Private ruling: Remote area housing assistance
Published: September 2011
Ruling period: Year ending 31 March 2012

Ruling: Q1: For the purpose of applying subsection 142(2E) of the Fringe Benefits Tax Assessment Act 1986 to the expense payment fringe benefits that will arise from the reimbursement by the employer of housing loan interest incurred by its employees, is it customary in the industry in which the employer operates for employers to provide housing assistance to their employees as required by paragraph 142(2E)(a) of the Fringe Benefits Tax Assessment Act 1986 ? | A1: No | Q2: For the purpose of applying subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 , will the expense payment fringe benefits that will arise from the reimbursement by the employer of housing loan interest incurred by its employees be provided under an arrangement entered into for the purpose of enabling the employer to obtain the concession available under subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 ? | A2: Not necessary to answer | Q3: For the purpose of applying subsection 142(2E) of the Fringe Benefits Tax Assessment Act 1986 to the expense payment fringe benefits that will arise from the reimbursement by the employer of housing loan interest incurred by its employees, is it customary in the industry in which the employer operates for employers to provide housing assistance to their employees as required by subparagraph 142(2E)(a)(iii) of the Fringe Benefits Tax Assessment Act 1986 ? | A3: Not necessary to answer

Relevant facts and circumstances: The employer is proposing to enable existing and future employees who reside in a remote area, for the purposes of continuing employment with the employer, to receive a reimbursement of all or part of their expenditure incurred in respect of a remote area housing loan. The reimbursement will be made by way of an agreement involving an effective salary sacrifice arrangement (SSA) between the employer and eligible employees. An eligible employee may salary package the interest payments accrued on a housing loan provided: 1. The employee owns land on which there is a house 2. The employee lives in the house which is his or her usual place of residence 3. The employee has a housing loan with a bank 4. The loan was entered into to enable the employee to purchase the land and house 5. The employee is a current employee of the employer 6. The dwelling is situated in a 'remote area' 7. The usual place of employment is not in, or adjacent to, an eligible urban area 8. The loan is a 'remote area housing loan connected with a dwelling' as required by paragraph 60(2)(b) and subsection 142(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) 9. The employee incurs interest in relation to the housing loan 10. The employer reimburses all or part of the interest expense incurred 11. This reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(I) of the FBTAA, and 12. The terms of the SSA are agreed upon and documented before any benefits are paid and before the work is performed

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 subsection 60(2), | Fringe Benefits Tax Assessment Act 1986 subsection 142(1), | Fringe Benefits Tax Assessment Act 1986 subsection 142(2E) and | Fringe Benefits Tax Assessment Act 1986 subsection 142(3).

Reasons for decision: Summary: Subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) allows a reduction of the taxable value of an expense payment fringe benefit that arises from the payment of interest in respect of a remote area housing loan. A loan is a remote area housing loan if it meets the requirements of section 142 of the FBTAA. Paragraph 142(1)(d) of the FBTAA requires that the common conditions set out in subsection 142(2E) of the FBTAA are satisfied. The common condition under paragraph 142(2E)(a) is that it must be customary for employers in the industry in which the employees are employed to provide housing assistance for their employees. Under paragraph 142(3)(c) of the FBTAA references to housing assistance include the reimbursement of housing loan interest. Taxation Determination TD 94/97 explains the ATO view of the meaning of the phrase 'customary for employers in the industry' in relation to the provision of fringe benefits to employees. Paragraph 2 of TD 94/97 states: A benefit will be accepted as being customary in the industry where it is normal for employees of that class or job description in the 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. Paragraphs 3 and 4 of TD 94/97 consider how to define an employers industry. The ATO will accept categorisation based on any recognised industry classification system e.g. Australian and New Zealand Standard Industrial Classification (ANZSIC) codes and it will be open for an employer to argue that their operations fall within any of the four levels of classification that make up the structure of the ANZSIC codes. The employers business comes under a specific ANZSIC code which is the classification for professional services where the primary activities of the employer are concerned. The Commissioner of Taxation has not issued a listing of industries in which it would be considered customary for employers to provide housing assistance. However, the now withdrawn Taxation Ruling IT 67 provided examples of classes of employees whose employers would meet this requirement. IT 67 provided guidance on the former section 26AAAB of the Income Tax Assessment Act 1936 which concessionally treated subsidised housing in remote areas for employees where it was customary for employers in the particular industry to provide employees with free or subsidised accommodation. The examples listed were as follows: · miners · sugar mill employees · bank employees · police · prison employees · school teachers · hospital employees · farm workers · hotel and motel staff, and · civil engineering workers, e.g. on bridge or dam works. For housing assistance to be customary the need for the assistance would arise from the nature of the employment or the conditions under which the person is employed. For example, housing assistance would be customary in occupations which require employees to live at or near a work site or where employees could be directed by the employer to perform their duties at a new location. The employees of the employer are not employed in such circumstances and it is not normal, common or usual for employees in the employer's industry to be provided with housing assistance. Therefore, it is not customary in the employer's industry to provide employees of any particular class or job description with housing assistance. The 'customary for employers in the industry' condition in paragraph 142(2E)(a) of the FBTAA would not be satisfied in respect of the expense payment fringe benefits to be provided to employees of the employer. This means that the common conditions in subsection 142(2E) of the FBTAA will not be satisfied and the interest expenditure incurred by the employees of the employer will not be in respect of loans that meet the requirements of remote area housing loans under subsection 142(1) of the FBTAA. As the loans are not remote area housing loans under subsection 142(1) of the FBTAA, the employer will not be entitled to reduce the taxable value of the expense payment fringe benefits that will arise in relation to the reimbursement of home loan interest incurred by their employees under subsection 60(2) of the FBTAA. It is not necessary to answer this question as the employer would not be entitled to the reduction of the taxable value of the expense payment fringe benefits under subsection 60(2) of the FBTAA because of the answer to Question 1. For a loan to be a remote area housing loan under section 142 of the FBTAA, the common conditions under paragraphs (a) and (b) of subsection 142(2E) must be satisfied. As paragraph 142(2E)(a) is not satisfied it is not necessary to determine whether paragraph 142(2E)(b) is satisfied.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.