Private ruling: Fringe benefits tax
Date of advice: 8 July 2024
Published: 19 August 2024
Date scheme commenced: 1 April 2024

Ruling: Q1: Are the allowances paid to the Employees, while on mandatory training abroad, considered a Living-Away-From-Home-Allowance (LAFHA) benefit under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. | Q2: If the answer to Question 1 is 'yes', will the provision of accommodation to the two Employees traveling abroad for training be an exempt fringe benefit under subsection 47(5) of the FBTAA? | A2: Not applicable. This private ruling applies for the following periods: Fringe Benefits Tax (FBT) year ending 31 March 2025 FBT year ending 31 March 2026 FBT year ending 31 March 2027 FBT year ending 31 March 2028 FBT year ending 31 March 2029 The scheme commenced on: 1 April 2024

Relevant facts and circumstances: Employee attendance at overseas helicopter training The Company provide allowances and accommodation to employees who will be required to travel to abroad for classroom-based helicopter training. The training lasts for 4 to 5 weeks. The allowances provided while an employee is abroad allows for reasonable additional expenses they will incur while doing the helicopter training. The allowances are categorised as Breakfast, Lunch, Dinner and Incidentals. Under the employees current agreement, the Company is obliged to pay for the employee's return airfares abroad. Allowances are paid at the time salary and wages are paid. The employee is required to complete the overseas travel diary and forward approved diary and all supporting documents, including all receipts for expenses, to the relevant department for processing within 10 days upon returning from overseas. The Company policy states that the travel allowance is to compensate the expenses incurred in the provision of meal and accommodation when they travel on official business at the direction of the Company. Hence, they should spend the full amount of the allowance provided on meals, accommodation, and incidentals. If they do not spend the full amount, they are not required to return residual funds to their employer. Classroom training is greater than 21 days. The usual place of employment for the employees attending this training is at an airport. They will be returning to that place of employment once they have completed the training. While abroad the employees will be accommodated in a motel which will be located close to the training facility (booked by administrative staff). Family is not permitted to travel with the employees. At the completion of the course the employees will return to their usual place of residence.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 subsection 30(1) | Fringe Benefits Tax Assessment Act 1986 section 31C | Fringe Benefits Tax Assessment Act 1986 section 31D, | Fringe Benefits Tax Assessment Act 1986 section 31E | Fringe Benefits Tax Assessment Act 1986 subsection 47(5) | Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(a) | Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(b) | Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(ba) | Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(c) | Fringe Benefits Tax Assessment Act 1986 paragraph 47(5)(d) | Fringe Benefits Tax Assessment Act 1986 sub paragraph 47(5)(d)(ii) | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Income Tax Assessment Act 1997 subsection 900-15(1) | Income Tax Assessment Act 1997 subsection 900-30(1) | Income Tax Assessment Act 1997 subsection 900-3(3) | Taxation Administration Act 1953 section 12-35 of Schedule 1

Reasons for decision: Detailed Reasoning - Question 1: Are the allowances paid to employees, while on mandatory training abroad, considered a Living-Away-From-Home-Allowance (LAFHA) benefit under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | Summary: The allowances paid to employees traveling abroad for helicopter training is not a LAFHA benefit for the purposes of subsection 30(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Subsection 30(1) of the FBTAA sets out the circumstances in which an allowance paid by an employer to an employee will qualify as a LAFHA benefit, and 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 payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time. | Detailed Reasoning - Does the Company pay an allowance in respect of their employment?: According to the FBTAA, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The 'employee' may be a current, former or future employee. Subsection 136(1) of the FBTAA defines a 'current employee' to mean 'a person who receives, or is entitled to receive, salary or wages'. 'Salary or wages', as defined in subsection 136(1) of the FBTAA, means payments from which an amount must be withheld under section 12-35 of Schedule 1 to the Taxation Administration Act 195 3. Based on the information provided, the employees meet the definition of 'current employee' because they receive salary or wages from the Company from which an amount must be withheld. In considering whether a benefit is provided to an employee in respect of their employment, subsection 136(1) of the FBTAA defines 'in respect of', in relation to the employment of an employee, to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. In J & G Knowles v Commissioner of Taxation [2000] FCA 196, the Full Federal Court, in examining the meaning of 'in respect of' an employee's employment held that the phrase required a "nexus, some discernible and rational link, between the benefit and employment", though noted that 'what must be established is whether there is a sufficient or material, rather than a causal connection or relationship between the benefit and the employment'. In this situation, payment of the allowances to the employees is sufficiently and materially connected to the employment of the respective employees, and as such, would be considered to have been provided 'in respect of' their employment'. Therefore, payment of the allowances to the employees is made in respect of their employment, thus satisfying the first condition in subsection 30(1) of the FBTAA. | Detailed Reasoning - Do the duties of employment require the employees to live away from their normal residence at the time the allowance is paid?: 'Normal residence' is defined in subsection 136(1) of the FBTAA as the employee's usual place of residence, when the employee's usual place of residence is in Australia. The FBTAA does not provide a definition of the term 'usual place of residence'. However, subsection 136(1) of the FBTAA defines '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 a shared basis. In the absence of a legislative reference, it is relevant to refer to the ordinary meaning of the word 'usual'. The Macquarie Dictionary defines 'usual' to mean 'habitual or customary...'. It is accepted that, in the current circumstances, an employee's permanent and settled principal place of residence is the employee's usual place of residence. | Detailed Reasoning - 'Living away from usual residence': Paragraph 130 of Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances (TR 2021/4) analyses the difference between a travel allowance and a LAFHA: 130. The main difference between a travel allowance and a LAFHA is that a: • travel allowance can only be paid to cover deductible accommodation and food and drink expenses and incidental expenses incurred by an employee when they are travelling on work • LAFHA is paid to provide compensation to an employee for the additional living expenses incurred by an employee because their duties of employment require them live at location away from their usual residence. Paragraph 42 of TR 2021/4 provides guidance for determining whether an employee is living at a location away from their usual residence. 42. The following factors would support a characterisation of an employee as living at a location away from their usual residence: • there is a change in the employee's regular place of work • the length of the overall period the employee will be away from their usual residence is a relatively long one • the nature of the accommodation is such that it becomes their usual residence • whether the employee is, or can be, accompanied by family or visited by family and friends. | Detailed Reasoning - Change in the employee's regular place of work: Paragraph 45 of TR 2021/4 outlines that where there is a change in the employee's regular place of work and the employee incurs accommodation and meal expenses to be closer to their new regular place of work, the employee will be living at that new location away from their usual residence. In this case, there is no change in the Employees regular place of work and the Employees are required to temporarily attend a training course abroad for a specific period of time before returning to their usual place of employment. | Detailed Reasoning - The length of the period away: Paragraph 48 of TR 2021/4 explains that the 'length of period away' means the overall period of time the employee spends living at a particular location for work. Paragraph 49 explains that the longer an employee spends away from their usual residence for work, the more likely the employee is living at the location. While the Commissioner accepts that an employee is travelling on work when the length of stay is no more than 90 calendar days in total for travel to the same work location in an FBT year (paragraphs 12 and 13 of Practical Compliance Guideline PCG 2021/3: Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location ), this does not necessarily mean that if the length of stay exceeds 90 days an employee is living at a location. All the factors set out in TR 2021/4 still need to be considered to reach such a conclusion (paragraph 4 of PCG 2021/3). In this instance, the period the employee has been or is expected to be away from their usual residence is a maximum of 35 days. As such, this period is considered a short length of time to be away from your usual place of residence. | Detailed Reasoning - The nature of the accommodation: Paragraphs 56 and 58 of TR 2021/4 explains that the nature of an employee's accommodation is relevant but does not determine whether the employee is living at a location away from their usual residence. Generally, where an employee works away from home for a considerable period and, for that period, stays in accommodation generally used for longer term accommodation (such as a house, unit, apartment or caravan), this would support a view that they are living at a location away from their usual residence. Paragraph 59 of TR 2021/4 notes that the use of short-term accommodation such as hotels and motels located close to the temporary work location is generally an indication that the employee is travelling on work. While the Employees are abroad attending helicopter training, they will stay in a hotel close to the training venue. This indicates that the Employees have been provided with short term accommodation. | Detailed Reasoning - Whether the employee is, or can be, accompanied by family or visited by family and friends: Paragraph 60 of TR 2021/4 provides that an employee who is living at a location away from their usual residence can generally be accompanied or visited by their family and friends. However, if an employee cannot be accompanied by family or visited by family and friends, this tends to indicate that the employer retains a degree of control over the employee outside their standard workday and which may contribute to an overall impression that the employee is travelling on work during this period. In this case, family members do not accompany the Employees while they are attending the training course abroad. The Employees will go back to their principal place of residence (and family members) at the completion of the training course. While the Employees are working away from home, they continue to maintain their usual place of residence; and they are not accompanied by family members. It is considered that the Employees do not take up settled accommodation or temporary residence elsewhere when they are working away from home. Accordingly, it is considered that the duties of employment do not require them to live at a location away from their normal residence. Therefore, the second condition in subsection 30(1) of the FBTAA is not satisfied. Is the allowance paid wholly or partly to compensate the employees for additional, non-deductible expenses incurred because of the requirement to live away from their normal residence? The third condition requires that an allowance should have been paid to compensate for additional non-deductible expenses. 'Non-deductible' is a pre-requisite in the third condition, we therefore need to determine whether the allowance is a deductible expense to the Employees. Subsection 136(1) of the FBTAA provides the definition of deductible expenses as follows: deductible expenses , in relation to an allowance paid to an employee, means 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 (ignoring Divisions 28, 32 and 900 of that Act). According to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), you can deduct a loss or outgoing if it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature. Paragraph 7 of TR 2021/4 outlines that the term 'incurred in gaining or producing assessable income' means incurred 'in the course of gaining or producing assessable income'. For an expense to be incurred in gaining or producing assessable income it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of assessable income. Paragraph 8 states that when determining what is productive of an employee's assessable income, consideration should be given to the scope of the employee's income-producing activities. Paragraphs 9 and 10 differentiate the 'living expenses and expenses incurred while 'travelling on work'. 9. Accommodation and food and drink expenses are ordinarily private or domestic in nature and are generally not deductible under section 8-1. This includes the costs an employee incurs to maintain their usual residence and of consuming food and drink to go about their daily activities. For the purposes of this Ruling, such expenses will be referred to as 'living expenses. 10. However, where an employee travels and stays away from their usual residence overnight in the course of performing their income-producing activities and incurs accommodation and food and drink expenses, these expenses will generally be deductible under section 8-1. For the purposes of this Ruling, an employee who stays away from their usual residence overnight in the course of performing their income-producing activities will be referred to as 'travelling on work'. Paragraph 24 of TR 2021/4 further outlines the relevant factors for determining whether an employee is travelling on work versus living expenses. 24. If any of the following factors apply, the employee will not be travelling on work and the accommodation and food, and drink expenses incurred will be living expenses: • The expenses are incurred because the employee's personal circumstances are such that they live far away from where they gain or produce their assessable income • The employee incurs the expenses because they are living at a location • The employee incurs the expenses as a result of relocating from their usual residence. | Detailed Reasoning - Personal circumstances: Paragraph 25 of TR 2021/4 explains that an employee cannot deduct accommodation and food and drink expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. The Employees have been sent abroad for helicopter classroom training. They have been sent to do this course so they can carry out their employment duties rather than due to their personal circumstances. The expenses on food, and other incidentals are incurred in the course of producing assessable income. Living at a location It has been established above that the Employees are not considered to be 'living at a location'. Relocation Paragraph 80 of TR 2021/4 lists the factors that indicate whether an employee has relocated or not. 80. Whether an employee has relocated is a question of fact. Factors that indicate an employee has relocated include: • they are at the new location for an extended period • they are required to move to that location permanently or indefinitely in order to perform their duties • their usual residence is no longer available for them to occupy because they have either sold it or because it has been leased or rented out long-term • they are accompanied by their family and the family's belongings have been transferred to the new location • their children attend school at the new location • their spouse or partner obtains employment at the new location • they change their postal address and electoral role details to their new place of residence • they establish ties to the local community, for example, by taking up membership at local sporting and recreational clubs at the new location. The Employees are not required to stay for an extended period of time or move permanently, and the other factors listed above do not apply to their circumstances. Therefore, the Employees do not have to relocate abroad. As the Employees do not undertake travel due to their personal circumstances, do not live at a location and have not relocated abroad, the expenses (on food and other incidentals) they incur cannot be living expenses. Rather, they incur these expenses while travelling on work. Therefore, these expenses are deductible expenses as they are necessarily incurred in gaining or producing assessable income. As a result, the third condition in subsection 30(1) of the FBTAA is not satisfied. | Detailed Reasoning - Conclusion: Whilst the Company pay the allowances to the Employees as a result of their employment, the Employees are not required to live away from home and the expenses they incur in relation the meals and other incidentals are deductible on the basis that they travel on work. Therefore, the allowances paid to Employees who are traveling abroad to do helicopter classroom training are not considered a LAFHA benefit pursuant to section 30(1) of the FBTAA. | Detailed Reasoning - Is the 'allowance' a travel allowance?: Generally, an employee can only deduct a loss or outgoing incurred in producing salary or wages, including losses or outgoings incurred for food and drink while travelling on work that is covered by a travel allowance, when the expenditure is substantiated with written evidence: subsections 900-15(1) and 900-30(1) of the ITAA 1997. Subsection 900-30(3) of the ITAA 1997 provides that a travel allowance is an allowance paid by an employer to cover expenses for accommodation, food or drink, or expenses incidental to the travel, incurred by an employee for travel away from the employee's ordinary residence in the course of her or his employment duties. The following paragraphs of the TR 2021/4 are relevant in determining whether the allowances are travel allowances for the purpose of subsection 900-30(3) of the ITAA 1997: 122. The name of an allowance does not determine the nature of that allowance. In order to determine whether an allowance is a travel allowance or a LAFHA, it is necessary to consider the purpose for which the allowance is paid. 123. A travel allowance is an allowance an employer pays (or is to pay) to an employee to cover losses or outgoings that: • an employee incurred for travel away from their ordinary residence, either within or outside Australia, that they undertake in the course of their duties as an employee, and • are incurred for accommodation or for food or drink expenses, or expenses that are incidental to the travel. 124. A travel allowance is assessable income. However, there are some circumstances where the amount of the travel allowance does not have to be reported in an employee's tax return as assessable income. 125. The receipt of travel allowance, which is included in an employee's assessable income, does not give rise to an entitlement to claim a deduction for accommodation and food and drink expenses. The nature of the expense and its connection to the employee's income-producing activities determines whether it is deductible. In these circumstances, when the Employees are required to travel to abroad, they are paid a fixed amount per night for meals and incidentals. This is a definite, pre-determined amount in line with the Employees award.The Employees are not required to refund any unexpended amounts to the Company. Accordingly, it is not intended that the payments compensate exactly for meal expenses that are incurred by the Employees. Therefore, payment made by the Company to the Employees per night is considered to constitute the payment of an allowance. These payments are not a reimbursement. The allowances paid to these Employees are therefore a travel allowance. | Detailed Reasoning - Question 2: If the answer to Question 1 is 'yes', will the provision of accommodation to the employees traveling abroad for training be an exempt fringe benefit under subsection 47(5) of the FBTAA? | Summary: As determined in Question 1, the allowance paid by the Company to officers traveling abroad for helicopter classroom training is considered a travel allowance and not a LAFHA. Therefore, as there is no fringe benefit, the benefit cannot be considered exempt.