Private ruling: FBT - remote area housing benefits
Date of advice: 22 December 2025
Published: 9 February 2026
Ruling period: Fringe Benefits Tax (FBT) Year Ended 31 March 20XX | FBT Year Ending 31 March 20XX | FBT Year Ending 31 March 20XX | FBT Year Ending 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Will the payments of interest on Loan 2, provided via the salary packaging arrangement, give rise to an expense payment benefit under section 20 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes. | Q2: Will Loan 2 be a housing loan relating to a dwelling under subsection 141(1) of the FBTAA, because it will be used 'wholly' for a relevant purpose? | A2: Yes. | Q3: Will Loan 2 be a 'remote area housing loan' for the purposes of subsection 142(1) of the FBTAA? | A3: Yes. | Q4: Will the employer be entitled to claim a 50% reduction in the taxable value of the expense payment fringe benefit, as it relates to interest in respect of Loan 2, under subsection 60(2) of the FBTAA? | A4: Yes.

Relevant facts and circumstances: The Employer employs staff who work in a remote area. Many roles offered by the Employer require specialist skills and qualifications. Being in a remote area means that the Employer has difficulty attracting qualified staff from the local area. It is customary in the industry to provide remote-area related benefits to attract and retain staff. Accordingly, the Employer allows certain employees to salary package benefits. The provision of the benefits is administered by a salary packaging provider (the Provider). The available benefits include payments of interest on a housing loan used to purchase a dwelling located in a remote area and used as an employee's usual place of residence. The Employee was employed by the Employer, to work in a remote area. The Employee was allowed to salary sacrifice some remote-area related benefits. The Employee purchased a property for $X with their spouse, prior to commencing in their role with the employer. The property was purchased with a mortgage obtained through an arm's length Lender. The property has since been used as the Employee's usual place of residence. After commencing employment, the Employee separated from their spouse and the property became part of a property settlement subject to an order by the Family Court of Australia. The Employee re-mortgaged the property with the Lender in order to purchase it outright on their own. The new mortgage amount was $X which included a payment of $X to their spouse for their share in the property. After the re-mortgage and repurchase of the property under the Family Law Act, the Employee salary packaged the interest portion of the loan repayments. The salary packaging arrangement gave rise to an expense payment fringe benefit. The Employer was eligible for a reduction in taxable value in respect of the benefit, under subsection 60(2) of the FBTAA. On three occasions (after the re-mortgage), the Employee inadvertently moved money from their mortgage account. The total amount of $X was used for a purpose that was not relevant to the purchase of the house. The money was transferred back to the mortgage account as soon as the Employee realised their mistake. However, the Provider advised the Employee that by moving the amounts, the loan was now not wholly related to the purchase of the remote area property. Consequently, the Employee's claim in relation to the interest could not be approved. The Employee's current mortgage balance is $X. They are proposing that they refinance the current mortgage into two loans: Loan 1 - will be for the redrawn amounts, which total $X Loan 2 - will be for the remaining cost of purchasing the property, which totals $X. The lender will keep separate accounts for the loans. The Lender and the Employee will deal with each other at arm's length, in relation to any loans made. Assumptions The proposed refinancing into two separate loans, one for the redraw amount and one for the property purchase, assumes that this structure will restore compliance with the "wholly related" requirement. The employer also assumes that all dealings between the employee and the lender will remain at arm's length, ensuring the integrity of the arrangement and continued eligibility for the remote-area benefit.

Relevant legislative provisions: Fringe Benefit Tax Assessment Act 1986, section 20 | Fringe Benefit Tax Assessment Act 1986, subsection 60(2) | Fringe Benefit Tax Assessment Act 1986 , subsection 136(1) | Fringe Benefit Tax Assessment Act 1986 , subsection 141(1) | Fringe Benefit Tax Assessment Act 1986, subsection 142(1) Detailed reasoning | The Employer employs staff who work in a remote area. In order to attract and retain staff the Employer allows certain employees to salary package benefits. The provision of the benefits is administered by the Salary Packaging Provider. The benefits that can be packaged by an employee include payments of interest on a housing loan, used to purchase a dwelling located in the remote area. Interest payments on a housing loan is expenditure that covers the cost of borrowing the money, and is an obligation incurred by the employee. Under the salary packaging arrangement, the Provider will pay the amount of interest expenditure due and will then be reimbursed by the Employer. A payment that discharges an obligation incurred by an employee may give rise to an expense payment benefit. | Expense Payment Benefits | An expense payment benefit is defined in section 20 of the FBTAA: | 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 to another person (in this section referred to as the recipient ) to may 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. | An expense payment benefit arises where a provider either makes a payment to discharge an obligation, or reimburses an amount incurred. The Employee currently has a remote area housing loan and has incurred an obligation to make loan repayments, including interest charges. The mortgage is in relation to a dwelling that the Employee initially purchased with their spouse, for $X. The property became part of a property settlement subject to an order by the Family Court of Australia. To purchase the property outright on their own, the Employee obtained a loan of $X which included a payment of $X to their spouse for their share in the property. | After the Employee withdrew amounts totalling $X it was determined that the loan was not wholly related to the purchase of the remote area property. The Employee is proposing to refinance the current housing loan into new two loans: | • Loan 1 - will be for the redrawn amounts, which total $X | • Loan 2 - will be for the remaining cost of purchasing the property, which totals $X. | The repayments that are required to be made on the new loans, will be considered to be obligations incurred by the Employee. The loan relating to the cost of purchasing the property is Loan 2. In terms of the salary packaging arrangement, the relevant obligation incurred (i.e. the benefit provided), will be the interest portion of Loan 2. | Pursuant to the arrangement the Provider as a third party, will pay the interest expense, on Loan 2. By paying the expense the Provider will discharge the obligation incurred by the Employee. The Employer will then reimburse the Provider for the amounts that are paid. As the payments will discharge an obligation incurred by the Employee, the Employee is considered to be the recipient of an expense payment benefit. If an expense payment meets the requirements of a fringe benefit, it will be an expense payment fringe benefit. | General principles | Fringe Benefit | A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which requires, 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: | (ii) their employer; or | (iii) an associate of the employer; or | (iv) 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 | (v) 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 | (c) an arrangement for or in relation to lending of money | The definition of 'provide' and 'provider' in subsection 136(1) of FBTAA are as follows: | 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. | 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 (TAA). The benefits provided meet the definition of 'benefit' in subsection 136(1) and 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. | The phrase 'in respect of' in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, for or in relation directly or indirectly to, that employment'. | The meaning of this phrase was considered by the Federal Court in J & G Knowles v. Federal Commissioner of Taxation [2002] 96 FCR 402; 2000 ATC 4151; 44 ATR 22 ( Knowles ) and Starrim Pty Ltd v. Federal Commissioner of Taxation [2000] FCA 952; 2000 ATC 4460; 44 ATR 487 ( Starrim ). | In Knowles the Full Federal Court considered the judgements in Smith v. FCT (1987) 164 CLR 513; 19 ATR 274; 87 ATC 4883 and Federal Commissioner of Taxation v. Rowe (1995) 60 FCR 99; 31 ATR 392; 95 ATC 4691 before concluding that it is not sufficient for the purposes of the FBTAA to conclude that there is a causal connection between the benefit and the employment. | At paragraph 26 the Court said: | Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material, rather than a, causal connection or relationship between the benefit and the employment. | The Employer employs staff to work in a remote area. The Employer has difficulty attracting staff with the necessary specialist skills and qualifications. They offer remote-area related benefits to attract and retain the staff they require. Benefits relating to payments of interest on a housing loan are provided to enable an employee to purchase a dwelling located in the remote area where they will perform their employment duties. The dwelling will used as the employee's usual place of residence. | It is considered that the particular benefits provided to the employees are sufficiently and materially connected, to their employment, and as such, are considered to be 'in respect of' their employment. Therefore, this condition is satisfied. | Is the benefit excluded from the definition of a fringe benefit? | A benefit which comes within paragraphs (f) and (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'. These paragraphs are not considered to be relevant in this case. There are also a number of exemptions in respect of expense payment benefits, available under sections 20A, 21 and 22. None of these exemptions are considered to be relevant to the Employee's circumstances. | Conclusion | The payments of interest on Loan 2, provided under the salary packaging agreement, are expense payment benefits. All of the conditions for a fringe benefit are satisfied in respect of the benefits; therefore an expense payment fringe benefit will arise in respect of these amounts. | Question 2 | Will Loan 2 be a housing loan relating to a dwelling under subsection 141(1) of the FBTAA, because it will be used 'wholly' for a relevant purpose? | Answer | Yes. | Summary | Loan 2 will meet the relevant conditions to be a housing loan relating to a dwelling under subsection 141(1) of the FBTAA. It is considered that it will be used 'wholly' for a relevant purpose because the expenditure incurred by the employee in repaying the mortgage will be wholly to enable the employee to acquire an estate or interest in land on which there was a dwelling. | Detailed reasoning | As determined above, the payments of interest on the Employee's housing loan will give rise to an expense payment fringe benefit. Fringes benefits tax (FBT) may be payable by the Employer on the taxable value of these benefits. Section 60 of the FBTAA provides a reduction in taxable value in relation to certain remote area housing benefits. Subsection 60(2) specifically deals with remote area interest payments or reimbursements. Broadly, the payment or reimbursement of interest on a loan provided to an employee to purchase a dwelling located in a remote area and used as their usual place of residence can be subject to a 50% reduction in taxable value. | One of the conditions specified under paragraph 60(1)(b) is that the loan is a "remote area housing loan connected with a dwelling". Subsection 141(1) of the FBTAA defines a 'housing loan'. This definition is relevant to the definition of a 'remote area housing loan' in subsection 142(1). The first step in considering if section 60 will apply is to determine if the loan is a housing loan relating to a dwelling for the purposes of subsection 141(1). | Section 141 - Housing loans, prescribed interests in land or stratum units and proprietary rights in respect of dwellings | Section 141 sets out the circumstances in which a loan is taken to be a housing loan for the purposes of the FBTAA. Subsection 141(1) requires that the loan moneys be used wholly for the relevant purpose, which includes: | • Acquisition of a prescribed interest in land on which a dwelling will be constructed; | • Construction or completion of construction of a dwelling on land in which the taxpayer held a prescribed interest; | • Acquisition of land on which there was a dwelling; | • Acquisition of an interest in a stratum unit, flat or home unit; | • Extension of a dwelling, by adding a room or part of a room to the dwelling; | • Repayment of a loan used wholly for one of the requisite purposes. | Paragraph 141(1)(b) specifies that it is also a condition that the dwelling must be used or proposed to be used as the person's usual place of residence at the time the loan was made. | Subsection 141(2) specifies what is a prescribed interest in land or in a stratum unit and also what constitutes a proprietary right in respect of a dwelling. This includes the owner of an estate in fee simple and lessees or licensees, where the lease or licence gives the lessee or licensee reasonable security of tenure for at least 10 years. The estate or interest may be owned singly or with others and it may be owned directly or as a result of a shareholding in a company. It also includes situations where the purchase price of the estate or interest is made by instalments over a period. | Paragraph 141(2)(c) specifies that a loan will not qualify as a housing loan where the lender does not maintain a separate account in respect of that housing loan. That is, if a single loan is used for both a relevant purpose and a non-relevant purpose (e.g. for painting and repairs), it is considered that the loan is not used wholly for a relevant purpose and therefore it would not be a housing loan in terms of section 141. | Application to facts | The Employee purchased a property for $X with their spouse, prior to commencing in their role with the Employer. After commencing employment, the Employee separated from their spouse and the property became part of a property settlement subject to an order by the Family Court of Australia. | The Employee re-mortgaged the property in order to purchase it outright on their own. The new mortgage amount was $X which included a payment of $X to their spouse for their share in the property. After the re-mortgage and repurchase of the property under the Family Law Act, the Employee salary packaged the interest portion of the loan repayments. The Employee was eligible to salary package because the mortgage on the property, was considered to be a housing loan relating to a dwelling 'wholly' for the purposes of subsection 141(1). On three occasions (after the re-mortgage), the Employee inadvertently moved money from their mortgage account. The total amount of $X was used for a purpose that was not relevant to the purchase of the house. The money was transferred back to the mortgage account as soon as the Employee realised their mistake. However, the Provider advised the Employee that by moving the amounts, the loan was now not 'wholly' related to the purchase of the remote area property. This decision by the Provider is considered to be in keeping with Australian Taxation Office (ATO) views on drawdowns or redraws and the circumstances in which section 141 would no longer be satisfied. | The views are supported by the explanatory material to the Fringe Benefits Tax Assessment Bill which makes it clear that in relation to paragraph 141(2)(c), a loan that would otherwise be a housing loan relating to a dwelling will not be treated as such if the lender does not keep a separate loan account so as to clearly distinguish between the loan and any other loans made by the lender to the borrower and any other moneys deposited by the lender to the borrower that are not to repay the loan or the loan interest. | The Employee in this case, was able to move money from their mortgage account because their loan facility allowed for redraws of extra repayments. In considering the impact of drawdowns or redraws in the context of subsection 141(1), the principles set out in Taxation Ruling TR 2002 Income tax: deductibility of interest on moneys drawn down under line of credit facilities and redraw facilities are relevant. In applying these principals, it is necessary for a redraw to be applied to one of qualifying purposes in paragraph 141(1)(a). In the circumstances, the Employee used the single loan for a relevant purpose and a non-relevant purpose. In such circumstances the loan could not have been said to have been used wholly for a relevant purpose. The loan was therefore no longer a subsection 141(1) housing loan, and the interest expense that was salary packaged was no longer 'remote area housing loan interest'. | The Employee is proposing to refinance the current housing loan so that it is split into new two loans: | • Loan 1 - will be for the redrawn amounts, which total $X | • Loan 2 - will be for the remaining cost of purchasing the property, which totals $X. | By refinancing, there will no longer be a single loan used for both a relevant purpose and a non-relevant purpose. Loan 2 will be used to pay for the remaining cost of purchasing the property, which is a dwelling is used by the Employee as their usual place of residence. The lender will keep separate accounts for the loans. As highlighted above, having separate loan accounts will enable the lender and borrower to clearly distinguish between the two different loans. It is accepted that the other section 141 requirements will still be satisfied. | Conclusion | Loan 2 will be used 'wholly' for a relevant purpose because the expenditure incurred by the employee in repaying the mortgage will be wholly to enable the employee to acquire an estate or interest in land on which there was a dwelling. Loan 2 will therefore, be considered to be a housing loan relating to a dwelling under subsection 141(1) of the FBTAA. The interest expense payments that are salary packaged will be interest payments on a housing loan in relation to a dwelling under subsection 141(1). | Question 3 | Is Loan 2 a 'remote area housing loan' for the purposes of subsection 142(1) of the FBTAA? | Answer | Yes. | Detailed Reasoning | It was determined above that Loan 2 will be a "housing loan relating to a dwelling"; subsection 142(1) of the FBTAA sets out the criteria that must be satisfied for Loan 2 to also be considered a "'remote area housing loan connected with a dwelling". Subsection 142(1) of the FBTAA provides: | [Remote area housing loan] | In this Act, a reference, in relation to 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 their 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) | Each of these conditions will be considered below. | Paragraph 142(1)(a) | The Employer employs staff to work in remote areas. The Employer attracts and retains staff by allowing them to salary package remote-area related benefits. The available benefits include payments of interest on a housing loan used to purchase a dwelling located in the remote area and used as an employee's usual place of residence. The Employee in this case purchased a property in a remote area and was eligible to salary package the interest expenditure in relation to the loan until, a redraw amount was used for a non-relevant purpose. | Loan 2 will be a housing loan for the remaining cost of purchasing the property. It is accepted that the paragraph 142(1)(a) conditions will be satisfied as: the Employee has continued in their role and is therefore working in a remote location as a current employee of the Employer; and the property that is in the remote location continues to be their usual place of residence. | Paragraph 142(1)(b) | The 'common conditions' as set out in subsection 142(2E) of the FBTAA are: | 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. | The Employer employs staff who work in a remote area. Many roles offered by the Employer require specialist skills and qualifications. Being in a remote area means the Employer has difficulty attracting qualified staff from the local area. It is customary in the industry to provide remote-area related benefits to attract and retain staff. Accordingly, the Employer allows certain employees to salary package benefits, including housing assistance benefits such as payments of interest on a home loan. | The Employee was employed to work in a remote area. They were eligible for remote-area related benefits; prior to commencing the role, they purchased a dwelling that is used as their usual place of residence. Loan 2 will enable the Employee to pay for the remaining cost of purchasing the property. It is accepted that the 'common conditions' in subsection 142(2E) of the FBTAA will be satisfied. And as such, paragraph 142(1)(b) of the FBTAA will be satisfied. | Paragraph 142(1)(d) | An arm's length loan means a loan where the parties to the loan are dealing with each other at arm's length in relation to the loan. The expression at arm's length is defined in The CCH Macquarie Concise Dictionary of Modern Law , 1988, CCH Australia Ltd/Macquarie Library Pty Ltd, Sydney as meaning that the parties to a transaction are not connected in such a way as to bring into question the ability of one to act independently of the other. | In this case, the property was purchased with a mortgage obtained through an arm's length Lender. The Employee is planning to refinance the current mortgage; Loan 2 will be used for the remaining cost of purchasing the property. The Lender and the Employee will continue to deal with each other at arm's length, in relation to any loans made. It is accepted that paragraph 142(1)(d) of the FBTAA will be satisfied. | Conclusion | All of the conditions in 142(1) are satisfied therefore, Loan 2 will be a housing loan that it is considered to be a remote area housing loan. The Loan 2 interest payments will be in relation to a housing loan that it is considered to be a remote area housing loan | Question 4 | Will the employer be entitled to claim a 50% reduction in the taxable value of the expense payment fringe benefit, as it relates to interest in respect of Loan 2, under subsection 60(2) of the FBTAA? | Answer | Yes. | Detailed reasoning | Subsection 60(2) Interest on a loan | Subsection 60(2) of the FBTAA provides a reduction of 50% of the taxable value of the fringe benefit in respect of the payment or reimbursement of interest on a loan provided to an employee to purchase a dwelling located in a remote area and used as their usual place of residence. To qualify for this reduction, the requirements under subsection 60(2) of the FBTAA must be satisfied. | 60(2) [Recipient of expense payment fringe benefit] 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 recipient's 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 dwelling as his or their usual place of residence during (in this section referred to as 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 that amount as relates to the occupation period. | Each subsection will be discussed below. | Paragraph 60(2)(a) | The Employer provides remote-area related benefits to attract and retain staff. The benefits are salary packaged; the provision of the benefits is administered by the Provider. The available benefits include payments of interest on a housing loan used to purchase a dwelling located in a remote area and used as an employee's usual place of residence. As discussed in Question 1, the payment or reimbursement of interest payments will give rise to an expense payment fringe benefit. | The Employee will be able to salary package the interest payments on Loan 2, which is considered to be a remote area housing loan. The Employee will therefore be a recipient of an expense payment fringe benefit. The requirement will be satisfied. | Paragraph 60(2)(b) | As discussed in Questions 2 and 3 above, Loan 2 will be a housing loan relating to a dwelling under subsection 141(1); and it will also be a 'remote area housing loan connected with a dwelling' under subsection 142(1) of the FBTAA. The Employee's expenditure will be in respect of interest for Loan 2 therefore, the requirements of this paragraph will be satisfied. | Paragraph 60(2) (c) | The recipient is required to have occupied or used the dwelling as his or their usual place of residence during an occupation period during which the interest accrued. The Employee was employed to work in a remote area and then purchased the property prior to commencing their role. They have occupied the dwelling as their usual place of residence; interest has continued to accrue during this period. The requirements of this paragraph are met. | Paragraph 60(2)(d) | As discussed above under Question 3, the property was originally purchased with a mortgage obtained through an arm's length Lender. Loan 2 which will be used for the remaining cost of purchasing the property will also be considered to be an arm's length loan as the Lender and the Employee will be continuing to deal with each other at arm's length. | The Employee intends to salary package the interest expenses relating to Loan 2. Under this arrangement, the Provider will pay the amount of interest expenditure due and will then be reimbursed by the Employer. As discussed in Question 1, this will give rise to an expense payment fringe benefit. | It is accepted that it is customary in the industry to provide remote-area related benefits to attract and retain staff. The Employer allows qualifying staff to salary package benefits, such as home loan interest repayments. The provision of benefits is considered to be granted under an arm's length arrangement even though the Employer and the employees are not at arm's length. | The provision of the benefits is administered by a third-party salary packaging provider. It is considered that the Employer and the Provider behave in the manner in which parties at arm's length would be expected to behave in conducting their affairs. As such, it is considered that allowing the Employee to salary package their housing loan interest is an arm's length arrangement. The transactions involving the Employer reimbursing the Provider for paying the interest expenses incurred by the Employee are considered to be arm's length transactions. The benefits are not provided to the Employee under a non-arm's length arrangement. The requirements of this paragraph are met. | Conclusion | If the Employee salary packages the interest payments in relation to Loan 2, this will give rise to an expense payment fringe benefit. The Employee will be the recipient of an expense payment fringe benefit that satisfies all of the requirements of subsection 60(2) of the FBTAA. Accordingly, the taxable value of the fringe benefit will be eligible for the 50% reduction.