Private ruling: Living-away-from-home allowance
Date of advice: 4 April 2016
Published: May 2016
Ruling period: Year ended 31 March 2017 and 31 March 2018
Date scheme commenced: The date on which the employees commences renting premises at the new work location

Ruling: Q1: Is the monthly food allowance paid to the employee a living-away-from-home allowance (LAFHA) under section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: If the food allowance paid to the employee is a living-away-from-home allowance fringe benefit, can the taxable value be reduced to nil by the exempt food component under subsection 31(2) of the FBTAA for the first 12 months that the duties of employment require the employee to live away from home? | A2: Yes. Where the food allowance is paid in a period after the first twelve months the taxable value of the fringe benefit will be the amount of the fringe benefit under section 31B of the FBTAA. | Q3: Will expense payment fringe benefits arise from the reimbursement of rent and utilities costs to the employee under section 20 of the FBTAA? | A3: Yes | Q4: If an expense payment fringe benefit arises from the reimbursement of the utilities cost, will it be an exempt benefit under section 21 of the FBTAA? | A4: Only costs that cannot be dissected from the residential arrangement will be exempt under section 21 of the FBTAA and only for the first 12 months that the duties of employment require the employee to live away from home. | Q5: If an expense payment fringe benefit arises from the reimbursement of rent will it be an exempt benefit under section 21 of the FBTAA for the first 12 months that the duties of employment require the employee to live away from home? | A5: Yes.

Relevant facts and circumstances: The taxpayer requires a senior executive (the employee) to undertake an 18 month fixed term secondment to another company. The employee will be required to work at the new work location of the other company. The employee's home, where they live with their family, is located approximately X.X kilometres from their permanent work place. The distance between the employee's family home and the new work location is approximately XX kilometres. The driving commute time between the employee's family home and the new work location is approximately 1.5 to 2 hours during peak hours each way. A public transport alternative would be longer. The employee works 10 hours per day Monday to Friday, and has to frequently attend meetings. To ensure that the employee maintains productive working hours, the quality of their work and their ability to efficiently carry out their management responsibilities and quickly access the new work location, the employer will require the employee to reside within close proximity to the new location. The employee's secondment employment contract includes a clause to the effect that the employee is required to reside within close proximity of the new work location. It is not practicable for the employee's family to relocate to the new work location. The employee will rent a property near the new work location during the term of secondment, while the employee's family members will remain in the family home. The taxpayer proposes to pay the employee a monthly food allowance. The taxpayer also proposes to reimburse the employee for rent and utility expenses for accommodation near the new work location. The employee will make the declaration specified in section 31F of the FBTAA. The employee will provide the employer with copies of actual rent and utilities expenses of the proposed rental accommodation.

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 section 30 | Fringe Benefits Tax Assessment Act 1986 section 31 | Fringe Benefits Tax Assessment Act 1986 section 31B | Fringe Benefits Tax Assessment Act 1986 section 31C | Fringe Benefits Tax Assessment Act 1986 section 31D | Fringe Benefits Tax Assessment Act 1986 section 31F | Fringe Benefits Tax Assessment Act 1986 section 31H | Fringe Benefits Tax Assessment Act 1986 section 136 | Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: Is the monthly food allowance paid to the employee a LAFHA under section 30 of the FBTAA? Section 30 of the FBTAA sets out the circumstance in which a payment to an employee will be a LAFHA benefit. 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 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 applying subsection 30(1) of the FBTAA an allowance the employer pays to an employee will be LAFHA if: 1. The allowance is paid in compensation for additional expenses incurred by an employee during a period by reason that the duties of employment require the employee to live away from his or her normal place of residence, and 2. The additional expenses are non-deductible expenses. 1. Is the allowance paid in compensation for additional expenses that arise by reason that the duties of employment require the employee to live away from his or her normal residence? Is the allowance in the nature of compensation for additional expenses incurred by the employee? Yes. The allowance is being paid as compensation for additional food expenditures incurred by the employee while residing in the rental accommodation. Is the employee living away from their normal place of residence? '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 a '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 on 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: 1. Habitual or customary: his usual skill. 2. Such as is commonly met with or observed in experience; ordinary: the usual January weather. 3. In common use; common: say the usual things. Miscellaneous Taxation Ruling MT 2030 Fringe benefit tax: living-away-from-home allowance benefits provides guidelines for determining an employee's usual place of residence. Paragraph 14 of MT 2030 states: As the decisions illustrate, the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e., the place where the employee is living at the time or some other place. A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for his employer at another locality, the employee would have continued to live at the former place. It would be relevant in reaching that view that there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality. This would be relevant even if the employee is living in temporary quarters close to a temporary job site... Paragraph 20 of MT 2030 provides the following general rule: Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live. These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051 ( Compass ). At paragraph 56, Deputy President S A Forgie said: 56. Putting to one side the case of Case 50 , all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move. In considering these principals, it is accepted that during the secondment period the employee's family home will be the employee's usual place of residence. Therefore, the employee will be living away from their usual place of residence during the period in which the employee is residing at the rental accommodation. Do the duties of employment require the employee to live away from their usual place of residence? The FBTAA does not provide a definition of the word 'require' in the context of subsection 30(1). Therefore, it is relevant to refer to the ordinary meaning of 'require'. The Macquarie Dictionary defines 'require' to mean: 1. to have need of; need: he requires medical care. 2. to call on authoritatively, order, or enjoin (a person, etc.) to do something: to require an agent to account for money spent. 3. to ask for authoritatively or imperatively; demand. 4. to impose need or occasion for; make necessary or indispensable: the work required infinite patience. 5. to call for or exact as obligatory: the law requires annual income tax returns. 6. to place under an obligation or necessity. 7. to wish to have: to require room service. 8. to make demand; impose obligation or need: to do as the law requires. ATO Interpretative Decision ATO ID 2013/8 Fringe Benefits Tax Employee required to change usual place of residence in order to perform duties of employment discusses the meaning of the term 'required' in the context of subparagraph 58B(1)(b)(iii) of the FBTAA. ATO ID 2013/8 refers to the ordinary meaning and concludes: Therefore, it is considered that the term 'required' as it is used in subparagraph 58B(1)(b)(iii) does not mean that the change of usual place of residence must be compulsory. Rather, the change may be one that is necessary in the circumstances in order for the employee to perform the duties of their employment. The term 'required' has also been considered by the Administrative Appeals Tribunal (AAT) in Compass . In Compass the AAT states at paragraph 63 that: 63. … it would seem that the agent requiring the employee to live away from his or her usual place of residence must be the employer, the inherent nature of the employment or a mixture of the two. It would seem that regard must be had to both in order to answer whether the employee is so required. The AAT in Compass concluded that the employee was not required to live away from home but chose to. In reaching that conclusion the AAT had regard to the fact that there was no evidence beyond the payment of the allowance itself that the employer required or even requested that the employee do so in order to perform their duties. The AAT decided that the payment itself took the matter no further. The Tribunal also took into account that the work itself did not seem to have demanded or required the employee to live away from home. In considering ATO ID 2013/8 and Compass it is accepted that the facts in Compass are distinguishable and the duties of employment require the employee to live away from their usual place of residence. | Detailed Reasoning - 2. Are the additional expenses non-deductible expenses?: Subsection 136(1) of the FBTAA defines the term '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). Generally, section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing incurred in gaining or producing assessable income provided the loss or outgoing is not of capital nature, a domestic nature or incurred in relation to gaining or producing exempt income or non-assessable, non-exempt income. Additional expenses for the purposes of subsection 30(1) of the FBTAA include expenses for additional food and accommodation expenses. Various court decisions have concluded that, generally, food and accommodation expenses incurred while living away from home are essentially living expenses of a private or domestic nature and are therefore not deductible. However, exceptions to this general rule have been considered in several court cases and subsequent ATO public rulings. These exceptions are summarised in paragraphs 3 and 4 of Taxation determination TD 96/7 Fringe benefits tax: is fringe benefits tax (FBT) payable on meals and accommodation provided to employees who work at remote construction sites, where the accommodation is not the usual place of residence of the employee? Paragraphs 3 and 4 of TD 96/7 state: 3. Where meals are provided, and it is concluded that the employee is travelling in the course of their employment, the taxable value of the benefit will be reduced to nil under the 'otherwise deductible' rule. The criteria for determining whether an employee is travelling in the course of performing their job are set out in paragraphs 35-43 of Taxation Ruling MT 2030. These criteria include: • the nature of the duties performed; • whether the employee is accompanied by dependants; and • the length of time spent away from home. As a practical general rule, where the question of whether or not the employee is travelling cannot easily be determined and the period away does not exceed 21 days, the employee may be accepted as travelling. 4. Guidance as to whether the 'otherwise deductible' rule will apply to reduce to nil the taxable value of meals provided to employees who are not travelling for work purposes is found in paragraph 5 of Taxation Ruling TD 93/230. Relevant factors to take into account include whether the employee: • is required to live close by work; • has a permanent residence away from the work site; • lives away from home for a relatively short period of time; and • has any choice as to the location of the accommodation provided. Again, the 21 day period mentioned in paragraph 3 above will be accepted as a relatively short period of time for the purpose of these tests. As set out in paragraph 3 of TD 96/7, paragraphs 37 to 43 MT 2030 outline factors which may indicate an employee is travelling in the course of performing their duties of their employment. In summarising paragraph 35-40 of MT 2030, the factors that may indicate an employee is travelling in the course of performing their duties of their employment, include: (a) no change of job location; (b) the allowance is paid because the employee is moves frequently from place to place; (c) the allowance is paid for short periods; (d) the employee is generally not accompanied by spouse or family; and (e) the nature of the accommodation. Where the accommodation is obtained on a short term basis, this may indicate the employee is travelling In applying the criteria to facts of the situation being considered: • there is a change of job location • the period of 18 months cannot be considered to be a relatively short period of time; • the employee will not move frequently from place to place; and • the proposed accommodation arrangement is not a temporary one. In considering all the factors mentioned above, we have decided that the employee is not travelling in the course of undertaking their employment duties. As a result, the food for which the allowance is paid is not a deductible expense. | Detailed Reasoning - Conclusion: The requirements for the allowance to be a LAFHA are met. Therefore, the food allowance the employer proposes to pay to the employee is a LAFHA in accordance with subsection 30(1) of the FBTAA . | Detailed Reasoning - Question 2: If the food allowance paid to the employee is a LAFHA, can the taxable value be reduced to nil by the exempt food component under subsection 31(2) of the FBTAA for the first 12 months that the duties of employment require the employee to live away from home? Sections 31, 31A and 31B of the FBTAA provide three alternate methods that can be used to calculate the taxable value of a living-away-from-home allowance fringe benefit. The relevant method to use depends upon whether the requirements of subsection 31(1) or subsection 31A(1) of the FBTAA are met. Section 31A does not apply in this case as the employee is not a fly-in fly-out and drive-in drive-out employee (an employee satisfying the requirements in section 31E). If the requirements of subsection 31(1) of the FBTAA are met, the taxable value under subsection 31(2) will be the amount of the fringe benefit reduced by any exempt accommodation component and any exempt food component. However, if the requirements are not met the taxable value under section 31B will be the amount of the allowance. | Detailed Reasoning - Are the requirements of subsection 31(1) of the FBTAA met?: Section 31 of the FBTAA states: 31(1) This section applies to a living-away-from-home allowance fringe benefit covered by subsection 30(1) in relation to a year of tax to the extent that the employee satisfies all of the following for the fringe benefit and the period to which it relates: (a) section 31C (about maintaining an Australian home); (b) section 31D (about the first 12 months); (c) section 31F (about declarations). 31(2) Subject to this Part, the taxable value of the fringe benefit in relation to the year of tax is the amount of the fringe benefit reduced by: (a) any exempt accommodation component; and (b) any exempt food component 31(3) Paragraph (2)(b) does not apply to the extent that the fringe benefit relates to a period during which the employee resumes living at his or her normal residence. 31(4) Neither paragraph (2)(a) nor (b) applies to the extent that the period to which the fringe benefit relates happens while the 12-month period referred to in subsection 31D(1) is paused. Each requirement listed in subsection 31(1) will be discussed separately below: Section 31C of the FBTAA Section 31C of the FBTAA states: The employee satisfies this section if: (a) the place in Australia where the employee usually resides when in Australia: (i) is a unit of accommodation in which the employee or the employee's spouse has an ownership interest (within the meaning of the Income Tax Assessment Act 1997); and (ii) continues to be available for the employee's immediate use and enjoyment during the period that the duties of that employment require the employee to live away from it; and (b) it is reasonable to expect that the employee will resume living at that place when that period ends. For the reasons given earlier, the employee usually resides in Australia in the family home. The employee owns and will maintain the family home and it will continue to be available for their use and enjoyment. The employee will return to their family to stay with over weekends and intends to resume living in the family home after the secondment period. Therefore, it is accepted that the employee satisfies section 31C of the FBTAA. Section 31D of the FBTAA The employee satisfies section 31D of the FBTAA if the fringe benefit relates only to all or part of the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she usually resides. Section 31D of the FBTAA effectively limits the use of the valuation method in subsection 31(2) of the FBTAA to a 12 month period. Therefore, it is accepted that during the first 12 months of the secondment period, section 31D of the FBTAA is satisfied. It is noted that the employer can pause the 12 month period under paragraph 31D (2)(a) of the FBTAA. If a LAFHA continues to be paid in this period the full amount of the fringe benefit is taxable: per subsection 31(4) of the FBTAA. Section 31F of the FBTAA You advised the Commissioner that the employee will make a declaration in accordance with section 31F of the FBTAA. | Detailed Reasoning - Calculation of the taxable value where section 31 applies: Subsection 31(2) of the FBTAA states: …the taxable value of the fringe benefit in relation to the year of tax is the amount of the fringe benefit reduced by: (a) any exempt accommodation component; and (b) any exempt food component. Please be advised that the exempt accommodation component for the purpose of subsection 31(2) will not be discussed as it is not relevant. Exempt food component The term 'exempt food component' is defined in subsection 136(1) of the FBTAA to have the meaning given by section 31H. Subsection 31H(1) of the FBTAA defines the exempt food component to be: … so much of the result of subsection (2) as is equal to the total of the expenses that: (a) are incurred by the employee for food or drink for eligible family members during the period to which the fringe benefit relates; and (b) if section 31G applies to the expenses - are substantiated under that section. Subsection 31H(2) provides: Work out the result of the following: Food component - Applicable statutory food total where: applicable statutory food total means the total of the statutory food amounts for eligible family members for the period to which the fringe benefit relates, reduced (but not below zero) by any amount that: (a) might reasonably be expected to be the total normal food or drink expenses for those eligible family members had they remained living in their normal residence during that period; and (b) was taken into account in working out the food component. Generally, the exempt food component of a LAFHA is so much of the allowance as is reasonable compensation for additional food costs the employee incurs because they are required to live away from their usual place of residence. The meaning of terms 'food component' and 'statutory food amount' are contained in subsection 136(1) of the FBTAA, subsection 136(1) states: Food component , in relation to a living-away-from home allowance fringe benefit, means so much (if any) of the fringe benefit as might reasonably be concluded to be compensation for expenses to be incurred by the employee for food or drink for eligible family members during the period to which the fringe benefit relates. Statutory food amount , in relation to a person, in relation to a period in relation to a year of tax, means the amount calculated in respect of that period: (a) in a case where the person had attained the age of 12 years before the beginning of the year of tax - at the rate of $42 per week; and (b) in any other case - at the rate of $21 per week The steps for calculating the exempt food component are outlined below: | Detailed Reasoning - Action: 1 Establish the food component 2 Subtract the applicable statutory food total from the food component. That is: Food component - applicable statutory food total 3 From the amount calculated at step 2, determine how much of that amount was incurred by the employee on food and drink. 4 The exempt food component is so much of the result of step 3 that can be substantiated if required. | Detailed Reasoning - Subsection 31(3) of the FBTAA: Subsection 31(3) of the FBTAA states that the exempt food component does not apply to the extent that the fringe benefit relates to a period during which the employee resumes living at his or her normal residence. This means that if an employer pays an allowance for food or drink for any days that the employee returns home, that part of the allowance for those days is fully taxable. | Detailed Reasoning - Conclusion: In this case, the Commissioner accepts the calculation provided by the taxpayer. Therefore, the taxable value of the allowance will be nil. | Detailed Reasoning - Question 3: Will expense payment fringe benefits arise from the reimbursement of rent and utilities costs to the employee under section 20 of the FBTAA? Section 20 of the FBTAA sets out circumstances in which an expense payment fringe benefits will arise. Section 20 of the FBTAA states: 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 to the recipient. The taxpayer intends to reimburse the employee of for the actual rental expense and utilities expenses. As a result subsection 20(b) of the FBTAA would apply. | Detailed Reasoning - If an expense payment fringe benefit arises from the reimbursement of the utilities cost, will it be an exempt benefit under section 21 of the FBTAA?: Section 21 of the FBTAA provides an exemption to accommodation expense payment benefits. Section 21 of the FBTAA states: Where: (a) an expense payment benefit is provided in a year of tax to current employee of an employer in respect of his or her employment; and (b) the recipients expenditure is in respect of accommodation for eligible family members; and (ba) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and (c) the accommodation is required solely because the duties of that employment require the employee to live away from his or her normal residence; and (d) the employee satisfies: (i) section 31C (about maintaining an Australia home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and (e) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out: (i) if the employee satisfies section 31C and 31D - the matters in subparagraphs 31F(1)(a)(i) to (iii); or (ii) if the employees satisfies section 31E - the matters in subparagraphs 31F(1)(b)(i) to (iii) the benefit is exempt benefit in relation to the year of tax In applying section 21 of the FBTAA, the expense payment benefit will be an exempt benefit if: 1. the recipient expenditure is in respect of accommodation for eligible family members; 2. the accommodation is not provided while the employee is undertaking travel; 3. the accommodation is provided solely because the duties of the employee's employment require the employee to live away from home; 4. subsection (d) and (e) are satisfied. | Detailed Reasoning - 1. Is the recipient's expenditure in respect of accommodation for eligible family members?: The term 'in respect of accommodation' and the word 'accommodation' are not defined in the FBTAA. ATO Interpretative Decision ATO ID 2001/803 Fringe benefit Tax: Living away from home and expenditure incurred in respect of accommodation briefly discusses the term 'in respect of accommodation'. ATO ID 2001/803 concludes that payment of a mortgage on the house the employee purchases to live in is not an expense 'in respect of accommodation' for the purpose of section 21 of the FBTAA. This decision subjects a narrow interpretation of the phrase 'in respect of accommodation'. It is also relevant to refer to ATO views in relation to other similar provisions of the FBTAA. ATO Interpretative Decision 2004/276 Exempt benefit: remote area housing and residential fuel (ATO ID 2004/276) considered if the provision of free electricity constitutes part of the remote area housing benefit and thus is exempt under section 58ZC of the FBTAA. ATO 2004/276 concluded that the remote area housing and electricity are two separate benefits. ATO Interpretative Decision 2005/158 Exemption benefit: remote area housing and water (ATO ID 2005/158) considered if the provision of water as agreed under a residential tenancy agreement constitutes part of the remote area housing benefit. It concluded that in those circumstances the provision of water is part of the remote housing benefit. In its reasons for decision, ATO ID 2005/158 considered the definition of 'housing right in subsection 136(1) of the FBTAA and concluded: Where water is provided to an employee in accordance with a residential tenancy agreement between the employer and employee, the water will form part of the housing right that is granted under the same agreement. In applying the guidance, only the cost of utilities that cannot be dissected from the cost of the accommodation is considered to be expenditure in respect of accommodation. Support for this conclusion was provided in the Tax Office response to agenda item 11 of the meeting of the FBT subcommittee of the National Tax Liaison meeting held on 8 November 2012. The following questions were asked: | Detailed Reasoning - Background: In accordance with the new rules regarding the tax treatment of LAFA benefits applicable as of 1 October 2012, where an employee is provided with an accommodation component of a LAFH allowance, he or she is required to substantiate expenditure on accommodation in order for that portion of the allowance to be exempt from FBT (assuming other conditions for exemption are also met). Alternatively, the employer may pay directly or reimburse accommodation costs, obtaining documentary evidence of the expenses where these were initially incurred by the employee. These will also be exempt from FBT (on the assumption that other conditions for exemption under the LAFH rules are also met). | Detailed Reasoning - Issue to address: Does the payment of utility costs and other expenses associated with accommodation form part of the cost of the accommodation, such that they might then be exempt from FBT under the LAFA provisions? The Tax Office response states: The ATO did not agree with TTI contention that the provision of utilities, such as electricity, water and gas, are an essential part of the provision of accommodation and therefore, these costs form part of the cost of providing accommodation… The ATO discussed generally the scenarios put forward in TTI submission and acknowledged different arrangements exist in relation to the provision of accommodation to employees. That extends to arrangements where the cost of the utilities cannot be dissected from the cost or value of the accommodation - such as in the case of a serviced apartment or campsite style accommodation. In other arrangements, however, the utilities may be billed separately. The provision of utilities may be by way of expense payments or residual benefits. The provision of the lease or licence in respect of a unit of accommodation may be residual benefit that will be an exempt benefit by virtue of subsection 47(5) of the FBTAA. If the benefit was not an exempt benefit, the taxable value of the lease or licence in respect of a unit of accommodation might be calculated under either section 49 or 51 or the FBTAA. That is, if the residual benefit was a taxable benefit, the taxable value would be determined by the market value of the right of occupancy. Where the right of occupancy includes the provisions of electricity the market value of the right of occupancy could be expected to reflect the value of electricity. In such a situation, a separate benefit will not arise in relation to, for example, the provision of electricity. This outcome will not be altered by the fact that the residual benefit in respect of the lease or licence of a unit accommodation is an exempt benefit. That is the provision of electricity will not be a separate benefit where the supply of electricity is part (that is not separable or capable of being dissected) of the residual benefit that comes within section 47(5). However, the ATO noted that where the electricity is provided separately it will not be capable of being treated as 'a lease or licence in respect of a unit of accommodation' (paragraph 47(5)(a)). In applying this guidance, utilities costs that are not part of the residential agreement will not be expenditures in respect of accommodation for the purpose of section 21 of the FBTAA. | Detailed Reasoning - 2. The accommodation is not provided while the employee is undertaking travel: This issue has already been addressed in Question 1, and it is accepted that the employee is not undertaking travel. | Detailed Reasoning - 3. The accommodation is provided solely because the duties of employment require the employee to live away from home: This issue has already been addressed in Question 1, and it is accepted that the duties of employment require the employee to live away from home. | Detailed Reasoning - 4. Subsection (d) and (e) are satisfied: Sections 31C, 31D and 31F of the FBTAA have been discussed in Question 2. As discussed, the employee satisfies the requirement in section 31D for the first twelve months that the duties of employment require the employee to live away from home. | Detailed Reasoning - Conclusion: In conclusion, only utilities costs that cannot be dissected from the residential arrangement (i.e. the lease agreement) will be exempt under section 21 of the FBTAA. | Detailed Reasoning - Question 5: If an expense payment fringe benefit arises from the reimbursement of rent will it be an exempt benefit under section 21 of the FBTAA for the first 12 months that the duties of employment require the employee to live away from home? Section 21 of the FBTAA has been discussed in Question 4. In applying the reasoning in Question 4, it is accepted that the reimbursement of actual rent to the employee will be exempt under section 21 of the FBTAA for the first 12 months that the duties of employment require the employee to live away from home.