Private ruling: Remote Area Housing Benefits
Published: November 2012
Ruling period: 1 April 2012 to 31 March 2013
Date scheme commenced: 1 April 2012

Ruling: Q1: If Entity A provides residential accommodation to its employees in respect of housing located in area A will this satisfy the requirements of subparagraph 58ZC(2)(d)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: If Entity A provides housing assistance to its employees in respect of housing located in area A will this satisfy the requirements of subsection 142(2E) of the FBTAA? | A2: Yes

Relevant facts and circumstances: Entity A's main business is located in area A. Area A is listed in PS LA 2000/6 as being a 'remote area' for the purposes of paragraph 140(1)(b) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). Entity A intends to implement arrangements with some of its employees working in area A to permit those employees to salary package a range of benefits specifically targeted at providing 'remote area residential-related benefits'. Eligible employees for the salary package arrangements will include all full-time and part-time employees with an ongoing employment relationship with Entity A. Casual employees of Entity A will be ineligible to enter these arrangements. Eligible employees can choose whether or not to participate in salary packaging arrangements. The salary packaging of benefits is authorised under the relevant enterprise agreement. Entity A's stated reasons for proposing to implement the salary packaging arrangements concerning 'remote area residential-related benefits' for its eligible employees is in order to attract, and retain, skilled employees to its business which is located in an area that has a relatively low population from which to draw suitable employees and which also faces other challenges for industries in the area. Research and surveys carried out by local government agencies in area A found difficulties being experienced by various industries in the area, including in Entity A's industry, concerning employee recruitment and retainment and also shortages of skilled workers. The above research and surveys carried out by local government agencies found that the supply of an appropriate workforce was a major issue in area A and the effects of this were anticipated to continue in the long run. Entity A is currently encountering difficulties in recruiting suitable staff from within area A to replace the recent loss of staff with specialised job-skills. Entity A is also currently encountering difficulties in recruiting suitable tertiary qualified staff, and other appropriately skilled employees experienced in the relevant industry, from within area A. Furthermore, Entity A intends to undergo extensive changes in the manner of its operations in the near future that will probably make it necessary to recruit additional suitable qualified employees from the outside of area A. Employees, working for Entity A in area A, are not ordinarily required to frequently change their place of residence as Entity A's operations are centralised within area A. There is usually sufficient suitable residential accommodation for Entity A's employees (other than any residential accommodation that may be provided by Entity A) at or near where Entity A's operations are centralised. However, the Applicants have stated that they are aware of other businesses which are part of the same industry as Entity A in area A, and also in other like areas, that already provide remote area housing assistance to their employees and that the provision of such housing assistance is neither unique, rare or unusual within that specific industry located in remote areas.

Relevant legislative provisions: Fringe Benefits Tax Assessments 1986 section 58ZC. | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(a). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(b). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(d). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(d)(i). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(d)(ii). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(d)(iii). | Fringe Benefits Tax Assessments 1986 paragraph 58ZC(2)(e). | Fringe Benefits Tax Assessments 1986 section 59. | Fringe Benefits Tax Assessments 1986 section 60. | Fringe Benefits Tax Assessments 1986 paragraph 140(1)(b) | Fringe Benefits Tax Assessments 1986 section 142. | Fringe Benefits Tax Assessments 1986 subsection 142(2E). | Fringe Benefits Tax Assessments 1986 paragraph 142(2E)(a). | Fringe Benefits Tax Assessments 1986 subparagraph 142(2E)(b)(i). | Fringe Benefits Tax Assessments 1986 subparagraph 142(2E)(b)(ii). | Fringe Benefits Tax Assessments 1986 subparagraph 142(2E)(b)(iii).

Reasons for decision: Summary: 1. Section 58ZC of the FBTAA exempts housing benefits that are remote area housing benefits. 2. To obtain exemption under section 58ZC of the FBTAA certain conditions must be met and, in the absence of any evidence to the contrary, it is considered that the necessary conditions of paragraphs 58ZC(2)(a) and 58ZC(2)(b) of the FBTAA will be met in this case. 3. It is also considered, in the absence of any evidence to the contrary, that paragraph 58ZC(2)(e) of the FBTAA will also be met in this case. 4. Paragraph 58ZC(2)(d) of the FBTAA states: (d) it would be concluded that it was necessary for the employer, during the year of tax, to provide, or to arrange for the provision of, residential accommodation 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; or (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 recipient was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned... 5. Therefore, the provision of housing benefits are not exempt as remote area housing benefits under section 58ZC of the FBTAA unless it can also be concluded that it was necessary for the employer to provide, or to arrange for the provision of, residential accommodation for the employees of the employer because of one (or more) of the reasons listed in paragraph 58ZC(2)(d) of the FBTAA. 6. It is considered that the facts of this case readily mean that subparagraphs 58ZC(2)(d)(i) and 58ZC(2)(d)(ii) of the FBTAA will not be met. 7. Consequently, it must be determined whether the remaining subparagraph of 58ZC(2)(d) of the FBTAA, namely 58ZC(2)(d)(iii), can be met in this case. 8. Subparagraph 58ZC(2)(d)(iii) of the FBTAA basically requires 'it would be concluded that it was necessary for the employer...to provide...residential accommodation for employees of the employer because...it was customary in the industry in which the recipient was employed...to provide residential accommodation for their employees'. 9. There may be several underlying reasons why a particular employer, located in a remote area, may consider it necessary to provide housing benefits to employees including the retention of existing employees or to make it more attractive for suitable potential employees to want take up employment with that particular employer. 10. Nonetheless, to satisfy the requirements of subparagraph 58ZC(2)(d)(iii) of the FBTAA, the reason that the employer finds it necessary to provide residential accommodation for employees must be because it was customary in the industry in which the recipient was employed to provide residential accommodation for their employees. 11. Taxation Determination TD 94/97 provides guidance on what the phrase 'customary for employers in the industry' means in relation to the provision of fringe benefits. TD 94/97 states: 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. 12. The Applicants have stated that they are aware of other businesses which are part of the same industry as Entity A in area A, and also in other like areas, that already provide remote area housing assistance to their employees and that the provision of such housing assistance is neither unique, rare or unusual within that specific industry located in remote areas. 13. Therefore, it is considered, based on the statements from the Applicants and in the absence of any evidence to the contrary, it can be concluded that the reason Entity A will find it necessary to provide residential accommodation for its employees is because it is customary in remote areas in the industry in which Entity A is engaged to provide residential accommodation for employees. 14. Consequently, where Entity A provides residential accommodation to its employees in respect of housing located in area A this will satisfy the requirements of subparagraph 58ZC(2)(d)(iii) of the FBTAA. 1. Section 60 of the FBTAA permits the reduction of the taxable values of various loan fringe benefits, expense payment fringe benefits and property fringe benefits related to remote area housing benefits. 2. Section 59 of the FBTAA permits the reduction of the taxable values of various expense payment fringe benefits, property fringe benefits and residual fringe benefits related to remote area residential fuel. Nonetheless, a primary requirement before the taxable values of the relevant fringe benefits in respect of remote area residential fuel are reduced is that the relevant recipient is also a recipient of remote area housing benefits. 3. However, not only must any applicable conditions listed in section 60 of the FBTAA be met before a reduction in the taxable values of the relevant fringe benefits is permitted the further applicable conditions related to remote area housing contained in section 142 of the FBTAA must also be met. 4. Each of the subsections of section 142 of the FBTAA require that the 'common conditions' set out in subsection 142(2E) of the FBTAA must be met. Subsection 142(2E) of the FBTAA states: 142(2E) [Common conditions] 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 or 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. 5. As it has already been determined above, at paragraph 13 of Question 1, that it is customary in industry to which Entity A belongs to provide residential accommodation for employees then, in the absence of any evidence to the contrary, it is considered that the requirements of paragraph 142(2E)(a) of the FBTAA will be met in this case. 6. For similar factual reasons as used above, at paragraph 6 of Question 1 in regard to subparagraphs 58ZC(2)(d)(i) and 58ZC(2)(d)(ii) of the FBTAA, it is considered that subparagraphs 142(2E)(b)(i) and 142(2E)(b)(ii) of the FBTAA will also not be met in this case. 7. Nonetheless, for similar reasons as used above at paragraph 13 of Question 1, it is considered that subparagraph 142(2E)(b)(iii) of the FBTAA will be met in this case as it can be concluded that it was necessary for Entity A to provide housing assistance for its employees because it is customary in remote areas in the industry in which Entity A is engaged to provide housing assistance for employees. 8. Therefore, if Entity A provides housing assistance to its employees in respect of housing located in area A this will satisfy the requirements of subsection 142(2E) of the FBTAA.