Private ruling: Fringe Benefits Tax
Published: May 2015
Ruling period: Year ended 31 March 2016 | Year ended 31 March 2017 | Year ended 31 March 2018 | Year ended 31 March 2019
Date scheme commenced: 1 April 20YY

Ruling: Q1: Are the pre-conditions set out in subsection 58C(1) of the Fringe Benefits Tax Assessment Act 1986 satisfied such that you can access the exemptions contained in subsections 58(2) and 58(3) of the Fringe Benefits Tax Assessment Act 1986 subject to the specific requirements of those subsections being met? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You employed your employee in a senior position. Under the terms of your employee's employment with you, your employee was required to be based in City Y. Accordingly, you relocated to City Y from Location I where your employee was previously living in order to take up the role with you. Before taking up the role with you, your employee had moved to Location I from City E a number of years before to take up a position with another company. Your employee's employment with that company ended in during 20XX. Your employee's spouse was also working in Location I until early 20YY. Apart from a few holiday trips visiting friends and family in City E and elsewhere as well as an overseas trip, your employee resided in Location I with your employee's spouse until late 20XX. Your employee lived in rented premises for the duration of the stay in Location I. Prior to moving to Location I, your employee had lived in City E for many years. Your employee and spouse owned a home in City E which was purchased more than 20 years ago and lived there until going to Location I. Your employee's family and close relationships are located in City E. Your employee continued to visit City E on a periodic basis whilst based in Location I in order to catch up with family and friends. This included visits to their City E residence in order to inspect the property and ensure that tenant probity issues were maintained. It became clear to your employee that the previous employer would not be able to offer a suitable position in City E. Your employee could also not easily find other positions in City E that were appropriate. In mid-20XX you offered your employee a senior City Y based role to commence early 20YY. At the time of being offered a contract of employment with you, your employee was proposing to return to City E so as to live in the residence there as the usual place of residence. For various reasons provided your employee decided to relocate to City Y. The duties and responsibilities of your employee's role were inherently such that your employee was required to relocate to City Y. You would not permit your employee to perform duties from either Location I or City E. Your employee is currently occupying rented premises in City Y and intends to purchase a new home in City Y in the near future. You are proposing to reimburse your employee for relocation expenses which incurred in relocating to City Y for the purposes of taking up employment with you. For example, selling costs in relation to the sale of the City E home including stamp duty legal fees agent's commission etc., as well as acquisition costs associated with the purchase of a new residence in City Y including stamp duty, legal fees, borrowing expenses etc. In addition you are considering reimbursing your employee for the removal costs incurred in moving to City Y from City E.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 58C

Reasons for decision: Summary: The pre-conditions set out in subsection 58C(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) are satisfied such that you can access the exemptions contained in subsections 58(2) and 58(3) of the FBTAA subject to the specific requirements of those subsections being met. | Detailed Reasoning - Detailed reasoning: Subsection 58C(1) of the FBTAA provides a set of pre-conditions which have to be met in order for a sale or acquisition of a dwelling as a result of relocation to be an exempt benefit: Where: (a) during a particular period (in this subsection called the ``former home holding period''), an employee of an employer, or an associate of an employee of an employer, holds: (i) a prescribed interest in land on which: (A) there is a building constituting or containing a dwelling; (B) the employee or associate proposes to construct, or complete the construction of, a building constituting or containing a dwelling; (ii) a prescribed interest in a stratum unit in relation to a dwelling; or (iii) a proprietary right in respect of a dwelling, being a flat or home unit; (b) the employee or associate sells, or proposes to sell, the interest or right solely because the employee is required to change his or her usual place of residence in order to perform the duties of his or her employment; (c) the employer first notifies the employee at a time (in this subsection called the ``notice time'') during the former home holding period that the employee is required to perform the duties of that employment at the employee's new place of employment; and (d) at the notice time, the employee occupied, or proposed to occupy, the dwelling, or proposed to occupy the proposed dwelling, as his or her usual place of residence; (e) (Repealed by No 23 of 2005) the following subsections have effect. | Detailed Reasoning - Paragraph (a): Your employee held an interest in land on which there was a dwelling in City E during the relevant time, therefore paragraph (a) is satisfied. | Detailed Reasoning - Paragraph (b): In relation to the term 'required', ATO ID 2013/8 Fringe Benefits Tax: Employee required to change usual place of residence in order to perform duties of employment discusses that term for the purposes of subparagraph 58B(1)(b)(iii) of the FBTAA. It is noted in ATO ID 2013/8, that the same reasoning can be applied for the purposes of sections 58C. ATO ID 2013/8 provides that the term required does not mean the change in the usual place of residence musty be compulsory. Rather the change may be one that is necessary in the circumstance in order for the employee to perform the duties of her or his employment. In ATO ID 2013/18, the employee was not required by her or his employer to change her or his usual place of residence. However, the duties of the employee's employment are such that it made it necessary for the employee to change her or his usual place of residence to effectively perform those duties. Factors taken into consideration were: • the distance between the employee's usual place of residence and the new place of employment • the employee was not permitted to perform her or his new duties of employment from the former place of employment • the employer did not provide transport for the employee to commute between her or his usual place of residence and the new place of residence, and • the employee is required to be on call at certain times and must sign on for duty within two hours of being contacted by their employer. Your employee could not have performed duties of employment from either Location I or City E and it was necessary to reside in City Y in order to perform those duties. Therefore your employee was required to change usual place of residence from Location I to City Y. The other issue to consider is whether your employee sold the City E dwelling solely because your employee was required to change usual place of residence from Location I to City Y. The term 'solely' is not defined in the legislation but would take its ordinary meaning within the context in which it sits. The word solely is defined in the Macquarie Dictionary , [Online], viewed 21 May 2015, www.macquariedictionary.com.au, as follows: 1. as the only one or ones: solely responsible 2. exclusively or only: plants found solely in the tropics 3. wholly; merely The general thrust of the concession in section 58C of the FBTAA is the recognition of mobility of employment and that it is not unusual for employers to bear the cost of various relocation expenses. In this context the use of the term solely indicates that there must not be another reason for the sale that is not related to or connected with the requirement for the employee to relocate in order to perform duties of employment. Therefore a relevant question to consider is whether your employee would have lived in the dwelling in City E rather than selling it, had your employee not been required to move to City Y. There are a number of facts that support the conclusion that your employee intended to return to live in City E as the usual place of residence: • Your employee's contract with the previous employer ended mid-20XX and your employee's spouse's contract ended in early 20YY. • Your employee had family and friends still in City E and visited them during the duration of the stay in Location I. • Although leased out, your employee ensured that the dwelling in City E was well maintained with premium fixtures and fittings. There are also facts which may indicate that your employee did not intend to return to live in City E as the usual place of residence, for example there was little prospect of your employee finding appropriate employment in City E. On balance, however, it is reasonable to conclude that the requirement to relocate was solely the reason why the dwelling in City E was sold. Paragraph (b) is therefore satisfied. | Detailed Reasoning - Paragraph (c): You offered your employee a senior City Y based role in mid-20XX and at that time your employee owned the City E dwelling, therefore this paragraph is satisfied. | Detailed Reasoning - Paragraph (d): At the time that you offered your employee the City Y based role your employee was proposing to return to City E and live in the residence there as the usual place of residence. Therefore this paragraph is satisfied. The pre-conditions for the exemption set out in subsection 58C(1) of FBTAA have been satisfied such that you can access the exemptions contained in subsections 58(2) and 58(3) of the FBTAA.