Private ruling: Living-away-from-home allowance
Published: December 2014
Ruling period: Year ended 31 March 2015 | Year ended 31 March 2016
Date scheme commenced: December 2014

Ruling: Q1: Is the allowance to be paid to your employee a living-away-from-home allowance? | 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 have an employee who is contracted to work for 12 months in location B. Your employee lives at location C. Because of the travel time each way between location B and your employee's home, your employee travels there on Sunday evening or Monday morning and returns home on Friday or Saturday every week. There is some Saturday work involved in the contract. Your employee is sometimes expected to work until late at night and there is an on-call component. You have rented an apartment for your employee to use whilst in location B. You want to pay an allowance for the additional cost of eating out and other incidental costs when staying in location B. Your employee's spouse has remained living at their home at location C. Your employee returns home every weekend. There is a possibility that an extension to the contract will be granted.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 30, | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) and | Income Tax Assessment Act 1997 section 8-1.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. The allowance that you intend to pay to your employee is a living-away-from-home allowance as the it satisfies section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). | Detailed Reasoning - Detailed reasoning: Section 30 of the FBTAA sets out the circumstances in which a payment to an employee will be a living-away-from-home allowance benefit. Subsection 30(1) states: Where: (a) At a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee: and (b) It would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for: (i) additional expenses (not being deductible expenses) incurred by the employee during a period; or (ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period; by reason that the duties of that employment require the employee to live away from his or her normal residence. The term 'deductible expenses' is defined in subsection 136(1) of the FBTAA to mean expenses incurred by the employee in respect of which a deduction is allowable to the employee under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Your employee will incur additional food costs and other incidentals whilst in location A. The wording of paragraph 30(1)(b)(ii) will be satisfied if the food costs and other incidentals are not deductible expenses. If your employee is considered to be travelling in the course of employment such expenses may be deductible expenses. Guidance for determining whether your employee is travelling in the course of her employment is provided by paragraphs 35 to 43 of MT 2030 Fringe benefits tax: Living-away-from-home allowance benefits. The paragraphs discuss three criteria which indicate the employee is travelling. The first criterion which is the nature of the duties performed is discussed in paragraphs 37 and 38 of MT 2030 which state: 37. Unlike living-away-from-home allowances, there is generally no change of employment location in relation to the payment of travelling allowances. While the expenses that they are intended to compensate for may be similar - meals and accommodation, etc., - the circumstances in which the allowances are paid are essentially different. 38. A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace. A travelling allowance, on the other hand, is paid because the employee is travelling in the course of performing his or her job. In the former case, there is a change of job location and an actual change of residence to a place at or near that location. In the latter, the employee does not change job locations but simply travels in order to carry out the requirements of the job. Your employee is required to perform the duties of employment in location A which is the location of your employee's workplace for the 12 months. Your employee will be living near the workplace. The second criterion is the length of time away from home which is discussed in paragraphs 39 and 40 of MT 2030 which state: 39. Travelling allowances are often paid for comparatively short periods, exceptions being allowances paid where the employment is inherently itinerant in nature or where travelling is a regular incident of the occupation, e.g., commercial travellers, travelling entertainers, etc. Academics studying on sabbatical leave have also been held to be travelling in the course of their employment rather than living away from home and thus could receive a travelling allowance over an extended period of time. 40. The nature of an allowance is not to be determined by reference solely to the period for which it is paid. As mentioned, a travelling allowance might be paid to a commercial traveller almost continuously throughout the year whereas another employee may receive a living-away-from-home allowance only for a month or so. Twelve months is not considered to be a relatively short period. Paragraph 40 of MT 2030 states that: 41. There will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from-home allowance. For longer periods, it will be necessary to determine the nature of the allowance with the guidance provided by this Ruling. Although it is suggested that a benchmark of 21 days would apply where it is difficult to establish the nature of the allowance, it provides some basis for determining what is normally considered a short length of time. Additionally, the nature of your employee's employment is such that your employee works at one place of employment rather than being itinerant. It is not part of employment duties to travel between location A and location B on weekends. The third criterion discussed in paragraphs 42 and 43 of MT 2030 is whether the employee is accompanied by dependants. Paragraphs 42 and 43 of MT 2030 state: 42. An employee travelling in the course of employment ordinarily would not be accompanied by his or her spouse and family. On the other hand, it is more common for the spouse and children of an employee who has temporarily changed job locations and is living away from the usual place of residence to have his or her family living at the new location. 43. 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. Although paragraph 42 states that an employee who is travelling will generally not be accompanied by his or her spouse and family this factor by itself is not sufficient to conclude the employee is travelling. The example provided in paragraph 43 of the employee who returns home on the weekend is similar to your employee's situation. In that example the employee is not considered to be travelling. There can be situations where meals and incidentals may be deductible even where an employee is not considered to be travelling, such as in the Roads and Traffic Authority (NSW) v. Federal Commissioner of Taxation (1993) 43FCR 223; (1993) 26 ATR 76; (1993) 93 ATC 4508 (RTA case). However the RTA Case has no application in this situation. The facts are sufficiently different as to distinguish it from the facts in the RTA case and the situations addressed in Taxation Determination TD 93/230 and Taxation Determination TD 96/7: • Your employee is not required to live at a remote location in Australia. • The living conditions are more than the basic conditions of a camp site. • Although you have chosen the accommodation for your employee, theoretically your employee could find alternative accommodation if your employee so wished. • Theoretically and in practice, family or friends could visit the accommodation at which your employee lives. As your employee is not travelling and the principles outlined in the RTA case do not apply, the food and incidental expenses incurred by your employee while in location A are not considered to be deductible expenses. The next question to be considered is whether those additional expenses arise because your employee is required to live away from her/his normal residence in order to perform the duties of employment. Normal residence is defined in subsection 136(1) of the FBTAA in relation to an employee to mean: (a) If the employee's usual place of residence is in Australia - the employee's usual place of residence; or (b) Otherwise - either: (i) the employee's usual place of residence; or (ii) the place in Australia where the employee usually resides when in Australia. The FBTAA does not define 'usual place of residence'. However, in subsection 136(1) it does define a 'place of residence' to mean: (a) a place at which the person resides; or (b) a place at which the person has sleeping accommodation; whether on a permanent or temporary basis and whether or not on a shared basis. Guidelines for determining an employee's usual place of residence are provided by MT 2030. Paragraphs 15 to 18 refer to various decision of Taxation Boards of Review relating to the former 51A of the Income Tax Assessment Act 1936 (ITAA 1936). In referring to these decisions paragraph 14 of MT 2030 states: As the decisions illustrate, the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e., the place where the employee is living at the time or some other place. A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for his employer at another locality, the employee would have continued to live at the former place. It would be relevant in reaching that view that there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality. This would be relevant even if the employee is living in temporary quarters close to a temporary job site. Further discussion occurs at paragraphs 19 to 25. Paragraph 20 provides the following general rule: Employees who move to a new locality to take up a position of limited duration with an intention to return to the old locality at the end of the appointment would generally be treated as living away from their usual place of residence. For example, a construction worker having to travel to a construction site to live and work would be in this category unless he had abandoned the former place of residence upon moving to the locality of the site. A case of the latter situation would be where the employee decided to permanently leave the former home, e.g., if a resident of Sydney, on obtaining a job for two years on a construction site in a remote part of Western Australia, decided to "sell up" in Sydney and move permanently to Western Australia to live. These principles and the various cases that have considered usual place of abode or usual place of residence were discussed by the Administrative Appeals Tribunal in Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845; 2008 ATC 10-051. At paragraphs 55 and 56 Deputy President S A Forgie said: 55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47 , it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence". 56. Putting to one side the case of Case 50 , all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move. Your employee's spouse continues to live at the residence in location B and your employee returns there every weekend. Your employee's employment contract is for a fixed period, although it may be extended. It is considered that your employee's place of residence at location is the normal residence. Therefore your employee will be incurring the additional expenses because your employee is required to live away from her/his normal residence in order to perform the duties of employment. As you the allowance will be paid to cover your employee's meal and incidental expenses, it can be concluded it is in the nature of compensation for those additional expenses and is therefore a living-away-from-home allowance benefit in accordance with section 30 of the FBTAA.