Private ruling: Fringe benefits tax
Date of advice: 25 January 2019
Published: May 2019
Ruling period: Year ended 31 March 2019
Date scheme commenced: April 2018

Ruling: Q1: Is the reimbursement of airfare expenses incurred by the employee an exempt benefit under section 58F of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: Is the reimbursement of expenses incurred by the employee for moving household effects an exempt benefit under section 58B of the FBTAA? | A2: 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. Your employee lived interstate and had not moved prior to applying for or being advised that they had obtained employment with you. Your employee and their family incurred the cost of the airfares in order to enable them to take up residence near you. You intend to reimburse expenses your employee incurred for those airfares. Your employee incurred removal expenses in order to relocate to take up employment with you. You intend to reimburse the expenses incurred for the collection and transfer of furniture and household goods from one location to the next, but not storage. The removal occurred between the acceptance of the letter of appointment and the commencement date of the position. You intend to obtain documentary evidence of your employee’s expenses.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 58B | Fringe Benefits Tax Assessment Act 1986 section 58F | Fringe Benefits Tax Assessment Act 1986 section 143A

Reasons for decision: Summary: The reimbursement of airfare expenses incurred by your employee will be an exempt benefit under section 58F. | Detailed Reasoning - Detailed reasoning: Section 58F provides that: Where: (a) a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer; (b) the benefit is in respect of relocation transport; and (c) in the case of an expense payment benefit: (i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and (ii) 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; the benefit is an exempt benefit in relation to the year of tax. Paragraph 58F(a) will be satisfied as you will be providing an expense payment benefit by reimbursing expenses incurred by your employee. Paragraph 58F(b) will be satisfied if that expense payment benefit is in respect of relocation transport. The circumstances in which a benefit will be treated as a benefit in respect of relocation transport are specified in section 143A: For the purposes of this Act, where: (a) any of the following benefits is provided in, or in respect of, a year of tax to an employee, or to an associate of the employee, in respect of the employment of the employee: (i) a car benefit relating to a particular car where the application or availability of the car is in respect of the provision of transport; (ii) an expense payment benefit where the recipients expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport; (iii) a property benefit where the recipients property consists of meals in connection with transport; (iv) a residual benefit where the recipients benefit consists of the provision of transport or accommodation in connection with transport; (b) the transport, meals or accommodation is for a family member; (c) the transport is required solely because: (i) the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; (ii) the employee, having lived away from his or her usual place of residence in order to perform the duties of that employment, is required to return to his or her usual place of residence: (A) in order to perform those duties; or (B) because the employee has ceased to perform those duties; or (iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment; (d) the transport is provided to enable a family member to: (i) if subparagraph (c)(i) applies - take up residence at or near the place where the employee performs the duties of that employment while living away from his or her usual place of residence; (ii) if subparagraph (c)(ii) applies - take up residence at the employee's usual place of residence; or (iii) if subparagraph (c)(iii) applies - take up residence at the employee's new usual place of residence; (e) if the transport is for the spouse, or a child, of the employee - the transport is not provided to enable the spouse or child to accompany the employee: (i) while the employee is undertaking travel in the course of performing the duties of that employment; and (ii) where the circumstances referred to in subsection 26-30(2) of the Income Tax Assessment Act 1997 do not apply; and (f) if the transport is for the employee - the transport is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and (g) if subparagraph (c)(iii) applies - the benefit is not provided under a non-arm's length arrangement; the benefit shall be taken to be in respect of relocation transport. The expense payment benefit that you intend to provide will be in respect of relocation transport: ● The expense incurred was for airfares for your employee and their family. ● Your employee was required to change their usual place of residence in order to undertake duties with you as they were living interstate prior to employment with you. ● The travel enabled your employee and family to take up residence after obtaining employment with you. ● We accept that the benefit will be provided under a non-arm’s length arrangement. Paragraph 58F(b) will be satisfied as the benefit is in relation to relocation transport as defined in section 143A. You have advised that you intend to obtain the documentary evidence of these expenses. Declaration date is defined in subsection 136(1) as follows: in relation to an employer in relation to a year of tax, means the date of lodgement of the return of the fringe benefits taxable amount of the employer of the year of tax, or such late date as the Commissioner allows Paragraph 58F(c) will be satisfied on the basis that you obtain the documentary evidence before the lodgement date for the FBT return. As all of the requirements of section 58F will be met, the reimbursement of expenses incurred by your employee for airfares will be an exempt benefit. | Summary: The reimbursement of expenses incurred by your employee for moving household effects will be an exempt benefit under section 58B. | Detailed Reasoning - Detailed reasoning: Section 58B provides that: (1) Where: (a) either of the following benefits is provided in, or in respect of, a year of tax in respect of the employment of an employee: (i) an expense payment benefit where the recipients expenditure is in respect of the removal or storage of household effects of the employee; (ii) a residual benefit where the recipients benefit consists of the removal or storage of household effects of the employee; (b) the removal or storage is required solely because: (i) the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; (ii) the employee, having lived away from his or her usual place of residence in order to perform the duties of that employment, is required to return to his or her usual place of residence: (A) in order to perform those duties; or (B) because the employee has ceased to perform those duties; or (iii) the employee is required to change his or her usual place of residence in order to perform the duties of that employment; (c) the removal or storage is required to enable a family member to: (i) if subparagraph (b)(i) applies—take up residence, or to continue to reside, at or near the place where the employee performs the duties of that employment while living away from his or her usual place of residence; (ii) if subparagraph (b)(ii) applies—take up residence at the employee’s usual place of residence; or (iii) if subparagraph (b)(iii) applies—take up residence, or to continue to reside, at the employee’s new usual place of residence; (d) if subparagraph (b)(iii) applies: (i) the removal takes place, or the storage commences to be provided, within 12 months after the day on which the employee commenced to perform the duties of that employment at the employee’s new place of employment; and (ii) the benefit is not provided under a non-arm’s length arrangement; (e) 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 (f) the removal or storage was not provided in connection with travel undertaken by the employee in the course of performing the duties of that employment; the benefit is an exempt benefit in relation to the year of tax. Subsection 58B(2) defines what constitutes the removal and storage of household effects for the purposes of the exemption: (a) a reference to the household effects of an employee is a reference to tangible property (whether or not owned by a family member) kept primarily for the personal use of family members; and (b) without limiting the generality of an expression used in subsection (1), the recipients expenditure shall be taken to be in respect of, and the recipients benefit shall be taken to consist of, the removal or storage of household effects if the expenditure or benefit is in respect of, or consists of, the transport, packing, unpacking or insurance of the household effects in connection with the removal or storage of the household effects. You will be reimbursing expenses incurred by your employee for the removal of furniture and household goods. This removal was required solely because your employee was required to change their usual place of residence in order to work for you. Consequently, paragraphs 58B(1)(a), (b), (c) and (f) will be satisfied. Subparagraph 58B(1)(d)(i) provides a time limit within which the removal must take place of 12 months after the employee commenced employment at the new locality, which has been met. As discussed in the reason for decision for question one, the benefit will be provided under an arm’s length arrangement, therefore paragraph 58B(1)(d) will be satisfied. You have advised that you intend to obtain the documentary evidence of these expenses. Paragraph 58B(1)(e) will be satisfied on the basis that you obtain the documentary evidence before the lodgement date for the FBT return. As all of the requirements of section 58B will be met, the reimbursement of your employee’s removal expenses will be an exempt benefit.

Reasons for decision: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.