Private ruling: FBT: Living-away-from-home allowance and residual benefit
Date of advice: 29 August 2025
Published: 27 October 2025
Ruling period: FBT year ended 31 March 20XX | FBT year ended 31 March 20XX | FBT year ended 31 March 20XX | FBT year ended 31 March 20XX
Date scheme commenced: XX XX 20XX

Ruling: Q1: Is the provision of the per diem allowance by X (Australia Co) to its Project Employees (PEs) to cover food and incidentals a Living-away-from-home allowance (LAFHA) benefit pursuant to subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where the PEs are on a project at a specific location for 4 months? | A1: Yes | Q2: If the per diem allowance is not subject to section 30 of the FBTAA and the allowance is equivalent or less than, the reasonable amounts for travel allowance expenses under the relevant Taxation Determination in relation to income tax and reasonable travel and overtime meal allowance expense amounts for an income tax year, would Australia Co be subject to Pay As You Go Withholding (PAYGW) and need to report the per diems allowance on the PEs' Income Statement via a Single Touch Payroll (STP) pay event? | A2: The per diem allowance is subject to section 30 of the FBTAA and as such is exempt from PAYGW under subsection 12-1(2) of Schedule 1 to the Taxation Administration Act 1953 (TAA). | Q3: Is the provision of accommodation by Australia Co to PEs a 'fringe benefit' as defined in subsection 136(1) of the FBTAA? | A3: No, where the requirements for an exemption under subsection 47(5) of the FBTAA are met, the benefit will be exempt and therefore excluded from being a fringe benefit. Yes, where the requirements for an exemption under subsection 47(5) of the FBTAA cannot be met, the benefit provided will be an external period residual fringe benefit. | Q4: If the answer to Question 3 is yes, does the otherwise deductible rule (ODR) in section 52 of the FBTAA apply to reduce the taxable value of the accommodation to nil? | A4: The ODR is not applicable (N/A), where the requirements for an exemption under subsection 47(5) of the FBTAA are met and the benefit is excluded from being a fringe benefit. No, where the requirements under subsection 47(5) of the FBTAA are not met and the benefit is an external period residual benefit, the otherwise deductible rule does not apply. | Q5: Is the provision by Australia Co to PEs of 'Return Flights' (to each project location at the commencement of the project and back to the PEs' home location at the end of that project), a 'fringe benefit' as defined in section 136 of the FBTAA? | A5: No, the flights are exempt benefits under section 58F of the FBTAA and therefore, excluded from being fringe benefits. | Q6: Is the provision by Australia Co to PEs of 'Weekend Flights' (to the PEs' home location and back to the project location on a weekly or fortnightly basis, for recreational purposes), a 'fringe benefit' as defined in subsection 136(1) of the FBTAA? | A6: Yes | Q7: If the answer to Question 6 is yes, does the ODR rule in section 52 of the FBTAA apply to reduce the taxable value of the Weekend Flights to nil? | A7: No | Q8: Where travel expenditure (the per diem allowance, accommodation, Return Flights and Weekend Flights) is incurred by a PE and then reimbursed, such that an expense payment benefit arises, would the Fringe Benefit Tax (FBT) principles discussed at Questions 1-7 equally apply? | A8: The reimbursement payments that 'replace' the per diems allowance would be a fringe benefit. The reimbursement payments in relation to accommodation, where the exemption requirements are met, would be exempt under section 21 of the FBTAA instead of subsection 47(5). The reimbursement payments in relation to the Return Flights to and from the project location (subject to the substantiation requirements being met), would be excluded benefits under section 58F. The reimbursement payments in relation to the Weekend Flights is an expense payment benefit. They do not satisfy section 58F of the FBTAA as exempt benefits. They are ineligible for a reduction of taxable value under section 60A or section 61 as remote area holiday transport or under section 61A as overseas employment holiday transport. The 'ODR' would not apply to the above payments for travel expenditure. The above reimbursement payments for travel expenditure would be exempt from PAYGW under subsection 12-1(3) of Schedule 1 to the TAA instead of subsection 12-1(2).

Relevant facts and circumstances: 1. The Employer and its member firms provide services. 2. The Employer and its member firms are separate legal entities. 3. All Australian employees of the Employer are legally employed by 'Australia Co'. The employees of the Employer and its member firms can be deployed to other member firms, under an 'arrangement'. 4. Australian or overseas projects require staff with specialised training, experience, and skills. The project employees may sometimes be sourced from another Australian Firm. 5. The projects therefore typically require relevant employees to travel from their home base to the project location for the duration of the project. 6. Where an Australia Co employee is expected to be at a project location for up to 12 months, they will fall under Australia Co's Travelling X Policy. Category X - Project Employees (PEs) 7. Australia Co is the PEs' employer as defined in section 136 of the FBTAA. 8. A PE is an employee of Australia Co that is expected to work at a specific domestic or overseas project location for 4 months. This 'Project arrangement' for a PE is normally in place for a total period of 12 months... Within the 'Project arrangement', a PE, after working at a specific project location for 4 months, may be relocated to another domestic or overseas project location, or may cease their 'Project arrangement' and return to their home location. 9. Under the Travelling X Policy, all PEs: • are subject to the terms and conditions of their employmentwith their Australia Co home office, which includes a requirement to travel for the purposes of employment if needed; • are subject to the ultimate control of their Australia Co home office; • accrue leave and other employment benefits with their Australia Co home office; and • are subject to the performance review procedures of their Australia Co home office. 10. While the PEs are on the project they will: • be provided with accommodation by Australia Co. The accommodation will be in a hotel room... Typically, PEs will not maintain accommodation at the project location for the days where they took Weekend Flights to return to their home location; • be paid a per diem allowance to cover food and incidentals while they are on the project, or otherwise seek reimbursement for actual expenditure; • be provided with flights to the project location at commencement of the project and back to their home location at the end of that project; • be provided with one Weekend Flight each weekend or fortnightly for recreational purposes...; • will work at the same project location for a period of 4 months; within this 4-month period, they may or may not return to the same accommodation after taking each of the Weekend Flight. • not generally be accompanied by their family...; and • be subject to Australia Co's code of conduct and Travelling X Policy during the project, including on flights to and from the project location. Assumptions 11. For the purposes of the private ruling, the Commissioner makes the following assumptions: • The amount of the per diem will be equivalent to or less than the reasonable amount specified in the relevant Taxation Determination for the relevant year. • If a travel diary must be provided to Australia Co by the employee by a declaration date, that travel diary will be provided by the PEs. • In accordance with section 20A and 47A Australia Co will make a no-private-use declaration in respect of transport benefits provided to the PEs. • The PEs will not make a contribution to the cost of the accommodation. • If the accommodation is not an exclusive employee residual benefit as defined in section 136 of the FBTAA, the PEs will provide to Australia Co, before the declaration date, declarations in a form approved by the Commissioner in relation to the provision of the accommodation. • PEs will maintain their usual place of residence and living arrangement in their home location and will provide Australia Co, before the declaration date, declarations in a form approved by the Commissioner in accordance with section 31F of the FBTAA. • Accommodation arrangements considered as part of the ruling relate to the PEs' first 12 months that the duties of their employment require them to live away from their normal residence at their assigned project location. • Australia Co's domestic project locations for the PEs are in eligible urban areas. • The PEs who work at an overseas project location remain taxable in Australia under Australian law.

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 23 | Fringe Benefits Tax Assessment Act 1986 section 24 | Fringe Benefits Tax Assessment Act 1986 section 30 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 subsection 47(5) | Fringe Benefits Tax Assessment Act 1986 section 51 | Fringe Benefits Tax Assessment Act 1986 section 52 | Fringe Benefits Tax Assessment Act 1986 section 58F | Fringe Benefits Tax Assessment Act 1986 section 61A | Fringe Benefits Tax Assessment Act 1986 section 136 | Fringe Benefits Tax Assessment Act 1986 section 143 | Fringe Benefits Tax Assessment Act 1986 section 143A | Fringe Benefits Tax Assessment Act 1986 section 143B | Fringe Benefits Tax Assessment Act 1986 section 143C | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1 | Taxation Administration Act 1953 section 12-1 of Schedule 1 | Taxation Administration Act 1953 section 12-35 of Schedule 1

Reasons for decision: Summary: The provision of the per diem allowance to cover food and incidentals is a LAFHA benefit. | Detailed Reasoning - Detailed reasoning: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which requires, inter alia, 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: (i) their employer; or (ii) an associate of the employer; or (iii) 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 (iv) a third party other than the employer or an associate of the employer, if the employer or an associate of the employer: (A) participates in or facilitates the provision or receipt of the benefit; or (B) 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; 4. The benefit is provided in respect of the employment of the employee. 5. 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). 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; (ii) the provision of, or of the use of facilities for, entertainment, recreation, or instructions; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; or The definition of 'provide' and 'provider' in subsection 136(1) of 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. Australia Co provides PEs with a benefit of a per diem allowance. Therefore, this condition is satisfied. Is a benefit provided to an employee or an associate of an employee? 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 . PEs are employees of Australia Co therefore this condition is satisfied. Is it provided in respect of employment? 'Employee' is defined in subsection 136(1) of the FBTAA as a current, former, or future employee. In this case, PEs are employees of Australia Co. There is no evidence that the PEs and Australia Co are dealing with each other in any other capacity than employees and employer. Therefore, it is considered that the provision of per diems allowance to PEs is sufficiently and materially connected [1] to their employment, and as such, would be considered to be 'in respect of' their employment. Therefore, this condition is satisfied. Is the per diem allowance a living-away-from-home allowance and whether the benefit is excluded from the definition of a fringe benefit? Subsection 136(1) of the FBTAA defines a LAFHA benefit as a benefit referred to in section 30 of the FBTAA. 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 to an employee 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. As previously discussed, the first condition of subsection 30(1) of the FBTAA is satisfied. The second condition of subsection 30(1) of the FBTAA requires that the allowance is paid for additional expenses that are not deductible. If the payment to the PEs is a travel allowance this condition is not satisfied. A travel allowance is paid to cover additional expenses that are 'deductible expenses under section 8-1 of the ITAA 1997'. It falls within the definition of 'salary and wages' and is therefore, excluded from being a fringe benefit. | Detailed Reasoning - LAFHA versus Travel Allowance: A payment is a LAFHA if it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for additional expenses incurred, or additional expenses incurred and other disadvantages suffered, because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment. Additional expenses do not include expenses for which the employee would be entitled to an income tax deduction. The whole or such part of the allowance that satisfies these tests is a LAFHA fringe benefit, the taxable value of which is calculated in accordance with the rules contained in section 31 of the FBTAA. Taxation Ruling 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) provides guidelines on travel allowances and LAFHA. Paragraph 130 of TR 2021/4 states, the main difference between a travel allowance and a LAFHA is that a: i. travel allowance can only be paid to cover deductible accommodation and food and drink expenses and incidental expenses incurred by an employee when they are travelling on work ii. LAFHA is paid to provide compensation to an employee for the additional living expenses incurred by an employee because their duties of employment require them live at location away from their usual residence. Paragraph 133 of TR 2021/4 further provides, to determine whether an allowance is a travel allowance or a LAFHA, it is first necessary to determine what expenditure the allowance is designed to cover or compensate the employee for and whether those expenses are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Usual residence The term '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 '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, an employee's permanent and settled principal place of residence is the employee's usual place of residence. Relevant factors - travelling on work versus living expenses To be deductible under section 8-1 of the ITAA 1997, the expense must have a sufficiently close connection to the performance of the employment duties and activities through which the employee earns income. [2] It will not be enough to show some general link or causal connection between the expenditure and the production of income. Paragraph 24 of TR 2021/4 provides, if any of the following factors apply, the employee will not be travelling on work and the accommodation and food and drink expenses incurred will be living expenses and therefore not deductible: i. the expenses are incurred because the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income. (personal circumstances - see paragraphs 25 to 37 of this Ruling); ii. the employee incurs the expenses because they are living at a location (living at a location - see paragraphs 38 to 78 of this Ruling); iii. the employee incurs the expenses as a result of relocating from their usual residence (relocation - see paragraphs 79 to 86 of this Ruling). | Detailed Reasoning - Personal circumstances: An employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. [3] In this case, it is PEs' work requirements and not their personal circumstances that require them to stay away from their usual residence. It is not only the fact they must stay overnight away from their usual residence to earn their assessable income, it is their 'income-producing activities' or 'work activities' which require them to do so. | Detailed Reasoning - Relocation: Where an employee has relocated for work, the costs of accommodation and food and drink will be living expenses; regardless of whether moving to the new location is required by the employer or the work. There is no suggestion that any PEs have relocated based on the information provided by Australia Co. It is assumed that PEs will maintain their usual residence in their home locations during the period of their Project arrangement and return to that home at the end of their Project arrangement. | Detailed Reasoning - Living at a location: Paragraph 42 of TR 2021/4 provides, the following factors would support a characterisation of an employee as living at a location away from their usual residence: • there is a change in the employee's regular place of work • the length of the overall period the employee will be away from their usual residence is a relatively long one • the nature of the accommodation is such that it becomes their usual residence • whether the employee is, or can be, accompanied by family or visited by family and friends. All the above factors should be considered, and no single factor is necessarily decisive. The weight given to each factor will vary depending on the employee's individual circumstances and is not a mathematical process. Reaching a conclusion as to whether an employee is living at a location away from their usual residence is a matter of judgment which requires a holistic assessment based on a consideration of all the factors. | Detailed Reasoning - Change in regular place of work: 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 [4] . In most cases, identifying an employee's regular place of work is clear. In circumstances where it is not 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. [5] Where there is a change in the employee's regular place of work and the employee incurs accommodation and food and drink 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. In these circumstances, the expenses incurred are living expenses and are not deductible. In situations where it is difficult to conclude whether a second or subsequent place of work is also a regular place of work, consideration should be given to matters including: i. the nature of the employment. A briefer period may be sufficient in the context of a short-term contract rather than ongoing employment, ii. the frequency at which the employee attends the workplace. Attending a location once a fortnight for four months would not usually be sufficient to establish a location as a regular place of work, iii. whether any element of choice on the part of the employee is influential such as the choice of where to live, and iv. whether the travel to a new workplace occur when the employee is on work time, or substantively under the direction or control of the employer. This would tend to support the characterisation of the travel to the location as being part of the employment rather than a prerequisite to travel to another regular place of work [6] . In this case, the PEs are required to attend their assigned offices at a specific domestic or overseas project location, regularly for a continuous period of 4 months. It is therefore considered that an additional regular place of work arises. As a result, the PEs would incur accommodation and food and drink expenses due to being close to their new regular place of work. Length of period away from their residence 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. PEs are expected to live at a specific domestic or overseas project location for 90 calendar days or more in total in an FBT year. They will be at the same work location for more than 21 calendar days at a time. Whilst the 21 calendar days could be separated by the Weekend Flights, the PEs attend the 'same work location' before and after the Weekend Flights, for 4 months. This is considered to be a lengthy period which suggests that the PEs are living away from their residence. [7] The nature of the accommodation 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 or apartment or caravan), this would support a view that they are living at a location away from their usual residence. In this instance Australia Co has advised that the accommodation will be in hotel rooms. Having regard to this, the nature of the accommodation tends towards a conclusion that the PEs are travelling on work. Whether the employee is or can be accompanied by family or visited by family or friends An employee who is living at a location away from their usual residence can generally be accompanied or visited by their family and friends. In this case Australia Co has advised that PEs would not generally be accompanied by their family. There is also no indication that family or friends are 'not allowed' to accompany or visit. Therefore, this factor may tend to suggest that the PEs are travelling on work. | Detailed Reasoning - Conclusion on whether the PEs are living at the location: Having had regard to the analysis above, PEs' regular place of work has changed, and they are living away from their usual residence. In the circumstances it is considered the PEs are living away from their usual residence due to: (a) there being a change in the PEs' regular place of work from their home office location to a project location; (b) the length of time the PEs will be away from their usual residences at their home locations; (c) although they will stay in hotel-style accommodation while they are working on project, we do not believe it is as decisive as factor (a) and factor (b) above. | Detailed Reasoning - Conclusion on whether the PEs' 'additional expenses' are deductible expenses: Having regard to the analysis above, while PEs' work necessarily requires them to undertake the travel, the additional expenses would not be deductible expenses because they are living away from their usual residence, and therefore the expenses are living expenses and not deductible. 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. Paragraph (g) of the definition of 'fringe benefit' excludes 'a benefit that is an exempt benefit'. There is no evidence to suggest the benefit is an exempt benefit. | Detailed Reasoning - Conclusion on whether the employees are provided with a 'LAFHA fringe benefit': The benefit of the per diem allowance is provided to the PEs in respect of their employment. It is in the nature of compensation for additional expenses they might incur, by reason that the duties of their employment require them to live away from their normal residence while they are on project. PEs' additional expenses are not deductible expenses. Therefore, the per diem allowance paid to them by Australia Co is a living-away-from-home allowance fringe benefit under section 30 of the FBTAA. The LAFHA may be concessionally taxed undern section 31 of the FBTAA if all of the requirements are satisfied. These requirements are: (a) the employee maintains a home in Australia, (b) the allowance relates to the first 12 months of LAFH, (c) accommodation and food expenses are substantiated, and (d) a declaration that (a) and (b) are satisfied and given to the employer. If a PE does not meet the above circumstances to qualify for concessional taxation treatment the whole of the allowance is subject to FBT. [8] | Detailed Reasoning - Question 2: If the per diem allowance is not subject to section 30 of the FBTAA and the allowance is equivalent or less than, the reasonable amounts for travel allowance expenses under the relevant Taxation Determination in relation to income tax and reasonable travel and overtime meal allowance expense amounts for an income tax year, would Australia Co be subject to Pay As You Go Withholding (PAYGW) and need to report the per diems allowance on the PEs' Income Statement via a Single Touch Payroll (STP) pay event? | Detailed Reasoning - Conclusion: The per diem allowance is a LAFHA fringe benefit pursuant to section 30 of the FBTAA as concluded under Question 1. As such it is not subject to PAYGW under subsection 12-1(2) of Schedule 1 to the TAA. | Detailed Reasoning - Question 3: Is the provision of accommodation by Australia Co to PEs a fringe benefit as defined in subsection 136(1) of the FBTAA? | Summary: The provision of accommodation is a residual benefit. Where the requirements for an exemption under subsection 47(5) of the FBTAA are met, the benefit will be exempt and therefore excluded from being a fringe benefit. Where the requirements for an exemption under subsection 47(5) of the FBTAA cannot be met, the benefit provided will be an external period residual fringe benefit. | Detailed Reasoning - Detailed reasoning: Is a benefit provided? Australia Co pays for PEs' accommodation directly which constitutes a 'benefit'. Therefore, this condition in the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied. Is the benefit provided to an employee or an associate of an employee? As discussed earlier the PEs are employees of Australia Co as defined under subsection 136(1) of the FBTAA. Is the benefit provided by the employer, or an associate of the employer or a third party in a situation that comes within either paragraph (e) or (ea) of the 'fringe benefit' definition? The benefit, being the provision of accommodation to the PEs is provided by Australia Co. As such this condition in the definition of 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied for the reasons as outlined above under Question 1. Is the provision of accommodation a Housing Benefit? A housing benefit arises under section 25 of the FBTAA, where an employee or an associate is granted a lease or licence to occupy employer provided premises as their usual place of residence. The Commissioner considers that generally an employee is living away from their usual place of residence when the employee would have continued to live in a particular place, but for having to change residence in order to work temporarily for the employer at another locality; and they expect to return to that place when the temporary period is over. [9] Therefore, in this instance as the PEs maintain their usual place of residence, being their customary or habitual place of residence in Australia, the benefit cannot be a housing benefit. The benefit provided is therefore considered to be a residual fringe benefit under section 45 of the FBTAA as it does not fit within the other specific categories contained in Divisions 2 to 11 of the FBTAA. 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. Paragraph (g) of the definition of 'fringe benefit' excludes 'a benefit that is an exempt benefit'. Subsection 47(5) of the FBTAA provides that accommodation provided by an employer to an employee can be an exempt benefit 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 (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); Paragraph 47(5)(a) As discussed above, as the PEs maintain their usual place of residence the benefit cannot be a housing benefit and the benefit provided is therefore a residual fringe benefit under section 45 of the FBTAA as it does not fit within the other specific categories contained in Divisions 2 to 11 of the FBTAA. A 'unit of accommodation' includes a house, flat, home unit, caravan or other mobile home, hotel, hostel, motel, guesthouse, bunkhouse, ship, vessel or floating structure. [10] The provision of the accommodation, being a hotel room is a residual benefit. It is a lease or licence in respect of a unit of accommodation provided to PEs in respect of their employment, thus satisfying this condition. Paragraph 47(5)(b) Based on section 136 of the FBTAA, where it is in relation to an employee whose duties of employment require the employee to live away, for a period, from his or her normal residence, include the employee, the term 'eligible family members' include the employee. The employment contract specifies that it is a requirement of their employment that employees work in other locations around Australia and oversees. It is therefore considered that the accommodation is provided solely because the duties of their employment require the PEs to live away from their normal residence. Paragraph 47(5)(ba) Paragraph 47(5)(ba) states that the employee must satisfy section 31C and 31D, or section 31E of the FBTAA. In this case, section 31C and 31D are the relevant sections to address. In relation to section 31C, Australia Co has advised that some PEs have, in Australia, near their home office location a unit of accommodation that they have an ownership interest in and continues to be available for their immediate use. It is reasonable to expect that these PEs will resume living at that place when their project ends. In relation to section 31D, it is assumed that the accommodation arrangements relate to a PEs' first 12 months that the duties of their employment require them to live away from their respective normal residence at the relevant project location. This paragraph is therefore considered satisfied in relation to the PEs that have a unit of accommodation in Australia that they have an ownership interest in, and that continues to be available for their immediate use while on project. For the PEs that do not have an ownership interest in a unit of accommodation, for example employees who live with a parent or guardian, this condition is not satisfied and as a result the exemption under subsection 47(5) of the FBTAA would not apply. Paragraph 47(5)(c) As addressed under Question 1 the PEs are considered to be living away from home as opposed to travelling in the course of their employment duties. Paragraph 47(5)(c) is therefore satisfied. Paragraph 47(5)(d) Paragraph 47(5)(d)(iii) requires the declaration to be given to the employer before the declaration date. 'Declaration date' is defined in subsection 136(1) of the FBTAA to mean: ... 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. (a) If the accommodation is not an exclusive employee residual benefit as defined in section 136 of the FBTAA, the employees will provide to Australia Co, before the declaration date, declarations in a form approved by the Commissioner in relation to the provision of the accommodation. Australia Co has advised that, if required, PEs will provide Australia Co, before the declaration date, declarations in a form approved by the Commissioner in relation to the provision of accommodation. Therefore paragraph 47(5)(d) will be satisfied. Conclusion for the provision of accommodation | Detailed Reasoning - Where the requirements under section 47(5) of the FBTAA are satisfied: Where: (a) the relevant declarations are obtained [11] (b) the provision of accommodation relates to the first 12 months, and (c) the requirements under section 31C of the FBTAA are met the provision of accommodation is excluded from being a fringe benefit as it will be an exempt benefit under subsection 47(5) of the FBTAA. | Detailed Reasoning - Where requirements under section 47(5) of the FBTAA are not satisfied: For the employees who do not meet the requirements under section 31C of the FBTAA and therefore, do not satisfy the conditions of an exemption under section 47(5) of the FBTAA, a residual fringe benefit will arise. Residual fringe benefits can be separated under four different categories under subsection 136(1) of the FBTAA as: (1) in-house non-period residual fringe benefits; (2) in-house period residual fringe benefits; (3) external non-period residual fringe benefits; (4) 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. In this case, Australia Co provides accommodation, comprising hotel rooms, to PEs. Australia Co does not provide accommodation to members of the public, and the benefit is provided for a period exceeding one day. There is no evidence the PEs and Australia Co are dealing with each other in any other capacity than as employees. Therefore, the provision of accommodation to these PEs is an external period residual benefit. There is no evidence to suggest the benefit is an exempt residual benefit. It is considered that the other requirements of a fringe benefit are satisfied and that the benefit is a residual fringe benefit. | Detailed Reasoning - Question 4: If the answer to Question 3 is yes, does the 'otherwise deductible rule' (ODR) in section 52 of the FBTAA apply to reduce the taxable value of the accommodation to nil? | Detailed Reasoning - Detailed reasoning: PEs that meet the requirements under section 31C of the FBTAA For PEs that meet the requirements under section 31C of the FBTAA the benefit is exempt and therefore the ODR is not applicable. PEs that do not meet the requirement under section 31C of the FBTAA The taxable value of the external period residual fringe benefit calculated in accordance with section 51 of the FBTAA can be reduced where the ODR in subsection 52(1) applies. The ODR operates to reduce the taxable value of a residual fringe benefit where the employee would have been entitled to a once-only deduction under section 8-1 of the ITAA 1997, (or where a specific provision of the tax laws applies to provide the deduction for the expense), had the employee personally incurred and paid the unreimbursed expense. As concluded in Question 1, the PEs' per diem allowance would not be deductible under section 8-1 of the ITAA 1997 because their expenses would not be incurred in the course of gaining or producing their assessable income, and the expenditure is of a private or domestic nature because PEs are living away from their usual residence. For the same reasons, their accommodation expense would not be deductible. Therefore, the taxable value of the fringe benefits cannot be reduced. | Detailed Reasoning - Question 5: Is the provision by Australia Co to PEs of 'Return Flights' (to each project location at the commencement of the project and back to the PEs' home location at the end of that project), a fringe benefit as defined in section 136 of the FBTAA? | Summary: The Return Flights are residual benefits however, they are exempt benefits under section 58F of the FBTAA and are therefore, excluded from being fringe benefits. | Detailed Reasoning - Detailed reasoning: It is considered that the provision by Australia Co to PEs of return flights is a residual benefit, because they do not fall into the category of benefits set out in Subdivisions A of Divisions 2 to 11 of the FBTAA. Is the benefit provided an exempt benefit and therefore excluded from being a fringe benefit? A benefit that is an exempt benefit in relation to the year of tax is not a 'fringe benefit'. The provision of a car, expense payment, property or residual benefit which is in respect of 'relocation transport' is an exempt benefit under section 58F of the FBTAA. The meaning of 'relocation transport' is contained in section 143A of the FBTAA. Relocation transport is transport that enables an employee to relocate to a new residence in circumstances where they are required to live away from home in order to perform employment-related duties, or are similarly required to relocate their usual place of residence. Each requirement from paragraphs (a) to (g) of section 143A need to be satisfied for the Return Flights to be relocation benefits. (a) a specified type of benefit is provided to an employee (or their associate) in respect of the employment of the employee which is in respect of or in connection with the provision of transport It is considered that Australia Co is providing PEs with a residual benefit, as such, it is a benefit of the type specified in paragraph 143A(a). (b) The transport, meals or accommodation is for a family member Subsection 136(1) of the FBTAA defines 'family member' to mean 'the employee', 'the spouse of the employee', and 'a child of the employee'. Australia Co provides the Return Flights to the employee (being the PEs), therefore satisfying the requirements in paragraph 134A(b) of the FBTAA. (c) The transport is required solely because the employee is or was required to live away from their usual place of residence in order to perform the duties of that employment The conditions in paragraph 134A(c) require the transport is required solely because: (i) the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; (ii) the employee, having lived away from his or her usual place of residence in order to perform the duties of that employment, is required to return to his or usual place of residence: (A) in order to perform those duties; or (B) because the employee has ceased to perform those duties; or (iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment. As addressed under Question 1, PEs are living away from their usual residence. Therefore, the condition in subparagraph 143A(c)(i) is met in relation to the first flight to the project location provided to PEs (and other family members if relevant). This flight is solely provided because the employee is required to live away from their usual place of residence in order to perform the duties of their employment with Australia Co. Similarly, the condition in subparagraph 143A(c)(ii) is also satisfied in relation to the PEs' last flight back to their homes at the end of their projects. This is because the PEs, having lived away from their usual place of residence in order to perform the duties of that employment, would return to their usual place of residence once they have ceased to perform those duties at the project locations. (d) The transport is provided to enable a family member to take up residence The conditions in paragraph 143A(d) are met in relation to the: (a) the first flight to the PEs' project location, as it enables the employee to take up residence near their new project location while living away from their usual place of residence per subparagraph 143A(d)(i), and (b) the last flight back to usual place of residence at the end of the assignment as it enables the employee to return to their usual place of residence, per subparagraph 143A(d)(ii). (e) If the transport is for the spouse, or a child, of the employee The condition in paragraph 143A(e) requires that the transport provided to a spouse or child of the employee, is not provided to enable the spouse or child, to accompany the employee while the employee or the spouse or child is undertaking travel in the course of performing the duties of their employment. In the case of the spouse or child, this is duties of employment with the same employer or as an employee of the employee. Australia Co has advised that the PEs are not generally be accompanied by their family therefore it is considered that this condition is not relevant. (f) If the transport is for the employee - the transport is not provided while the employee is undertaking travel in the course of performing the duties of that employment Taxation Ruling 2021/1 Income tax: when are deductions allowed for employee's transport expenses? (TR 2021/1) provides guidance on whether travel expenses incurred by an employee are "in the course of" gaining or producing assessable income. TR 2021/1 explains that "other ways that this has been expressed in the context of transport expenses, is that the employee is travelling "on work" [12] , the travel is part of the employment, or the travel is an incident of the employment." [13] As per paragraph 84 of TR 2021/1, where an employee is living at a location away from their usual residence (usually on a temporary basis) for work but retains a connection to their previous home (for example, family remains behind), transport between their new work location and their previous home would not be deductible. This is the case even if the agreement with their employer involves the employer agreeing to provide or fund such transport. As addressed under Question 1, it is considered that the PEs are living at a location away from their usual residence and therefore the travel between their home and their subsequent regular place of work is not in the course of gaining or producing their assessable income. It is considered that in these circumstances the PEs are not travelling while performing the duties of their employment with Australia Co and therefore, the condition in paragraph 143(A)(f) is met. ( g) The benefit is not provided under a non-arm's length arrangement There is no suggestion on the information provided that the Return Flights are provided under a non-arm's length arrangement therefore the condition in paragraph 134A(g) is met. It is considered that the Return Flights satisfy the conditions therefore are section 143A relocation transport benefits. | Detailed Reasoning - Conclusion on the application of section 58F: Having regard to the requirements in sections 143A and 58F of the FBTAA, it is considered that the Return Flights provided by Australia Co to PEs between their home locations and project locations are in respect of 'relocation transport' and are therefore, exempt benefits under section 58F. As such they are excluded from being fringe benefits. It is assumed that the necessary evidence as specified under paragraph 58F(c)(ii) is provided to the employer before the FBT return for the year must be lodged. | Detailed Reasoning - Question 6: Is the provision by Australia Co to PEs of 'Weekend Flights' (to the PEs' home location and back to the project location on a weekly or fortnightly basis, for recreational purposes), a 'fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: The provision of the 'Weekend Flights' is a residual fringe benefit. The Weekend Flights do not satisfy section 58F of the FBTAA as exempt benefits. They are ineligible for a reduction of taxable value under section 60A or section 61 as remote area holiday transport or under section 61A as overseas employment holiday transport. | Detailed Reasoning - Detailed reasoning: When a PE's project location is not within the daily commutable distance from their home office, Australia Co will provide them with Weekend Flights for recreational purposes, each weekend or fortnightly. It is considered that the provision of the Weekend Flights to the PEs, from their project location to their home location and returning to their project location, is a residual benefit as the benefit does not fall into the category of benefits set out in Subdivisions A of Divisions 2 to 11 of the FBTAA As mentioned earlier, a benefit that is an exempt benefit in relation to the year of tax is not a 'fringe benefit'. Is the benefit provided an exempt benefit and therefore excluded from being a fringe benefit? The provision of a car, expense payment, property or residual benefit which is in respect of 'relocation transport' is an exempt benefit under section 58F of the FBTAA. Section 143A requires the benefits must be provided as a consequence of the employee being required to relocate. As the Weekend Flights are provided for the PEs to have weekends at their home location for recreational purposes the benefits are not being provided for relocation or taking up residence. Accordingly, they do not meet the requirements of section 143A. Therefore, they are not a section 58F exempt relocation benefit. It is concluded that all of the requirements of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA are satisfied, and that a residual fringe benefit arises in respect of the Weekend Flights. Can the taxable value of the residual fringe benefits be reduced? Remote Area Holiday Transport reduction Transport, meals or accommodation provided to an employee and family members in remote areas can be subject to a reduction in taxable value under section 60A or section 61of the FBTAA. However, in this case, under the assumption that the PEs' project locations are in eligible urban areas, it does not satisfy the requirement under paragraph 143(1)(f), which requires an employee performs the duties of his or her employment at a place not in, or adjacent to, an eligible urban area. This means the benefits do not meet section 143 as remote area holiday transport, therefore are ineligible for a reduction under section 60A or section 61. Overseas Employment Holiday Transport reduction Transport, accommodation, or meals provided to an overseas employee and family members in connection with having a holiday of not less than three days can be subject to a reduction in taxable value under section 61A of the FBTAA. However, section 143C requires that the employee is an 'overseas employee'. As the PEs do not meet the definition of overseas employees under section 143B, the benefits are ineligible for a reduction under section 61A. | Detailed Reasoning - Question 7: If the answer to Question 6 is yes, does the otherwise deductible rule in section 52 of the FBTAA apply to reduce the taxable value of the Weekend Flights to nil? | Detailed Reasoning - Detailed reasoning: Where a residual benefit is provided, the otherwise deductible rule allows the gross taxable value of certain fringe benefits to be reduced by the amount of the notional once-only income tax deduction that the employees would otherwise have been entitled to. As discussed in Question 4, as the PEs are living away from their usual residence, the Weekend Flight expenses are not considered to have been incurred in the course of gaining or producing their assessable income; they are of a private or domestic nature. Therefore, the employees would not be entitled to a deduction under section 8-1 of the ITAA 1997. As a result, the 'otherwise deductible rule' does not apply. | Detailed Reasoning - Question 8: Where travel expenditure (for the per diem amounts, accommodation, Return Flights and Weekend Flights) is incurred by a PE and then reimbursed, such that an expense payment benefit arises, would the Fringe Benefit Tax (FBT) principles discussed at Questions 1-7 equally apply? | Summary: The principles would equally apply if the benefits were provided as expense payment benefits. | Detailed Reasoning - Detailed reasoning: The per diems The per diems are to be provided to cover additional expenses that the employees might incur, where the duties of their employment require them to live away from their normal residence, while they are on project. Where the per diems are paid as an allowance, it is concluded in Question 1 that they were a LAFHA under section 30 of the FBTAA. As the PEs are living away from home, their additional expenses are considered to be non-deductible expenses. Where the per diems are provided as an expense payment benefit, no exemption would be available and an expense payment fringe benefit would arise. The taxable value of an expense payment benefit may be reduced using the ODR, under section 24 of the FBTAA. But as concluded above, the PEs' expenses would not be incurred in the course of gaining or producing their assessable income, and the expenditure is of a private or domestic nature because the PEs are living away from their usual residence. The PEs would therefore, not be entitled to a deduction and the taxable value cannot be reduced. The accommodation Where the accommodation is provided as an expense payment benefit, the subsection 47(5) exemption is not applicable as this only applies to residual benefits. Expenditure on accommodation provided to an employee who is required to live away from their normal residence in order to perform employment duties can be an exempt benefit under section 21. The conditions in subsection 21(d) include similar requirements to subsection 47(5). These include that the employee must satisfy section 31C and 31D, or section 31E of the FBTAA. These requirements relate to: • maintaining a home in Australia and being required to live away from home that relates only to all or part of the first 12 months; or • working on a fly-in fly-out or drive-in drive-out basis. When an employee does not satisfy the requirements as in section 31C and 31D, or section 31E of the FBTAA an expense payment fringe benefit arises in respect of the accommodation. The Return Flights As noted in Question 5, an expense payment benefit which is in respect of 'relocation transport' can also be an exempt benefit under section 58F. The Return Flights benefits will be provided as a consequence of the employee having to relocate and are therefore, section 143A relocation transport benefits. Having regard to the requirements in sections 143A and 58F of the FBTAA, it is considered that the Return Flights provided by Australia Co to PEs between their project location and their home location are in respect of 'relocation transport' and are therefore, exempt benefits under section 58F. As such they are excluded from being a fringe benefit. It is assumed that the necessary evidence as specified under paragraph 58F(c)(ii) is provided to the employer before the FBT return for the year must be lodged. The Weekend Flights The reimbursement payments in relation to the Weekend Flights is an expense payment benefit. For the same reasons as outlined in Question 6, they do not satisfy section 58F of the FBTAA as exempt benefits; they are ineligible for a reduction of taxable value under section 60A or section 61 as remote area holiday transport or under section 61A as overseas employment holiday transport. Can the 'otherwise deductible rule' in section 24 of the FBTAA apply to reduce the taxable value of the expense payment benefits? The travel expenditure is not considered to be incurred in the course of gaining or producing the assessable income of the PEs as it is of a private or domestic nature. Therefore, the employees would not be entitled to a deduction under section 8-1 of the ITAA 1997. As a result, the taxable values of any expense payment fringe benefits that arise cannot be reduced using the 'otherwise deductible rule' in section 24 of the FBTAA. [1] J & G Knowles & Associates v. Federal Commissioner of Taxation [2000] FCA 196, [26]. [2] Paragraph 16 TR 2021/4 [3] Paragraph 25 TR 2021/4 [4] Paragraph 25 TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses [5] Paragraph 26 Ibid. [6] Paragraph 32 Ibid. [7] Paragraph 13 Practical Compliance Guideline PCG 2021/3 Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location - ATO compliance approach [8] Section 31B of the FBTAA [9] Fringe benefits tax: a guide for employers Chapter 11 [10] Subsection 136(1) FBTAA [11] Subsection 47(5)(d)(ii) of the FBTAA [12] John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82 ( John Holland ) at [45], per Edmonds J. [13] TR 2021/1 [12]