Private ruling: Fringe benefits tax - Travel or Living Away From Home
Published: December 2013
Ruling period: Year ending 31 March 2014
Date scheme commenced: 1 April 2013

Ruling: Q1: Is the provision of the accommodation a fringe benefit as defined in subsection 136(1) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA) 1986) provided by the employer? | A1: Yes | Q2: If the provision of accommodation is a fringe benefit, does the otherwise deductible rule in section 52 of the FBTAA 1986 reduce the taxable value of the fringe benefit to nil? | A2: No | Q3: Where a per diem is paid to an employee, is the per diem subject to section 30 of the FBTAA 1986? | A3: No | Q4: If the per diem provided by the employer is not subject to section 30 of the FBTAA 1986 and the per diem is equivalent to, or less than, the reasonable amounts for travel allowance expenses under Taxation Determination TD 2013/16, does the employer need to report the per diem on the employee's PAYG payment summary? | A4: N/A | Q5: Is the provision of travel to and from Y at the beginning and the end of the project a fringe benefit, as defined in subsection 136(1) of the FBTAA 1986, provided by the employer? | A5: Yes | Q6: If the provision of travel to and from Y at the beginning and the end of the project is a fringe benefit, does the otherwise deductible rule in section 52 of the FBTAA reduce the taxable value to nil? | A6: N/A | Q7: If the employer provides transport from Y back to X during the project and then transport back to Y (e.g. flights home for a weekend), is the transport to and from the employee's home base a fringe benefit provided by the employer? | A7: Yes | Q8: If the transport from Y back to X during the project and then transport back to Y is a fringe benefit, does the otherwise deductible rule in section 52 of the FBTAA reduce the taxable value of the benefit to nil? | A8: Yes | Q9: Do the answers in questions 1-6 change if the employee is provided with transport as outlined in question 7? | A9: No

Relevant facts and circumstances: The employer proposes to provide services for a client in another city (Y). The project is expected to be for a period greater than 21 days. It is expected that there will be no further work from the project after completion of services. To assist in delivering the project, the taxpayer proposes to send an employee from its X office to work in Y on the project. The employee will be based in Y during this period. The employee's employment contract states that the employee's place of employment is X and the employee will return and continue to work in the taxpayer's X office at the end of the assignment in Y The taxpayer's employee lives and works in X. At this stage, it is not intended that any family will accompany or stay with the employee whilst they are working in Y. The employee will have their usual place of residence in X at all times during the period they are in Y, and will return to this usual place of residence upon completion of the project in Y. In order for the employee to complete the project in Y, the taxpayer proposes to provide the following to the employee: · Temporary accommodation to the employee whilst working in Y · A per diem to cover the employee's meals and incidental expenses whilst working in Y. This per diem is an allowance provided by the taxpayer to the employee, and · Flights for the employee's travel from X to Y at the start of the project, and from Y to X at the end of the project. Based on current practice, accommodation provided by the taxpayer to the employee is provided by a travel arranger designated by the taxpayer. The designated travel arranger will then choose the accommodation for the employee from a list of preferred suppliers. The assistance proposed for the employee is in accordance with current company practice for employees on business related travel.. In addition to the flights to and from Y at the beginning and the end of the project, the taxpayer is also contemplating the provision of flights to the employee's home in X and return flights back to Y during the project. These flights may be at intervals of less than 21 days during the project and are likely to be for weekend visits to the employee's X home. The employment duties to be performed while the employee is in Y are the same duties performed in X and will be in relation to a specific client and project that requires the employee to be temporarily located in Y. The employee's home base is X and this is where the employee provides services to the employer. However, due to the nature of the employee's duties, the employee's employment does require the employee to work on various projects at various locations away from the X office as needed by projects..As the projects are at various locations, the employee will be required from time to time to travel to the project locations. Generally, the employee is only away from the X base for short periods of time and works for the taxpayer in X for the majority of the time. In determining where the employee resides in Y, the taxpayer will provide the lowest cost option for accommodation based on the accommodation that is provided by their travel provider. The accommodation arrangements are subject to whether accommodation is available for the duration of the project. If this is not the case, the taxpayer will then provide the employee with the next lowest cost option for the remaining duration of the project (subject to that accommodation's availability).

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 30 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 section 52 | Fringe Benefits Tax Assessment Act 1986 section 58(f) | Fringe Benefits Tax Assessment Act 1986 subsection 47(5) | Fringe Benefits Tax Assessment Act 1986 subsection 136 (1) | Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: The provision of the accommodation by the employer to the employee whilst travelling to Y is a residual fringe benefit as defined by section 45 of the FBTAA 1986, unless the conditions of subsection 47(5) of the FBTAA are satisfied. | Detailed Reasoning - Detailed reasoning: Subsection 136(1) of the FBTAA defines both a benefit and a fringe benefit. A benefit includes 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 instruction; 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 the lending of money. A fringe benefit is defined, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: (a) provided at any time during the year of tax; or (b) provided in respect of the year of tax; being a benefit provided to the employee or to an associate of the employee by: (c) the employer; or (d) an associate of the employer The definition of fringe benefit can be summarised (with appropriate simplifications) as a benefit provided, in respect of a year of tax, by an employer to an employee in respect of the employment of that employee. The accommodation to be produced to the employee whilst working in Y is a benefit in terms of the definition of benefit in subsection 136(1) of the FBTAA 1986. The accommodation benefit will be a residual benefit as per section 45 of the FBTAA 1986, as it is not a benefit by virtue of a provision of subdivision A of Division 2 to 11(inclusive) of the FBTAA 1986. A benefit will be a fringe benefit if it satisfies the definition of fringe benefit in subsection 136(1) of the FBTAA 1986, unless an exemption applies. Where an exemption applies to a benefit there is no need to determine if the benefit is a fringe benefit. In this case, the benefit would be an exempt benefit if the conditions outlined in subsection 47(5) of the FBTAA 1986 are satisfied. If the conditions are not satisfied the accommodation benefit would be a residual fringe benefit, as it is produced by the employee's employer in respect to their employment. On the assumption that the conditions in subsection 47(5) of the FBTAA 1986 are satisfied, the accommodation benefit is an exempt benefit and not a fringe benefit. The taxable value is the amount the employee could reasonably be expected to pay to obtain the benefit under an arm's length transaction, reduced by any amount paid by the employee, and any other reductions or exemptions that may apply. | Summary: The otherwise deductible rule in section 52 of the FBTAA 1986 does not apply as the accommodation benefit is an exempt benefit under subsection 47(5) of the FBTAA 1986. | Detailed Reasoning - Detailed reasoning: As the benefit is an exempt benefit under subsection 47(5) of the FBTAA 1986 the otherwise deductible rule in section 52 can have no operation. However, had the benefit not been exempt under subsection 47(5) of the FBTAA 1986, the accommodation expense would be a private expense and not deductible under section 8-10 of the ITAA 1997 because the employee is living away from home and not travelling for work. | Summary: The per diem paid to the employee is an allowance subject to section 30 of the FBTAA 1986. | Detailed Reasoning - Detailed reasoning: Section 30 of the FBTAA refers to the provision of living away from home allowances (LAFHA). A LAFHA is a payment to compensate an employee for additional, non-deductible expenses, or to compensate for disadvantages suffered, because an employee is required to live way from their usual place of residence in order to perform their employment duties. It has been established above that in this situation, the circumstances show that the employee is not travelling but living away from home. Therefore, the per diem would be a living away from home allowance fringe benefit and subject to section 30 of the FBTAA 1986. | Summary: The per diem provided by the employer is subject to section 30 of the FBTAA 1986 and is not required to be reported on the employee's PAYG payment summary. | Detailed Reasoning - Detailed reasoning: As the allowance is a living away from home allowance fringe benefit it will be subject to fringe benefits tax and not PAYG. Therefore the tax value of the fringe benefit does not need to be reported on the employee's PAYG payment summary unless it is part of the employee's reportable fringe benefits. | Summary: The benefit that will be received by the employee as a result of the travel to and from Y at the beginning and end of the project is exempt under section 58 of the FBTAA 1986. Therefore it does not constitute a fringe benefit. Detailed reasoning The travel to and from Y at the beginning and end of the project will constitute a benefit as defined in subsection 136(1) of the FBTAA 1986. As stated above, the benefit is a residual benefit under section 45 of the FBTAA 1986. Therefore, if the benefit is relocation transport benefit, it will be an exempt benefit under section 58F of the FBTAA and not a fringe benefit. It has been determined above that the employee will be living away from home and not travelling. A living away from home allowance is paid in connection with temporary relocation. Hence the transport costs at the beginning and end of the project would be exempt benefits under section 58F of the FBTAA 1986. The employee will be receiving the benefit of travel, and it is provided with respect to the employee's employment. The benefit is provided with respect to the employee's travel to Y for work purposes, and is incidental to the primary purpose of travel. As per section 45 of the FBTAA, any fringe benefit that is not subject to the rules of other identified benefits is residual fringe benefits. Essentially, these are the fringe benefits that remain, or are left over, because they are not one of the more specific categories of fringe benefit. The taxable value is the amount the employee could reasonably be expected to pay to obtain the benefit under an arm's length transaction, reduced by any amount paid by the employee, and any other reductions or exemptions that may apply. | Summary: The otherwise deductible rule in section 52 of the FBTAA 1986 is not applicable in reducing the taxable value of the residual accommodation benefit to nil. Detailed reasoning As the benefit is an exempt benefit under section 58F of the FBTAA 1986, section 52 of the FBTAA 1986 can have no operation. | Summary: The flights from Y to X and back on weekend will constitute a fringe benefit. Detailed reasoning The transport to be provided to the employee to travel between Y and X, whilst working in City Y, will be a benefit in terms of the definition of benefit in subsection 136(1) of the FBTAA 1986. The transport benefit will be a residual benefit as per section 45 of the FBTAA 1986. This benefit will be a fringe benefit if it satisfies the definition of fringe benefit in subsection 136(1) of the FBTAA 1986 as no exemption applies to the benefit. The benefit will be provided by the employee's employer in respect of their employment. Hence it will be a residual fringe benefit. | Summary: The otherwise deductible rule in section 52 of the FBTAA 1986 will not reduce the taxable value of the residual transport benefit to nil. Detailed reasoning For the otherwise deductible rule under section 52 of the FBTAA to apply, the employee would need to be entitled to a deduction for the transport costs, under section 8-1 of the ITAA 1997, had they incurred the expenditure. Section 8-1 of the ITAA 1997 denies a deduction where the expenditure is of a private nature. In this case, the reason for the travel from Y back to X during the project will be private in nature, as no work will be performed in X. Therefore, the taxable value of the transport residual fringe benefit will not be reduced by the otherwise deductible rule under section 52 of the FBTAA 1986. | Summary: The tax treatment of the benefits outlined in this scheme will not be affected if the employee is provided with transport from Y back to X during the project. | Detailed Reasoning - Detailed reasoning: As stated above, the taxpayer is considered to be living away from home and not travelling during the project. Therefore, the per diem paid is a living away from home allowance. The fact that the taxpayer may travel back to X on several weekends during the life of the project does not alter the taxpayer's circumstances from living away from home to travel. This conclusion is not altered even if the travel back to X occurs every 21 days or less. The taxpayer is still living away from home and working in Y for greater than 21 days period, and not several shorter periods. This is consistent with paragraph 43 of Taxation Ruling No. MT 2030 Fringe Benefits Tax: Living away from home allowance benefits, which states: 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. To illustrate the point, an employee who lives during the working week in the country town where his permanent job is located but who travels perhaps several hundred kilometres to live during weekends with his wife and children in the family home located in another town would be, during the week, living away from home. So, too, would a married public servant based in a capital city who is seconded for six months to carry out a special task interstate in circumstances where his family stays behind in the family home. It is not where the family is that determines the nature of the allowance but where the employee is in relation to the usual place of residence and whether, on the facts, the employee can be said to be travelling on the job or living away from home.

Reasons for decision: Living away from home allowance or Travel Allowance: | It must first be established whether the proposed arrangement is 'living away from home' or 'travel'. There are different tax treatments for both Living Away from Home Allowance (LAFHA) and travelling allowances. LAFHA's are a fringe benefit as per section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), whereas travelling allowances are part of the employee's assessable income and are not fringe benefits. | A LAFHA may be paid to an employee for additional expenses incurred and disadvantages suffered because the employee's duties of employment require them to live away from their normal residence. | Instead of paying cash LAFHA to an employee, an employer may reimburse expenses and provide food and/or accommodation at the new location. The difference between the two depends on surrounding circumstances of each case. | Is the employee travelling or residing away from home? | Miscellaneous Tax Ruling MT 2030 Fringe Benefits Tax: Living Away From Home Allowance Benefits and chapter 11 at 11.12 of the ATO publication 'Fringe Benefits Tax: A guide for Employers sets out the differences between a living away from home allowance and a travelling allowance. | LAFHA is generally 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. There is a 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 the period exceeds 21 days, the allowance is likely treated as LAFHA. | Travelling allowances on the other hand are paid because an employee is travelling in the course of performing their job. There is no change of job location in relation to paying the allowance. Where an employee is travelling, they are generally not accompanied by their spouse and family. | In your situation, the employee will be away from their usual place of residence for more than 21 days, and therefore the employee will be living away from home for this period. The fact that the employee may travel back to X several times whilst in Y will not alter this conclusion. The purpose of this travel is private. The employee is travelling to visit family and not travelling on work.