Edited version of private advice

Authorisation Number: 1052265790736

Date of advice: 22 July 2024

Ruling

Subject: FBT - remote area housing and other benefits

Question 1

Is XXXX located in, or adjacent to, an 'eligible urban area' pursuant to subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 2

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

Answer

Yes.

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.

This ruling applies for the following periods:

Fringe Benefits Tax year ending 31 March 20YY

FBT year ending 31 March 20YY

FBT year ending 31 March 20YY

The scheme commenced on:

25 March 20YY

Relevant facts and circumstances

The company is an Australian company which operates its business in XXXX.

It is located XXXX kilometres from XXXX, and approximately XX km from XXXX.

During the XXXX FBT year, the company purchased houses in the XXXX area which are being used by employees working in XXXX as residential accommodation.

The employees relocate to the area to carry out employment duties at the request of the company.

The employees' usual place of employment is the area.

The company provides their employees working in the area these houses as a place of residence during their employment.

These houses are only provided to current employees of the company and their spouses and families.

The company found it necessary to provide housing benefits to their employees on the basis that there was insufficient suitable residential accommodation available around the region due to another scheme, the XXXX (a development project), also being underway at XXXX whereby the employees working on that project are provided with housing in the area.

The housing right was granted to the employees under an arm's-length arrangement.

The company do not charge their employees any rent or fees for residing in the houses.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 (FBTAA)Section 25

Fringe Benefits Tax Assessment Act 1986 (FBTAA)Section 58ZC

Fringe Benefits Tax Assessment Act 1986 (FBTAA)Section 140

Fringe Benefits Tax Assessment Act 1986 (FBTAA)Subsection 136(1)

Income Tax Assessment Act 1936 (ITAA) Section 318

Reasons for decision

Issue

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

Question 1

Is XXXX located in, or adjacent to, an 'eligible urban area' pursuant to subsection 140(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

XXXX is an area that is not located in, or adjacent to, an 'eligible urban area'. As such, XXXX is considered to be 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) of the FBTAA 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 40 kilometres from an urban centre with a census population of less than 130,000; or

             ii.   situated less than 100 kilometres 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 in excess of 130,000, is XXXX in XXXX. XXXX is approximately XXXX kilometres from XXXX. Therefore, it is satisfied that XXXX is situated more than 40 kilometres from the centre point of an eligible urban area that had population of 14,000 to less than 130,000 (based on the 1981 census).

Conclusion

It is considered that the XXXX area is a remote area for FBT purposes as it is a location that is not in, or adjacent to, an eligible urban area.

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

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 '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;

...

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.

A 'unit of accommodation' is also defined 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 term 'usual place of residence' is not defined within the FBTAA, however 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.

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 'habitual or customary' or 'in common use'.

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

Application to your circumstances

XXXX (the employer and 'provider') provides company-owned houses to their current employees (the 'recipients'), and their employees' spouses and families, to use as residential accommodation free of charge whilst the employees carry out their work duties. The houses provided meet the definition of a 'unit of accommodation'.

As per the discussion in ATO Interpretative Decision ATO ID 2009/156 Income Tax, Capital allowances: quasi-ownership right over land - meaning of lease (ATO ID 2009/156), in determining whether a lease has been granted, the Courts will look at the substance of the transaction and the conduct of the parties to characterise the rights that have been created. It is considered that in the current case the arrangement and conduct of the parties points to an intention to confer a right of exclusive possession, and therefore a lease has been created.

Current employees have been provided with the right to use accommodation owned by the employer, and 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' as defined in section 25 of the FBTAA.

Conclusion

It is considered that the employer is providing a housing benefit to current 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 employer 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 area 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.

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 such a benefit as one where a person grants a housing right to another person.

We have concluded in the response to Question 2 that the employer is providing a housing benefit to current employees where the accommodation provided is the employees' usual place of residence.

In determining whether such a housing benefit provided to an employee of the employer is a remote area housing benefit, the requirements in subsection 58ZC(2) of the FBTAA are discussed below.

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 considered that the XXXX area is a remote area for FBT purposes as it is a location that is not in, or adjacent to, an eligible urban area.

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 accommodation is only offered to current employees. The employees' usual place of employment is in the XXXX area, and we have determined that the XXXX area is not 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)(ii) of the FBTAA, the reason that the employer finds it necessary to provide residential accommodation for employees must be because 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). It must be considered whether the employer satisfies subparagraph (ii) of 58ZC(2)(d).

According to the information in the facts, the employer has stated that the provision of residential accommodation to employees who work in the XXXX area is to support their employees. They have further advised that there was insufficient suitable residential accommodation available for its employees in the XXXX area on the basis that another scheme, the XXXX (a development project), is also underway at XXXX whereby the employees working on that project are provided with housing in the area.

The Commissioner accepts that the provision of housing by the employer to its current employees is necessary as sufficient suitable residential accommodation was not otherwise available for employees in the XXXX area. Accordingly, subparagraph 58ZC(2)(d)(ii) is satisfied.

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.

As per the facts, the employer provided their employees with accommodation under an arm's length arrangement.

The Commissioner considers that the arrangement under which the employer provided accommodation to its employees is not for the purposes of enabling the employer to obtain the benefit of the application of section 58ZC.

This criterion is satisfied.

As each of the conditions in subsection 58ZC(2) of the FBTAA are satisfied, the housing benefits provided to employees of the employer constitute a remote area housing benefit, thus satisfying subsection 58ZC(1).

Conclusion

It is concluded that the accommodation benefits provided by the employer in the XXXX area are exempt remote area housing benefits, as all relevant requirements in section 58ZC of the FBTAA are satisfied.