; normal; customary; conforming in form or arrangement; recurring at fixed times; periodic; characterised by fixed principle; uniform procedure; adhering to rule or procedure". The term 'rotational' is defined in the Macquarie Dictionary as "regularly recurring succession". Further, Cambridge Dictionaries Online defines 'rotational' in the employment context to mean "shift work on a rotational basis" and "relating to a system in which the person who does a particular job is regularly changed".

Subparagraph 31E(a)(i) is further defined under the Tax Law Amendment (2012 Measure No.4) and its corresponding Explanatory Memorandum. It states that "the employee is considered to be working on a fly-in fly-out or drive-in drive-out basis when on a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks, such as a standard five-day working week and weekend".

Therefore, as the proposed roster arrangements indicate, the employees do not work the same days in consecutive weeks thus satisfying the requirements set out under subparagraph 31E(a)(i) and as the employees return to their normal residence after their rostered shift the requirements of subparagraph 31E(a)(ii) are satisfied.

b) Industry custom

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

2. A benefit will be accepted as being customary where "it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit".

3. In defining the employer's industry, this Office will accept categorisation based on any recognised industry classification system. Examples of these are the industry codes for business income used by this Office (listed in the company income tax return instructions), and Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.

Company A's employees involved with the site are comprised of personnel and officers involved in performing environmental assessment, ensuring the safety of the site, or providing technical oversight for the site, as well as onsite field managers coordinating the project. Based on the ANZSIC codes, construction services fall under the division "Construction" which is the broadest level of classification. It is established that it is common for employees performing similar duties across the same division to operate under a FIFO or DIDO arrangement in scenarios where the employment duties are required to be performed in a remote location. This satisfies the requirements under subsection 31E(b).

c) Unreasonable to travel on a daily basis

From the background facts presented, it would be unsafe and unreasonable to expect company A's employees to travel daily to the site from their normal residence given the remote location of the usual place of employment and the hazardous conditions that are associated with the journey. Subsection 31E(c) would therefore be satisfied.

d) Will return to usual place of residence

Company A's employees performing duties at the site maintain a residence away from the usual place of employment and are not permitted to reside permanently at the site. Therefore, the employee will resume living at their usual place of residence when the duties no longer require them living at the site. This would satisfy subsection 31E(d).

As all the requirements listed under section 31E are satisfied, the proposed arrangements will be considered FIFO and DIDO under section 31E of the FBTAA.

Question 2

Summary

Accommodation provided by Company A to employees working under a FIFO or DIDO arrangement will be exempt under subsection 47(5) of the FBTAA.

Detailed reasoning

Section 47 of the FBTAA establishes exempt residual benefits. Subsection 47(5) of the states that a benefit is an exempt benefit:

(5)           Where

(a)           a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and

(b)           the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and

                                            (ba)                  the employee satisfies:

(i)             sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or

(ii)            section 31E (about fly-in fly-out and drive-in drive-out requirements); and

(c)            the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and

(d)           any of the following conditions is satisfied:

(i)             subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment;

(ii)            if the employee satisfies sections 31C and 31D--the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii);

(iii)           if the employee satisfies section 31E--the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii);

the benefit is an exempt benefit in relation to the year of tax.

(a) Accommodation is a residual benefit

Subsection 136(1) of the FBTAA defines a residual benefit to mean a benefit that is a residual benefit by virtue of

section 45.

Section 45 of the FBTAA states that a benefit is a residual benefit for the purposes of the FBTAA if the benefit is

not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). In basic terms, a residual

benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

Divisions 2 to 5 and 7 to 11 are not relevant to the arrangement subject to this ruling. Division 6 may be relevant and is discussed below.

Division 6 of the FBTAA applies to housing benefits. Section 25 of the FBTAA states that:

The subsistence during the whole or a part of a year of tax of a housing right granted by a person (in this section referred to as the provider) to another person (in this section referred to as the recipient) shall be taken to constitute a benefit provided by the provider to the recipient in respect of the year of tax.

The definition of a "housing right" in subsection 136(1) of the FBTAA states:

in relation to a person, means 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.

As the housing provided to the employees cannot be considered the person's usual place of residence, this division would not apply.

Therefore, the benefit provided by the employer does not fall within any of the provisions of Subdivision A of Division 2 to 11 of the FBTAA and the accommodation provided is therefore a residual benefit under section 45 of the FBTAA.

(b) Accommodation is provided solely because the employee is Living Away from Home

The unit of accommodation to be provided by Company A is provided for the employee solely because of the employment duties that require the employee to live away from his or her usual residence whilst working. As the employee satisfies the FIFO and DIDO requirements of section 31E, subsection 47(5)(b) is also satisfied.

(c) Accommodation is not provided whilst the employee is undertaking travel in the course of performing the duties of that employment

Company A employees that are residing on site for the purposes of their employment are living away from home as opposed to travelling for business. Employees do not live on site on a permanent basis, despite being their regular place of employment. They are required to travel from their usual place of residence outside of the site and their employment duties will require them to live away from their usual place of residence on a regular and rotational basis. As accommodation is not being provided while the employee is travelling, subsection 47(5)(c) is satisfied.

(d) Declaration

As subparagraphs 47(5)(d)(i) and 47(5)(d)(ii) do not apply to this case, subparagraph 47(5)(d)(iii) must be satisfied. Company A employees residing on site during their rostered days satisfy the requirements set out in section 31E and are required to complete a declaration satisfying the requirements set out in subparagraphs 31F(1)(b)(i) to (iii). Therefore, paragraph 47(5)(d) will also be satisfied.

As such the accommodation provided by Company A to employees will be an exempt residual benefit under Section 47 of the FBTAA.

Question 3

Summary

Yes. Meals provided to employees will have a taxable value of $x per meal under section 63 of the FBTAA, which is reduced to nil by the employee contribution of $X per meal.

Detailed reasoning

A reduction of taxable value of living-away-from-home food fringe benefits is allowed where the requirements are satisfied in section 63 of the FBTAA. Section 63 of the FBTAA states that a reduction is allowed

(1) Where:

(a) a living-away-from-home food fringe benefit, or 2 or more living-away-from-home food fringe benefits, in relation to an employer in relation to a year of tax relates or relate to a particular employee; and

(b) the fringe benefit or fringe benefits are equivalent to the food component of a living-away-from-home allowance fringe benefit in respect of a particular period in the year of tax; and

(c) that food component exceeds the sum of the statutory food amounts in respect of eligible family members in respect of that period; and

(d) the employee satisfies:

(i)             sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or

(ii)            (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and

(da) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out:

(i)             if the employee satisfies sections 31C and 31D-the matters in subparagraphs 31F(1)(a)(i) to (iii); or

(ii)            if the employee satisfies section 31E-the matters in subparagraphs 31F(1)(b)(i) to (iii);

the following provisions apply:

(e) if there is only one living-away-from-home food fringe benefit-the amount that, but for this section and section 62, and the recipient's contribution, would be the taxable value of that fringe benefit, shall be reduced by the amount of the excess referred to in paragraph (c);

(f) if there are 2 or more living-away-from-home food fringe benefits-the amounts that, but for this section and section 62, and the recipient's contribution, would be the taxable values of those fringe benefits shall be reduced by amounts proportionate to those taxable values and equal in total to the amount of the excess referred to in paragraph (c).

Living Away From Home food fringe benefit

Under section 136 of the FBTAA, a living-away-from-home food fringe benefit is defined as:

(a)            an expense payment fringe benefit provided in respect of the employment of an employee where:

(i)             the recipient's expenditure was incurred in respect of food or drink; and

(ii)            the food or drink was not for consumption while the employee was undertaking travel in the course of performing the duties of that employment; and

(iii)           the food or drink was for consumption by eligible family members at a time when the duties of that employment required the employee to live away from his or her normal residence; or

(b)            a property fringe benefit provided in respect of the employment of an employee where:

(i)             the recipient's property is food or drink; and

(ii)            the food or drink was not for consumption while the employee was undertaking travel in the course of performing the duties of that employment;

(iii)           and the food or drink was for consumption by eligible family members at a time when the duties of that employment required the employee to live away from his or her normal residence.

As the cost of the meals will be invoiced to the employer, a property fringe benefit would incur. As the meals are provided whilst working at the site, paragraphs 136(b)(ii) and (iii) would also be satisfied. Therefore, subsection 136(b) has been satisfied, and a living-away-from-home food fringe benefit will be provided.

Reduction of the taxable value of a LAFH Food Benefit

As the arrangements satisfy the requirements set out in subsection 63(d) to (da), there would be a reduction in the taxable value of the benefits. Subsection 63(1)(e) to (f) is further explained in Chapter 19.4 of the Fringe benefits tax - a guide for employers' where the taxable value of a property fringe benefit may be reduced to the equivalent of $42 a week for an adult (a person over the age of 12 before the beginning of the FBT year).

This would result in a benefit provided being equal to $6 per day ($42 ÷ 7 days = $6 per day). The employee contribution would see the taxable value of the meals under section 63 of the FBTAA be reduced to nil.

Question 4

Summary

The food allowance provided by Company A to employees to compensate for additional food expenses can be considered a Living-Away-From-Home-Allowance (LAFHA) under section 30(1) of the FBTAA and falls within the 'exempt food component'.

Detailed reasoning

Subsection 30(1) of the FBTAA establishes the circumstances where an allowance will be considered LAFHA. An allowance will be considered a LAFHA where:

(a) at a particular time, in respect of the employment of the employee of an employer, the employer pays an allowance to the employee; and

(b) it would be concluded that the whole or a part of the allowances is in the nature of compensation to the employee for:

(i) additional expenses (not being deductible expenses) incurred by the employee during a period; or

(ii) additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which the employee is subject, during a period.

According to the facts, employees will be provided an allowance. The allowance is used to compensate for additional food expenditure whilst living away from home. The expenditure will be incurred because of the requirement that the employee living away from their usual place of residence to fulfil their duties. These expenses will not be deductible expense to the employee. As it satisfies the conditions under subsection 30(1), the allowance provided to employees will constitute a LAFHA.

Under section 31A of the FBTAA, the taxable value of LAFHA fringe benefits provided to FIFO and DIDO employees are calculated as follows:

(1) This section applies to a living-away-from-home allowance fringe benefit covered by subsection 30(1) in relation to a year of tax to the extent that the employee satisfies all the following for the fringe benefit and the period to which it relates:

(a) the requirement that the employee has residential accommodation at or near his or her usual place of employment;

(b) section 31E (about extra requirements for these employees);

(c) section 31F (about declarations).

(2) Subject to this Part, the taxable value of the fringe benefit in relation to the year of tax is the amount of the fringe benefit reduced by:

(a) any exempt accommodation component; and

(b) any exempt food component.

As employees will be provided with accommodation at or near the usual place of employment, paragraph 31A(1)(a) is satisfied. The employees working at the site satisfy the requirements of section 31E and therefore paragraph 31A(1)(b) will be satisfied. Furthermore, employees will also provide to the employer a declaration in accordance with section 31F and as such paragraph 31A(1)(c) is satisfied. Therefore, the requirements of section 31A have all been satisfied, and this section would apply to the arrangements.

Subsection 31A(2) outlines that the taxable value of a LAFHA will be reduced by the exempt accommodation component and an exempt food component. Subsection 31A(2)(a) dealing with the exempt accommodation

component would not be relevant as employees will not be provided with an allowance for accommodation costs.

The exempt food component referred to at subparagraph 31A(2)(b) is further defined in section 31H to be the additional food and drink expenses incurred by the employee that can either be substantiated or are exempt from substantiation.

The proposed food amount to be paid by Company A for food costs would be calculated at a rate of $x per meal, which would result in a food component for additional food costs being paid that is less than the ATO reasonable food amount. For the 2022 FBT year, Taxation Determination TD 2021/3 specifies that the reasonable amount for food and drink within Australia in respect of an adult is $283. The amount of the LAFHA food component paid to employees will be less than this amount.

Following in line with sections 31G and 31H of the FBTAA, this amount can be provided to employees without the need to substantiate the expenses incurred. Therefore, provided that requisite declaration is provided, the amount should be treated as an exempt food component under section 31A.