Private ruling: Fringe benefits
Date of advice: 5 September 2025
Published: 27 October 2025
Ruling period: Fringe Benefits Tax (FBT) Year ended 31 March 20XX | FBT Year ended 31 March 20XX | FBT Year ended 31 March 20XX | FBT Year ending 31 March 20XX | FBT Year ending 31 March 20XX | FBT Year ending 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Will the provision by the Employer of a meal allowance to Employee 1 during a Campaign Trip constitute a living-away-from-home allowance (LAFHA) benefit under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. Issue 2 - Provision of Meals to Employee 2 | Q2: Will the provision of meals to Employee 2 using the Employer's credit card constitute a meal entertainment benefit as defined in subsection 136(1) of the FBTAA? | A2: No. | Q3: If the answer to Question 2 is 'No', will the provision of meals to Employee 2 using the Employer's credit card constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA? | A3: Yes. | Q4: Will the 'otherwise deductible' rule in section 44 of the FBTAA apply to reduce the taxable value of the property fringe benefit to nil? | A4: Yes. | Q5: Will reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA? | A5: Yes. | Q6: If the answer to Question 6 is 'Yes', will the 'otherwise deductible' rule in section 24 of the FBTAA apply to reduce the taxable value of the expense payment fringe benefit to nil? | A6: Yes. Issue 3 - Provision of Accommodation to Employee 1 and Employee 2 | Q7: Does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'housing benefit' as defined in section 25 of the FBTAA? | A7: No. | Q8: Does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'property benefit' under section 40 of the FBTAA? | A8: No. | Q9: If the answer to Questions 8 and 9 is 'No', does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'residual fringe benefit' as defined in section 45 of the FBTAA? | A9: Yes. | Q10: If the answer to Question 10 is 'Yes', will the 'otherwise deductible' rule in section 52 of the FBTAA apply to reduce the taxable value of the residual fringe benefit to nil? | A10: Yes.

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The Employer has 2 employees. These employees are also the beneficiary of the Employer. The Employer carries on an online business. The employees are undertaking an intensive 'on the road' campaign where they are travelling to different cities and towns, giving presentations at community venues. These venues will be booked in advance prior to travelling to the area in which the venue is booked. The Employer's objective is for these employees to remain on the road for as long as feasible, maximising its reach by hosting seminars in as many locations as possible. With over 6,000 locations across Australia, these venues will serve as the Employer's primary focus. The Employer will also expand into other suitable venues such as community centres and outreach hubs. Given that many of these locations are independently operated, availability will vary significantly. Therefore, the employees' schedule needs to remain dynamic and flexible, allowing them to adapt to opportunities as they arise during the campaign. For each trip (Campaign Trip), the employees may either: • travel from the Employer's base to a single campaign venue, and then return home base after one to 2 nights, or • travel continuously between multiple campaign venues for an extended period before returning to home base. In these circumstances: ­ Some campaign venues will only require an overnight stay or one to 2 days for a single seminar. ­ Other campaign venues will require staying for a maximum of 2 to 3 weeks, depending on the number of seminars and venues. ­ The total length of time the employees may be away from their usual place of residence during the Campaign Trip may be between 3 to 9 months. During each Campaign Trip, the Employer will provide the 2 employees (Employee 1 and Employee 2) with meals and accommodation (in addition to their respective salary or wages) as follows: Meals • Employee 1: ­ The Employer will provide Employee 1 with an allowance for meals. • Employee 2: ­ Employee 2 will predominantly pay for their meals using a corporate credit card (in the Employer's name) that is provided to them by the Employer. ­ In some circumstances, Employee 2 will pay for their meals using their own personal funds and seek reimbursement of these expenses from the Employer. Accommodation • Both Employee 1 and Employee 2 are provided with accommodation in the form of a caravan that is owned by the Employer. • As both employees travel together, they share accommodation in the caravan. No family members will accompany Employee 1 and Employee 2 whilst they are travelling during the campaign.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 24 | Fringe Benefits Tax Assessment Act 1986 section 25 | Fringe Benefits Tax Assessment Act 1986 subsection 30(1) | Fringe Benefits Tax Assessment Act 1986 section 37AC | Fringe Benefits Tax Assessment Act 1986 section 37AD | Fringe Benefits Tax Assessment Act 1986 section 40 | Fringe Benefits Tax Assessment Act 1986 section 41 | Fringe Benefits Tax Assessment Act 1986 section 44 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 section 52 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subsection 900-15(1) | Income Tax Assessment Act 1997 subsection 900-30(1) | Income Tax Assessment Act 1997 subsection 900-30(3) Assumption | During each Campaign Trip, food and drinks are not provided to, and consumed by, Employee 1 and/or Employee 2: | • on the Employer's home base, or | • under a salary packaging arrangement. | The caravan will be parked close to each temporary work location/campaign venue during a Campaign Trip. | The Employer does not have any ownership or exclusive occupancy rights as lessee of any of the campaign venues at which Employee 1 and Employee 2 provide presentations to as part of a Campaign Trip.

Reasons for decision: Detailed Reasoning - Question 1: Will the provision by the Employer of a meal allowance to Employee 1 during a Campaign Trip constitute a living-away-from-home allowance (LAFHA) benefit under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | Summary: The provision by the Employer of a meal allowance to Employee 1 during a Campaign Trip will notconstitute a LAFHA benefit under subsection 30(1) of the FBTAA. | Detailed Reasoning - Relevant matters for consideration: Whilst the payment of a meal allowance to Employee 1 does not constitute a LAFHA benefit, consideration will need to be given to whether any FBT obligations would arise for the Employer in respect of any other benefit the meal allowance may give rise to. This will incorporate a determination of whether or not the payment of a meal allowance to Employee 1 constitutes a 'fringe benefit'. A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which requires the following conditions to be satisfied: • A benefit is provided at any time during the year of tax. • The benefit is provided to an employee or an associate of the employee. • The benefit is provided by: ­ their employer; or ­ an associate of the employer; or ­ 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 ­ a third party other than the employer or an associate of the employer, if the employer or an associate of the employer: o participates in or facilitates the provision or receipt of the benefit; or o 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; The benefit is provided in respect of the employment of the employee. 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. Where payment of the meal allowance does not constitute a 'fringe benefit': • One of the conditions of the definition of a 'fringe benefit' is that the benefit not be 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. • Where the payment of a meal allowance to Employee 1 constitutes a 'travel allowance' (as defined in subsection 900-30(3) of the Income Tax Assessment Act 1997 (ITAA 1997)), this would constitute an 'excluded benefit' under paragraph (f) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA such that it would notmeet the definition of a 'fringe benefit' (and thus have no FBT implications for the Employer). Where payment of the meal allowance does constitute a 'fringe benefit': • If the payment of a meal allowance to Employee 1 does notconstitute a 'travel allowance' as defined in subsection 900-30(3) of the ITAA 1997, andit is concluded that the payment of a meal allowance to Employee 1 constitutes a 'fringe benefit' as defined in subsection 136(1) of the FBTAA, then given - as per the response to Question 1 - it has been determined that Employee 1 is travelling on work, any meal expenses would be deductible to Employee 1. • Therefore, depending on the type of fringe benefit that may apply in these circumstances, the Employer may apply in the 'otherwise deductible' rule to reduce the taxable value of the fringe benefit (potentially to nil). The Employer must have certain documents to demonstrate the extent to which the expense would be deductible to Employee 1. This is a substantiation requirement. This may include a travel diary kept by Employee 1 or an employee declaration. | Detailed Reasoning - Detailed reasoning: When an allowance is paid by an employer to cover meals, it is necessary to determine whether that allowance is a travel allowance or a LAFHA, as each is subject to a different tax. 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) explains the criteria for determining whether an allowance is a travel allowance or a LAFHA fringe benefit. Specifically, a: • travel allowance is included in an employee's assessable income under the ITAA 1997, and • LAFHA is a fringe benefit which is non-assessable non-exempt income in the hands of the employee and may give rise to FBT which is paid by the employer. 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) 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. In summary, there are 3 conditions that must be met for a payment to an employee to be considered a LAFHA benefit: • The payment is an allowance an employer pays an employee in respect of the employment of that employee. • The duties of their employment require the employee to live away from their normal residence. • The whole or part of the allowance is in the nature of compensation to the employee for: ­ non-deductible additional expenses an employee might be expected to incur, or ­ non-deductible additional expenses an employee might be expected to incur and other disadvantages suffered, because the duties of an employee's job require them to live away from their normal residence. Each of these conditions is considered further below. | Detailed Reasoning - Is the payment an allowance the Employer makes to Employee 1 in respect of their employment?: Paragraph 2 of Taxation Ruling TR 1992/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement (TR 1992/15) provides that 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. An 'employee' is defined in subsection 136(1) of the FBTAA to include a current, future and former employee. Subsection 136(1) of the FBTAA 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 payments from which an amount must be withheld under section 12-35 of Schedule 1 to the Taxation Administration Act 195 3. Based on the information provided, the employees meet the definition of current employee because they receive salary or wages from you from which an amount must be withheld. In considering whether a benefit is provided to an employee in respect of their employment, subsection 136(1) of the FBTAA defines 'in respect of', in relation to the employment of an employee, to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. In J & G Knowles v Commissioner of Taxation [2000] FCA 196, 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'. In this situation, the payment of a meal allowance to Employee 1 is sufficiently and materially connected to the employment of Employee 1, and as such, would be considered to have been provided 'in respect of' their employment'. Therefore, payment of a meal allowance to Employee 1 was made in respect of their employment, thus satisfying the first condition (paragraph (a) of subsection 30(1) of the FBTAA). | Detailed Reasoning - 'Normal residence': 'Normal residence' is defined in subsection 136(1) of the FBTAA as an employee's usual place of residence, when the employee's usual place of residence is in Australia. The FBTAA does not provide a separate 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, Employee 1's permanent and settled principal place of residence in a location is their usual place of residence. | Detailed Reasoning - 'Living away from usual residence': Paragraph 42 of TR 2021/4 sets out key indicators which would indicate whether an employee is living at a location away from their usual residence or travelling on work: (a) Whether there is a change in the employee's regular place of work (b) The length of the overall period the employee will be away from their usual residence (c) The nature of the accommodation (d) Whether the employee is, or can be, accompanied by or visited by family or friends. Each of these indicators is considered in further detail below. | Detailed Reasoning - Change in Employee 1's regular place of work: Paragraph 45 of TR 2021/4 outlines that where there is a change in an 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. Conversely, where there is no change in the employee's regular place of work and the employee incurs accommodation and food and drink expenses when they temporarily attend and stay overnight at another location in the course of carrying out their income-producing activities, the employee will not be living at the location they visit and work at temporarily (paragraph 46 of TR 2021/4). The Commissioner's view of the concept of 'regular place of work' is outlined in paragraphs 24 to 38 of Taxation Ruling TR 2021/1: Income tax: when are deductions allowed for employees' transport expenses ? which states the following: 25. Most employees have a regular place of work, being a usual or normal place where the employee starts and finishes their work duties with a particular employer. 26. In most cases, identifying an employee's regular place of work is clear. In circumstances where it isn't clear, it may be necessary to consider in more depth the contract of employment, customary practice, the nature of the work duties, where these duties commence and at what point in time the employee is under the direction and control of their employer in order to determine where the employee's regular place of work is. 32. ...In situations where it is difficult to conclude whether a second or subsequent place of work is also a regular place of work, an actual or anticipated duration of three months or more at the location would usually be sufficient for the location to amount to a regular place of work. | Detailed Reasoning - The length of the period away: Paragraphs 48 and 49 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. Where an employee is living at one location for work for an extended period, that period is not broken by short trips they take from that location, for example travelling back to their usual residence on weekends or when travelling on work from that location. Generally, the longer an employee spends away from their usual residence for work, the more likely the employee is living at the location. In contrast, an employee generally will not be living at a location away from their usual residence where the overall period that they stay away from their usual residence in the course of performing their income-producing activities is reasonably short (paragraph 50 of TR 2021/4). Of relevance to the current circumstances is paragraph 51 of TR 2021/4 which states that: Just because an employee is away from their usual residence for an extended period does not necessarily mean that they are living at a location away from their usual residence. If the employment requires ongoing travel to multiple locations the employee may not be in any location long enough to be regarded as living at a location. This may be the case, for instance, with a performing artist on tour. | Detailed Reasoning - 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 58 of TR 2021/4). 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. | Detailed Reasoning - Whether Employee 1 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. | Detailed Reasoning - Application to the Employer's circumstances: In weighing up the 4 indicators above, the Commissioner considers that Employee 1 is notliving at a location away from their usual residence. Employee 1 is travelling on work. This conclusion is based on the following: • Employee 1 does not stay at a particular campaign venue for more than X to X weeks during a Campaign Trip. Employee 1's regular place of work remains at the Employer's base. As such, there is no change in Employee 1's regular place of work when undertaking a Campaign Trip. • Whilst the total length of time Employee 1 may be away from their usual place of residence during a Campaign Trip may be between X to X months, Employee 1 does not stay at a particular campaign venue for more than X to X weeks during the Campaign Trip. In applying the principle in paragraph 51 of TR 2021/4, just because Employee 1 is away from their usual residence for an extended period does not necessarily mean that they are living at a location away from their usual residence. As the employment requires ongoing travel to multiple campaign venues, Employee 1 is not considered to be in any location long enough to be regarded as living at a location. The key factor here is that Employee 1's regular place of employment does not change. • No family members will accompany Employee 1 whilst they are travelling during a Campaign Trip. • The nature of the accommodation (a caravan) is relevant but not determinative of whether Employee 1 is living away from home or travelling on work. Despite paragraph 58 of TR 2021/4 alluding to a caravan as being longer-term accommodation which supports a view of 'living at a location away from an employee's usual residence', it is assumed that the caravan in the current circumstances will be parked close to the temporary work location/campaign venue. When weighing this with the other indicators above, it is concluded that Employee 1 is travelling on work, and is not living away from their usual residence whilst on a Campaign Trip. As such, the second condition in subsection 30(1) of the FBTAA is not satisfied. Is the allowance paid wholly or partly to compensate Employee 1 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 be paid to compensate for additional non-deductible expenses. As 'non-deductible' is a pre-requisite in this condition, we therefore need to determine whether the meal allowance is paid to compensate Employee 1 for a tax-deductible expense. Subsection 136(1) of the FBTAA provides the definition of deductible expenses as: 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 ITAA 1997, an employee can deduct a loss or outgoing if it is incurred in producing their 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 of TR 2021/4 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 of TR 2021/4 differentiate '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 of the ITAA 1997. This includes the costs an employee incurs to maintain their usual place of 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'. It was concluded in the second condition above that Employee 1 is travelling on work and is not living at any campaign venue during a Campaign Trip. As provided in paragraph 10 of TR 2021/4, any meal expenses incurred by Employee 1 whilst travelling on work cannot be 'living expenses' and will be deductible under section 8-1 of the ITAA 1997. Therefore, Employee 1's meal expenses during a Campaign Trip are deductible expenses as they are necessarily incurred in gaining or producing assessable income. As the meal allowances in the current circumstances are not paid to compensate for additional 'non-deductible' expenses, the third condition in subsection 30(1) of the FBTAA is notsatisfied. As all of the 3 conditions outlined in subsection 30(1) of the FBTAA have not been met, a meal allowance paid to Employee 1 during a Campaign Trip is not considered a LAFHA benefit. | Detailed Reasoning - Question 2: Will the provision of meals to Employee 2 using the Employer's credit card constitute a meal entertainment benefit as defined in subsection 136(1) of the FBTAA? | Summary: The provision of meals to Employee 2 using the Employer's credit card will not constitute a meal entertainment benefit as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: A 'meal entertainment benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit that is a 'meal entertainment benefit' because of section 37AC of the FBTAA. Subsection 32-10(2) of the ITAA 1997 states that entertainment is provided even if business discussions occur. In the note to section 32-10 of the ITAA 1997, business lunches and social functions are given as examples of 'entertainment'. Section 37AC of the FBTAA 1986 states: Where at a particular time an employer (the provider) to whom this Division applies provides meal entertainment to another person (the recipient) the provision of the meal entertainment is taken to constitute a meal entertainment benefit provided by the provider to the recipient at that time. The provision of meal entertainment is defined in section 37AD of the FBTAA as: A reference to the provision of meal entertainment is a reference to the provision of: (a) Entertainment by way of food or drink; or (b) Accommodation or travel in connection with, or for the purpose of facilitating entertainment to which paragraph (a) applies; or (c) The payment or reimbursement of expenses incurred in providing something covered by paragraph (a) or (b); (d) Whether or not: (e) Business decisions or business transactions occur; or (f) In connection with the working of overtime or otherwise in connection with the performance of the duties of any office or employment; or (g) For the purposes of promotion or advertising; or (h) At or in connection with a seminar. 'Entertainment by way of food or drink' is not further defined in the legislation. Therefore, they have their ordinary meaning taken in the context that they appear in Division 32 of the ITAA 1997. Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17) considers entertainment as it relates to the provision of food and drink for FBT and income tax purposes. Paragraphs 18 to 20 of TR 97/17 explain that, in most cases, the mere provision of food and drink satisfies the 'entertainment' test. It is only in a narrow category of cases where the mere provision of food or drink does not amount to entertainment. However, of relevance in circumstances where an employee is provided with meals while travelling on work, paragraph 21 of TR 97/17 states: Where an employee is travelling in the course of performing their employment duties, the food or drink provided is consumed as a result of that work-related travel. In the absence of supplementary entertainment, the food or drink is not provided by the employer in order to confer entertainment on that employee. Therefore, the meal does not have the character of entertainment. In the response to Question 1 of this Ruling, it was concluded that Employee 1 was travelling on work (and not living away from their usual place of residence) during a Campaign Trip. The Commissioner considers that Employee 2 is also travelling on work (and not living away from their usual place of residence) for the same reasons as outlined in the response to Question 1. Therefore, as Employee 2 is considered to be travelling in the course of performing their employment duties, meals consumed by Employee 2 during a Campaign Trip is as a result of that work-related travel such that the meal does not have the character of 'entertainment' pursuant to paragraph 21 of TR 97/17. Given the 'provision of meal entertainment' as defined in section 37AD of the FBTAA is not satisfied, the definition of 'meal entertainment benefit' in sections 37AC and subsection 136(1) of the FBTAA is also not satisfied. In turn, the definition of a 'meal entertainment fringe benefit' in subsection 136(1) of the FBTAA is not satisfied. | Detailed Reasoning - Question 3: If the answer to Question 2 is 'No', will the provision of meals to Employee 2 using the Employer's credit card constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA? | Summary: The provision of meals to Employee 2 using the Employer's credit card will constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Property fringe benefit: The term 'property fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a property benefit'. | Detailed Reasoning - 'Property benefit': A 'property benefit' is defined in subsection 136(1) of the FBTAA to mean: a benefit referred to in section 40 but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III. Section 40 of the FBTAA states: Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. 'Property' is defined in subsection 136(1) of the FBTAA to include tangible property. Having regard to the phrase 'but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III' in the subsection 136(1) definition of a 'property benefit', of these nine divisions of the FBTAA, the only Divisions that are relevant to the provision of food and drink by the Employer are Divisions 5 (which deals with expense payment fringe benefits) and 9A (which deals with meal entertainment fringe benefits). In the current circumstances, Employee 2's meal expenses cannot be considered an expense payment fringe benefit as the Employer's corporate credit card is used for payment of the expenses. Expense payment fringe benefits apply to expenses incurred by an employee that are reimbursed or paid by their employer. They do not apply to meals an employer purchases directly and provides to their employee, nor do they apply to meals purchased using a credit card in the Employer's name. As per the response to Question 2 above, the benefit also could not constitute a 'meal entertainment benefit' as the meals provided to Employee 2 whilst travelling on work are not considered 'entertainment'. Therefore, where Employee 2 uses their corporate credit card to purchase meals (that is, it is the Employer that is liable for any expenses incurred on the credit card), the benefit they are receiving is the provision of food and drink which is tangible property, which constitutes a 'property benefit' as defined in subsection 136(1) of the FBTAA. Having regard to the definition of a 'property fringe benefit' in subsection 136(1) of the FBTAA, it has been established that the benefit is a 'property benefit'. It is now necessary to consider if the benefit is also a 'fringe benefit'. | Detailed Reasoning - 'Fringe benefit': 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: 4. their employer; or 5. an associate of the employer; or 6. 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 7. 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; The benefit is provided in respect of the employment of the employee. 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 discussion is provided below in respect of whether each element or condition of the definition of a 'fringe benefit' is satisfied. | Detailed Reasoning - Is a benefit provided?: Subsection 136(1) of the FBTAA provides a broad definition of a 'benefit' 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; ... The definitions of 'provide' and 'provider' in subsection 136(1) of the FBTAA are as follows: | Detailed Reasoning - provide:: (a) in relation to a benefit - includes allow, confer, give, grant or perform; and (b) ... provider, in relation to a benefit, means the person who provides the benefit. Employee 2 is provided with meals using a corporate credit card under an arrangement for or in relation to the performance of Employee 2's work. This constitutes the provision of a 'benefit' as defined in subsection 136(1) of the FBTAA. Therefore, this condition is satisfied. | Detailed Reasoning - Is a benefit provided to an employee or an associate of an employer?: 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 payments from which an amount must be withheld under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA). Employee 2 is paid salary or wages from which an amount is withheld by the Employer under section 12-35 of Schedule 1 to the TAA. Employee 2 is therefore considered to be a 'current employee' of the Employer as that term is defined in subsection 136(1) of the FBTAA. As the benefit is provided to an employee (Employee 2) of the Employer, this condition is satisfied. | Detailed Reasoning - Is the benefit provided by an employer, an associate of the employer or a third party?: The term 'employer' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer. Subsection 136(1) of the FBTAA defines a 'current employer' to mean a person who pays, or is liable to pay, salary or wages.As per the Facts, the Employer pays salary or wages to Employee 2 and thus meets the definition of an 'employer' in subsection 136(1) of the FBTAA. Therefore, as the benefit is provided by the Employer (Employee 2's employer), this condition is satisfied. | Detailed Reasoning - Is the benefit provided in respect of employment?: As per subsection 136(1) of the FBTAA, the term 'in respect of', in relation to the employment of an employee, includes 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 an employee: • whether or not the benefit also relates to some other matter or thing • whether the employment is past, present or future • whether or not the benefit is surplus to the recipient's requirements • whether or not the benefit is also provided to another person • whether or not the benefit is 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 any employment • whether or not the provision of the benefit 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 ( Knowles ), 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'. A similar view was also held in Essenbourne Pty Ltd v FC of T 2002 ATC 5201 and Starrim Pty Ltd v FCT (2000) 102 FCR 194; [2000] FCA 952; 2000 ATC 4460; (2000) 44 ATR 487. The full Federal Court in Knowles also suggested that it would be useful to ask 'whether the benefit is a product or incident of the employment'. To establish whether a sufficient or material connection exists between the provision of the benefit (that is, the right to use the vehicle for private purposes) and the employment of Employee 2, it is necessary to consider the circumstances in which the benefit has been provided. If it were not for the employment relationship between the Employer and Employee 2, where Employee 2 is involved in the day-to-day operation of the Employer's business, Employee 2 would not have received the benefit. Therefore, the connection between the benefit received by Employee 2 and Employee 2's employment is material and sufficient, and not merely causal. On this basis, the benefit provided to Employee 2 would be considered to be 'in respect of the employee's employment'. As such, this condition is satisfied. | Detailed Reasoning - Is the benefit excluded from the definition of a 'fringe benefit'?: A benefit which comes within paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is excluded from being a fringe benefit. As confirmed by the response to Question 4 below, it is considered that the benefit provided by the Employer in the current circumstances 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. Therefore, this condition is satisfied. | Detailed Reasoning - Conclusion: Each of the relevant conditions of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA are satisfied in the current circumstances, such that the provision of meals to Employee 2 using the Employer's credit card constitutes a 'fringe benefit'. The meals provided to Employee 2 using the corporate credit card also constitutes a 'property benefit' as defined in subsection 136(1) of the FBTAA. As the provision of meals to Employee 2 using the corporate credit card is a 'fringe benefit that is a property benefit', it meets the definition of a 'property fringe benefit' is defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Question 4: Will the 'otherwise deductible' rule in section 44 of the FBTAA apply to reduce the taxable value of the property fringe benefit to nil? | Summary: The 'otherwise deductible' rule in section 44 of the FBTAA will apply to reduce the taxable value of the property fringe benefit to nil. | Detailed Reasoning - Detailed reasoning: As per the response to Question 3 of this Ruling, the provision of meals to Employee 2 using the corporate credit card is a 'property fringe benefit' as defined in subsection 136(1) of the FBTAA. Such a benefit would be an 'external' property fringe benefit as the property (the food and drinks) does not consist of goods that are similar or identical to those the Employer sells in the ordinary course of business. The taxable value of these external property fringe benefits is calculated in accordance with section 43 of the FBTAA. The 'otherwise deductible' rule in section 44 of the FBTAA operates to reduce the taxable value of a property fringe benefit where the recipient of the benefit is an employee, and the employee would have been entitled to a once-only deduction under either the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997 for the expense had they personally incurred it. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA as follows: once-only deduction, in relation to expenditure, means a deduction in a year of income in respect of a percentage of the expenditure where no deduction is allowable in respect of a percentage of the expenditure in any other year of income. Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing incurred in gaining or producing assessable income. However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997. For any deduction to be allowable under section 8-1 of the ITAA 1997, an employee must be able to demonstrate that there is a real and direct connection between an outgoing (in this case, the cost of Employee 2's meals) and the gaining of assessable income. Where an employee travels and stays away from their usual place of 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 of the ITAA 1997. In the response to Question 2 of this Ruling, it was concluded that Employee 2 was travelling on work (and not living away from their usual place of residence) during a Campaign Trip. As such, Employee 2's meal expenses during a Campaign Trip would be deductible by Employee 2 under section 8-1 of the ITAA 1997 as these expenses are necessarily incurred in gaining or producing assessable income. The deduction would be a 'once-only deduction' as defined in subsection 136(1) of the FBTAA as no percentage of the expense would be allowable as a deduction in any other year of income. Therefore, it is considered that the 'otherwise deductible' rule would apply to reduce the taxable value of the external property fringe benefit to nil under section 44 of the FBTAA. If the Employer uses the 'otherwise deductible' rule, the Employer must have certain documents to demonstrate the extent to which the expense would be deductible to Employee 2. This is a substantiation requirement. They may include a travel diary kept by Employee 2 or an employee declaration. | Detailed Reasoning - Question 5: Will reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: Reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip will constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Expense payment fringe benefit: An 'expense payment fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is an expense payment benefit'. The terms 'fringe benefit' and 'expense payment benefit' are considered below. | Detailed Reasoning - 'Fringe benefit': The definition of a 'fringe benefit' in subsection 136(1) of the FBTAA was discussed in the response to Question 3 of this Ruling. The Commissioner considers that reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip meets the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA on the same basis as concluded in the response to Question 3, as it is a 'benefit' provided to an employee by an employer by reason of the employee's employment, and it is not considered to be a benefit that is specifically excluded. | Detailed Reasoning - 'Expense payment benefit': Section 20 of the FBTAA sets out the circumstances in which a payment or reimbursement will be an 'expense payment benefit'. Paragraphs 20(a) and 20(b) state: 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. In the current circumstances, the Employer (the provider) reimburses Employee 2 (the recipient) in whole for an amount of expenditure (the cost of meals) incurred by Employee 2 during a Campaign Trip. As such, the payment is considered to be an 'expense payment benefit' under paragraph 20(b) of the FBTAA. Based on the above discussion, the definitions of a 'fringe benefit' and an 'expense payment benefit' are satisfied, which in turn satisfies the definition of an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA. Therefore, reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip gives rise to an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA) for the Employer. | Detailed Reasoning - Question 6: If the answer to Question 6 is 'Yes', will the 'otherwise deductible' rule in section 24 of the FBTAA apply to reduce the taxable value of the expense payment fringe benefit to nil? | Summary: The 'otherwise deductible' rule in section 24 of the FBTAA will apply to reduce the taxable value of the property fringe benefit to nil. | Detailed Reasoning - Detailed reasoning: As per the response to Question 6 of this Ruling, the reimbursement by the Employer of costs incurred by Employee 2 for meals during a Campaign Trip gives rise to an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA) for the Employer. Such a reimbursement would constitute an 'external' expense payment fringe benefit as the expenditure (on food and drinks that the Employer reimburses Employee 2 for) is not for a good or service that the Employer sells to customers in the ordinary course of business. The taxable value of these external expense payment fringe benefits is calculated in accordance with section 23 of the FBTAA. The 'otherwise deductible' rule in section 24 of the FBTAA operates to reduce the taxable value of an expense payment fringe benefit where the recipient of the benefit is an employee, and the employee would have been entitled to a once-only deduction under either the ITAA 1936 or the ITAA 1997 for the expense had they personally incurred it. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA as follows: once-only deduction, in relation to expenditure, means a deduction in a year of income in respect of a percentage of the expenditure where no deduction is allowable in respect of a percentage of the expenditure in any other year of income. Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing incurred in gaining or producing assessable income. However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997. For any deduction to be allowable under section 8-1 of the ITAA 1997, an employee must be able to demonstrate that there is a real and direct connection between an outgoing (in this case, the cost of Employee 2's meals) and the gaining of assessable income. Where an employee travels and stays away from their usual place of 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 of the ITAA 1997. In the response to Question 5 of this Ruling, it was concluded that Employee 2 was travelling on work (and not living away from their usual place of residence) during a Campaign Trip. As similarly concluded in the response to Question 5 of this Ruling, Employee 2's meal expenses during a Campaign Trip would be deductible by Employee 2 under section 8-1 of the ITAA 1997 as these expenses are necessarily incurred in gaining or producing assessable income. The deduction would be a 'once-only deduction' as defined in subsection 136(1) of the FBTAA as no percentage of the expense would be allowable as a deduction in any other year of income. Therefore, it is considered that the 'otherwise deductible' rule would apply to reduce the taxable value of the external expense payment fringe benefit to nil under section 24 of the FBTAA. If the Employer uses the 'otherwise deductible' rule, the Employer must have certain documents to demonstrate the extent to which the expense would be deductible to Employee 2. This is a substantiation requirement. They may include a travel diary kept by Employee 2 or an employee declaration. | Detailed Reasoning - Question 7: Does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'housing benefit' as defined in section 25 of the FBTAA? | Summary: The provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip does not constitute a 'housing benefit' as defined in section 25 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Under section 25 of the FBTAA, a 'housing benefit' will arise where a person grants a 'housing right' to another person, as follows: 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 (referred to in this section 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 'housing right' is defined in subsection 136(1) of the FBTAA as meaning a lease or licence being granted to a person to occupy or use a unit of accommodation as that person's current usual place of residence: 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. A 'unit of accommodation' is defined in subsection 136(1) of the FBTAA as including a caravan. The term 'usual place of residence' was discussed in the response to Question 1 of this Ruling. In the response to Question 1, it was accepted that Employee 1's permanent and settled principal place of residence in home base is their usual place of residence. The Commissioner also accepts that Employee 2's permanent and settled principal place of residence in a home base is their usual place of residence. In the current circumstances, the caravan will notbe occupied or used by both Employee 1 and Employee 2 as their usual place of residenceduring a Campaign Trip. This is because Employee 1's and Employee 2's usual place of residence whilst undertaking a Campaign Trip will be their respective places of residence in Bundaberg. As such, a 'housing right' as defined in subsection 136(1) of the FBTAA is not provided by the Employer to Employee 1 and Employee 2. In turn, the definition of a 'housing benefit' is also not satisfied as per the definition of that term in section 25 of the FBTAA. | Detailed Reasoning - Question 8: Does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'property benefit' under section 40 of the FBTAA? | Summary: The provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip does not constitute a 'property benefit' under section 40 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 40 of the FBTAA states: Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. 'Property' is defined in subsection 136(1) of the FBTAA to include tangible property. The word 'provide', in relation to property, is defined in subsection 136(1) of the FBTAA to mean dispose of (whether by sale, gift, declaration of trust or otherwise), or to have beneficial or legal ownership of the property. In this case, no property is 'provided' by the Employer to Employee 1 and Employee 2. This is because the Employer retains legal ownership of the caravan, and does not transfer any beneficial or legal ownership over to Employee 1 and Employee 2 during a Campaign Trip. In other words, Employee 1 and Employee 2 have not been given the caravan - they have just been allowed to use it during the Campaign Trip. On this basis, section 40 of the FBTAA is not satisfied such that the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip does notconstitute a 'property benefit'. | Detailed Reasoning - Question 9:: If the answer to Questions 8 and 9 is 'No', does the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitute a 'residual fringe benefit' as defined in section 45 of the FBTAA? | Summary: The provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip constitutes a 'residual fringe benefit' as defined in section 45 of the FBTAA. | Detailed Reasoning - Residual fringe benefit: A 'residual fringe benefit' is defined in subsection 136(1) of the FBTAA as 'a fringe benefit that is a residual benefit'. | Detailed Reasoning - 'Fringe benefit': The definition of a 'fringe benefit' in subsection 136(1) of the FBTAA was discussed in the response to Question 3 of this Ruling. The Commissioner considers that provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip meets the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA, as it is a 'benefit' provided to an employee by an employer by reason of the employee's employment, and it is not considered to be a benefit that is specifically excluded. | Detailed Reasoning - 'Residual benefit': Subsection 136(1) of the FBTAA defines a 'residual benefit' to mean a benefit that is a residual benefit by virtue of section 45. Section 45 of the FBTAA states that a benefit is a residual benefit for the purposes of the FBTAA if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). That is, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA. For the reasons provided in the response to Question 8, the benefit provided by the Employer (the provision of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip) is not a housing benefit (Subdivision A of Division 6). The benefit also is not a 'property benefit' under section 40 of the FBTAA (Subdivision A of Division 11) for the reasons provided in the response to Question 9. The benefit also does not fall within any of the other provisions of Subdivision A of Divisions 2 to 11 of the FBTAA. The benefit provided is therefore a residual benefit under section 45 of the FBTAA. As the definitions of a 'fringe benefit' and a 'residual benefit' are satisfied, the definition of a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA is also satisfied. Residual fringe benefits can be separated under 4 different categories under section 136(1) of the FBTAA as follows: • In-house non-period residual fringe benefits • In-house period residual fringe benefits • External non-period residual fringe benefits • External period residual fringe benefits Broadly, an 'in-house residual fringe benefit' is a residual benefit provided by an employer or associate of the employer as part of their business activities. An 'external residual fringe benefit' is a benefit that is not an in-house residual fringe benefit. The distinction between a 'period' and a 'non-period' residual fringe benefit depends on the definition of 'period residual fringe benefit' in subsection 136(1) and section 149 of the FBTAA. A 'period residual fringe benefit' is defined as a residual fringe benefit that is provided during a period. Under subsection 149(1), a benefit is taken to be provided during a period if, and only if, it is provided and subsists during a period of more than one day and is not deemed to be provided at a particular time or on a particular day. The effect of this is that, generally, where a residual fringe benefit is provided and subsists for more than one day, it is a period residual fringe benefit. Therefore, the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip is an external period residual fringe benefit. | Detailed Reasoning - Question 10: If the answer to Question 10 is 'Yes', will the 'otherwise deductible' rule in section 52 of the FBTAA apply to reduce the taxable value of the residual fringe benefit to nil? | Summary: The 'otherwise deductible' rule in section 52 of the FBTAA will apply to reduce the taxable value of the residual fringe benefit to nil. | Detailed Reasoning - Detailed reasoning: As per the response to Question 10 of this Ruling, the provision by the Employer of a caravan for Employee 1 and Employee 2 to use as shared accommodation during a Campaign Trip is an external period residual fringe benefit. The taxable value of an external period residual fringe benefit is calculated in accordance with section 51 of the FBTAA. The 'otherwise deductible' rule in section 52 of the FBTAA operates to reduce the taxable value of a residual fringe benefit where the recipient of the benefit is an employee, and the employee would have been entitled to a once-only deduction under either the ITAA 1936 or the ITAA 1997 for the expense had they personally incurred it. A 'once-only' deduction is defined in subsection 136(1) of the FBTAA as follows: once-only deduction, in relation to expenditure, means a deduction in a year of income in respect of a percentage of the expenditure where no deduction is allowable in respect of a percentage of the expenditure in any other year of income. Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing incurred in gaining or producing assessable income. However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997. For any deduction to be allowable under section 8-1 of the ITAA 1997, an employee must be able to demonstrate that there is a real and direct connection between an outgoing and the gaining of assessable income. Where an employee travels and stays away from their usual place of 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 of the ITAA 1997. In the response to Questions 5 and 7 of this Ruling, it was concluded that Employee 2 was travelling on work (and not living away from their usual place of residence) during a Campaign Trip. On that basis, expenses otherwise incurred by Employee 1 and Employee 2 in respect of shared accommodation in a caravan during a Campaign Trip would be deductible by Employee 1 and Employee 2 under section 8-1 of the ITAA 1997 as these expenses are necessarily incurred in gaining or producing assessable income. The deduction would be a 'once-only deduction' as defined in subsection 136(1) of the FBTAA as no percentage of the expense would be allowable as a deduction in any other year of income. Therefore, it is considered that the 'otherwise deductible' rule would apply to reduce the taxable value of the external period residual fringe benefit to nil under section 52 of the FBTAA. If the Employer uses the 'otherwise deductible' rule, the Employer must have certain documents to demonstrate the extent to which the expense would be deductible to Employee 1 and Employee 2. This is a substantiation requirement. They may include a travel diary kept by each employee or a declaration from each employee.

Reasons for decision: These reasons for decision accompany the Notice of private ruling for the entity.