Private ruling: FBT - Relocation Expenses
Published: March 2014
Ruling period: 1 April 2013 - 31 March 2014
Date scheme commenced: 26 June 2012

Ruling: Q1: Are relocation expenses reimbursed by the employer to an employee considered exempt under the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)? | A1: Yes

Relevant facts and circumstances: An offer of employment was made to the employee on 1 October 2012. At the time the offer was made the employee was residing abroad. A visa application for the employee was sent to the Department of Immigration and Citizenship (DIAC). This application was rejected purely due to the fact that it had been done on paper and not electronically. A new electronic application was sent to DIAC. DIAC acknowledged the receipt of the application with the official date stamp. The employee received a successful visa application letter from DIAC. Due to the delay in obtaining the visa a new commencement date for the start of the job was negotiated between parties. This date was the only suitable date for the employee as he was under a contract with his current employer. Once the Visa was granted, there was a stipulation that the applicant had to make his first entry into Australia before a specified date. This date could not be changed or postponed. The employee therefore, came to Australia prior to that date for six days to satisfy the visa requirements. He incurred airfare costs to Australia and five nights accommodation expenses. In order to obtain the visa the employee also incurred other expenses as listed below: Police Clearance; Skills Assessment Qualifications and Employment; Various Translation Services; Certification and Notary Public Expenses; Application for employer nomination for a permanent resident visa; Application for permanent employer sponsored visa permanent resident visa; Return tickets to Australia; Accommodation in Australia; Health Assessment Expenses; When the employee commenced employment in Australia he asked for reimbursement of these expenses. The employer reimbursed the employee as requested.

Relevant legislative provisions: Subsection 136(1) of the FBTAA 1986 | Section 58F of the FBTAA 1986 | Section 20 of the FBTAA 1986 | Section 142A of the FBTAA 1986 | Subsection 142A(1) of the FBTAA 1986

Reasons for decision: Summary: Yes the relocation expenses that were reimbursed to an employee are exempt under the FBTAA 1986. | Detailed Reasoning - Detailed reasoning: Under the FBTAA 1986, a fringe benefit is a benefit provided in respect of employment. Subsection 136(1) of the FBTAA 1986 defines the term 'employment', in relation to a person, to mean 'the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee'. Subsection 136(1) also defines the term 'employee' to include a current employee, a future employee or a former employee. Based on the facts provided in this case, it is considered that the employee in question is an employee for Fringe Benefits Tax (FBT) purposes. Therefore, the FBT law applies to benefits, if any, provided by the employer to the employee in respect of his employment. Section 58F of the FBTAA 1986 provides that a benefit that meets the costs of travelling to an interview or selection test, in connection with an application for employment with a new employer or a promotion or transfer with an existing employer, is an exempt benefit. It states that: 58F Where: (a) a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer; (b) the benefit is in respect of relocation transport; and (c) in the case of an expense payment benefit: (i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and (ii) documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date; the benefit is an exempt benefit in relation to the year of tax . In this case, the employee applied for a position and was granted an offer of employment. He incurred airline expenses to fly to Australia in order to take up employment. His employer has reimbursed the employee for this expense. This reimbursement to the employee for the airfare expense he incurred is considered to be an expense payment benefit pursuant to section 20 of the FBTAA 1986. The facts indicate that the conditions in section 58F will be met: • it will be an expense payment benefit provided in respect of the employees employment in the 2014 FBT year; • the benefit will be provided for the expenses incurred in moving to Australia to take up an employment position; • the benefit will not be provided in respect of the particular car expenditure; and the documentary evidence of the expense has been provided. Therefore, the expense payment benefit in relation to the reimbursement of flight expenses will be an exempt benefit pursuant to section 58F of the FBTAA 1986. Section 142A of the FBTAA 1986 extends the meaning of the term transport to include other benefits. Subsection 142A(1) of the FBTAA 1986 states: For the purposes of this Act, recipients expenditure that is in respect of, or a recipients benefit that consists of: (a) accident insurance, airport or departure tax, passenger movement charge, a passport, a visa or a vaccination; or (b) any similar matter or thing; in connection with transport shall be taken to be in respect of the provision of, or to consist of, transport. Of the remaining expenses being paid by the employer, a payment made directly to the Department of Immigration for a visa would be considered to be transport under subsection 142A(1) of the FBTAA and would be covered by the relocation transport exemption contained within section 58F of the FBTAA. However what needs to be determined is whether the indirect costs (police clearance, skills assessment, translation services, health assessment, certification and notary public expenses, flights and accommodation to meet visa requirements), are in respect of a visa. As held in the Full Federal Court decision of J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151 (2000) 44 ATR 22, the words 'in respect of' have no fixed meaning. However 'the words must be given a meaning that depends on the context in which the words are found'. It was also held by the Court that there must be a 'sufficient or material connection or relationship' between the benefit and employment. In the case of the medical examination, although not a visa, it is part of the visa application process and is required by the Department of Immigration before they will issue the visa. Therefore there is a sufficient connection between the visa and the medical examination and this expense would be covered by the relocation transport exemption. The Department of Immigration also requires the certification of professional qualifications, a police check and interview before they issue the visa. Again although not a direct cost there is also a sufficient connection between these expenses and the visa. It makes sense that all documentation would need to be in English which would explain the translation expenses. It was also a requirement of DIAC that in order to validate the visa, the employee had to enter Australia prior a certain time. As his employment was not commencing until an future date, and in order to satisfy the visa requirements stipulated by DIAC, the employee flew to Australia where his employment is and stayed for six days and five nights. If the employee did not have to satisfy DIAC and visa requirements he would not have made the trip to Australia. Therefore the police check, certification of professional qualifications, translation expenses and the flight and accommodation in order to meet the visa requirements are covered by the relocation transport exemption in section 58F of the FBTAA 1986.