Private ruling: relocation benefits
Published: January 2013
Ruling period: 1 April 2013 - 31 March 2014
Date scheme commenced: 1 April 2013

Ruling: Q1: If the entity reimbursed its employee for expenses incurred on the sale of a house after obtaining a new position at a different location, would the reimbursement be exempt from fringe benefits tax under section 58C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) | A1: No

Relevant facts and circumstances: · An employee of an entity (the employer) was offered a new job position in Month X 2012. The position was located in Location A. · At the time the employee was notified of their new job, the employee lived in a rented property in Location B. · The employee owns a property in Location C. The employee does not live there. · The employee sold the property in Location C in Month Y 2012. · The employee has applied to be reimbursed the fees associated with the sale of their property in Location C. · After notification of the employee's new job location in Location A the employee continued to live in the property in Location B. · The reason for the employee continuing to live in the property in Location B is because only part of their new duties requires the employee to be physically at Location A and some duties are conducted close to Location B which is in a central location. · The employer does not require that the employee move to Location A to undertake their new duties of employment.

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

Reasons for decision: Summary: Section 58C of the FBTAA provides that certain benefits that relate to the sale and/or acquisition of a dwelling as a result of an employee relocation will be exempt benefits if the criteria contain in the following subsections is satisfied: · Subsection 58C(1) which sets out the necessary pre-conditions for exemption where an employee or an associate of an employee is provided benefits on the sale or acquisition of a dwelling. · Subsection 58C(2) which details the kind of benefits relevant to the sale of property and other qualifications. · Subsection 58C(3) which addresses the acquisition of property and mirrors the conditions and requirements contained in the previous mentioned subsections. In this case, the employer is proposing to reimburse expenses on the sale of its employee's house in Location C. Therefore, both subsections 58C(1) and 58C(2) will need to be satisfied for the benefit to be exempt from fringe benefits tax. | Detailed Reasoning - Pre-conditions: For a benefit to be an exempt benefit in relation to the sale of a property, the pre-conditions in subsection 58C(1) of the FBTAA need to be satisfied. In summary, the following conditions are: 1. The employee (or associate) owns a prescribed interest in a dwelling or a right in a dwelling, called the 'former dwelling' (paragraph 58C(1)(a)) 2. 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 employment in order to perform the duties of his or her employment. 3. The employer notifies the employee that they are required to perform the duties of the employment at a new place of employment at a time while they are still in their former dwelling. 4. At the time the employee was notified, the employee occupied or proposed to occupy the former dwelling as his or her usual place of residence. Applying the above to the facts of this case: It is considered that Month Y 2012. However, for the reasons below the next three conditions are not satisfied as the employee lived in the property in Location B before he was notified of the location of his new employment duties and remained in Location B after he was notified. Consequently, the employee's usual place of residence has not changed. The employee sold his interest/right solely because he is required to change his usual place of residence The employee must sell their interest/right in their former dwelling solely because they are required to change their usual place of residence to undertake their new employment duties. ATO ID 2013/8 Fringe Benefits Tax : Employee required to change usual place of residence in order to perform duties of employment discusses the term 'required' for the purposes of subparagraph 58B(1)(b)(iii) of the FBTAA. However, 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 must be compulsory, Rather the change may be one that is necessary in the circumstances in order for the employee to perform the duties of their employment. In ATO ID 2013/18, the employee was not required by their employer to change their usual place of residence. However, the duties of the employee's employment are such that it made it necessary for the employee to change their 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 their new place of employment · The employee was not permitted to perform their new duties of employment from the former place of employment · The employer did not provide transport for the employee to commute between their 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. It is considered that the employee's usual place of residence at the time they was notified of their new work location was the property in Location B. The employee used the property as the place where they normally resided even though they owned a property in Location C. After notification of the employee's new work location in Location A, the employee chose to remain in Location B as they may have to attend some duties in the corresponding region and city centre. None of the indicators above are satisfied as the employee has not changed his usual place of residence. Further, the employer did not require the employee to change their usual place of residence. The employee has remained in their usual place of residence (Location B) to undertake duties that are in Location A and in areas close to Location B which is in a central location. Consequently, the employee is able to perform their new duties of employment without changing their usual place of residence in Location B. Therefore, this requirement is not satisfied because the employee did not change their usual place of residence and the employee was not required to change their usual place of residence to undertake their new employment duties in Location A. Time employee was notified The employee was notified of their new employment location in Month X 2012. At the time the employee was notified they occupied a property in Location B. This requirement is not satisfied, as the employee did not occupy their 'former dwelling' in Location C. Occupied former dwelling as usual place of residence The employee's usual place of residence was not their property in Location C at the time they were notified of their new employment duties. Rather, the employee's usual place of residence was at the property in Location B. Therefore, the necessary pre-conditions in section 58C(1) have not been satisfied. | Detailed Reasoning - Benefits in respect of the sale of property: Subsection 58C(2) of the FBTAA further provides conditions on benefits associated with the sale of property and states: Where: (a) either of the following benefits is provided in respect of that employment of the employee in, or in respect of, a year of tax: (i) an expense payment benefit where the recipients expenditure is incidental to the sale of that interest or right; (ii) a residual benefit where the recipients benefit is incidental to the sale of that interest or right; (aa) the employee or associate entered into a contract for the sale of the interest or right within 2 years after the day (the new employment day ) on which the employee commenced to perform the duties of that employment at the employee's new place of employment; (b) if, apart from this paragraph, this subsection would apply in relation to 2 or more dwellings or proposed dwellings in relation to the change in the employee's usual place of residence - the employer of the employee elects that this subsection apply in relation to only one of those dwellings or proposed dwellings; (c) if paragraph (b) applies - the benefit relates to the dwelling or proposed dwelling in respect of which the election is made; (d) if subparagraph (a)(i) applies - documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date; and (e) the benefit is not provided under a non-arm's length arrangement; the benefit is an exempt benefit in relation to the year of tax. In this case, although the employee has sold their property within two years and applied for a reimbursement of the agent's commission which is considered to be an expense payment benefit, the sale of employee's property in Location C was not the employee's usual place of residence and the employee's usual place of residence has not changed. As the pre-conditions in subsection 58C(1) of the FBTAA have not been satisfied the reimbursed amount will not be exempt from fringe benefits tax.