ATO ID 2003/160: Remote area housing: reduction of taxable value - residential property and employee's purchase consideration
Date of decision: 14 January 2003
Year of income: Year ended 31 March 2002
Business line: Private Groups and High Wealth Individuals

Issue
Does the employee's expenditure incurred in purchasing a house in a remote area satisfy the paragraph 142(2C)(c) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) requirement of being 'recipients expenditure that is incurred wholly to enable the employee to acquire an estate or interest in land on which there is a dwelling'?

Decision
Yes, because the employee's expenditure is wholly for that purpose.

Facts
After commencing employment with the employer, the employee acquires land on which there is a house (the property). The property is located in a remote area. The property is acquired under a contract of sale. The employer reimburses the employee all (or part) of the purchase price of the property. The reimbursement is made with reference to the purchase price of the property, being the expenditure incurred by the employee. The reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

Reasons for decision
Summary: Under subsection 60(4) of the FBTAA, an employer is entitled to apply a 50% reduction to the taxable value of certain 'expense payment fringe benefits' when the 'recipients expenditure is in respect of remote area residential property'. Broadly, the subsection discounts by 50% the taxable value of a fringe benefit relating to the provision of assistance to enable an employee to acquire a 'unit of remote area accommodation' (typically, a house in a remote area of Australia). Subsection 142(2C) of the FBTAA provides rules for determining eligibility for this 50% reduction. Subsection 142(2C) of the FBTAA sets out the criteria of when 'the recipients expenditure is in respect of remote area residential property'. Paragraph 142(2C)(c) of the FBTAA includes the requirement that the 'recipients expenditure' be incurred wholly 'to enable the employee to acquire an estate or interest in land on which there is a dwelling'. The recipient of the 'expense payment fringe benefit' is an employee of the employer. 'Recipients expenditure', as defined in section 136(1) of the FBTAA means, in relation to an 'expense payment benefit', the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA. The 'recipients expenditure' is the employee's purchase price under the contract of sale. The Macquarie Dictionary Online defines the term 'wholly' as meaning: 1. entirely; totally; altogether; quite. 2. to the whole amount, extent, etc. 3. so as to comprise or involve all. The 'recipients expenditure', being the purchase price under the contract of sale, is considered to be expenditure incurred wholly or entirely for the purpose of acquiring the property. Accordingly, paragraph 142(2C)(c)of the FBTAA is satisfied. Subsection 142(2C) of the FBTAA contains other requirements. Subparagraph 142(2C)(g)(ii) requires that, at the time the 'recipients expenditure' was incurred, which is the date the contract of sale was executed, the employee was a current employee and the usual place of employment was in a remote area. Note: Refer also to ATO Interpretative Decision ATO ID 2003/158 where an employee's residential loan repayments were considered not to be qualifying expenditure within paragraph 142(2C)(c) of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 60(4) subsection 136(1) subsection 142(2C) paragraph 142(2C)(c) subparagraph 142(2C)(g)(ii)
Related ATO interpretative decisions: ATO ID 2003/157 | ATO ID 2003/158 | ATO ID 2003/159
Other references: Macquarie Dictionary Online
Subject references: Expense payment fringe benefits FBT expense payment FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value