Private ruling: Fringe Benefits Tax
Date of advice: 1 June 2017
Published: September 2017
Ruling period: Year ended 31 March 2013 | Year ended 31 March 2014 | Year ended 31 March 2015
Date scheme commenced: April 2012

Ruling: Q1: Is the payment of rental expenses incurred by the employees exempt in accordance with section 21 of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes, for the period up to and including 30 September 2012 No, for the period from 1 October 2012 | Q2: Is the provision of accommodation exempt in accordance with subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 ? | A2: Yes, for the period up to and including 30 September 2012 No, for the period from 1 October 2012

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The employer provided the following benefits to employees from overseas who were working in Australia temporarily: ● the payment of rental expenses incurred by employees for accommodation in Australia, or ● the provision of accommodation in Australia. The employees worked for the employer overseas and were transferred temporarily to undertake assignments in Australia. The employer did not obtain a signed living away from home declaration for each employee at the end of the relevant FBT years but has since obtained a Living-away-from-home declaration - from 1 October 2012 under transitional rules . All but one of the employees had an eligible employment arrangement in place prior to 8 May 2012. The employees' arrangements were not materially varied or renewed from 7.30pm on 8 May 2012 up to and including 30 September 2012.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 21 | Fringe Benefits Tax Assessment Act 1986 subsection 47(5) | Fringe Benefits Tax Assessment Act 1986 section 31C | Fringe Benefits Tax Assessment Act 1986 section 31E | Tax Laws Amendment (2012 Measures No. 4) Act 2012 Schedule 1, Part 3 | Income Tax Assessment Act 1997 section 995-1 | Social Security Act 1991 subsection 7(2)

Reasons for decision: Summary: For the period up to and including 30 September 2012 the payment of rental expenses incurred by the employees is not an exempt benefit in accordance with section 21. For the period from 1 October 2012, the payment of rental expenses incurred by the employees is not an exempt benefit in accordance with section 21 as the employees' did not maintain a home in Australia at which they usually resided. | Detailed Reasoning - Detailed reasoning: Period up to and including 30 September 2012 Prior to 1 October 2012, section 21 stated: Where: (a) an expense payment benefit is provided in a year of tax to a current employee of an employer in respect of his or her employment; (b) the recipients expenditure is in respect of accommodation for eligible family members; (ba) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; (c) the accommodation is required solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; and (d) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out: (i) the employee's usual place of residence; and (ii) the place at which the employee actually resided while living away from his or her usual place of residence; the benefit is an exempt benefit in relation to the year of tax. For the period to 30 September 2012 the employer paid the expenses of rental accommodation for employees who were current employees, thus satisfying paragraph 21(a). Paragraph 21(ba) is satisfied as the employees were not undertaking travel in the course of performing their duties of employment. Paragraph 21(c) will be satisfied if the accommodation was required because the employees were required to live away from their usual place of residence in order to undertake their duties of employment. For the purposes of the FBTAA a place of residence is defined in subsection 136(1): …in relation to a person, means: (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 Since the accommodation in Australia is a place of residence of the employee, it is necessary to determine the employee's usual place of residence. The issue of what is meant by the term usual place of residence is addressed in paragraphs 11 to 25 of Miscellaneous Tax Ruling MT 2030 (MT 2030) Fringe benefits tax: living-away-from-home allowance benefits . Paragraph 14 of the MT 2030 states: …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. Paragraphs 15 to 18 of the MT 2030 provide a brief description of the decisions from some cases which illustrate this point. It is concluded at paragraph 19 that 'an underlying theme of the cases is the general presumption that the employee's usual place of residence will be close to where he or she is permanently employed'. Employees who move in order to undertake a position of limited duration and who intend to return to the old locality at the end of that employment will generally be considered to be living away from their usual place of residence. By way of illustrating this, paragraph 22 of the MT 2030 states: Examples of employees on appointments of finite duration who will generally be living away from their usual place of residence are foreign nationals employed in Australia on a temporary basis and Australian residents (e.g., export consultants, diplomats, immigration officials, etc.) stationed in a foreign country for a time. Provided the appointment is for a limited period and the employee can be expected in the normal course to return to the same city or district of the home country to live, the employee may be treated as living away from his or her usual place of residence. The location of the employee's usual place of residence will depend on whether the employee has had a change in permanent job location or is undertaking a position of limited duration. If the employee's place of permanent employment changes and the employee relocates as a consequence, the employee would not be considered to be living away from home. The facts lend weight to the conclusion that the employees were living away from their usual place of residence in order to perform the duties of their employment. It is on this basis that the employees required the accommodation that they rented therefore paragraph 21(c) is satisfied. The final requirement is that a declaration is given to the employer before the declaration date, in a form approved by the Commissioner purporting to set out: ● the employee's usual place of residence, and ● the place at which the employee actually resided while living away from his or her usual place of residence. The term declaration date is defined in subsection 136(1): In relation to an employer in relation to a year of tax, means the date of lodgement of the return of the fringe benefits taxable amount of the employer of the year of tax, or such later date as the Commissioner allows. The employer did not obtain a declaration by the declaration date. The employer has since obtained declarations that provide the same information as the declarations relevant to the period before 1 October 2012. Taking into account the fact that the employees were living away from their usual places of residence, the Commissioner will allow those declarations as having been lodged by the declaration date. Consequently, all of the conditions in section 21 are satisfied and the payment of rental expenses incurred by the employees for the period 1 April 2012 until 30 September 2012 is an exempt benefit. Period from 1 October 2012 onwards Section 21 as amended states: Where: (a) an expense payment benefit is provided in a year of tax to a 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) sections 31C (about maintaining an Australian 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 sections 31C and 31D - the matters in subparagraphs 31F(1)(a)(i) to (iii); or (ii) if the employee satisfies section 31E - the matters in subparagraphs 31F(1)(b)(i) to (iii); the benefit is an exempt benefit in relation to the year of tax. Section 31C is satisfied 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; (b) it is reasonable to expect that the employee will resume living at that place when that period ends. Section 31E is satisfied if: (a) the employee, on a regular and rotational basis: (i) works for a number of days and has a number of days off (but not the same days in consecutive weeks); and (ii) on completion of the working days, travels from his or her usual place of employment to his or her normal residence and, on completion of the days off, returns to that usual place of employment; and (b) the basis of work described in paragraph (a) is customary for employees performing similar duties in that industry; and (c) it would be unreasonable to expect the employee to travel on a daily basis on work days between: (i) his or her usual place of employment; and (ii) his or her normal residence; having regard to the location of those places; and (d) it is reasonable to expect that the employee will resume living in his or her normal residence when the duties of that employment no longer require him or her to live away from it. Under the amended section 21 unless an employee works on a fly-in fly-out or drive-in drive-out basis, expense payment benefits will only be exempt benefits where the employee maintains a home in Australia at which he or she usually resides and it is available for his or her immediate use and enjoyment during the period the employee is required to live away from home. Amended section 21 applies generally to employees who are living away from their normal residence on or after 1 October 2012 in respect of benefits provided in relation to the periods commencing on or after 1 October 2012. However, there are transitional rules that may apply to employment arrangements for living-away-from-home benefits in place prior to Budget time at 7.30pm (AEST) on 8 May 2012. Where the transitional rules apply the employee is not required to maintain a home in Australia and the concession is not limited to 12 months. The transitional rules are contained in Schedule 1, Part 3 of the Tax Laws Amendment (2012 Measures No. 4) Act 2012 . Subsection 27(1) of that Act states that: During the transitional period, disregard paragraph 31C(a) and section 31D of the Fringe Benefits Tax Assessment Act 1986 if: (a) the employee is neither a temporary resident nor a foreign resident; and (b) during the entire period: (i) starting at the Budget time; and (ii) ending on 30 September 2012; that employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed. The transitional period means the period: (a) starting on 1 October 2012; and (b) ending at the earliest of: (i) 30 June 2014; and (ii) The time the eligible employment arrangement referred to in paragraph (1)(a) or (2)(b) ends; and (iii) The first time that eligible employment arrangement is varied in a material way or renewed. The terms temporary resident and foreign resident are defined in the Tax Laws Amendment (2012 Measures No. 4) Act 2012 to have the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). As defined in section 995-1 of the ITAA 1997 you are a temporary resident if: (a) you hold a temporary visa granted under the Migration Act 1958; and (b) you are not an Australian resident within the meaning of the Social Security Act 1991; and (c) your spouse is not an Australian resident within the meaning of the Social Security Act 1991 However you are not a temporary resident if you have been an Australian resident (within the meaning of this Act), and any of paragraphs (a), (b) and (c) are not satisfied, at any time after the commencement of this definition. An Australian resident for the purposes of the Social Security Act 1991 is defined in subsection 7(2) of that Act. Subsection 7(2) states that a person will be an Australian resident if he or she resides in Australia and is: (a) an Australian citizen; (b) the holder of an Australian permanent resident visa; or (c) the holder of a special category visa and is a “protected SCV holder” (generally applicable to New Zealand citizens who entered Australia before 27 February 2001). The employees were employed on visas for a limited period in order to undertake their assignments in Australia. They were not Australian residents within the meaning of the Social Security Act 1991 . As they were temporary residents, the transitional rules do not apply to the provision of expense payment benefits for the period from 1 October 2012 to 30 June 2014. Therefore the employees were required to maintain a home in Australia for that period. The employees did not have places at which they usually resided in Australia rather they usually resided overseas and their intention was to return to their residences overseas. Therefore the employees do not satisfy section 31C and the requirements of paragraph 21(d) are not met. Consequently the provision of the expense payment benefits is not an exempt benefit under section 21. | Summary: For the period up to and including 30 September 2012 the provision of accommodation to the employees is an exempt benefit in accordance with subsection 47(5). For the period from 1 October 2012, the provision of accommodation to the employees is not an exempt benefit in accordance with subsection 47(5) as the employees did not maintain a home in Australia at which they usually resided. | Detailed Reasoning - Detailed reasoning: Period up to and including 30 September 2012 For the period up to 30 September 2012 subsection 47(5) stated: Where: (a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee in respect of his or her employment; (b) the unit of accommodation is for the accommodation of eligible family members and is provided solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; (c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; (d) either of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out: (A) the employee's usual place of residence; and (B) the place at which the employee actually resided while living away from his or her usual place of residence; the benefit is an exempt benefit in relation to the year of tax. The circumstances of the employees to whom accommodation was provided are the same as those to whom expense payment benefits were provided in relation to accommodation they rented. As explained in the reasons for decision to question one, the accommodation was provided because the employees were living away from their usual place of residence in order to perform their duties of employment. The accommodation was not provided while the employees were undertaking travel in the course of performing the duties of their employment. The employees did not provide living-away-from-home declarations by the declaration date. The employer has since obtained declarations that provide the same information as the declarations relevant to the period before 1 October 2012. Taking into account the fact that the employees were living away from their usual places of residence, the Commissioner will allow those declarations as having been lodged by the declaration date. Consequently, all of the conditions in subsection 47(5) are satisfied and the provision of accommodation to the employees for the period 1 April 2012 until 30 September 2012 is an exempt benefit. Period from 1 October 2012 onwards Subsection 47(5) as amended states: Where: (a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and (b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and (ba) the employee satisfies: (i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and (c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and (d) any of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii); (iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii); the benefit is an exempt benefit in relation to the year of tax. As explained in the reasons for decision to question one, as the employees are temporary residents the transitional rules will not apply and section 31C is not disregarded for the period 1 October 2012 to 30 June 2014. Paragraph 47(5)(ba) requires that an employee satisfy section 31C. The employees' did not have places at which they usually resided in Australia rather they usually resided overseas and their intention was to return to their residences overseas. Therefore the employees do not satisfy section 31C. Consequently, the provision of the accommodation to the employees is not an exempt benefit in accordance with subsection 47(5).

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.