Private ruling: Fringe benefits tax
Date of advice: 1 February 2016
Published: March 2016
Ruling period: 1 July 20XX to the end of the employee's contract of employment
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will a fringe benefit arise in relation to the provision of accommodation to the employee by the employer from 1 July 20XX to the end of the employee's contract of employment if the employee does not maintain a home in Australia at which the employee usually resides in that period? | A1: Yes | Q2: If the answer to question 1 is yes, should the employer include the taxable value of the fringe benefit that arises in the 'reportable fringe benefits amount' on the employee's payment summary? | A2: Yes

Relevant facts and circumstances: The employer employs the employee on a contract of employment that begins prior to May 20YY and ends after July 20XX. The employee is based overseas for the period of the contract. One of the employee's conditions of employment is the provision of accommodation overseas for the period of the contract of employment. The employee had a 'living-away-from-home allowance arrangement' in place as at 7.30pm AEST on May 20YY that is due to expire at the end of the contract of employment.

Relevant legislative provisions: Fringe Benefits Tax Application to the Commonwealth) Act 1986 Subsection 3(1) | Fringe Benefits Tax Assessment Act 1986 Section 5E | Fringe Benefits Tax Assessment Act 1986 Section 20 | Fringe Benefits Tax Assessment Act 1986 Section 25 | Fringe Benefits Tax Assessment Act 1986 Section 31C | Fringe Benefits Tax Assessment Act 1986 Section 45 | Fringe Benefits Tax Assessment Act 1986 Section 47 | Fringe Benefits Tax Assessment Act 1986 Subsection 47(5) | Fringe Benefits Tax Assessment Act 1986 Subsection 135P(1) | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1) | Fringe Benefits Tax Regulations 1992 Regulations 4 to 9 | Taxation Administration Act 1953 S ubsection 16-155 | Tax Laws Amendment (2012 Measures No. 4) Act 2012 S ection 27

Reasons for decision: Summary: Will a fringe benefit arise in relation to the provision of accommodation to the employee by the employer from July 20XX to the end of the employee's contract of employment if the employee does not maintain a home in Australia at which the employee usually resides in that period? In the arrangement that is the subject of this Ruling, the employer provides the employee with overseas accommodation from July 20XX to the end of the employee's contract of employment (the relevant period). The definition of a 'fringe benefit' is provided at subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). In general terms, the definition of a 'fringe benefit' provides that a fringe benefit will arise in relation to the provision of the accommodation by the employer to the employee in the relevant period if the following conditions are satisfied: (a) the provision of the accommodation is a benefit; (b) the benefit is provided to the employee or an associate of the employee; (c) the benefit is provided by the employer, an associate of the employer or a third party under an arrangement; (d) the benefit is provided in respect of the employment of the employee; and (e) the benefit does not come within any of paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. These conditions are considered in relation to the arrangement that is the subject of this Ruling below. | Detailed Reasoning - (a) Is the provision of accommodation by the employer to the employee a benefit?: The term 'benefit' is defined in subsection 136(1) of the FBTAA as follows: benefit includes any right (including a right in relation to, an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes … The provision of accommodation involves the provision of a right to use a unit of accommodation. Therefore, the provision of accommodation by the employer to the employee in the relevant period is a benefit. | Detailed Reasoning - (b) Is the benefit provided to the employee or an associate of the employee?: The benefit that is provided under the arrangement that is the subject of this Ruling is provided to the employee. | Detailed Reasoning - (c) Is the benefit provided by the employer, an associate of the employer or a third party under an arrangement?: One of the conditions of the employee's employment while the employee is overseas is the provision of accommodation by the employer. Therefore, the benefit is provided by the employer under an arrangement. | Detailed Reasoning - (d) Is the benefit provided in respect of the employment of the employee?: One of the conditions of the employee's employment while the employee is overseas is the provision of accommodation by the employer. Therefore, the accommodation is provided in respect of the employment of the employee. | Detailed Reasoning - (e) Does the benefit come within any of paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA?: For the purposes of this Ruling, the only relevant paragraph to consider is paragraph (g) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA which states: … a benefit that is an exempt benefit in relation to a year of tax … Therefore, if the benefit that is the subject of this Ruling, (that is, the provision of accommodation by the employer to the employee in the relevant period) is an exempt benefit, a fringe benefit will not arise in relation to that benefit. In order to determine whether the benefit is an exempt benefit it is necessary to initially consider the type of benefit that has been provided. The FBTAA is divided into 12 specific categories of benefits. One of those types of benefits is a 'residual benefit'. Section 45 of the FBTAA defines a 'residual benefit' as follows: A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). The benefit that is the subject of this Ruling does not fall within one of the specific categories of benefits in Subdivision A of Divisions 2 to 11 of the FBTAA. Therefore, in accordance with section 45 of the FBTAA, the benefit is a residual benefit. Section 47 of the FBTAA provides certain scenarios where a residual benefit is exempt and is, therefore, not considered to be a fringe benefit. Relevantly, subsection 47(5) of the FBTAA provides that where an employer provides a benefit that is the use of a unit of accommodation to an employee whose duties of employment require them to live away from his or her normal residence, the benefit will be an exempt benefit where certain conditions are met. Based on the information provided by the applicant, the Commissioner accepts that the employee's duties require him or her to live away from his or her normal residence in the relevant period. The type of conditions that must be met for subsection 47(5) of the FBTAA to apply will depend on whether or not the employee works on a 'fly-in-fly-out or drive-in-drive-out basis'. In the arrangement that is the subject of this Ruling, the employee does not work on a 'fly-in-fly-out or drive-in-drive-out basis'. Part 20.4 of the Fringe benefits tax - a guide for employers (NAT 1054) summarises the conditions that apply from July 20XX for subsection 47(5) of the FBTAA to apply where an employee does not work on a 'fly-in-fly-out or drive-in-drive-out basis' as follows: • the employee must maintain a home in Australia at which they usually reside and it is available for their use and enjoyment at all times; • the fringe benefit must relate to the first 12 month period at a particular work location; and • the employee must give the employer a declaration about living away from home. If any of these conditions are not met, the exemption at subsection 47(5) of the FBTAA will not apply to the benefit that is the subject of this Ruling. Based on the information provided by the applicant, it is inferred that the employee does not maintain a home in Australia at which the employee usually resides in the relevant period. Therefore, the exemption at subsection 47(5) of the FBTAA will not apply to the provision of accommodation by the employer to the employee in the relevant period. Therefore, the benefit that is the subject of this Ruling is not an exempt benefit in accordance with paragraph (g) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. Further, the benefit does not come within any of the other paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. | Detailed Reasoning - Conclusion: In the arrangement that is the subject of this Ruling, all of the conditions that are required in the definition of a fringe benefit' in subsection 136(1) of the FBTAA for a fringe benefit to arise are satisfied. Therefore, a fringe benefit will arise in relation to the provision of accommodation to the employee by the employer from July 20XX to the end of the contract of employment if the employee does not maintain a home in Australia at which the employee usually resides in that period. | Detailed Reasoning - Question 2: If the answer to question 1 is yes, should the employer include the taxable value of the fringe benefit that arises in the 'reportable fringe benefits amount' on the employee's payment summary? In general, subsection 16-155 of the Taxation Administration Act 1953 provides that an employer must give a payment summary to an employee within 14 days of the end of a financial year and that where an employee has a 'reportable fringe benefits amount' the payment summary must include that amount. Subsection 135P(1) of the FBTAA provides than an employee has a 'reportable fringe benefits amount' for a year of income (1 July to 30 June) if the employee's 'individual fringe benefits amount' for the fringe benefits tax year (1 April to 31 March) in the year of income is more than $2,000. Subsection 5E(2) of the FBTAA provides that the 'individual fringe benefits amount' is the sum of the employee's share of the taxable value of each fringe benefit other than an 'excluded fringe benefit'. Therefore, a fringe benefit that is an 'excluded fringe benefit' is not included in the employee's 'reportable fringe benefits amount' that is to be included on the employee's payment summary. Subsection 5E(3) of the FBTAA at paragraphs (a) to (l) lists those fringe benefits that are an 'excluded fringe benefit'. Relevant to the fringe benefit that arises in the arrangement that is the subject of this Ruling is paragraph 5E(3)(i) of the FBTAA that states that a fringe benefit that '… is a benefit prescribed by the regulations for the purposes of this paragraph' is an 'excluded fringe benefit'. It is noted that the fringe benefit that arises in the arrangement that is the subject of this Ruling is not an 'excluded fringe benefit' pursuant to any of the other paragraphs in subsection 5E(3). Regulations 4 to 9 of the Fringe Benefits Tax Regulations 1992 specify a number of fringe benefits that are an 'excluded fringe benefit' for the purposes of paragraph 5E(3)(i) of the FBTAA. | Detailed Reasoning - Conclusion: Certain fringe benefits are not taken into account in the calculation of the 'reportable fringe benefits amount' that must be included on an employee's payment summary. These fringe benefits are specified in subsection 5E(3) of the FBTAA and in Regulations 4 to 9 of the Fringe Benefits Tax Regulations 1992 . The fringe benefit that arises in the arrangement that is the subject of this Ruling does not come within subsection 5E(3) of the FBTAA or Regulations 4 to 9 of the Fringe Benefits Tax Regulations 1992. Therefore, the employer should include the taxable value of the fringe benefit that arises in the arrangement that is the subject of this Ruling in the 'reportable fringe benefits amount' on the employee's payment summary.