ATO Interpretative Decision

ATO ID 2010/182 (Withdrawn)

Fringe Benefits Tax

Fringe benefits tax: exempt benefits - remote area housing benefits - salary sacrifice arrangement
FOI status: may be released
  • The ATO ID 2010/182 is withdrawn as the principles are discussed in ATO ID 2010/183.
    This document has changed over time. View its history.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Whether the provision of housing benefits by the employer to a new employee under a salary sacrifice arrangement where the housing is located in a remote area, will invoke the application of subparagraph 58ZC(2)(e)(ii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision

No, the recipient's overall housing right was not granted to an employee under an arrangement for the purpose of obtaining the benefit of the exemption provided by section 58ZC of the FBTAA. The arrangement was implemented to enable the employer to provide the benefit of housing to its employee as an ordinary business requirement of the employer.

Facts

An employer has a workplace located in a remote area as described in Practice Statement Law Administration PS LA 2000/6.

It is customary for employers in the employer's industry to provide subsidised residential accommodation for their employees.

The employer engages a new employee. On engagement the employee enters into a salary sacrifice arrangement with the employer where the employee agrees to forego part of his or her total remuneration that he or she would otherwise expect to receive as salary or wages, in return for the employer providing a house with a similar rental value. The salary sacrifice arrangement is an 'Effective SSA' as described in Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements.

The employer obtains a lease over a residential property from the owner of the property at the market rental. The terms of the lease allow the employer to make the house available to an employee as a residence.

The property is located in a remote area as described in PS LA 2000/6.

The employer grants the employee a lease or licence to occupy or use the house as the employee's usual place of residence.

Reasons for Decision

When an employer provides a housing benefit to its employee in a remote area and the requirements of section 58ZC of the FBTAA are satisfied, the housing benefit is a 'remote area housing benefit' which is an 'exempt benefit'.

Subparagraph 58ZC(2)(e)(ii) of the FBTAA provides conditions which if satisfied will deny the exemption otherwise available under section 58ZC of the FBTAA. Subparagraph 58ZC(2)(e)(ii) provides that:

(e)
the recipients overall housing right was not granted to the recipient under:

(i)
....
(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.

'Recipients overall housing right', 'arrangement' and 'housing right' are defined in subsection 136(1) of the FBTAA:

"recipients overall housing right" , in relation to a housing fringe benefit in relation to a year of tax, means the housing right to which the fringe benefit relates, including that housing right as it subsisted, or will subsist, outside the year of tax.
"arrangement" means:

(a)
any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b)
any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

"housing right" , in relation to a person, means a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence.

Under subparagraph 58ZC(2)(e)(ii) of the FBTAA, the granting of the 'recipients overall housing right' to the recipient under an 'arrangement' refers to the granting of the lease or licence to the employee to use the house or unit of accommodation as the usual place of residence under an arrangement, scheme or undertaking.

Subparagraph 58ZC(2)(e)(ii) of the FBTAA requires that the parties to the arrangement enter into the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of the section.

In Newton v. Federal Commissioner of Taxation (1958) 98 CLR 1; (1958) 11 ATD 442; (1958) 7 AITR 298, the Privy Council examined the meaning of the word 'purpose'.

Lord Denning said at page number CLR 8; ATD 445; AITR 304,

The word "purpose" means, not motive, but the effect which is sought to achieve - the end in view.

Lord Denning also said (at the same page),

In order to bring an arrangement within the section, you must be able to predicate by looking at the overt acts by which it was implemented that it was implemented in that particular way so as to avoid tax. If you cannot so predicate, but have to acknowledge that the transactions are capable of explanation by reference to ordinary business or family dealing, without necessarily being labelled as a means to avoid tax, then the arrangement does not come within the section.

In this arrangement which provides or grants the 'recipient's overall housing right', the arrangement is entered into by each of the parties for the purpose of enabling the employer to provide the benefit of housing to its employee. There are no overt acts by which one could predicate that the arrangement has been implemented by any of the parties for the purpose of allowing the employer to enjoy the benefits of the tax exemption. The arrangement can be explained as being one of ordinary business dealings as is customary in the employer's industry.

Accordingly, the recipient's overall housing right was not granted to an employee under an arrangement described in subparagraph 58ZC(2)(e)(ii) of the FBTAA. Subparagraph 58ZC(2)(e)(ii) is not satisfied.

Date of decision:  28 September 2010

Year of income:  Year ended 31 March 2011

Legislative References:
Income Tax Assessment Act 1936
   section 260

Fringe Benefits Tax Assessment Act 1986
   section 58ZC
   subparagraph 58ZC(2)(e)(ii)
   subsection 136(1)

Case References:
Newton v Federal Commissioner of Taxation
   (1958) 98 CLR 1
   (1958) 11 ATD 442
   (1958) 7 AITR 298

Related Public Rulings (including Determinations)
Taxation Ruling TR 2001/10

Related ATO Interpretative Decisions
ATO ID 2010/183

Other References:
Practice Statement Law Administration PS LA 2000/6

Keywords
Housing fringe benefits
FBT exempt housing benefit
Remote area housing fringe benefits

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  8 October 2010

ISSN: 1445-2782

history
  Date: Version:
  28 September 2010 Original statement
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