Private ruling: Residual Exempt benefit
Date of advice: 18 May 2016
Published: June 2016
Ruling period: 31 March 2016
Date scheme commenced: 01 April 2015

Ruling: Q1: Will the rotational flights provided to fly-in-fly-out employees to and from their usual place of employment constitute an exempt residual benefit pursuant to subsection 47(7) of the FBTAA 1986? | A1: Yes

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 Company is the operator of a project that involves construction. The Company has a number of employees who work on a fly-in-fly-out basis on site who are involved in the construction of the project. The shortest practicable surface route distance between the construction site and the closest urban area is more than 40km. The closest urban area to the construction site has a census population of over 28,000 and less than 130,000. The company provides rotational flights for fly-in-fly-out employees to travel from their usual place of employment to their usual place of residence on completion of the working days and return from their usual place of residence to their usual place of employment on completion of their days off. The Company's employees work for a number of days before having a number of days off. All employees in question are provided with accommodation near their usual place of employment. The majority are housed in specially constructed accommodation village units near the site. The Company has access to rooms at the airport Lodge for fly-in-fly-out employees if required during peak construction. The relevant employees all have a usual place of residence in other State or Territories.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 47 | Fringe Benefits Tax Assessment Act 1986 section 140.

Reasons for decision: Summary: Subsection 47(7) of the FBTAA 1986 provides conditions that allow a benefit to be an exempt benefit where certain transport provided to employees constitutes a residual benefit provided. Section 45 of the FBTAA 1986 defines a residual benefit as a benefit that is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 inclusive. The rotation flight provided by the Company to fly-in-fly-out employees does not fall into any of those categories. Sub-section 47(7) provides five conditions which, if satisfied, result in transport being an exempt benefit: (a) an employee's usual place of employment is: (i) on an oil rig, or other installation, at sea; or (ii) at a location in a State or internal Territory but not in, or adjacent to, an eligible urban area; or (iii) at a remote location that is not in a State or internal Territory; and (b) the employee is provided with residential accommodation, at or near that usual place of employment, by: (i) the employer; or (ii) an associate of the employer; or (iii) a person (in this subparagraph referred to as the 'arranger') other than the employer or an associate of the employer under an arrangement between: (A) the employer or an associate of the employer; and (B) the arranger or another person; and (c) the employee, on a regular basis: (i) works for a number of days and has a number of days off; and (ii) on completion of the working days, travels from that usual place of employment to his or her usual place of residence and, on completion of the days off, returns from his or her usual place of residence to that usual place of employment; and (d) the employee is provided with transport on a regular basis in connection with the travel referred to in subparagraph (c)(ii) and that transport is provided by: (i) the employer; or (ii) an associate of the employer; or (iii) a person (in this subparagraph referred to as the 'arranger') other than the employer or an associate of the employer under an arrangement between: (A) the employer or an associate of the employer; and (B) the arranger or another person; and (e) it would be unreasonable to expect the employee to travel on a daily basis on work days between: (i) that usual place of employment; and (ii) the location of the employee's usual place of residence; having regard to the location of those places; | Detailed Reasoning - (a) The place of employment is not 'adjacent to' an 'eligible urban area': Section 140(1) sets out what is an 'eligible urban area' and what is a location that is 'adjacent to an eligible urban area'. Subsection 140(1) provides: (a) A reference to an eligible urban area is a reference to: (ii) An area that: (A) is situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and (B) is an urban centre with a census population of not less than 28,000; and (ii) An area that: (A) is not situated in an area described in Schedule 2 to the Income Tax Assessment Act 1936; and (B) is an urban centre with a census population of not less than 14,000; and (b) A reference to a location that is adjacent to an eligible urban area is a reference to a location that, as at the date of commencement of this section: (i) was situated less than 40 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000; or (ii) was situated less than 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of not less than 130,000. Subsection 140(3) defines the census population of an urban centre as the census count on an actual location basis of the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australian Statistician in the document entitled 'Persons and Dwellings in Local Government Areas and Urban Centres'. Paragraph 140(1)(a) provides that an 'eligible urban area' is a reference to an area that is an urban centre with a census population of not less than 14,000 (or 28,000 for an urban centre located in Zone A or B in Schedule 2 to the ITAA 1936). Since the closest urban area to the usual place of employment has a census population over 28,000, it does not matter whether or not it is in an area mentioned in Schedule 2. Therefore, based on its population, the urban area in question is an eligible urban centre. Paragraph 140(1)(b) defines a location that is 'adjacent to an eligible urban area' to include one that is situated less than 40km from an urban centre with a 1981 Census population of less than 130,000. For larger urban centres, the distance is instead 100km. Under this provision, a place will be treated as not being 'adjacent to an eligible urban centre' where it is at least 40 kilometres from an eligible urban centre with a 1981 Census population below 130,000. The shortest practicable surface route distance between the construction site and the closest urban area is more than 40km. For these reasons, we accept that construction site being the usual place of employment is at a location in a State or Territory, not adjacent to an eligible urban area in accordance with section 140. | Detailed Reasoning - (b) The employee is provided with residential accommodation by the employer: The employees of the Company working on the construction are provided with accommodation near their usual place of employment. This accommodation is at, or near their usual place of employment. This condition is satisfied. | Detailed Reasoning - (c) Employee works for a number of days and has a number of days off: The term place of residence in relation to a person is defined in subsection 136(1) of the FBTAA as: (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. The Company provides rotational flights for fly-in-fly-out employees to travel from the usual place of employment to their usual place of residence on completion of the working days and return from their usual place of residence to the usual place of employment on completion of their days off. The employees work for a number of days before having a number of days off. These employees all have a usual place of residence elsewhere than in the accommodation provided to them near their usual place of employment. This condition is satisfied. | Detailed Reasoning - (d) Transport is provided on a regular basis by the employer: The Company arranges and pays for the cost of transport by way of flights to fly-in-fly-out employees between the employee's usual place of residence and usual place of employment. The flights are provided in connection with travels referred to in subparagraph (c)(ii) and are provided by the Company. This condition is satisfied. (e) Unreasonable to expect the employee to travel on a daily basis on work days The location of the construction site has been accepted as satisfying paragraph 47(7)(a) and the employees' usual places of residence are in other States or Territories. Therefore it is accepted to be unreasonable to expect the employees to travel to and from work on a daily basis. This condition is satisfied. | Detailed Reasoning - Conclusion: In respect of the fly-in-fly-out employees' provision of rotational flights by the Company, all conditions in subsection 47(7) are satisfied. The residual benefits in the form of the rotational flights between the Company employee's usual place of residence and their usual place of employment are exempt benefits.