Private ruling: Remote area housing assistance benefits
Published: May 2013
Ruling period: 1 April 2013 to 31 March 2016
Date scheme commenced: 1 April 2013

Ruling: Q4: Can the value of the benefit arising from the reimbursement of holiday travel expenses be reduced under section 60A or section 61 of the FBTAA? No.

Relevant facts and circumstances: You are a public benevolent institution and are endorsed as a charitable institution. The benefits you propose to offer your employees through a salary sacrifice arrangement are: · the reimbursement of 50% of the employee's rental expenses where the accommodation is the employee's usual place of residence · the reimbursement of an employee's interest expense on a housing loan on a residential property where that property is the employee's usual place of residence · the reimbursement of residential fuel expenses including electricity, gas, wood or oil for heating purposes, and · the reimbursement of holiday travel expenses. You will reimburse your employees for those expenses upon the presentation of bank statements, invoices, receipts and/or declarations. You will only reimburse residential fuel where an employee has also salary sacrificed for their rent or their mortgage interest.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act subsection 5E(3) | Fringe Benefits Tax Assessment Act Section 20 | Fringe Benefits Tax Assessment Act Section 57A | Fringe Benefits Tax Assessment Act Section 59 | Fringe Benefits Tax Assessment Act Section 60 | Fringe Benefits Tax Assessment Act Section 61 | Fringe Benefits Tax Assessment Act Section140

Reasons for decision: Detailed Reasoning - Detailed reasoning: Can the value of the expense payment benefit that arises from the reimbursement of the rental expenses be reduced under subsection 60(2A) of the FBTAA? You propose to offer housing assistance to your employees under an effective salary sacrifice arrangement whereby you will reimburse of 50% of your employee's gross rent. Section 20 of the FBTAA describes when a reimbursement made to an employee will constitute an expense payment benefit. Section 20 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 by the provider to the recipient. The reimbursement you will provide to your employee under the arrangement will be expense payment benefits according to the requirements of subsection 20(b) of the FBTAA. Subsection 60(2A) of the FBTAA allows for the reduction of the taxable value of expense payment fringe benefits in respect of remote area housing rent where certain conditions are satisfied. Subsection 60(2A) states: Where: (a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; (b) the recipients expenditure is in respect of remote area housing rent connected with a unit of accommodation; (c) the recipient occupied or used the unit of accommodation as his or her usual place of residence during a period (in this subsection called the occupation period ) during which the rent accrued; and (d) the fringe benefit was not provided under: (i) a non-arm's length arrangement; or (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section; the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of the recipients expenditure as relates to the occupation period. In summary, the taxable value of the expense payment benefits you will provide to your employees will be reduced by 50% if the following requirements are met: 1.1 the recipient of the expense payment benefit is your employee 1.2 the expenditure by the employee is in respect of remote area housing rent 1.3 your employee occupied or used the unit of accommodation as their usual place of residence 1.4 the fringe benefit was not provided under a non-arm's length arrangement or an arrangement that was entered into by any of the parties to the arrangement, for the purpose, or for purposes that included the purpose, of enabling you to obtain the application of the reduction in taxable value | Detailed Reasoning - 1.1 Will the recipient of the expense payment benefit be your employee?: The expense payment benefit will be provided to employees currently working at your facility. | Detailed Reasoning - 1.2 Will the employee's expenditure be in respect of remote area housing rent?: The term 'remote area housing rent' is defined in the FBTAA in subsection 142(1A) as follows: In this Act, a reference, in relation to a year of tax in relation to an employee of an employer, to remote area housing rent connected with a unit of accommodation is a reference to rent or other consideration payable in respect of the subsistence of a lease or licence in respect of the unit of accommodation where: (a) during the whole of the period (in this subsection referred to as the occupation period ) in the year of tax when the employee occupied or used the unit of accommodation as his or her usual place of residence: (i) the unit of accommodation was situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and (ii) the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area; (b) the common conditions set out in subsection (2E) are satisfied in relation to the occupation period; and (c) the lease or licence was not granted under: (i) a non-arm's length arrangement; or (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for the purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60. The common conditions referred to in paragraph 142(1A)(b) above, are set out in subsection 142(2E) of the FBTAA as follows: For the purposes of the application of this section to a fringe benefit in relation to a year of tax in relation to an employee of an employer, the common conditions in relation to a particular period in relation to a particular time are as follows: (a) it is customary for employers in the industry in which the employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees; (b) it would be concluded that it was necessary for the employer, during the year of tax, to provide or arrange for the provision of housing assistance for employees of the employer because: (i) the nature of the employer's business was such that employees of the employer were liable to be frequently required to change their places of residence; (ii) there was not, at or near the place or places at which the employees of the employer were employed sufficient suitable residential accommodation for those employees (other than residential accommodation provided by or on behalf of the employer); or (iii) it is customary for employers in the industry in which the employee was employed during that period or at that time, as the case may be, to provide housing assistance for their employees. In summary, according to the requirements of subsection 142(1A) and subsection 142(2E), the expenditure by your employee will be in respect of remote area housing rent if the following conditions are met: 1.2.1 your employee will pay rent for the use a unit of accommodation 1.2.2 the accommodation must be the employee's usual place of residence 1.2.3 the accommodation must be in a remote area 1.2.4 the employee's usual place of employment must be in a remote area; 1.2.5 it is customary for employers in the industry in which your employees are employed to provide housing assistance for their employees 1.2.6 one of the following three conditions is satisfied making it necessary for you to provide or arrange for the provision of the accommodation: · the nature of your business is such that employees are liable to frequently change their places of residence, or · there is insufficient suitable residential accommodation otherwise available for your employees at or near the place or places where the employees are employed, or · it is customary for employers in the industry in which your employees are employed, to provide housing assistance for their employees 1.2.7 the lease or licence is not granted under a non-arm's length arrangement or, under an arrangement that was entered into for the purpose, or for purposes that included the purpose, of enabling you to obtain the benefit of the application of the reduction. | Detailed Reasoning - 1.2.1 Will your employee be paying rent for the use of the accommodation?: Your employee will be paying rent for the accommodation. | Detailed Reasoning - 1.2.2 Will the accommodation be the employee's usual place of residence?: The accommodation will be the employee's usual place of residence. | Detailed Reasoning - 1.2.3 Will the accommodation be located in a remote area?: A location is considered remote for the purposes of paragraph 142(1A)(a) if it is situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area. Section 140 of the FBTAA provides a definition of the term 'eligible urban area' and sets out the criteria for a location to be considered a remote area. Chapter 19 of ATO Fringe benefits tax - a guide for employers (NAT 1054) summarises the requirements applicable to most employers for a location to be considered remote as follows: It is located in a remote area if it is not in or near an urban centre. This means the accommodation must be located at least 40 kilometres from a town with a census population between 14,000 and 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more (population figures based on the 1981 Census). If the accommodation is in Zone A or B (for income tax purposes), it must be located at least 40 kilometres from a town with a census population between 28,000 and 130,0000, and at least 100 kilometres from a town with a census population of 130,000 or more. Where the shortest practical surface route between a locality and an eligible urban area includes a route by water, the distance travelled by water is doubled for the purposes of working out how remote that locality is from the eligible urban area. Subsection 140(1A) of the FBTAA extends the remote area test for certain employers that are listed under subsections 140(1B), (1C), (1CA) and (1D). These employers are: w a public hospital w a non profit hospital w a charitable institution w a government body where the employee's duties of employment are exclusively performed in or in connection with a non profit hospital or a public hospital w public ambulance service, and w a government body where the employee's duties of employment are performed in a police service. Subsection 140(1A) states: [Certain housing benefit ] However, this Act operates in relation to a housing benefit provided in respect of the employment of an employee of an employer described in subsection (1B) ), (1C), (1CA) or (1D) as if: (a) a reference in this Act (except in paragraph (1)(a), this paragraph and subsection 140(4)) to an eligible urban area were a reference to an eligible urban area that is an urban centre with a census population of not less than 130,000; and (b) subparagraph (1)(b)(i) were omitted. Therefore where a housing benefit is provided to an employee of one of the above listed employers, the extended remote area test contained in subsection 140(1A) is to be applied in determining whether the benefit is exempt from FBT under section 58ZC of the FBTAA. The ATO fact sheet Fringe benefits tax - remote areas and Law Administration Practice Statement PS LA 2000/6 Fringe benefits tax: what is considered to be remote for the purposes of the remote area housing benefit (PS LA 2000/6) have lists of towns that are in remote areas according to the tests set out in subsection 140(1) and 140(1A) of the FBTAA.. The extended remote area test applies only to those employers listed above when valuing the housing benefits they have provided to their employees. Therefore as you will not be providing housing benefits, the relevant list for your situation is list 1 in the fact sheet or attachment 1 of PS LA 2000/6. Under the proposed arrangement you will only offer housing assistance to employees who work at your facility. Your facility is not located in an area listed as a remote area in either list 1 of the fact sheet or attachment 1 of PS LA 2000/6. | Detailed Reasoning - 1.2.4 Will the employee's usual place of employment be located in a remote area?: The employee will be performing their duties of employment at your facility which as determined above in not located in a remote area. | Detailed Reasoning - 1.2.5 Is it customary in the industry for employers to provide housing assistance to their employees?: The meaning of the phrase 'customary for employers in the industry' is discussed in Taxation Determination TD 94/97 Fringe benefits tax: what does the phrase 'customary for employers in the industry' mean in relation to the provision of fringe benefits to employees? Paragraphs 2 and 3 of TD 94/97 state: 2. A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary. 3. In defining the employer's industry, this Office will accept categorisation based on any recognised industry classification system. Examples of these are the industry codes for business income used by this Office (listed in the company income tax return instructions), and Australian and New Zealand Standard Industrial Classification (ANZSIC) codes. You have engaged a salary packaging provider to manage the salary sacrifice arrangements of your employees. The information booklet provided by the salary packaging provider contains information for all employers who provide benefits to their employees who live and work in remote areas. We therefore accept that it is customary in the industry for employers to provide housing assistance to their employees. | Detailed Reasoning - 1.2.6 Is one of the conditions listed under paragraph 142(2E)(b) of the FBTAA satisfied?: As established above, it is customary for employers in the industry in which your employees are employed, to provide housing assistance for their employees. | Detailed Reasoning - Conclusion: As your employees work and reside in an area which is not considered a remote location you are not able to reduce the taxable value of the expense payment fringe benefits, which arise when you reimburse your employees' rental expenses, in accordance with subsection 60(2A) of the FBTAA. | Detailed Reasoning - Can the value of an expense payment benefit that arises from the reimbursement of home loan interest be reduced under subsection 60(2) of the FBTAA?: You propose to reimburse your employees for the interest on their home loan through an effective salary sacrifice arrangement. The reimbursements you will provide to your employees under the arrangement will be expense payment benefits according to the requirements of subsection 20(b) of the FBTAA. Subsection 60(2) of the FBTAA allows for the reduction of the taxable value of certain expense payment fringe benefits in respect of interest incurred from a remote area housing loan connected with a dwelling. Subsection 60(2) states: Where: (a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; (b) the recipients expenditure is in respect of interest in respect of a remote area housing loan connected with a dwelling; (c) the recipient occupied or used the unit of accommodation as his or her usual place of residence during a period (in this subsection called the occupation period ) during which the interest accrued; and (d) the fringe benefit was not provided under: (i) a non-arm's length arrangement; or (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section; the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of the recipients expenditure as relates to the occupation period. In summary, the taxable value of the expense payment benefits you will provide to your employees will be reduced by 50% if the following requirements are met: 1.1 the recipient of the expense payment benefit is your employee 1.2 the expenditure by the employee is in respect of interest in respect of a remote area housing loan connected with a unit of accommodation 1.3 your employee occupied or used the unit of accommodation as their usual place of residence during the period in which the rent accrued 1.4 the fringe benefit was not provided under a non-arm's length arrangement or an arrangement that was entered into by any of the parties to the arrangement, for the purpose, or for purposes that included the purpose, of enabling you to obtain reduction in taxable value provided by section 60. | Detailed Reasoning - 1.1 Will the recipient of the expense payment benefit be your employee?: The expense payment benefit will be provided to your employees working in your aged care facility. | Detailed Reasoning - 1.2 Will the expenditure by your employee be in respect of interest on a remote area housing loan connected with a unit of accommodation?: The term remote area housing loan is defined in section 142(1) as: a year of tax in relation to an employee of an employer, to a remote area housing loan connected with a dwelling is a reference to a housing loan relating to the dwelling where: (a) during the whole of the period (in this subsection referred to as the ``occupation period'') in the year of tax when the employee occupied or used the dwelling as his or her usual place of residence: (i) the dwelling was situated in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and (ii) the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area; (b) the common conditions set out in subsection (2E) are satisfied in relation to the occupation period; and c) (Omitted by No 95 of 1988) (d) the loan was not made to the employee pursuant to: (i) a non-arm's length arrangement; or (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of section 60. Two of the requirements which must be met for the 50% reduction to apply is that the dwelling on which the housing loan was granted must be located in a remote area and the employee must also work in a remote area. The response provided above in question 1 in relation to determining whether your aged care facility is located in a remote area applies here. Your facility is not located in a remote area for the purposes of accessing the 50% reduction available under subsection 60(2) of the FBTAA. | Detailed Reasoning - Conclusion: Therefore, you are unable to apply the 50% reduction to the taxable value on the expense payment benefit that arises from the reimbursement of your employee's home loan interest. | Detailed Reasoning - Can the value of the benefit arising from the reimbursement of residential fuel be reduced under section 59 of the FBTAA?: You propose to reimburse your employees for the cost of gas, electricity or other residential fuel under an effective salary sacrifice arrangement. Section 59 of the FBTAA provides for a reduction in the taxable value of remote area residential fuel. Subsection 59(1) states: (a) residential fuel is for use: (i) in connection with the recipients unit of accommodation; and (ii) during the subsistence of the recipients overall housing right; in relation to a remote area housing benefit, in relation to an employer in relation to a year of tax; and (b) any of the following conditions are satisfied: (i) the recipients expenditure in relation to an expense payment fringe benefit in relation to the employer in relation to the year of tax or a subsequent year of tax is in respect of the supply of that residential fuel; (ii) the recipients property in relation to a property fringe benefit in relation to the employer in relation to the year of tax is that residential fuel; (iii) the recipients benefit in relation to a residual fringe benefit in relation to the employer in relation to the year of tax is the benefit of the consumption of that residential fuel; the amount that, apart from this subsection and section 62, would be the taxable value of the fringe benefit referred to in paragraph (b) in relation to the year of tax is reduced by 50%. To be entitled to the 50% reduction in taxable value for residential fuel, the fuel must be in relation to a remote area housing benefit. As you will not be providing remote area housing benefits, you will not be able to access the 50% reduction in the taxable value of the expense payment fringe benefit arising from your reimbursement of your employees' residential fuel costs. | Detailed Reasoning - Can the value of the benefit arising from the reimbursement of holiday travel expenses be reduced under section 61 or 60A of the FBTAA?: You propose to reimburse your employees for certain holiday travel costs. Under an award or industry custom, an employee working in a remote area may be reimbursed for the costs of travelling from, or may be provided with transport from, the remote area for the purpose of having a holiday, and similarly, back to the remote area after the holiday. To access concession available for holiday transport one essential requirement set out in both section 61 and 60A is that an employee must be working in a remote area. Your employees' place of employment is not in a remote area. Therefore you are unable to access the 50% reduction available under section 61 or 60A of the FBTAA where you reimburse your employees for their holiday transport costs as they are not working in a remote area.