Private ruling: Fringe benefits tax: living-away-from-home or travel allowance
Published: December 2014
Ruling period: 1 July 2013 to 31 March 2017
Date scheme commenced: 1 July 2013

Ruling: Q1: Will a living-away-from-home allowance fringe benefit arise from the allowance paid to an employee required to perform employment duties at 15 different locations during a 10 month period? | A1: No

Relevant facts and circumstances: The employee is paid an allowance during a 10 month period in which the employee is required to be away from their normal residence while performing employment duties at 15 different locations. The allowance covers meals and incidentals. Accommodation for the employee is provided by the employer in hotels, motels or serviced apartments. Family members do not accompany the employees on tour. The period spent at each location varies between four days and five weeks. The most common period is 10 days. The employee's family members remained at home during the ten month period.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 30 | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Summary: Will a living-away-from-home allowance fringe benefit arise from the allowance paid to an employee required to perform employment duties at 15 different locations during a 10 month period? Under the arrangement the employer will pay its employees an allowance during the ten month period in which they are required to stay away from home while performing their employment duties at 15 different locations. In general terms, the taxation treatment of the allowance will depend upon whether the allowance is a living-away-from-home allowance. If the allowance is a living-away-from-home allowance fringe benefit the employer will be liable to pay the amount of the tax (if any) that arises from the payments. However, if the allowance is not a living-away-from-home fringe benefit, it is the employee who will be liable to pay the amount of the tax (if any)that arises from the payments. | Detailed Reasoning - Is the allowance a living-away-from-home allowance?: Section 30 of the FBTAA sets out the requirements for an allowance paid to an employee to be a living-away-from-home allowance benefit. Subsection 30(1) states: Where: (a) at a particular time, in respect of the employment of the employee of an employer, the employer pays an allowance to the employee; and (b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for: (i) additional expenses (not being deductible expenses) incurred by the employee during a period; or (ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period; by reason that the duties of that employment require the employee to live away from his or her normal residence; the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time. In applying paragraph 30(b) an allowance will not be a living-away-from-home allowance where it is paid for deductible expenses. For example, expenses incurred by an employee who is travelling. Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) contains guidelines for determining the circumstances in which an allowance paid to an employee is to be treated as a living-away-from-home allowance. Relevantly, MT 2030 explains at paragraphs 35 to 43 the principles that distinguish a travelling allowance from a living-away-from-home allowance. Paragraph 35 of MT 2030 states: 35. Because they are subject to different taxation treatments, it is important that living-away-from-home allowances are distinguished from travelling allowances paid to employees. Living-away-from-home allowances are taxable fringe benefits …, whereas travelling allowances form part of the employee's assessable income against which appropriate deductions may be allowed for the cost of meals, accommodation and incidental expenses incurred while the employee is travelling in the course of carrying out the duties of employment. Further, paragraphs 38 and 39 of MT 2030 state: 38. A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. In the former case, there is a change of job location and an actual change of residence to a place at or near that location. In the latter, the employee does not change job locations but simply travels in order to carry out the requirements of the job. 39. Travelling allowances are often paid for comparatively short periods, exceptions being allowances paid where the employment is inherently itinerant in nature or where travelling is a regular incident of the occupation, e.g., commercial travellers, travelling entertainers , etc. [emphasis added] Paragraphs 42 and 43 of MT 2030 consider the relevance of an employee being accompanied by his or her family: 42. An employee travelling in the course of employment ordinarily would not be accompanied by his or her spouse and family. On the other hand, it is more common for the spouse and children of an employee who has temporarily changed job locations and is living away from the usual place of residence to have his or her family living at the new location. 43. That is not to say that an unaccompanied employee should always be treated as travelling and an accompanied one regarded as living away from home. While those factors might be indicative of the nature of the employee's absence, the tests for determining the purpose of an allowance are as previously explained. [emphasis added] These factors are summarised in a table in part 11.12 of the ATO publication Fringe benefits tax: a guide for employers . | Detailed Reasoning - Travelling allowances: This is paid where an employee has taken up temporary residence away from their usual place of residence in order to carry out duties at a new, but temporary, workplace. This is paid because an employee is travelling in the course of performing their job. There is a change of job location in relation to paying the allowance. There is no change of job location in relation to paying the allowance. Where an employee is living away from home, it is more common for that employee to be accompanied by their spouse and family. Where an employee is travelling, they are generally not accompanied by their spouse and family. They are paid for longer periods. They are paid for short periods. In considering whether the allowance is a living-away-from-home allowance, the following factors are taken into account: • the allowance is paid for the period in which the employees are away from home performing their employment duties at a range of locations; • the employees only spend a short period of time at each location as the time spent at each location can vary between four days and five weeks. The usual time period is 10 days; • the employees can be away from home for up to 10 months of the year if they are fully booked; • the employees normally stay in short term accommodation in a hotel, motel or serviced apartment; • if the employees are away for a 10 month period they will perform their employment duties at 15 different locations; • family members do not accompany the employees; and • the employees maintain a home while they are away. Although the employees spend a considerable amount of time away from home (10 months), the other factors indicate that the employees are travelling to carry out the duties of their employment, rather than setting up temporary residence so as to be able to carry out employment duties at a new workplace. Therefore, in applying the principles in paragraphs 35 to 43 of MT 2030, the allowance is considered to be a travelling allowance, rather than a living-away-from-home allowance. | Detailed Reasoning - The taxation of a travelling allowance: As the allowance is not a living-away-from-home allowance, the employer will not be liable to pay fringe benefits tax on the allowance. However, the employer will need to consider whether it is necessary to withhold from the allowance and show the amount on the employee's payment summary. In general terms, a withholding obligation will not arise in relation to an allowance and it will not be necessary to show the allowance on an employee's payment summary if the allowance is paid for travel involving an overnight absence and is not more than the reasonable amount set by the Commissioner. Further information regarding the withholding and payment summary requirements that apply to a travel allowance can be obtained from: • the ATO publication Withholding from allowances; and • Taxation Ruling TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses. Both of these publications are available from the ATO website www.ato.gov.au.