Private ruling: Fringe benefits tax - Living away from home allowance and other benefits
Date of advice: 5 January 2017
Published: June 2017
Ruling period: Year ending 31 March 2012 | Year ending 31 March 2013 | Year ending 31 March 2014 | Year ending 31 March 2015 | Year ending 31 March 2016 | Year ending 31 March 2017
Date scheme commenced: DD MM YY

Ruling: Q1: Will the allowance paid to your employee be a living-away-from-home allowance (LAFHA) benefit pursuant to subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No | Q2: If the answer to Question 1 is yes, will the taxable value of the fringe benefit be reduced by any exempt accommodation component? | A2: Not necessary to answer. Issue 2 | Q3: Will the flights provided to your employee and/or their family members be a residual benefit pursuant to section 45 of the FBTAA? | A3: Yes | Q4: Will the flights provided to your employee and/or their family members be an expense payment benefit pursuant to section 20 of the FBTAA? | A4: Yes

Relevant facts and circumstances: The employer has appointed the employee to the position of Chief Executive Officer. The employment contract commenced in 201X and is for a 5 year fixed term period. The position will be principally based at a Facility in a State X. Under the employment contract the employee is entitled to an accommodation allowance for a fixed amount per annum to provide the means to maintain suitable temporary accommodation in State X. The allowance is conditional on the employee maintaining their primary place of residence in State Y. The accommodation allowance will not be provided to the employee as cash but will be provided as a reimbursement upon evidence of expenses incurred. The allowance is provided in addition to the employee's total remuneration package. The employment contract also entitles the employee to reunion travel which is provided on an annual basis while the employee maintains their primary place of residence. The entitlement will be up to XX return flights to State Y per year. The majority of the employee's reunion travel may be combined with official business travel. As a result the employer will organise and pay for such travel directly. Any reunion travel arranged for by the employee separately will be reimbursed upon evidence of expenses incurred. The reunion travel entitlement may be used for travel by the employee or their immediate family. The employee owns a residence in the State Y and has lived there for over 10 years. The employee's dependent daughter continues to live in this home. The employee is not intending to move their family with them to the State X. The employee intends to return to State Y on termination of their contract. The employee's accommodation in the State X is a three bedroom apartment. They are currently committed to a 12 month lease on the apartment which is renewable. The employee has provided the employer with a living-away-from-home declaration covering the period of their employment contract.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 20 | Fringe Benefits Tax Assessment Act 1986 section 21 | Fringe Benefits Tax Assessment Act 1986 subsection 30(1) | Fringe Benefits Tax Assessment Act 1986 section 31 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 section 136

Reasons for decision: Summary: The benefit provided to the employee will not be a living-away-from-home allowance benefit pursuant to subsection 30(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 30 of the FBTAA sets out the circumstances in which an allowance paid by an employer to an employee will qualify as a living-away-from-home allowance. Subsection 30(1) of the FBTAA states: Where: (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 employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; 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. In summarising these requirements an allowance will be a living-away-from home-allowance if: (a) it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for: ● additional non deductible expenses incurred by the employee during a period; or ● additional non deductible expenses and other additional disadvantages to which the employee is subject during a period; and (b) the additional expenses and other disadvantages arise because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment. In order to determine whether a living-away-from-home allowance benefit has been provided we must first determine whether the benefit being provided by the employer is actually an allowance. Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement (TR 92/15), explains the difference between an allowance and a reimbursement for the purposes of determining whether a payment is a fringe benefit or whether that payment is assessable income. Paragraph 2 of TR 92/15 describes an allowance as: A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance. Further at paragraph 3, reimbursement is described as: A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessary disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. A requirement that the recipient vouch expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance…. Under the terms of the employment contract the employee is entitled to an accommodation allowance to a fixed value per annum to provide the employee with the means to maintain suitable temporary accommodation. The employment contract further provides that the accommodation allowance will not be provided to the employee as cash but rather will be provided as reimbursement upon evidence of expenses incurred. Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT2030) provides the following in relation to non-cash living-away-from-home fringe benefits at paragraphs 44 to 46: Instead of paying a cash living-away-from-home allowance, employers may provide equivalent benefits in a non-cash form where an employee is living away from home. For example, the employee's actual accommodation expenses may be reimbursed by the employer, or the employee and (where applicable) the employee's family may be permitted to occupy residential accommodation owned by the employer. In such circumstances, section 21 of the Act would operate to exempt the reimbursement which would otherwise be an expense payment fringe benefit taxable in accordance with section 23, and sub-section 47(5) would operate to exempt the accommodation which could otherwise be a residual fringe benefit taxable in accordance with section 49 or 51. On the facts provided the employee is not being paid an allowance by the employer. Rather the employee is being reimbursed for expenditure incurred in maintaining suitable temporary accommodation. In order to claim the amount the employee is required to produce evidence to the employer verifying the expenses incurred in relation to accommodation. Whilst the amount of reimbursement is limited to a fixed amount per annum that does not alter the character of the payment as the payment is based on the precise amount of the actual expenditure. Therefore, as the benefit provided to the employee is in the form of reimbursement and not an allowance, it does not meet the requirements of subsection 30(1) of the FBTAA, to be a living-away-from-home allowance benefit. | Detailed Reasoning - Question 2: As the answer to question 1 was no, there is no reason to consider question 2. | Summary: The provision of reunion travel to the employee and/or their family members by the employer to travel between State X and State Y constitutes the provision of a residual fringe benefit under section 45 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 45 of the FBTAA states: A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Division 2 to 11 (inclusive). The Commissioner's view on which benefits constitute residual fringe benefits is contained in Fringe benefits tax - a guide for employers (the employers guide). The employers guide specifically lists the provision of services such as travel as being an example of a residual fringe benefit. As a general rule, residual fringe benefits are treated as having been received when, or over the period during which, the particular benefits are provided. Under the terms of the employment contract the employee is entitled to reunion travel on annual basis which is the provision of up to 12 return flights to State Y per year. The contract further provides that as the majority of the reunion travel may be combined with official business travel the employer will organise and pay for such travel directly. Where the reunion travel is combined with official business travel the employer will need to document the different components of the travel, being business and private, to ensure the benefit is calculated correctly. Therefore the provision of reunion travel to the employee and/or their family members by the employer to travel between State X and State Y constitutes the provision of a residual fringe benefit under section 45 of the FBTAA. | Summary: The reimbursement of reunion travel to the employee by the employer for travel between State X and State Y by the employee and/or their family members constitutes the provision of an expense payment benefit under section 20 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 20 of the FBTAA states that an expense payment benefit is provided: 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. Under the terms of the employment contract should the employee arrange reunion travel separately, then this would be reimbursed upon evidence of expenses incurred. The reunion travel entitlement may be used by the employee or their immediate family. Therefore the reimbursement of reunion travel to the employee by the employer for travel between State X and State Y by the employee and/or their family members constitutes the provision of an expense payment benefit under section 20 of the FBTAA.