Edited version of private advice

Authorisation Number: 1052362709628

Date of advice: 31 March 2025

Ruling

Subject: FBT - travel

Question 1

Are the benefits provided to the Company's Australian employees who participate in the program considered to be a living-away-from-home-allowance (LAFHA) for the purposes of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in circumstances where these employees primarily stay in one location abroad for a maximum period of 10 weeks throughout the X-month travel period?

Answer 1

No.

Question 2

Are the benefits provided to the Company's Australian employees who participate in the program considered to be a LAFHA for the purposes of subsection 30(1) of the FBTAA in circumstances where these employees work in multiple locations abroad throughout the X-month travel period?

Answer 2

No.

This private ruling applies for the following periods:

Fringe Benefits Tax (FBT) year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

For X months of the program, Australian employees of the Company travel to abroad to receive training.

Employees remain on the Australian payroll and subject to Australian PAYG Withholding for the duration of their travel.

The employees do not change their work or office location while abroad and remain with the same manager.

They still have a home in Australia that they maintain.

What does the travel look like across the X-month program?

Employees on the program will be required to change location within the overseas country to attend different facilities. Across the X-month period travel period of the program it is expected that employees will travel to and stay in X-X locations, but they may actually visit up to XX locations for several days in each instance. The pattern of travel for each participant is dependent on their individually specific learning plan. This may include repeat visits to particular sites in order to participate in or observe specific scheduled activities.

The employer does not have certainty around the timing that employees will be located in each of the different locations. This is because the travel and duration of stay at each location is dependent on the requirements of the abroad country which may be subject to delays and other considerations.

There is a need to be flexible in the travel planning due to changes. In addition, things like weather condition delays can affect scheduled activities.

Changes in the original travel plans may also arise as further opportunities to learn from particular activities present unexpectedly and are added into the original travel plan.

As a result of this much of the in-country travel isn't booked until the participant is in the abroad country, and the travel bookings need to be flexible to allow for changes.

Where changes in travel occur, the individual's learning plan may be reprioritised to either bring forward a consultation with a subject matter expert or provide access to a non-time sensitive facility or the individual may undertake self-paced learning.

As much of the XX-month learning program is self-paced online learning or assignment writing, during the X months of travel participants are able to progress in the program without the requirement to be in a specific location.

The minimum duration in one location will ordinarily be a XX, although in some instances a participant may have a short X-night stay at a location to attend a specific activity.

The maximum duration in one location will be less than XX weeks. When an employee travels to a new location, they do not maintain their accommodation in the prior location.

Due to the uncertainty and requirement to be able to easily move location, the accommodation provided is often a hotel or other short-stay accommodation, although in some exceptional cases employees may be able to book Airbnb or serviced apartments. This generally occurs only where the quality of the hotels in the area is not suitable for the participants, and the alternative accommodation is still booked only on a short-term basis.

Hotels or other short-term accommodation is required because participants may receive short notice of the requirement to travel, and they must be able to easily cease their accommodation and book accommodation at the new location.

By way of example, participants in the 20XX program travelled to XXXXX in the abroad country for initial orientation sessions, before departing to locations across the country. Each participant was required to travel to and stay in at X-X locations during the X-month overall period of travel, including the orientation sessions.

Personal travel

Employees are not accompanied by family. Family members may visit at the participant's initiative as this is not prohibited by the Company in Australia. The Company in Australia does not provide support for visits by family to occur, and any additional expenses incurred as a result of visiting family are at the employee's own cost.

Participants may travel for sightseeing on weekends at their own cost, when they are not required to attend activities.

On completion of the X-month program, participants may extend their stay abroad for a short period and at their own cost, to undertake a personal holiday.

What costs does the Company in Australia incur to support the travel of participants?

The Company is Australia covers the following reasonable and evidenced costs:

•                     travel to and from the abroad country

•                     travel internal to that country

•                     accommodation

•                     hire car

•                     food and drinks

•                     incidentals

•                     car parking

The Company in Australia encourages the use of a corporate credit card when incurring the above expenses.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 30

Fringe Benefits Tax Assessment Act 1986 section 136

Taxation Administration Act 1953 schedule 1 section 12-47

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Are the benefits provided to the Company's Australian employees who participate in the Program considered to be a living-away-from-home-allowance (LAFHA) for the purposes of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in circumstances where these employees primarily stay in one location abroad for a maximum period of XX weeks throughout the X-month travel period?

Summary

The benefits provided to Australian employees are not considered LAFHA. The employees are considered to be travelling on work due to uncertainty of the location and period of stay in one location that cannot be determined ahead of time.

Detailed reasoning

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

1.             A benefit is provided at any time during the year of tax.

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

3.             The benefit is provided by:

a.              their employer; or

b.              an associate of the employer; or

c.              a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or

d.              a third party other than the employer or an associate of the employer, if the employer or an associate of the employer:

i.                participates in or facilitates the provision or receipt of the benefit; or

ii.                participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

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

5.             The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1) of the FBTAA.

A benefit is provided

The definition of benefit is broadly 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; ...

'Provide' is defined in subsection 136(1) as:

(a)           in relation to a benefit - includes allow, confer, give, grant or perform; and

(b)           in relation to property - means dispose of (whether by sale, gift, declaration of trust or otherwise):

(i)            if the property is a beneficial interest in property but does not include legal ownership - the beneficial interest; or

(ii)            in any other case - the legal ownership of the property.

For the purposes of the FBTAA, a benefit will only be provided when the employees are sent abroad for work and all travel expenses are paid for. As such, the first condition (i.e. the provision of a 'benefit') of the definition of a 'fringe benefit' as defined in subsection 136(1) is satisfied.

The benefit is provided to an employee or an associate of an employee

An employee is defined in subsection 136(1) of the FBTAA to include a current, future, and former employee.

Subsection 136(1) defines a 'current employee' to mean a person who receives, or is entitled to receive, salary or wages.

'Salary or wages', as defined in subsection 136(1) of the FBTAA, means a payment from which an amount must be withheld under section 12-47 of Schedule 1 to the Taxation Administration Act 1953.

As the benefit will be provided to employees while they are abroad, (while remaining on the company's payroll in Australia) it is considered that the benefit is provided to a current employee. The second condition (i.e. a benefit is provided to an employee) of the definition of a fringe benefit as defined in subsection 136(1) is satisfied.

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

'Employer' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer.

Therefore, as the benefit (being the receipt of the travel) will be provided by a current employer, the third condition (i.e. a benefit is provided by an employer, an associate of the employer or a third party under an arrangement with an employer) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied.

In respect of employment

Subsection 136(1) of the FBTAA defines the term 'in respect of' in relation to the employment of an employee, as including 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'.

Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of the employee:

•         whether or not the benefit relates to some other matter or thing

•         whether the employment is past, present or future

•         whether or not the benefit is surplus to the recipients requirements

•         whether or not the benefit is also provided to another person whether or not the benefit is, to any extent, offset by any inconvenience or disadvantage

•         whether or not the benefit is provided or used, or required to be provided or used, in connection with that employment

•         whether or not the provision of the benefit is, or is in the nature of, income; and

•         whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee.

In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22, the full Federal Court - in examining the meaning of 'in respect of' an employee's employment - held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment', though noted that 'what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment'.

The connection between the benefit(s) that would be received by an employee of the Company and their employment would be material and sufficient, and not merely causal. If it were not for the employees' employment with the Company, the employees of the Company would not be entitled to receive the benefit.

On the basis of the above, a benefit provided to an employee of the Company would be considered to be 'in respect of the employee's employment'.

As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied.

Before considering the fifth element of the definition of a fringe benefit as described under section 136(1) of the FBTAA we need to consider what type of benefit is being provided.

Living-away-from-home allowance and whether benefit excluded from the definition of a fringe benefit

Section 136 of the FBTAA defines a living-away-from-home-allowance (LAFHA) benefit as a benefit referred to in section 30 of the FBTAA.

Subsection 30(1) of the FBTAA sets out the circumstances in which an allowance paid by an employer to an employee will qualify as a LAFHA benefit, and states:

Where:

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

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

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

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

by reason that the duties of that employment require the employee to live away from his or her normal residence;

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

As the company will pay the costs incur during the program while abroad, and as determined in the analysis above the first condition of subsection 30(1) of the FBTAA is satisfied.

To determine whether the benefit is a fringe benefit and more specifically a LAFHA benefit, it needs to be determined if the benefit is an excluded benefit i.e. a travel allowance. Determining this, addresses the second condition of subsection 30(1) of the FBTAA as to whether the expenses are non-deductible.

Do the duties of employment require the employees to live away from their normal residence at the time the allowance is paid?

'Normal residence' is defined in subsection 136(1) of the FBTAA as the employee's usual place of residence, when the employee's usual place of residence is in Australia.

The FBTAA does not provide a definition of the term 'usual place of residence'.

However, subsection 136(1) of the FBTAA defines 'place of residence' to mean:

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

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

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

In the absence of a legislative reference, it is relevant to refer to the ordinary meaning of the word 'usual'. The Macquarie Dictionary defines 'usual' to mean 'habitual or customary ... '

It is accepted that, in the current circumstances, an employee's permanent and settled principal place of residence is the employee's usual place of residence.

Living away from usual residence'

Paragraph 130 of Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances (TR 2021/4) analyses the difference between a travel allowance and a LAFHA:

130.        The main difference between a travel allowance and a LAFHA is that a:

•                     travel allowance can only be paid to cover deductible accommodation and food and drink expenses and incidental expenses incurred by an employee when they are travelling on work

•                     LAFHA is paid to provide compensation to an employee for the additional living expenses incurred by an employee because their duties of employment require them live at location away from their usual residence.

Paragraph 42 of TR 2021/4 provides guidance for determining whether an employee is living at a location away from their usual residence.

42.          The following factors would support a characterisation of an employee as living at a location away from their usual residence:

•                     there is a change in the employee's regular place of work

•                     the length of the overall period the employee will be away from their usual residence is a relatively long one

•                     the nature of the accommodation is such that it becomes their usual residence

•                     whether the employee is, or can be, accompanied by family or visited by family and friends.

Change in the employee's regular place of work

Paragraph 45 of TR 2021/4 outlines that where there is a change in the employee's regular place of work and the employee incurs accommodation and meal expenses to be closer to their new regular place of work, the employee will be living at that new location away from their usual residence.

In this case, there is no change in the employees' regular place of work and the employees are required to temporarily attend training abroad for a specific period of time before returning to their usual place of employment in Australia.

The length of the period away

Paragraph 48 of TR 2021/4 explains that the 'length of period away' means the overall period of time the employee spends living at a particular location for work. Paragraph 49 explains that the longer an employee spends away from their usual residence for work, the more likely the employee is living at the location.

While the Commissioner accepts that an employee is travelling on work when the length of stay is no more than 90 calendar days in total for travel to the same work location in an FBT year (paragraphs 12 and 13 of Practical Compliance Guideline PCG 2021/3: Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location), this does not necessarily mean that if the length of stay exceeds 90 days an employee is living at a location.

All the factors set out in TR 2021/4 still need to be considered to reach such a conclusion (paragraph 4 of PCG 2021/3).

In this instance, the period the employee has been or is expected to be away from their usual residence is a period of ten weeks. As such, this period is not considered a short length of time to be away from your usual place of residence. However, this length of stay is not determinative in this case. The key factor is that the employees regular place of employment does not change.

The nature of the accommodation

Paragraphs 56 and 58 of TR 2021/4 explains that the nature of an employee's accommodation is relevant but does not determine whether the employee is living at a location away from their usual residence. Generally, where an employee works away from home for a considerable period and, for that period, stays in accommodation generally used for longer term accommodation (such as a house, unit, apartment or caravan), this would support a view that they are living at a location away from their usual residence.

Paragraph 59 of TR 2021/4 notes that the use of short-term accommodation such as hotels and motels located close to the temporary work location is generally an indication that the employee is travelling on work.

While the employees are abroad attending training, they will stay in a variety of accommodation depending on length of time away and availability of accommodation. Mostly it will be hotels or other short-stay accommodation. This indicates that the employees have been provided with short term accommodation.

Whether the employee is, or can be, accompanied by family or visited by family and friends

Paragraph 60 of TR 2021/4 provides that an employee who is living at a location away from their usual residence can generally be accompanied or visited by their family and friends. However, if an employee cannot be accompanied by family or visited by family and friends, this tends to indicate that the employer retains a degree of control over the employee outside their standard workday and which may contribute to an overall impression that the employee is travelling on work during this period.

In this case, family members do not accompany the employees while they are attending the training course abroad. The employees will go back to their principal place of residence (and family members) at the completion of the training course. Family members can visit at their own expense and employees can extend their stay for travel purposes at the end of the training if the desire, but again this is at their own expense.

While the employees are working away from home, they continue to maintain their usual place of residence; and they are not accompanied by family members. It is considered that the employees do not take up settled accommodation or temporary residence elsewhere when they are working away from home. Accordingly, it is considered that the duties of the officer's employment do not require them to live at a location away from their normal residence.

Therefore, the second condition in subsection 30(1) of the FBTAA is not satisfied.

Is the allowance paid wholly or partly to compensate the employees for additional, non-deductible expenses incurred because of the requirement to live away from their normal residence?

The third condition requires that an allowance should have been paid to compensate for additional non-deductible expenses. 'Non-deductible' is a pre-requisite in the third condition, we therefore need to determine whether the allowance is a deductible expense to the employees.

Subsection 136(1) of the FBTAA provides the definition of deductible expenses as follows:

deductible expenses in relation to an allowance paid to an employee, means expenses incurred by the employee in respect of which a deduction is allowable to the employee under section 8-1 of the Income Tax Assessment Act 1997 (ignoring Divisions 28, 32 and 900 of that Act).

According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

Paragraph 7 of TR 2021/4 outlines that the term 'incurred in gaining or producing assessable income' means incurred 'in the course of gaining or producing assessable income'. For an expense to be incurred in gaining or producing assessable income it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of assessable income.

Paragraph 8 states that when determining what is productive of an employee's assessable income, consideration should be given to the scope of the employee's income-producing activities.

Paragraphs 9 and 10 differentiate the 'living expenses and expenses incurred while 'travelling on work'.

9.             Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible under section 8-1. This includes the costs an employee incurs to maintain their usual residence and of consuming food and drink to go about their daily activities. For the purposes of this Ruling, such expenses will be referred to as 'living expenses.

10.          However, where an employee travels and stays away from their usual residence overnight in the course of performing their income-producing activities and incurs accommodation and food and drink expenses, these expenses will generally be deductible under section 8-1. For the purposes of this Ruling, an employee who stays away from their usual residence overnight in the course of performing their income-producing activities will be referred to as 'travelling on work'.

Paragraph 24 of TR 2021/4 further outlines the relevant factors for determining whether an employee is travelling on work versus living expenses.

24.          If any of the following factors apply, the employee will not be travelling on work and the accommodation and food, and drink expenses incurred will be living expenses:

•                     the expenses are incurred because the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income

•                     the employee incurs the expenses because they are living at a location

•                     the employee incurs the expenses as a result of relocating from their usual residence.

Personal circumstances

Paragraph 25 of TR 2021/4 explains that an employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income.

The employees have been sent abroad for training. They have been sent to do this course so they can carry out their employment duties rather than due to their personal circumstances. The expenses on food, and other incidentals are incurred in the course of producing assessable income.

Living at a location

It has been established above that the employees are not considered to be 'living at a location'.

Relocation

Paragraph 80 of TR 2021/4 lists the factors that indicate whether an employee has relocated or not.

80.          Whether an employee has relocated is a question of fact. Factors that indicate an employee has relocated include:

•                     they are at the new location for an extended period

•                     they are required to move to that location permanently or indefinitely in order to perform their duties

•                     their usual residence is no longer available for them to occupy because they have either sold it or because it has been leased or rented out long-term

•                     they are accompanied by their family and the family's belongings have been transferred to the new location

•                     their children attend school at the new location

•                     their spouse or partner obtains employment at the new location

•                     they change their postal address and electoral role details to their new place of residence

•                     they establish ties to the local community, for example, by taking up membership at local sporting and recreational clubs at the new location.

The employees are not required to stay for an extended period of time or move permanently, and the other factors listed above do not apply to their circumstances. Therefore, the employees do not have to relocate abroad.

As the employees do not undertake travel due to their personal circumstances, do not live at a location and have not relocated abroad, the expenses (on food and other incidentals) they incur cannot be living expenses. Rather, they incur these expenses while travelling on work. Therefore, these expenses are deductible expenses as they are necessarily incurred in gaining or producing assessable income.

As a result, the third condition in subsection 30(1) of the FBTAA is not satisfied.

Conclusion

Whilst the Company pays for the travel for the employees as a result of their employment, the employees are not required to live away from home and the expenses they incur in relation the meals and other incidentals are deductible on the basis that they travel on work. Therefore, the expenses paid for employees who are traveling to abroad to do training are not considered a LAFHA benefit pursuant to section 30(1) of the FBTAA.

As the payment of the travel expenses are not considered LAFHA, consideration needs to be given to what other benefit it could give rise to. Depending on how the travel expenses are paid, will determine what benefit will arise. Determination of what exact benefit arises is outside the scope of this ruling. But it is worth noting that as we have determined that the employees are travelling on work these expenses would be deductible to the employee. Therefore, you can use the otherwise deductible rule to reduce the value of the fringe benefit. You must have certain documents to demonstrate the extent to which the expense would be deductible to the employee. This is a substantiation requirement. They may include a travel diary kept by the employee or an employee declaration.

Question 2

Are the benefits provided to the Company's Australian employees who participate in the Program considered to be a LAFHA for the purposes of subsection 30(1) of the FBTAA in circumstances where these employees work in multiple locations throughout the X-month travel period?

Summary

Using the same reasoning as question 1, the benefits provided to the Australian employees are not considered LAFHA. The employees will be considered travelling on work due to uncertainty of the location and period of stay in one location that cannot be determined a head of time.