Edited version of private advice

Authorisation Number: 1052005893992

Date of advice: 13 July 2022

Ruling

Subject: Remote area housing

Question 1

Is it considered customary in the XX industry for employers to provide remote area housing benefits to employees pursuant to subsection 58ZC(2) of the FBTAA?

Answer

Yes

This ruling applies for the following periods:

•         FBT year ending 31 March 20XX

•         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 operations of the employer include XX

•         The principal product of the employer is X and a majority of their employees are involved in the X process

•         A vast majority of workplaces are located in remote areas

•         Due to the sheer magnitude of the production, employees are required to live in remote areas near their workplace

•         It is therefore quite common for employees to be provided with remote housing benefits, due to the nature and conditions of their employment

•         Due to the nature of the industry and limited number of qualified and experienced personnel available to work at the workplace, it has become increasingly more competitive to attract experienced talent. Compounded with the remote locations of the workplace, it has become common practise to offer benefits such as housing, to attract talent in.

•         While historically, the employer has provided housing to some of its employees, it now intends to provide housing benefits to all employees that live and work in remote areas with a view to attracting more workforce to its industry and its workplaces in regional and rural areas

•         The unit of accommodation is located in a State or internal Territory and is not at a location in, or adjacent to, an eligible urban area

•         The recipient is a current employee of the employer at the time the benefit is provided, and the usual place of employment of the recipient was not at a location in, or adjacent to, an eligible urban area

•         The accommodation is the employee's usual place of residence and

•         The proposed arrangements are not provided under a non-arm's length arrangement, or an arrangement for the purpose or purposes of enabling the employer to obtain the benefit of any relevant section of the FBTAA

•         The employer's ANZSIC code classifications are XX

•         The employer provided a copy of their:

o   Housing policy and guideline (drafted XXXX)

o   Housing Standard dated XX

o   Template of employment contract along with an addendum to include housing as a benefit to be agreed with the employee

o   Job advertisements of third parties operating in the XX industry which are available in the public domain.

o   A link to the Government initiative for businesses and employers in the industry.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 25

Fringe Benefits Tax Assessment Act 1986 Section 58ZC

Fringe Benefits Tax Assessment Act 1986 Subsection 58ZC(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 58ZC(2)

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 Paragraph 140(1)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 140(1)(b)

Reasons for decision

Question 1

Is it considered customary in the XX industry for employers to provide remote area housing benefits to employees pursuant to subsection 58ZC(2) of the FBTAA?

Yes

Detailed reasoning

Is a housing benefit provided?

Section 25 of the FBTAA defines a 'housing benefit' as being a housing right granted by a person to another person.

A 'housing right' is defined by subsection 136(1) of the FBTAA to mean a lease or license granted to a person to occupy or use a unit of accommodation to the extent that the lease or license subsists at a time when the unit of accommodation is the person's usual place of residence.

Subsection 136(1) of the FBTAA defines a 'unit of accommodation' to include a house, flat or home unit, and accommodation in house, flat or home unit'. The terms 'lease' and 'licence' are not defined in the FBTAA. On their ordinary meaning, these terms would include the granting of a right to use the specified land for accommodation purposes.

The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) of the FBTAA, it does define a 'place of residence' to mean:

(a)  a place at which the person resides; or

(b)  a place at which the person has sleeping accommodation;

whether on a permanent or temporary basis and whether or not on a shared basis.

In the absence of a legislative reference, it is relevant to refer to the ordinary meaning of 'usual'. The Macquarie Dictionary Online defines 'usual' to mean:

1. habitual or customary: his usual skill.

2. such as is commonly met with or observed in experience; ordinary: the usual January weather.

3. in common use; common: say the usual things.

noun

4. that which is usual or habitual.

phrase

5. as usual, as is (or was) usual; in the customary or ordinary manner: he will come as usual.

As provided in the ATO's Fringe benefits tax - a guide for employers publication[1] (the Guide), an employee is regarded as living away from their 'usual place of residence' if they are required to do so in order to perform their employment-related duties and could have continued to live at the former place if they did not have to work temporarily in a different locality.

Whether a place is an employee's usual place of residence is a question of fact, based on all the circumstances.

Based on the facts provided, the employer has provided housing to some of its employees, however, it now intends to provide housing benefits to all employees that live and work in remote areas near their relevant workplace. The accommodation is the employee's usual place of residence.

This arrangement therefore satisfies the definition of a 'housing benefit' as defined in section 25 of the FBTAA.

Is the housing benefit a remote area housing benefit?

A remote area housing benefit is defined in subsection 136(1) of the FBTAA as having the meaning given by subsection 58ZC(2).The conditions for a housing benefit to be a 'remote area housing benefit' are set out in subsection 58ZC(2) of the FBTAA, as stipulated below.

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 an Employee of the Employer because:

(i)            the nature of the employer's business was such that Employee 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 Employee of the Employer were employed, sufficient suitable residential accommodation for those (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.

The term 'in respect of the employment of the employee' was considered in J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 (Knowles). The full Federal Court in Knowles - in examining the meaning of 'in respect of' an employee's employment - held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment', though noted that 'what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment'. A similar view was also held in Essenbourne Pty Ltd v FC of T 2002 ATC 5201 and Starrim Pty Ltd v FCT (2000) 102 FCR 194; [2000] FCA 952; 2000 ATC 4460; (2000) 44 ATR 487.

The full Federal Court in Knowles also suggested that it would be useful to ask 'whether the benefit is a product or incident of the employment'.

To establish whether a sufficient or material connection exists between the provision of the accommodation and the employment of the employee, it is necessary to consider the circumstances in which it has been provided.

Based on the facts, the employer has provided housing to some of its employees, but now intends to provide housing benefits to all employees that live and work in remote areas with a view to attracting more workforce to its industry and its workplaces in regional and rural areas. The employees are required to live in remote areas near their workplace to undertake their employment duties.

Therefore, the connection between the benefit received by the employee and the employee's employment is material and sufficient, and not merely causal. If it were not for the employee's employment, the employee would not have received the accommodation benefit.

Paragraph 58ZC(2)(a) of the FBTAA

A unit of accommodation will be treated as being in a remote area if it is not located in, or adjacent to, an eligible urban area.

Pursuant to paragraph 140(1)(a) of the FBTAA, an 'eligible urban area' is an area that is either:

•         situated in Zone A or Zone B for income tax purposes (as described in Parts I and II respectively in Schedule 2 to the Income Tax Assessment Act 1936 (ITAA 1936)) and is an urban centre with a 1981 census population of not less than 28,000, or

•         not situated in Zone A or Zone B for income tax purposes and is an urban centre with a 1981 census population of not less than 14,000.

According to paragraph 140(1)(b) of the FBTAA, an area that is 'adjacent to an eligible urban area' is an area that is situated either:

•         less than 40 kilometres by the shortest practicable surface route from the centre of an eligible urban area with a 1981 census population of less than 130,000, or

less than 100 kilometres by the shortest practicable surface route from the centre of an eligible urban area with a 1981 census population of 130,000 or more.

You have advised that the unit of accommodation is located in a State or internal Territory and is not at a location in, or adjacent to, an eligible urban area.

Therefore, as the employees reside in a remote area - the condition in paragraph 58ZC(2)(a) of the FBTAA is satisfied.

Paragraph 58ZC(2)(b) of the FBTAA

Based on the facts provided, it is accepted that during the relevant period of the arrangement, the employee who has occupied/will continue to occupy the unit of accommodation is a current employee of the employer, and the usual place of employment is not, as concluded above, located within or adjacent to an eligible urban area.

Therefore, the condition in paragraph 58ZC(2)(b) of the FBTAA is satisfied.

Paragraph 58ZC(2)(d) of the FBTAA

From the facts provided, subparagraphs 58ZC(2)(d)(i) and 58ZC(2)(d)(ii) of the FBTAA are not required to be considered.

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 explains what is meant by the phrase 'customary for employees in the industry' in subparagraph 58ZC(2)(d)(iii).

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.

The Commissioner does not have a current published list of industries in which it would be considered customary for employers to provide housing assistance.

However, the now withdrawn, Taxation Ruling IT 67 Subsidised housing benefits provided examples of classes of Employees whose Employers would meet this requirement. IT 67 provided guidance on the former section 26AAAB of the Income Tax Assessment Act 1936 which provided concessional treatment for subsidised housing in remote areas for Employees where it was customary for employers in the particular industry to provide Employees with free or subsidised accommodation.

The examples listed were as follows:

•         miners

•         sugar mill

•         bank

•         police

•         prison

•         school teachers

•         hospital

•         farm workers

•         hotel and motel staff, and

•         civil engineering workers, e.g. on bridge or dam works.

In defining the employer's industry, this Office will accept categorisation on any recognised industry classification system.

You have advised that the relevant industry in which the employer is operating a business is in X and X.

Historically, it has been customary in the industry for X and X employers to provide employees with housing benefits as per Taxation Ruling IT 67.

Job advertisements by third parties operating in the X and X industry where housing is specifically mentioned as a benefit is evidence that it is normal or common in those industries to receive housing benefits.

The Government initiative recognises that employers within the X industry provide accommodation to employees.

Your housing policy and guideline was drafted in XXXX.

You have provided a template of your employment contract along with an addendum to include housing as a benefit to be agreed with the employee.

The housing benefit is provided to attract experienced employees, enabling them to live and work in remote areas near their employer's facilities.

We accept that it is customary in the industry for employers to provide remote area housing to employees in X and X industry and therefore, subparagraph 58ZC(2)(d)(iii) has been satisfied.

Paragraph 58ZC(2)(e) of the FBTAA

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.

You've advised that the 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 for the purposes of this ruling 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 employees in a remote area.

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

Conclusion

In circumstances where certain employees enter into a housing arrangement with the employer, 'a housing benefit is provided pursuant to section 25 of FBTAA.

As per the discussion above, each of the conditions for such housing benefits to constitute a 'remote area housing benefit' as set out in subsection 58(2) of the FBTAA are satisfied. This includes that it is customary in the industry for employers in the X and X industry to provide residential accommodation to employees for the purposes of subparagraph 58ZC(2)(d)(iii).

[1] https://www.ato.gov.au/law/view.htm?Docid=SAV/FBTGEMP/00001&PiT=99991231235958