Edited version of private advice

Authorisation Number: 1052131147521

Date of advice: 16 November 2023

Ruling

Subject: FBT - remote area

Question 1

Is the XXXX area recognised as a remote area pursuant to subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Question 2

Is the accommodation provided by the Company to certain employees a 'housing benefit' under section 25 of the FBTAA?

Answer

Yes, but only to those employees where the accommodation is their usual place of residence.

Question 3

If the answer to Question 2 is 'yes', is the housing benefit an 'exempt remote area housing benefit' under section 58ZC of the FBTAA?

Answer

Yes.

Question 4

Are the payments or reimbursements of rent provided by the Company to employees under a valid salary sacrifice agreement an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Answer

Yes.

Question 5

If the answer to Question 4 is 'yes', the Company satisfy the necessary criteria required for the purposes of accessing the Fringe Benefits Tax (FBT) concessions available under subsection 60(2A) of the FBTAA?

Answer

Yes.

Question 6

Are the payments of home loan expenses (interest) provided by the Company to employees under a valid salary sacrifice agreement who purchase a dwelling in the XXXX area an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Answer

Yes.

Question 7

If the answer to Question 6 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(2)of the FBTAA?

Answer

Yes.

Question 8

Are the payments of loan expenses (interest) provided by the Company to employees under a valid salary sacrifice agreement who build a dwelling in the XXXX area considered an expense payment fringe benefit under subsection 136(1) of the FBTAA?

Answer

Yes.

Question 9

If the answer to Question 8 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(4) of the FBTAA?

Answer

Yes.

Question 10

Does the residential fuel (including electricity) provided by the Company to an employee residing in the XXXX area in connection with their usual place of residence in a remote area give rise to an expense payment fringe benefit under subsection 136(1) of the FBTAA?

Answer

Yes.

Question 11

If the answer to Question 10 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under section 59 of the FBTAA?

Answer

Yes.

Question 12

Are the payments of holiday travel, accommodation and food provided by the Company to their employees, their spouses and families under a valid salary sacrifice agreement considered an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Answer

Yes.

Question 13

If the answer to Question 12 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under section 60A or 61 of the FBTAA?

Answer

Yes.

This private ruling applies for the following periods:

Fringe Benefits Tax (FBT) year ending 31 March 2024

FBT year ending 31 March 2025

FBT year ending 31 March 2026

FBT year ending 31 March 2027

FBT year ending 31 March 2028

The scheme commenced on:

1 April 2023

Relevant facts and circumstances

The Company is a privately owned Australian company operating primarily in the xxxx production industry.

XXXX is a town and the location of one of four xxxx currently owned by the Company.

It is customary in the xxxx manufacturing industry for employers to provide remote area fringe benefits to attract and retain various classes of employees at remote locations where operations occur. As such, the Company includes remote-area related benefits in their remuneration packages, which contributes to attracting and retaining staff.

The employees to whom the remote area-related benefits provided are current employees of the Company at the time of the provision of the benefit, who carry out their employment duties in xxxx. The Company has advised that employees working at the xxxx site typically fall within the following categories:

•         employees ordinarily reside in the xxxx area and have taken a role with the Company

•         employees relocated to the xxxx area for reasons unrelated to the Company employment and have subsequently accepted a role at the Company

•         employees who have returned to the xxxx area to take on a role at the Company, who immediately prior to accepting the role were residing outside the xxxx area (but have previously resided in the xxxx area)

•         employees who previously resided outside the xxxx area who have relocated to the area in order to fulfil a role at the xxxx.

Housing is provided by the Company to employees in the following forms.

Scenario 1. Property Owned by the Company

Property 1

Company-owned property in the xxxx area that is occupied by the Company's Farm Manager as their usual place of residence, at no cost to the employee. Housing is not factored into the employee's remuneration package, as this arrangement also benefits the Company by having the employee onsite (i.e. site security, proximity to farming operations etc.). All utility costs and property maintenance are paid by the company.

Property 2

Company-owned property in the xxxx area that is occupied by the Company's Production Manager as their usual place of residence, at no cost to the employee. Housing is not factored into the employee's remuneration package, as this arrangement also benefits the Company by having the employee onsite (i.e., site security, proximity to production operations etc.). All utility costs and property maintenance are paid by the employee.

Property 3

Company-owned property in the xxxx area that can be rented by one or more employees on a casual basis. There may be multiple occupants with each occupant signing an individual lease. These arrangements are generally short-term in nature, with rent determined based on market rates. Rent is collected from employees' post-tax income. This is considered the usual place of residence for these employees.

Property 4

Company-owned property in the xxxx area that can be rented on a permanent basis, and as the employee's usual place of residence. Rent is charged at $xxx per calendar month (inclusive of a flat rate for gas and electricity). The property is deemed unsuitable for general commercial residential leasing (due to the age and condition of the premises), therefore taking all these factors into account, the monthly cost charged is expected to be at market. The $xxx monthly charge is collected from employees' post-tax income.

Under the above four situations the employee has signed a residential tenancy agreement with the Company.

Free water and or electricity that is to be provided by the Company is written into the tenancy agreement.

Scenario 2. Employees residing in their own residence

Situation 1

Employees will enter into a residential lease agreement for a unit of accommodation in the xxxx area, under an arm's length arrangement. The unit of accommodation is their usual place of residence. The employee will enter a salary sacrifice arrangement to package 50% of their rental cost.

Situation 2

Employees will salary sacrifice 50% of their residential home loan costs (mortgage interest) for a unit of accommodation they have purchased in the xxxx area. The unit of accommodation is their usual place of residence.

Situation 3

Employees will salary sacrifice 50% of their residential home loan costs (mortgage interest) for a unit of accommodation they have built in the xxxx area. The unit of accommodation is their usual place of residence.

In the above three situations, the residential tenancy agreement is typically in the employee's name and has been entered into between the employee and the landlord. The Company as the employer is not a party to the residential agreement. However, where the employee is seeking to salary package some of their rental costs, a salary sacrifice arrangement is subsequently entered into between the Company and the employee.

An agreement between the parties will be entered into in advance of the employee accruing the salary or wages. As such, the arrangement entered qualifies as an effective salary sacrifice arrangement in that:

•         the arrangement is entered into before the employee performs the work

•         a written salary sacrifice agreement is entered into between the Company and the employee

•         the employee has no access to the sacrificed salary.

The provision of water and electricity by the Company is written in the tenancy agreements.

Residential fuel, consisting of gas and electricity, is provided to each classification of employees.

Free water and/or electricity is provided to the employees under Scenario 1.

Residential fuel is only provided to employees of the Company who also receive a housing benefit or subsidised rent or interest.

The Company is considering providing return travel benefits to employees in the future.

In the event the Company provides these benefits, it will also seek to provide this to an employee's spouse and eligible family members.

Accommodation and food associated with holiday travel is also being considered by the Company.

Once the Company commences providing travel benefits to employees, they intend on transacting this as an expense payment fringe benefit (i.e., by allowing an employee to enter a salary sacrifice arrangement for the reimbursement of 50% of expenses incurred).

The Company will only offer the benefit when the leave is for more than three days.

The employee's holiday destination is not expected to be at the place they resided before commencing employment in the xxxx area or the capital city of the state in which the workplace is located.

The employee will return to their employment at the end of their leave.

The arrangements have been entered into at arm's length.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

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 Paragraph 58ZC(2)(d)

Fringe Benefits Tax Assessment Act 1986 Paragraph 58ZC(2)(e)

Fringe Benefits Tax Assessment Act 1986 Subparagraph 58ZC(2)(d)(iii)

Fringe Benefits Tax Assessment Act 1986 Section 59

Fringe Benefits Tax Assessment Act 1986 Subsection 59(1)

Fringe Benefits Tax Assessment Act 1986 Section 60

Fringe Benefits Tax Assessment Act 1986 Subsection 60(2)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(2)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(2)(b)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(2)(c)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(2)(d)

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

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(2A)(b)

Fringe Benefits Tax Assessment Act 1986 Subsection 60(4)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(4)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 60(4)(b)

Fringe Benefits Tax Assessment Act 1986 Section 60A

Fringe Benefits Tax Assessment Act 1986 Section 61

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 1986Paragraph 140(1)(a)

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

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

Fringe Benefits Tax Assessment Act 1986 Subsection 142(1A)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(1A)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(1A)(b)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(1A)(d)

Fringe Benefits Tax Assessment Act 1986 Subsection 142(2C)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2C)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2C)(b)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2C)(c)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2C)(d)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2C)(e)

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

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(2E)(b)

Fringe Benefits Tax Assessment Act 1986 Paragraph 142(3)(aa)

Fringe Benefits Tax Assessment Act 1986 Section 143

Fringe Benefits Tax Assessment Act 1986 Subsection 143(1)

Fringe Benefits Tax Assessment Act 1986 Paragraph 143(1)(a)

Fringe Benefits Tax Assessment Act 1986 Paragraph 143(1)(b)

Fringe Benefits Tax Assessment Act 1986 Paragraph 143(1)(c)

Income Tax Assessment Act 1936 Section 318

Reasons for decision

Issue

Fringe Benefit Tax (FBT) - Remote area housing and other benefits

Question 1

Is the xxxx area recognised as a remote area pursuant to subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The xxxx area is satisfied as a remote area for FBT purposes.

Detailed reasoning

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) sets out what is an 'eligible urban area' and what is a location that is 'adjacent to an eligible area'. It states that:

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.

Paragraph 140(1)(a) of the FBTAA 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 Income Tax Assessment Act 1936 (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 your circumstances

Xxxx 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, is xxxx. Therefore, it is satisfied that xxxx is situated more than 40 kms from the centre point of an eligible urban area.

Conclusion

It is accepted that the xxxx area is a remote area for FBT purposes.

Question 2

Is the accommodation provided by the Company to certain employees a 'housing benefit' under section 25 of the FBTAA?

Summary

The accommodation benefit provided by the Company to its employees will be satisfied as a housing benefit subject to section 25 of the FBTAA.

Detailed reasoning

Housing fringe benefit

A 'housing fringe benefit' is defined in subsection 136(1) of the FBTAA as a fringe benefit that is a 'housing benefit'.

A 'fringe benefit', as defined in subsection 136(1) of the FBTAA, requires the following conditions to be satisfied:

1.     The benefit is provided to an employee or an associate of the employee.

2.     The benefit is provided in respect of the employment of the employee.

3.     The benefit is provided by the employer, an associate of the employer or a third party.

4.     The benefit is not an excluded benefit.

What is a benefit, as defined in subsection 136(1)?

A 'benefit' is defined in subsection 136(1) of the FBTAA as:

...any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a) an arrangement for or in relation to:

(i) the performance of work (including work of a professional nature), whether with or without the provision of property;

(ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;

(b) a contract of insurance; or

(c) an arrangement for or in relation to the lending of money.

The Company is providing accommodation to employees in the following forms:

•         company-owned properties for the farm manager and the production manager free of charge

•         company-owned property that can be rented by one or more employees on a casual basis

•         company-owned property that can be rented on a permanent basis.

As this fulfils the definition given in subsection 136(1) of the FBTAA, the provision of accommodation to employees is considered a 'benefit' within its ordinary meaning.

Is the benefit 'provided' by the employer?

Subsection 136(1) of the FBTAA defines 'provide' in relation to a benefit to include 'allow, confer, give, grant or perform'. The act of making accommodation available for employees falls within the term 'provide'. The Company has provided the benefit to their employees by providing them with accommodation.

It is considered that a benefit is being provided to employees by the employer.

Is a benefit provided by the employer to an associate of the employee?

The FBTAA directs the definition of 'associate' to the meaning which is given in section 318 of the ITAA 1936. At subsection 318(1) it is stated that an associate of a natural person (referred to as the primary entity) is:

(a) a relative of the primary entity;

(b) a partner of the primary entity or a partnership in which the primary entity is a partner;

(c) if a partner of the primary entity is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner;

While the benefit is provided to employees of the Company there is occasion that a spouse and family of the employee resides at the same location. Therefore, the benefit is being provided by the employer to an associate of the employee.

Based on the above, it is considered that the accommodation provided to employees constitutes a 'fringe benefit'. To determine if the benefits constitute a 'housing fringe benefit', it is necessary to consider of the benefit is a 'housing benefit'.

Is the benefit a 'housing benefit'?

Section 25 of the FBTAA, as stated below, provides that a housing benefit will arise when a recipient is provided with the right to use a unit of accommodation by a provider and the accommodation is the recipient's usual place of residence:

"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".

A 'housing right' is defined in subsection 136(1) of the FBTAA as:

...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.

Therefore, a housing fringe benefit will arise if all the following conditions are satisfied:

•         the person receiving the benefit is an employee or an associate of an employee.

•         the employee is provided with the right to use a unit of accommodation.

•         the accommodation is the employees usual place of residence.

Are the people receiving the accommodation employees?

The benefit of accommodation is being provided to the employee and an associate of the employee (their families) as the result of the employees' employment.

The employee is provided with the right to use a unit of accommodation.

A unit of accommodation for fringe benefits purposes is stated in subsection 136(1) of the FBTAA to include a house, flat or home unit, accommodation in a hotel, hostel, motel or guesthouse, accommodation in a bunkhouse or other living quarters, accommodation in a ship, vessel or floating structure and a caravan or mobile home.

The Company is providing accommodation to employees in locations on-site to where the Company operates. They also provide a company-owned house for short-term accommodation which is rented out to several individual tenants. A further property is provided on a permanent basis in the xxxx area.

The employees have all been provided with the right of accommodation by the Company.

The accommodation is the employees usual place of residence.

In considering whether the provided accommodation is an employee's usual place of residence, it is necessary to consider what is meant by the term 'place of residence'. Subsection 136(1) of the FBTAA defines a place of residence as:

(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.

An employee's place of residence is the place at which they reside or have some form of sleeping accommodation, regardless of whether it is on a permanent, temporary, or shared basis. However, the question of whether an employee is living away from their usual place of residence involves consideration of two places of residence - the place where the employee is living at the time, and some other place.

An employee is regarded as living away from their usual place of residence if they would have continued to live at the former place had the duties of their employment not required them to work temporarily in the new locality.

The type of fringe benefit to arise from this situation is dependent on the facts of the employee.

What is the usual place of residence?

The term usual place of residence is not defined within the FBTAA, but it is discussed in the now withdrawn Miscellaneous Taxation Ruling MT 2030.

MT 2030 states that generally, a person's usual place of residence will be close to the place where he or she is permanently employed. Therefore, if an employee moves from their former place of residence to commence employment duties at xxxx without any intention of returning to their former residence, xxxx will be their usual place of residence.

However, if the employee has another place of residence which they intend to return to at the end of their appointment, xxxx may not be their usual place of residence. MT 2030 also states that generally, an employee who moves to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment will be treated as living away from their usual residence.

Cases where the accommodation is the employee's usual place of residence

The Company have advised that the accommodation provided is the employees' usual place of residence.

Therefore, the employees whose accommodation is their usual place of residence are in receipt of a housing benefit under section 25 of the FBTAA.

Conclusion

It is accepted that the Company is providing a housing benefit to those employees where the accommodation provided is their usual place of residence.

Question 3

If the answer to Question 2 is 'yes', is the housing benefit an 'exempt remote area housing benefit' under section 58ZC of the FBTAA?

Summary

The accommodation benefit provided by the Company to its employers where the accommodation is their usual place of residence will be satisfied as an exempt housing benefit subject to section 58ZC of the FBTAA.

Detailed reasoning

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 states:

Remote area housing benefit to be exempt

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

What constitutes remote housing benefit

2)    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)

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 recipient's 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.

Each of these subsections is discussed as below.

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) of the FBTAA to mean a benefit referred to in section 25 of the FBTAA. Section 25 defines that benefit as where a person grants a housing right to another person.

We have considered in Question 2 whether the Company is providing a housing benefit and have concluded that a housing benefit is being provided to employees of the Company who are provided with a unit of accommodation but only if it is their usual place of residence.

Also, according to the detailed reasoning provided for Question 1 above, it is accepted that xxxx is remote area for FBT purposes, in accordance with section 140 of the FBTAA.

Therefore, a remote area housing benefit is provided by the Company in the xxxx area to their employees whose usual place of residence is in this accommodation.

Subsection 58ZC(2) of the FBTAA - 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.

Paragraph 58ZC(2)(a) of the FBTAA - Accommodation must be located in a remote area

As stated in the detailed reasoning provided for Question 1 above, it is accepted that xxxx is not adjacent to any eligible urban area and satisfied as remote area for FBT purposes.

This criterion is satisfied.

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

The Company have informed us that the accommodation is only offered to current employees. The employees usual place of employment is in the xxxx area, and we have determined that neither of these locations are in or adjacent to an eligible urban area.

This criterion is satisfied.

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

There may be several underlying reasons why a particular employer, located in a remote area, may consider it necessary to provide housing benefits to employees including the retention of existing employees or to make it more attractive for suitable potential employees to want to take up employment with that employer.

Nonetheless, to satisfy the requirements of subparagraph 58ZC(2)(d)(iii) of the FBTAA, the reason that the employer finds it necessary to provide residential accommodation for employees must be because it was customary in the industry in which the recipient was employed to provide residential accommodation for their employees. It must be considered whether the Company satisfies subparagraph (iii) of 58ZC(2)(d).

Paragraph 2 of Taxation Determination TD 94/97 Fringe benefits tax: what the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees (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.

TD 94/97 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.

According to the information in the facts, the Company have stated that the provision of residential accommodation to employees who work in xxxx area is to attract and retain various classes of employees at remote locations where operations occur. According to the company income tax returns the description of their main business activity is xxxx manufacturing. In addition, TD 94/97 specifically states that xxxx manufacturing would be considered an industry where it is customary to provide accommodation. With the application of subparagraph 58ZC(2)(d)(iii), it is accepted that it is customary in the industry for employers to provide remote area housing to employees in the xxxx industry.

This criterion is satisfied.

Paragraph 58ZC(2)(e) of the FBTAA - The arrangement must be at arm's length and not for the purposes of the employer obtaining a benefit

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.

The Company also states that those remote area related benefits arrangement are entered at an arm's length basis. And these arrangements are not for the purposes of enabling the Company to obtain the benefit of the application of section 58ZC.

This criterion is satisfied.

Conclusion

It is concluded that the accommodation benefits provided by the Company in xxxx area are exempt remote area housing benefits, as all relevant provisions of section 58ZC are satisfied.

Question 4

Are the payments or reimbursements of rent provided by the Company to employees under a valid salary sacrifice agreement an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Summary

The payment of rent by the Company on behalf of an employee to an unrelated third party under a valid salary sacrifice arrangement will give rise to an expense payment benefit.

Detailed reasoning

An 'expense payment fringe benefit' is defined in subsection 136(1) of the FBTAA to mean a fringe benefit that is an 'expense payment benefit'.

A 'fringe benefit' was defined in the response to Question 2.

'Expense payment benefits' are defined in section 20 of the FBTAA as follows:

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.

Application to your circumstances

Employees will enter into a residential lease agreement for a unit of accommodation in the xxxx area, under an arm's length arrangement. The unit of accommodation is their usual place of residence. The employee will enter a valid salary sacrifice arrangement to package 50% of their rental cost.

Conclusion

A payment made by the Company in discharge or reimbursement of 50% of the total rent under a salary sacrifice agreement on behalf of the employee for rent that the employee has incurred to an unrelated third party will constitute an expense payment benefit pursuant to section 20 of the FBTAA.

Question 5

If the answer to Question 4 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(2A) of the FBTAA?

Summary

As all the conditions under subsection 60(2A) of the FBTAA will be satisfied, the taxable value of any expense payment benefit in relation to remote area housing rent under the proposed arrangement will be reducible pursuant to subsection 60(2A) of the FBTAA.

Detailed reasoning

Subsection 60(2A) of the FBTAA provides that the taxable value of an expense payment benefit shall be reduced by 50% where the following conditions apply:

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 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 a period (in this subsection called the "occupation period") during which the rent 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 the recipient's expenditure as relates to the occupation period.

To determine whether the payment by the Company under a salary sacrifice agreement on behalf of or to the employee for rent that the employee has incurred to an unrelated third party will be reducible, a discussion is provided below in respect of whether each element or condition in subsection 60(2A) of the FBTAA will be satisfied.

Paragraph 60(2A)(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;

Based on the facts provided, the recipient of the expense payment benefit (as provided by the Company) under the arrangement will be a current employee of the Company.

Therefore, the condition in paragraph 60(2A)(a) of the FBTAA will be satisfied.

Paragraph 60(2A)(b) the recipient's expenditure is in respect of remote area housing rent connected with a unit of accommodation

In determining whether the amount of a payment made in discharge, or reimbursement of, rent under a salary sacrifice agreement on behalf of the employee, for rent that the employee has incurred to an unrelated third party is 'in respect of a remote area housing rent connected with a unit of accommodation', it is necessary to consider subsection 142(1A) of the FBTAA which sets out the requisite conditions.

Subsection 142(1A) of the FBTAA is set out below:

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.

Each of these conditions will be considered below.

Paragraph 142(1A)(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:

It has been determined at Question 1 that the xxxx is considered a remote area.

Based on the facts provided, under the arrangement, the individual occupying the unit of accommodation is a current employee of the Company and occupy the accommodation as their 'usual place of residence'.

This criterion has been satisfied.

Paragraph 142(1A)(b) the common conditions set out in subsection (2E) are satisfied in relation to the occupation period;

The paragraph requires that 'the common conditions set out in subsection 142(2E) are satisfied in relation to the occupation period'.

The 'common conditions' as set out in subsection 142(2E) of the FBTAA are iterated below:

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 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).

The first of the common conditions set out in paragraph 142(2E)(a) of the FBTAA is that:

(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 to their employees;

Under paragraph 142(3)(aa) of the FBTAA references to 'housing assistance' include 'the making of payments in discharge or reimbursement of rent or other consideration incurred by a person in respect of the subsistence of a lease or licence in respect of a unit of accommodation'.

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.

TD 94/97 explains the ATO view of the meaning of the phrase 'customary for employers in the industry' 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 in the industry where it is normal for employees of that class or job description in the 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 benefits 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 evidence to suggest it is customary (or normal) for employers in the xxxx industry to provide housing assistance to their employees.

The issue of whether it is customary in the xxxx industry to provide accommodation to employees has been discussed previously at Question 3 where it was determined that it is customary within the industry for employers to provide remote area housing to employees in the xxxx industry.

We have to 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 you as an employer to provide housing assistance for your employees because:

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

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

(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 evidence to suggest that it is customary for employers in your industry, to provide housing assistance to their employees. This requirement is therefore met.

The common conditions under paragraphs 142(2E)(a) and (b) are satisfied.

Paragraph 142(1A)(d) the lease or licence was not granted under a non-arm's length arrangement or 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.

The last criteria of subsection 142(1A) has also been met as the facts state that the arrangement is an arm's-length arrangement.

Conclusion

A payment made by the Company under a salary sacrifice agreement to discharge rent that the employee has incurred to an unrelated third party will constitute an 'expense payment benefit' pursuant to subsection 20(a) of the FBTAA.

Under the arrangement, the conditions in paragraph 142(1A)(a) of the FBTAA, in relation to the employee being an employee of the Company during the relevant period, the unit of accommodation being the employee's 'usual place of residence', and the unit of accommodation and usual place of employment not being at a location in, or adjacent to, an eligible urban area, will be satisfied.

The common conditions in paragraph 142(2E)(a) of the FBTAA will also be satisfied under the arrangement, and therefore the requirements under 142(1A)(b) of the FBTAA will be met, and the requirement under paragraph 60(2A)(b) of the FBTAA that the recipients expenditure be in respect of 'remote area housing rent connected with a unit of accommodation' will also be met.

Consequently, as all of the conditions under subsection 60(2A) of the FBTAA will be satisfied, the taxable value of any expense payment benefit in relation to remote area housing rent under the proposed arrangement will be reducible pursuant to subsection 60(2A) of the FBTAA.

Question 6

Are the payments of home loan expenses (interest) provided by the Company to employees under a valid salary sacrifice agreement who purchase a dwelling in the xxxx area an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Summary

The payment of loan expenses by the Company on behalf of an employee to an unrelated third party under a valid salary sacrifice arrangement will give rise to an expense payment benefit.

Detailed reasoning

An 'expense payment fringe benefit' is defined in subsection 136(1) of the FBTAA to mean a fringe benefit that is an 'expense payment benefit'.

A 'fringe benefit' was defined in the response to Question 2.

'Expense payment benefits' are defined in section 20 of the FBTAA and has been outlined in the response to Question 4 and is also relevant here.

In summary, 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 pays a third party in respect of an amount of expenditure incurred by the employee.

Application to your circumstances

Employees will salary sacrifice 50% of their residential home loan costs (mortgage interest) for a unit of accommodation they have purchased in the xxxx area. The unit of accommodation is their usual place of residence. As the employer is paying a third-party home loan costs (mortgage interest) on behalf of the employee, an expense payment benefit will arise.

Conclusion

A payment made by the Company in discharge of the residential home loan costs (mortgage interest) for employees who have either purchased a home and who have a valid salary sacrifice agreement in place will constitute an 'expense payment benefit' pursuant to section 20 of the FBTAA and an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

Question 7

If the answer to Question 6 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(2)of the FBTAA?

Summary

The accommodation assistance provided by the Company to its employees is eligible for reduction of taxable value subject to subsection 60(2) of the FBTAA.

Detailed reasoning

Subsection 60(2) Interest on a loan

Subsection 60(2) of the FBTAA 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 this reduction, the requirement under subsection 60(2) of the FBTAA must be satisfied.

[Interest on loan] 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 recipient's 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.

Each subsection will be discussed below.

Paragraph 60(2)(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

We have been informed by the Company that the payment of home loan expenses is only offered to current employees of the Company.

This criterion has been satisfied. We have determined in Question 6 that an expense payment fringe benefit will arise where the Company makes a payment on behalf of the employee to a third party for discharge of home loan costs (mortgage interest).

Paragraph 60(2)(b) - The recipient's expenditure is in respect of interest for a remote area housing loan connected with a dwelling

Subsection 142(1) of the FBTAA 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) of the FBTAA provides:

[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.

Paragraph 142(1)(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:

Paragraph 142(1)(a) of the FBTAA 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. The Company has informed us that this is the case.

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

This paragraph has been discussed previously where it was determined that all the common conditions have been met.

Paragraph 142(1)(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.

Paragraph 142(1)(d) of the FBTAA 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 the reduction of taxable value under section 60. The Company has informed us that all transactions are arm's-length.

Paragraph 60(2) (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)(a) of the FBTAA 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. Based on the facts, this condition has been met.

Paragraph 60(2)(d) - The loan was made at arm's-length and not for the purposes of the employer obtaining a benefit

The Company have informed us that all transactions are at arm's-length. This condition has been satisfied.

Conclusion

As stated in the facts above, the Company pays a third party for interest incurred on the employees' home loan in relation to their usual place of residence located in the remote area through a valid salary sacrifice agreement. An expense payment fringe benefit will arise when the Company pays the interest expenditure incurred by employees on the remote area housing loans.

Therefore, the interest expense payment amount that would be the taxable value of the fringe benefit shall be reduced by 50% if all requirements under subsection 60(2) are satisfied.

The Company has stated in their application that the reimbursement will only be given to current employees. Therefore, paragraph 60(2)(a) is satisfied as the recipients of the expense payment fringe benefit are the employees of the Company.

To be satisfied with the requirements under paragraph 60(2)(b) of the FBTAA, the home loans entered by the employees must be considered as remote area housing loans connected with a dwelling, subject to the criteria set out under subsections 142(1) and (2E) of the FBTAA. Accordingly, with application to the Company's circumstances, all criteria under subsection 142(1) of the FBTAA are satisfied for a loan to be considered a 'remote area housing loan connected with a dwelling'. Therefore, it is satisfied that the requirements of paragraph 60(2)(b) of the FBTAA are met.

As stated in our analysis of subsection 142(1) of the FBTAA above, paragraph 142(1)(a) 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. Therefore, it is satisfied that the requirement of paragraph 60(2)(c) is met.

Similarly, paragraph 142(1)(d) of the FBTAA 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 the reduction of taxable value under section 60. Therefore, the requirement of paragraph 60(2)(d) is also met.

As such, all requirements of subsection60(2) are satisfied.

It is concluded that the reimbursement for interest costs provided by the Company, associated with their employee's residential housing loan relating to accommodation located in the remote area, are eligible for reduction of taxable value subject to subsection 60(2) of the FBTAA.

Question 8

Question

Are the payments of loan expenses (interest) provided by the Company to employees under a valid salary sacrifice agreement who build a dwelling in the xxxx area considered an expense payment fringe benefit under subsection 136(1) of the FBTAA?

Summary

The payments of loan expenses provided by the Company to employees under a valid salary sacrifice agreement who build a dwelling in the xxxx area are considered an expense payment fringe benefit under subsection 136(1) of the FBTAA.

Detailed reasoning

The law explaining expense payment fringe benefits has been outlined and explained in Question 4 and is also relevant here.

In summary, 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 pays a third party in respect of an amount of expenditure incurred by the employee.

Application to your circumstances

Employees will salary sacrifice 50% of their residential home loan costs (mortgage interest) for a unit of accommodation they have built in the xxxx area. The unit of accommodation is their usual place of residence. As the employer is paying a third-party home loan costs (mortgage interest) on behalf of the employee, an expense payment benefit will arise.

Conclusion

A payment made by the Company in discharge of the residential home loan costs (mortgage interest) for employees who have had a home built, and who have a valid salary sacrifice agreement in place, will constitute an expense payment benefit pursuant to section 20 of the FBTAA and an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

Question 9

If the answer to Question 8 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(4) of the FBTAA?

Summary

The Company satisfies all the necessary criteria required for the purposes of accessing the FBT concessions available under subsection 60(4) of the FBTAA.

Detailed reasoning

Subsection 60(4) - Expense payment fringe benefit in respect of remote arearesidential property

Subsection 60(4) of the FBTAA 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) of the FBTAA 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%.

Paragraph 60(4)(a) of the FBTAA - 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

We have determined that the payment of home loans expenses meet the definition of an expense payment fringe benefit.

Paragraph 60(4)(b) of the FBTAA - 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) of the FBTAA. Subsection 142(2C) provides rules for determining eligibility for the subsection 60(4) reduction in taxable value.

Subsection 142(2C) of the FBTAA sets out the criteria which determine when the recipient's expenditure is in respect of remote area residential property.

Subsection 142(2C) of the FBTAA 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 recipient's 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 recipient's 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 recipient's expenditure was incurred;

(f)    if paragraph (c) or (d) applies - as soon as reasonably practicable after the time the recipient's 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 recipient's 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 recipient's 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 14A of Part III.

As we already covered in the analysis of subsection 60(2) of the FBTAA, the conditions under paragraph 60(4)(a) are satisfied as the recipients of expense payment fringe benefits are current employees of the Company.

According to the application, they intend to reimburse their employees for expenditure which may be incurred under any of the paragraphs 142(2C) (a), (b), (c) or (d) of the FBTAA.

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

•                     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.

•                     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 months period of purchase, this condition will be satisfied.

Where paragraphs 142(2C)(c) or (d) of the FBTAA 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) of the FBTAA will be satisfied provided that at the time the expenditure is incurred, the land was located in the remote area, and the employee was a current employee of the Company in a location that is a remote area.

As discussed in the analysis of subsection 60(2) of the FBTAA above:

•         the common conditions set out in subsection 142(2E) of the FBTAA have been previously discussed where it was determined that all the conditions have been satisfied. Accordingly, paragraph 142(2C)(h) is satisfied.

•         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) of the FBTAA is satisfied.

Conclusion

It is concluded that the reimbursement of expenditure provided by the Company, in respect of remote area residential property that includes an interest in land in the remote area, are eligible for a reduction of taxable value subject to subsection 60(4) of the FBTAA.

Question 10

Does the residential fuel (including electricity) provided by the Company to an employee residing in the xxxx area in connection with their usual place of residence in a remote area give rise to an expense payment fringe benefit under subsection 136(1) of the FBTAA?

Summary

The payments of residential fuel (including electricity) provided by the Company to employees under a valid salary sacrifice agreement who build a dwelling in the xxx area are considered an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.

Detailed reasoning

The law explaining expense payment fringe benefits has been outlined and explained in Question 4 and is also relevant here.

In summary, 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 pays a third party in respect of an amount of expenditure incurred by the employee.

Application to your circumstances

Employees under Scenario 1, Property 1 and 2 are receiving free residential fuel benefits (being electricity, gas, and water). The employer is paying a third-party for these expenses on behalf of the employee. Therefore, an expense payment benefit will arise.

Conclusion

A payment made by the Company in discharge of the residential fuel costs (being electricity, gas and water) for employees under Scenario 1 will constitute an expense payment benefit pursuant to subsection 20(a) of the FBTAA and an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

Question 11

Summary

If the answer to Question 10 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under section 59 of the FBTAA?

Detailed reasoning

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

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

Subsection 59(1) - Remote Area Residential Fuel

Subsection 59(1) of the FBTAA provides:

If

(a) residential fuel is for use:

(i) in connection with the recipient's 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 recipient's 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 recipient's 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 your circumstances

To qualify for a reduction under subsection 59(1), several 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) of the FBTAA. This test has been satisfied in our analysis for Question 3 above.

On the basis that the provision of residential fuel by the Company will be used in connection with an employee's unit of accommodation in relation to a remote area housing benefit, paragraph 59(1)(a) of the FBTAA is satisfied.

Also, as stated in our analysis of Question 10 above, it is also satisfied that the Company provides expense payment fringe benefits 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 paragraph59(1)(b) is also satisfied.

Conclusion

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

Question 12

Are the payments of holiday travel, accommodation and food provided by the Company to their employees, their spouses and families under a valid salary sacrifice agreement considered an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA?

Summary

The payments of holiday travel, accommodation and food provided by the Company to their employees, their spouses and families under a valid salary sacrifice agreement are considered an expense payment fringe benefit under subsection 136(1) of the FBTAA.

Detailed reasoning

The law explaining expense payment fringe benefits has been outlined and explained in Question 4 and is also relevant here.

In summary, 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 pays a third party in respect of an amount of expenditure incurred by the employee.

Application to your circumstances

The facts, as provided by the Company, tell us that once the Company commences providing travel benefits to employees, they intend on transacting this as an expense payment fringe benefit (i.e. by allowing an employee to enter into a salary sacrifice arrangement for the reimbursement of 50% of expenses incurred).

Conclusion

It is considered that an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA will arise when the Company commences reimbursing travel, accommodation and food expenses for employees, their spouses and families through a valid salary sacrifice agreement.

Question 13

If the answer to Question 12 is 'yes', will the Company satisfy the necessary criteria required for the purposes of accessing the FBT concessions available under section 60A or 61 of the FBTAA?

Summary

The provision of holiday travel, accommodation, and food by the Company to its employees, their spouses and families are eligible for reduction of taxable value subject to section 60A or 61 of the FBTAA.

Detailed Reasoning

Section 143 of the FBTAA defines a 'remote area holiday transport fringe benefit' as a benefit that meets the costs of holiday transport (or meals and accommodation en-route during travel) and are provided in accordance with an award or industry custom to an employee who works in a remote area.

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 of the FBTAA.

Generally, the concession applies where transport, or meals or accommodation in connection with transport is provided or reimbursed in respect of an employee working in a designated remote area, in relation to a holiday for the employee or the spouse or a child of the employee.

To qualify, the benefit can be an expense payment fringe benefit (paragraph 143(1)(a)); a property fringe benefit (paragraph 143(1)(b)); or a residual fringe benefit (paragraph 143(1)(c)).

In this case, as outlined in Question 12, an expense payment fringe benefit will arise with the provision of these benefits.

A benefit will be in respect of 'remote area holiday transport' where the conditions in subsection 143(1) of the FBTAA are satisfied.

Subsection 143(1) provides:

For the purposes of this Act:

(a) the recipient's expenditure in relation to an expense payment fringe benefit;

(aa) the recipient's 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 recipient's 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 your circumstances

With consideration of the facts, the following conditions under subsection 143(1) are considered to be satisfied:

(a)    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.

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

(f)     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 xxxx area (being a remote area).

(g)    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.

(h)    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 xxxx area and another location.

(j) condition (i) will be satisfied as the transport is intended to allow the employee to travel between the xxxx 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) on the basis that the Company will have satisfied paragraph (g) above, this condition will also be satisfied where the spouse and children have not accompanied the employee while they are undertaking travel while performing duties of their employment

(k)    condition (ii) will be satisfied given, as discussed previously, it is customary in the xxxx manufacturing industry for employers to provide remote area fringe benefits to attract and retain employees at remote locations where xxxxxx operations occur. It is accepted that this condition is satisfied.

As we have determined that the provision of the benefits is an expense payment fringe benefit and satisfies the conditions of section 143(1) of the FBTAA, the value of a 'remote area holiday transport fringe benefit' may be reduced in accordance with subsection 60A(1) or 61(1), as applicable.

Subsection 60A(1) Reduction of taxable value - remote area holiday transport fringe benefit subject to ceiling

Subsection 60A(1) of the FBTAA provides a reduction of taxable value for remote area holiday transport fringe benefits subject to ceiling and states that:

Where one or more remote area holiday transport fringe benefits in relation to an employer in relation to a year of tax relate to a particular employee of the employer and to a particular holiday for a particular family member, the amount (in this subsection called the ''gross taxable value'') that, but for this subsection and section 62, would be:

(a) so much of the taxable value of that fringe benefit as is attributable to transport, meals or accommodation in relation to the holiday for the family member; or

(b) so much of the sum of the taxable values of those fringe benefits as is attributable to transport, meals or accommodation in relation to the holiday for the family member;

as the case requires, in relation to that year of tax, shall be reduced by:

(c) 50% of the gross taxable value; or

(d) 50% of the benchmark travel amount in relation to that fringe benefit, or in relation to those fringe benefits, in relation to the holiday for the family member;

whichever is the less.

Therefore, the gross taxable value of the remote area holiday transport fringe benefit is the sum of the taxable value of the fringe benefits attributable to transport, meals or accommodation, in relation to the holiday, for the family member(s).

The value of that benefit is then reduced by the lesser of either 50% of the gross taxable value of the benefit or 50% of the benchmark travel amount that would be applicable to that benefit.

Where an employee contributes towards the cost of providing the fringe benefit the taxable value of the fringe benefit is reduced by the amount of that contribution.

Therefore, under subsection 60A(1) of the FBTAA, the 50% reduction for a remote area holiday transport fringe benefit subject to ceiling is applied on the gross taxable value before any employee contributions are deducted.

Section 61 Reduction of taxable value - remote area holiday transport fringe benefit not subject to ceiling

Like section 60A, section 61 must satisfy the criteria of section 143 of the FBTAA which sets out how an expense payment, property or residual benefit shall be taken to be in respect of remote area holiday transport.

We have determined above that the Company meet the requirements of section 143 of FBTAA. It follows that section 61 will be applicable and the Company will be eligible for the reduction in taxable value for the remote area holiday transport. The difference between section 60A and section 61 is that section 60 A is subject to a ceiling while section 61 is not subject to a ceiling.

Therefore, if all the conditions are met, either section 60A or section 61 will apply depending on whether there is a ceiling applied or not.

Conclusion

We are satisfied that the provision of remote area holiday transportation by the Company to its employees are eligible for reduction of taxable value subject to all the conditions of section 60A and 61 of the FBTAA being met.