Private ruling: LAFHA - short term assignment - overseas workers
Date of advice: 9 August 2024
Published: 23 September 2024
Ruling period: Year ended 31 March 20XX | Year ended 31 March 20XX | Year ended 31 March 20XX | Year ended 31 March 20XX | Year ended 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Is the per diem allowance paid to employees under each category arrangement considered to be a living-away-from-home-allowance (LAFHA) for the purposes of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Category 1: No Category 2: No Category 3: No Category 4: No Category 5: No Category 6: No Category 7a: Yes Category 7b: Yes Category 7c: Yes Category 7d: Yes | Q2: If the answer to question 1 is no, is the per diem allowance subject to pay-as-you-go-withholding (PAYGW) and reportable through Single Touch Payroll? | A2: No. | Q3: Is the provision of accommodation to employees under each category of arrangement a residual benefit to which the "otherwise deductible rule" in section 52 of the FBTAA applies to reduce the taxable value of the benefit to nil? | A3: Category 1: Yes Category 2: Yes Category 3: Yes Category 4: Yes Category 5: Yes Category 6: Yes Category 7a: No Category 7b: No Category 7c: No Category 7d: No

Relevant facts and circumstances: Background 1. Employer A would send employees to Australia to assist with the delivery of key projects. 2. These projects require the technical expertise and industry experience that may not be available at the project's location. 3. These employees are usually sent to Australia from Employer A on a short-term assignment (STA), under a range of different assignment arrangements. 4. Each of the STA arrangements are detailed below: Table 1: Each of the short-term assignment (STA) arrangements are detailed below: Category Duration in Australia Details 1 2 - 3 weeks every 3 months Employees performing "peer review" roles on projects, required to attend only at project milestones. 2 2 - 6 weeks Employees visiting Australia to either: 3 2 - 3 weeks Employees visiting Australia for meetings or forums. 4 2 - 6 weeks Employees attending and inputting on short term projects, towards specific project milestones. 5 3 - 8 weeks Employees who are required to oversee internal business or operational meetings where proprietary knowledge is required. 6 6 weeks - 3 months Employees attending and inputting on short term projects, towards specific project milestones. 7 7a - 3 months 7b - 4 months 7c - 5 months 7d - 6 months Employees required to assist with resourcing. This occurs where the employee supplies skills which are required in the short-medium term aspects. 5. In all cases, employees on STA are maintaining a home outside of Australia. 6. The employee's home country manager continues to undertake performance reviews. 7. While the employees are in Australia, they remain subject to their home country travel policy, code of conduct, and short-term assignment guidance. 8. Employees on STA are not encouraged to bring personal belongings and are not provided with allowances or reimbursements for additional luggage or shipping of personal effect to Australia. 9. Employees on STA do not own or acquire cars or other substantial furniture in Australia. 10. While on assignment in Australia, the majority of employees on STA are working towards the delivery of Australian projects. 11. Employees on STA do not actively make social or economic ties while in Australia. 12. Employees are provided an invitation letter upon the commencement of their STA. This letter is issued for immigration purposes and specifies that the employees' Employer A employment agreement remains active while on STA. Allowances 13. Employees remain on their home country's payroll. 14. Employer B pays a per diem allowance of AUD$XX to cover meals and incidentals to the above categories of employees. 15. Employer B pay the allowance and provides: • accommodation • return flights; and • travel expenses, including transfers to/from the airport and local public transport to/from the accommodation and Employer B's office, if required. 16. The allowance is expected to be fully expended. 17. Employees are not paid a per diem allowance on non-working/personal days, other than weekends. 18. Where an employee has personal/ non-workdays in Australia, Employer B does not meet any of the costs in respect of private days. Accommodation 19. Serviced accommodation is booked and paid for by Employer B. 20. Family do not accompany the employees on STA. Assumption This decision is only applicable to employees on short-term visits in Australia, who are treated as being taxable under Australian taxation law. For these employees, you have confirmed Employer B is the "employer" for the purposes of the short-term visit exception, as per Taxation Ruling TR 2013/1 Income tax: the identification of 'employer' for the purposes of the short-term visit exception under the Income from Employment Article, or it's equivalent, of Australia's tax treaties.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 20 | Fringe Benefits Tax Assessment Act 1986 section 21 | Fringe Benefits Tax Assessment Act 1986 section 23 | Fringe Benefits Tax Assessment Act 1986 section 24 | Fringe Benefits Tax Assessment Act 1986 section 30 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 section 47 | Fringe Benefits Tax Assessment Act 1986 section 52 | Fringe Benefits Tax Assessment Act 1986 section 136 | Income Tax Assessment Act 1997 section 8-1 Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances and living-away-from-home allowances. | Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? | Taxation Ruling TR 2013/1 Income tax: the identification of "employer" for the purposes of the short-term visit exception under the Income from Employment Article, or its equivalent, of Australia's tax treaties.

Reasons for decision: Detailed Reasoning - Detailed reasoning: 1. A "fringe benefit" is defined in subsection 136(1) of the FBTAA, which requires the following conditions to be satisfied: i. A benefit is provided at any time during the year of tax. ii. The benefit is provided to an employee or an associate of the employee iii. The benefit is provided by: 1. Their employer: or 2. An associate of the employer; or 3. 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 4. 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. iv. The benefit is provided in respect of the employment of the employee. v. The benefit is not one that is specifically excluded as per paragraph (f) to (s) of the definition of a fringe benefit in subsection 136(1). | Detailed Reasoning - A benefit is provided to an employee or an associate of an employee: 2. 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. 3. "Salary or wages", as defined in subsection 136(1) of the FBTAA, means a payment from which an amount must be withheld under section 12-47 of Schedule 1 to the Taxation Administration Act 1953. 4. Whilst the employees are in Australia, they remain on their home country's payroll. Where the employees are taxable in Australia, you have advised Employer B is the "employer" for the purposes of the short-term visit exception, as per Taxation Ruling TR 2013/1. 5. Therefore, this condition is met. | Detailed Reasoning - A benefit is provided: 6. A benefit is broadly defined in subsection 136(1) of the FBTAA 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: An arrangement for or in relation to: • The performance of work (including work for a professional nature), whether with or without the provision of property: • The provision of, or of the use of facilities for, entertainment, recreation, or instruction; or • The conferring of rights, benefits, or privileges for which renumeration is payable in the form of a royalty, tribute, levy or similar extraction i. A contract of insurance; or ii. An arrangement for or in relation to the lending of money. 7. Subsection 136(1) of the FBTAA defines "provide" an "provider" as follows: Provide: vi. In relation to a benefit - includes allow, confer, give, grant, or perform; and Provider: vii. in relation to a benefit, means the person who provides the benefit. 8. Employer B provides employees with a benefit of a per diem allowance. This condition is satisfied. | Detailed Reasoning - In respect of employment: 9. "Employee" is defined in section 136 of the FBTAA as a current, former, or future employee. 10. The employees are "employees" of Employer A because they receive "salary or wages" as defined under subsection 136(1). Employer B is an associate of Employer A. 11. The employees and Employer B are dealing with each other in the capacity of employees and employer while the employees are on assignment in Australia (see paragraph 4). It is considered that the per diem allowance provided to employees is sufficiently connected to their employment and is, "in respect of" their employment. This condition is satisfied. | Detailed Reasoning - Living-away-from-home allowance and whether benefit excluded from the definition of a fringe benefit: 12. Section 136 of the FBTAA defines a living-away-from-home-allowance (LAFHA) benefit as a benefit referred to in section 30 of the FBTAA. 13. Subsection 30(1) of the FBTAA sets out the circumstances where an allowance paid by an employer to an employee will qualify as a LAFHA benefit to an employee and states: Where: viii. At a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and ix. It would be concluded that the whole or part of the allowance is compensation to the employee for: 1. Additional expenses (not being deductible expenses) incurred by the employee during a period; 2. 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. 14. As per paragraph 10, the first condition of subsection 30(1) of the FBTAA is satisfied. 15. To determine whether the benefit is a fringe benefit and more specifically a LAFHA benefit it needs to be determined if the benefit is an excluded benefit i.e. a travel allowance. Determining this addresses the second condition of subsection 30(1) of the FBTAA as to whether the expenses are non-deductible. | Detailed Reasoning - LAFHA vs Travel Allowance: 16. An allowance will be a LAFHA benefit where it would be concluded that some or all of the allowance is, in the nature of compensation to an employee, for: a. Additional expenses (not being deductible expenses) incurred by an employee, or b. Additional expenses (not being deductible expenses) incurred by the employee and other additional disadvantages to which an employee is subject, Because the employee is required to live away from their normal residence in order to perform duties of their employment. As a LAFHA is a fringe benefit, it is non-assessable non-exempt income in the hand of the employee. 17. Taxation Ruling 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances and living-away-from-home allowances (TR 2021/4) provides guidance on the difference between travel allowances and LAFHA. 18. Per paragraph 130 of TR 2021/4, the main difference between a travel allowance and a LAFHA is that a: i. Travel allowance can only be paid to cover deductible accommodation and food and drink expenses and incidental expenses incurred by an employee when they are travelling on work ii. LAFHA is paid to provide compensation to an employee for the additional living expenses incurred by an employee because their duties of employment require them to live at a location away from their usual residence. 19. An allowance is assessable under the Income Tax Assessment Act 1997 and may be subject to PAYG withholding obligations where: • it is a travel allowance and not a LAFHA fringe benefit, and • it is a travel allowance which does not meet the relevant exceptions. If the allowance is assessable, the deductibility of the expenses needs to be considered. 20. Paragraph 133 of TR 2021/4 further states, to determine whether an allowance is a travel allowance or a LAFHA, it is first necessary to determine what expenditure the allowance is designed to cover or compensate an employee for and whether those expenses are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Usual residence: 21. Subsection 136(1) of the FBTAA defines, "normal residence" as the employee's usual place of residence, when an employee's usual place of residence in in Australia. 22. The FBTAA does not provide a definition for the term, "usual place of residence". 23. Subsection 136(1) of the FBTAA defines, "place of residence" in relation to a person as: iii. A place at which a person resides; or iv. A place at which the person has sleeping accommodation; Whether on a permanent or temporary basis and whether or not on a shared basis. 24. It is relevant to refer to the ordinary meaning of the word, "usual" when there is an absence of a legislative reference. The Macquarie Dictionary defines, "usual" to mean, "habitual or customary...". 25. Considering the above, an employee's permanent principal place of residence is the employee's usual place of residence. | Detailed Reasoning - Travelling on work vs living expenses: 26. For an expenses to be deductible under section 8-1 of the ITAA 1997, the expense must be sufficiently linked to the performance of employment duties and activities through which the employee earns income. A general link or casual connection between the expense and the production of income is not enough to demonstrate a link. Accommodation, food and drink expenses must be incurred directly because of the employees' work duties, rather than incidental to the duties themselves. 27. Paragraph 24 of TR 2021/4 provides, if any of the following factors apply, the employee will not be travelling on work and the accommodation, food and drink expenses incurred will be living expenses: v. The expenses are incurred because the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income vi. The employee incurs the expenses because they are living at a location vii. The employee incurs the expenses as a result of relocating from their usual residence | Detailed Reasoning - Personal Circumstances: 28. An employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. Expenses incurred for this reason are living expenses and are not deductible. 29. Employer A have provided a template employment contract. That contract stipulates: "You may be required to travel and work both within and outside XXXXX from time to time and you must maintain an up-to-date passport in order to so. There is no current requirement for you to work outside XXXXX for more than a period of one month, and further particulars shall be given to you in the event that such requirement arises." 30. Therefore, it is a work requirement and not their personal circumstances that require employees on STA to stay away from their usual residence and it is not only the fact they must stay overnight away from their usual residence to earn their assessable income, but also their "income-producing activities" or "work activities" which require them to do so. | Detailed Reasoning - Relocation: 31. Where an employee has relocated for work, the cost of accommodation and food and drink will be living expenses; regardless of whether moving to the new location is required by the employer or the work. 32. The application states the employees of Employer A maintain their normal residence during the period of their assignment to Australia and will return to that location at the end of the assignment. | Detailed Reasoning - Living at a location: 33. Paragraph 42 of TR 2021/4 states the following factors support a characterisation of an employee as living at a location away from their usual residence: • There is a change in the employee's regular place of work • The length of the overall period the employee will be away from their usual residence is a relatively long one • The nature of the accommodation is such that it becomes their usual residence • Whether the employee is, or can be, accompanied by family or visited by family and friends. 34. No single factor is decisive in determining if an employee is living at a location and all factors should be considered. Reaching a conclusion as to whether an employee is living at a location away from their usual residence is a matter of judgement which requires an assessment based on consideration of all the factors. 35. Consideration should also be given to the following matters: • The nature of the employment. A briefer period may be sufficient in the context of a short-term contract rather than ongoing employment. • The frequency at which the employee attends the workplace. Attending a location once a fortnight for four months would not usually be sufficient to establish a location as a regular place of work. • Whether any element of choice on the part of the employee is influential such as the choice of where to live, and • Whether the travel to a new workplace occurs when the employee is on work time, or substantively under the direction or control of the employer. This would tend to support the characterisation of the travel to the location as being part of the employment rather than a prerequisite to travel to another place of work. 36. Paragraph 25 of Taxation Ruling 2021/1 Income tax: when are deductions allowed for employees' transport expenses? (TR2021/1) states: "Most employees have a regular place of work, this being the normal or usual place where the employee starts and finishes their work duties with a particular employer." 37. Paragraph 26 of TR 2021/1 continues: "In most cases, identifying an employee's regular place of work is clear. In circumstances where it is not clear, it may be necessary to consider in more depth the contract of employment, the nature of the work duties, where these duties commence and at what point the employee is under the direction and control of their employer to determine where the employee's regular place of work is." 38. Where there is a change in the employee's regular place of work and the employee incurs accommodation and food and drink expenses to be closer to their new regular place of work, the employee will be living at that new location away from their usual residence. In these circumstances, the expenses incurred are living expenses and are not deductible. 39. In this case, the employees are attending a work location in Australian for varying lengths of time. The XXXXX Short Term Assignment (STA) Guide defines a short-term assignment as: "An international assignment of over one month but less than 6 months in duration." The provided template employment contract stipulates that: "There is currently no requirement for you to work outside XXXXX for more than a period of one month, and further particulars shall be given to you in the event such requirements arise." Given the time frame stipulated in the employment contract, the STA guide definition and the assignment categories, it is considered there has been a change in the regular place of work in some but not all categories. Consideration needs to be given to the circumstances. | Detailed Reasoning - Length of period away from their residence: 40. The 'length of period away' means the overall period of time the employee spends living at a particular location for work. Where an employee is living at one location for work for an extended period, that period is not broken by short trips they take from that location, for example travelling back to their usual residence on weekends or when travelling on work from that location. Generally, the longer an employee spends away from their usual residence for work, the more likely the employee is living at the location. 41. The length of time an employee is on assignment in Australian varies as per the categories outlined under Background. Each category of stay will be discussed below . | Detailed Reasoning - The nature of the accommodation: 42. The nature of an employee's accommodation is relevant but does not determine whether the employee is living at a location away from their usual residence. Generally, where an employee works away from home for a considerable period and, for that period, stays in accommodation generally used for longer term accommodation (such as a house, unit or apartment or caravan), this would support a view that they are living at a location away from their usual residence. 43. However, an employee may live and make their home in any kind of accommodation. 44. In this instance, Employer B books and pays for serviced accommodation close to the work location, usually within walking distance. 45. The way the accommodation is being used does not prevent it from being used for longer-term arrangements when the length of stay dictates. | Detailed Reasoning - Whether the employee is or can be accompanied by family or visited by family or friends.: 46. An employee who is living at a location away from their usual residence can generally be accompanied or visited by their family or friends. 47. In this case, Employer A have advised that employees on STA will not be accompanied by their family. There is no indication that family or friends are not permitted to accompany or visit. | Detailed Reasoning - Conclusion of whether the employees are living at the location: 48. Having regard to the above analysis, it is essential to look at the circumstances and length of stay for each category to determine if an employee is living at a location or travelling on work. Table 2: Having regard to the above analysis, it is essential to look at the circumstances and length of stay for each category to determine if an employee is living at a location or travelling on work. | Detailed Reasoning - Travel or LAFHA: 1 2 - 3 weeks every 3 months Employees performing "peer review" roles on projects, required to attend only at project milestones. Travel 2 2 - 6 weeks Employees visiting Australia to either: Travel 3 2 - 3 weeks Employees visiting Australia for meetings or forums. Travel 4 2 - 6 weeks Employees attending and inputting on short term projects, towards specific project milestones. Travel 5 3 - 8 weeks Employees who are required to oversee internal business or operational meetings where proprietary knowledge is required. Travel 6 6 weeks - 3 months Employees attending and inputting on short term projects, towards specific project milestones. Travel 7 7a - 3 months 7b - 4 months 7c - 5 months 7d - 6 months Employees required to assist with resourcing. This occurs where the employee supplies skills which are required in the short-medium term aspects. LAFHA An employee in Category 7: i. is away from their normal residence for work purposes. ii. is away for a length of time that is not considered relatively short. iii. is staying in accommodation that is suited to both short and longer term stays. iv. is not prevented from being accompanied by family or visited by family and friends, however, you have stated that family do not accompany employees on STA. Having regard to the analysis above and the circumstances of this assignment, which is given to be the same in each sub-category, Category 7 employee's regular place of work has changed, and they are living away from their usual residence. It is considered that the circumstances are similar to that in Example 7 of TR 2021/4. Employees in Category 7: • Stay for a relatively long period, between 3 and 6 months; and • Continue to be employees of Employer A while on assignment in Australia; and • Evidence suggests they will likely stay in apartment-style accommodation. In the circumstances it is considered the employees on STA under Category 7 are living away from their usual residence due to: • There being a change in the regular place of work for employees in Category 7; from XXXXX to the Australian work location. • The length of time the employees in Category 7 will be away from their usual residence in XXXXX being between 3 and 6 months. • The fact that evidence suggests the employees will stay in apartment-style accommodation while they are working in Australia. Therefore, the per diem allowance is considered to be a LAFHA for the purposes of subsection 30(1) of the FBTAA. | Detailed Reasoning - Question 2: If the answer to question 1 is no, and the allowance is equivalent to, or less than, the reasonable amounts for travel allowance expenses under Taxation Determination TD 2023/3 or a future Taxation Determination in relation to income tax and the reasonable travel and overtime meal allowance expense amounts for an income tax year, does the Employer need to withhold PAYGW and report the per diem allowance through Single Touch Payroll (STP) or on the employee's income statement. | Detailed Reasoning - Detailed Reasoning: 49. The PAYG withholding provisions are contained in Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA) . 50. Section 12-35 of Schedule 1 to the TAA states: "An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)." 51. An allowance is subject to PAYG withholding obligations where: • it is a travel allowance and not a LAFHA fringe benefit, and • it is a travel allowance which does not meet the relevant exceptions. This is because: • travel allowance is included in an employee's assessable income under section 15-2 of the ITAA 1997, whereas; • LAFHA is a fringe benefit which is non-assessable non-exempt income in the hands of the employee and may give rise to FBT which is paid by the employer (see subsection 6-15(3) of the ITAA 1997 and section 23L of the ITAA 1936). 52. A travel allowance is defined in subsection 900-30(3) of the ITAA 1997 as: "A travel allowance is an allowance your employer pays or is to pay to you to cover losses or outgoings: a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel. The travel may be within or outside Australia." 53. Taxation Ruling TR 2004/6 Substantiation exception for reasonable travel and overtime meal allowance expenses explains at paragraph 55, thatthe Commissioner takes the view that the term 'travel away from the employee's ordinary residence' means that the employee must sleep away from their home. Accordingly, for a payment to be a travel allowance the payment must be an allowance paid to an employee to cover accommodation, food, drink or incidental expenses incurred when they travel in the course of their duties; and they need to sleep away from their home. For a payment to be a travel allowance the following requirements must therefore be met: 1) The payment paid by the employer to the employees is an allowance. 2) The allowance is paid to cover the cost of accommodation, for food or drink, or expenses incidental to the travel. 3) The employee is required to travel in the course of their duties as an employee. 4) The travel requires that the employee has to sleep away from their ordinary residence. | Detailed Reasoning - Is the payment by the employer to the employees, an allowance?: 54. It is necessary to determine whether the payment/benefit provided is actually an allowance. 55. Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement (TR 92/15) explains the difference between an allowance and a reimbursement for the purposes of determining whether a payment is a fringe benefit or whether that payment is assessable income. 56. Paragraph 2 of TR 92/15 describes an 'allowance' as: "A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance." 57. 'Reimbursement' is described at paragraph 3 of TR 92/15 as: "A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessary disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. A requirement that the recipient vouch expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. A requirement that the recipient refunds unexpended amounts to the employer adds further weight to that presumption." 58. Paragraph 10 of TR 92/15 further provides the following in respect of the term 'reimbursement': "The ordinary meaning of the word "reimburse" implies that the recipient is to be compensated exactly for an expense already incurred although not necessarily disbursed. The definition of "reimburse" under subsection 136(1) of the FBTAA is wide enough to include payments made before expenses are incurred. However, whether payment is made before or after expenses are incurred by the recipient, it qualifies as a reimbursement when the provider considers the expense to be its own and the recipient incurs the expense on behalf of the provider. As a result, a requirement that the recipient vouch or substantiate expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. A further indication of a reimbursement is where the recipient is required to refund unexpended amounts to the provider." 59. In this case, employees on STA under categories 1-6 are required to travel from XXXXX to Australia and are paid a per diem allowance of $XX for meals and incidentals. This is a fixed, pre-determined amount that is expected to be fully expended. Employees are not required to refund any unexpended amounts and the per diem allowance is not intended to compensate exactly for meal expenses incurred by employees on STA under categories 1-6. Therefore the per diem allowance of $XX is considered to be an allowance and not a reimbursement. The first requirement is satisfied. | Detailed Reasoning - Did the employer pay an allowance to the employee to cover the cost of accommodation, for food or drink, or incidental expenses?: 60. Employees on STA under Categories 1-6 are required to travel from XXXXX to Australia for work. These employees are paid a fixed amount of $XX a day for meals and incidentals in respect of this travel. 61. It is accepted that the reason this allowance is paid is to cover food and drink expenses incurred and therefore the second requirement is met. | Detailed Reasoning - Was the employee required to travel in the course of their duties as an employee?: 62. As per paragraph 29, employees of Employer A are required from time to time to travel outside XXXXX and are required to keep an up-to-date passport to enable this travel. It is considered that the employees on STA under Categories 1-6 are required to travel in the course of their duties as an employee and therefore the third requirement is satisfied. | Detailed Reasoning - Did the travel require the employee to sleep away from their ordinary residence?: 63. As per paragraph 25, it is accepted that the employees' ordinary place of residence is their usual residence. 64. Employees on STA under Categories 1-6 travel to Australia from XXXXX in order to perform their employment duties. 65. It is accepted that due to the nature of the travel that is undertaken to perform their employment duties that employees on STA under Categories 1-6 are required to sleep away from their home. Therefore the fourth requirement is satisfied. 66. As all the required are satisfied, it is considered that the per diem allowance for meal and incidentals paid to the employees on STA under Categories 1-6 constitutes a travel allowance under subsection 900-30(3) of the ITAA 1997. | Detailed Reasoning - Do any exceptions apply to the travel allowance?: 67. To determine if a travel allowance is subject to PAYG withholding under section 12-35 of Schedule 1 of the TAA the travel allowance must not meet the relevant exceptions. 68. An exception applies if: • The employee is expected to spend all of the travel allowance on accommodation, food, drink or incidental expenses • The amount and nature of the travel allowance is shown separately in the employers accounting records • The travel allowance is not for overseas accommodation • The amount of the travel allowance paid to an employee is less than, or equal to the reasonable travel allowance rate. 69. As established in paragraph 60, the per diem allowance amount of $XX is an allowance paid to the employees on STA under Categories 1-6 for meals and incidentals. It is expected to be fully expended and is not intended to compensate exactly for meals and incidentals incurred by the employee when on STA under Categories 1-6. The allowance is not for overseas accommodation and is less than the reasonable travel allowance rate. | Detailed Reasoning - Conclusion as to whether the allowance is subject to PAYG withholding and needs to be reported through STP and on the employee's income statement.: 70. The travel allowance of $XX per day paid to employees on STA under Categories 1-6 is not subject to PAYG withholding under section 12-35 of Schedule 1 of the TAA and does not need to be reported in STP or on the employee's income statement. | Detailed Reasoning - Question 3: Is the provision of accommodation to employees under each category of arrangement a residual benefit to which the "otherwise deductible rule" in section 52(1) of the FBTAA applies to reduce the taxable value of the benefit to nil? | Detailed Reasoning - Is a benefit provided?: 71. Employer B pays for accommodation directly for employees under each category of arrangement, Therefore, this condition in the definition of a "fringe benefit" in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Is a benefit provided to an employee or an associate of an employee?: 72. As per paragraph 11 the employees on STA are employees of Employer A. Therefore this condition of a "fringe benefit" in subsection 136(1) of the FBTAA is satisfied. Is the benefit provided by the employer, or an associate of the employer or a third party in a situation that comes with either paragraph (e) or (ea) of the "fringe benefit" definition? 73. The benefit is being provided by Employer B as an associate of Employer A. As such this condition in the definition of 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Is the provision of accommodation a Housing Benefit?: 74. A Housing benefit arises where an employee or an associate is granted a lease or licence to occupy employer provided premises as their usual place of residence. 75. The Commissioner considers that generally an employee is living away from their usual place of residence where, the employee would have continued to live in a particular place, but for having to change residence in order to work temporarily for the employer at another locality and expects to return to that place when the temporary period is over. 76. Therefore, in this instance as the employee maintains their usual place of residence and returns there when the STA has ceased, the benefit cannot be a housing benefit. | Detailed Reasoning - Is the benefit a residual fringe benefit?: 77. Residual fringe benefits can be separated under four different categories under section 136(1) of the FBTAA as: (1) In-house non-period residual fringe benefits; (2) In-house period residual fringe benefits; (3) External non-period residual fringe benefits (4) External period residual fringe benefits 78. Broadly, an "in-house residual fringe benefit" is a residual benefit provided by an employer or associate of the employer as part of their business activities. An "external residual fringe benefit" is a benefit that is not an in-house residual fringe benefit. 79. The distinction between a 'period' and a 'non-period' residual fringe benefit depends on the definition of 'period residual fringe benefit' in subsection 136(1) and section 149 of the FBTAA. A 'period residual fringe benefit' is defined as a residual fringe benefit that is provided during a period. Under subsection 149(1), a benefit is taken to be provided during a period if, and only if, it is provided and subsists during a period of more than one day and is not deemed to be provided at a particular time or on a particular day. The effect of this is that, generally, where a residual fringe benefit is provided and subsists for more than one day, it is a period residual fringe benefit. 80. In this case, Employer B provides accommodation of serviced apartments to employees on STA. Employer B does not provide accommodation to members of the public, and the benefits provided in relation to a period exceeding one day. There is no evidence that employees on STA and Employer B are dealing with each other in any other capacity than as employees. 81. Therefore, the provision of accommodation to employees on STA is an external period residual benefit. | Detailed Reasoning - Is the benefit an exempt residual fringe benefit?: 82. Subsection 47(5) of the FBTAA provides that accommodation provided by an employer to an employee can be an exempt benefit where: (a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and (b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and (ba) the employee satisfies: (i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and (c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment (d) any of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) if the employee satisfies sections 31C and 31D--the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii); (iii) if the employee satisfies section 31E--the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii); 83. In all cases, employees on STA are maintaining a home outside of Australia. Therefore, they do not satisfy section 31C. The employees are not fly in fly out or drive in drive out employees, therefore, they do not satisfy section 31E. There is no evidence to suggest that employees on STA under Categories 1-6 receive exempt external period residual fringe benefits. 84. The taxable value of the external period residual fringe benefit calculated in accordance with section 51 of the FBTAA is reduced where the "otherwise deductible" rule in subsection 52(1) applies. 85. The "otherwise deductible" rule operates to reduce the taxable value of a residual fringe benefit where the employee would have been entitled to a once-only deduction under section 8-1 of the ITAA 1997 (or where a specific provision of the tax laws applies to provide the deduction) for the expense has the employee personally incurred and paid the unreimbursed expense. 86. If the employee would not be able to claim a deduction under section 8-1 of the ITAA 1997 for the hypothetical expenditure, the employer would not be able to use the "otherwise deductible" rule to reduce the value of the fringe benefit. | Detailed Reasoning - Conclusion: 87. As concluded under Question 1 employees on STA under Categories 1-6 are traveling for work. Therefore, their accommodation expenses would be deductible, and the taxable value of accommodation expenses paid by the employer would be reduced to zero under the "otherwise deductible" rule. 88. Accommodation expenses for employees on STA under all sub-categories of Category 7 would not be deductible under section 8-1 of the ITAA 1997 as employees under these categories are living away from their usual residence and the accommodation costs would be private in nature.

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