Private ruling: Fringe benefits: drive-in drive-out
Published: December 2014
Ruling period: 1 April 2014 to 31 March 2015 | 1 April 2015 to 31 March 2016 | 1 April 2016 to 31 March 2017 | 1 April 2017 to 31 March 2018 | 1 April 2018 to 31 March 2019
Date scheme commenced: 1 April 2014

Ruling: Q1: Will your employees working under a drive-in drive-out (DIDO) arrangement satisfy the requirements set out in section 31E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. | Q2: Will accommodation provide by you to your employees working under a DIDO arrangement be exempt under section 47(5) of the FBTAA? | A2: Yes for the first 12 month period where, under the proposed arrangement, the employee is required to live away from their normal place of residence, the accommodation provided is exempt. No, after the first 12 month period the accommodation provided is not exempt. | Q3: Are meals provided to your employees in the dining room at your premises exempt property fringe benefits under section 41 of the FBTAA? | A3: Yes. | Q4: Will the food allowance provided by you to your employees to compensate them for additional food expenses when meals are not provided be considered living away from home allowance (LAFHA) pursuant to subsection 30(1) of the FBTAA? | A4: Yes for the first 12 month period where, under the proposed arrangement, the employee is required to live away from their normal place of residence, the food allowance is considered a living away from home allowance and therefore exempt. No, after the first 12 months the food allowance component is not exempt from the taxable value calculation.

Relevant facts and circumstances: You are considering altering your employment arrangements to a DIDO employment basis. Employees will have their usual place of residence at a different location and travel to and from your work place by personal vehicle to fulfil their employment duties on a regular rotational basis. The employment duties would be fulfilled on a regular, rostered basis and the employee would travel home to their usual place of residence at the conclusion of their work period. Work rosters will be arranged around DIDO work cycles. Whilst the employee is working, they would be housed by you in an existing accommodation structure at no personal expense to the employee. You will provide the employee with accommodation that is owned by you for the duration of their rostered days. The costs involved in maintaining the usual place of residence outside of the work place would be at the personal expense of the employee. The propose roster would be Monday to Thursday during the first week and Tuesday to Friday during the second week. The employees would be required for maintenance activities. Most of the planned maintenance activities will be scheduled during the days of the standard roster. However, there will be occasions when planned maintenance is performed over weekends. Staff on the roster will be scheduled to undertake this work on a variation of the standard roster. If unplanned maintenance arises on a weekend, existing staff will be called in. There exists an on-call system whereby staff on the roster may be called upon to perform on-call work. Staff will be asked to undertake weekend work if it is required. Some of the staff will be asked to work each second weekend. The number of staff and particular members of staff required to work will depend on the size of the project being undertaken and the skills needed for the project. On completion of the rostered working days, the employee will travel from your work place to their normal place of residence. On completion of the rostered days off, the employee will return to their place of employment. You intend to provide your employees residing at the work place with one meal per day in your dining facility. The meals are to be provided in the dining facility owned and operated by you. Employees will be provided with a food allowance to meet the additional cost of food whist they are working to cover meals not provided by you. The food allowance will be calculated with reference to the ATO's reasonable food guidelines as released by the Commissioner annually and the allowance be apportioned for the number of meals it is intended to cover and prorated for days worked during a 7 day period. You will require the employee to complete a declaration in a form approved by the Commissioner before the declaration date.

Relevant legislative provisions: section 31E of the FBTAA | section 45 of the FBTAA | subsection 47(5) of the FBTAA | section 41 of the FBTAA | section 30 of the FBTAA | section 31 of the FBTAA | section 31A of the FBTAA

Reasons for decision: Summary: Your employees working under the proposed DIDO arrangement do not satisfy the requirements set out in section 31E of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 31E of the FBTAA provides the conditions that must be satisfied for an employee to be considered as working on a fly-in fly-out and drive-in drive-out basis. Section 31E of the FBTAA states that the employee satisfies this section if: (a) the employee, on a regular and rotational basis: (i) works for a number of days and has a number of days off (but not the same days in consecutive weeks), and (ii) on completion of the working days, travels from his or her usual place of employment to his or her normal residence and, on completion of the days off, returns to that usual place of employment, and (b) the basis of work described in paragraph (a) is customary for employees performing similar duties in that industry, and (c) it would be unreasonable to expect the employee to travel on a daily basis on work days between: (i) his or her usual place of employment, and (ii) his or her normal residence, having regard to the location of those places, and (d) it is reasonable to expect that the employee will resume living in his or her normal residence when the duties of that employment no longer require him or her to live away from it. Subparagraph 31E(a)(i) of the FBTAA provides a requirement that the employee satisfies that provision if the employee on a regular and rotational basis works for a number of days and has a number of days off (but not the same days in consecutive weeks. This requirement was introduced by the Tax law Amendment (2012 measures No. 4) Act 2012. The revised explanatory memorandum associated with the bill provides the following additional guidance on this matter. 1.48 The employee is considered to be working on a fly-in fly-out or drive-in drive-out (or equivalent) basis when: • on a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks, such as a standard five day working week and weekend [Schedule 1, Part 1, item 1, subparagraph 31E(a)(i)] ; • the employee returns to the employee's normal residence during the days off [Schedule 1, Part 1, item 1, subparagraph 31E(a)(ii)] ; • it is customary in the industry in which the employee works for employees performing similar duties to work on a rotational basis and return home during days off; for example, miners - the work duties continue to be undertaken by other employees on a rotational basis while any particular employee is on days off [Schedule 1, Part 1, item 1, paragraph 31E(b)] ; • it is unreasonable to expect the employee to travel to and from work and the normal residence on a daily basis given the locations of the employment and their home [Schedule 1, Part 1, item 1, paragraph 31E(c)] ; and • it is reasonable to expect that the employee will resume living at the normal residence when the employment duties no longer require them to live away from home [Schedule 1, Part 1, item 1, paragraph 31E(d)] . ATO ID 2013/43 provides some guidance on the phrase regular and rotational basis requirements for fly-in fly-out and drive-in drive-out employees and states: The requirements to be met for an employee to be considered to be a fly-in fly-out and drive-in drive-out employee are set out in section 31E of the FBTAA. Subparagraph 31E(a)(i) states: The employee satisfies this section if: (a) the employee, on a regular and rotational basis: (i) works for a number of days and has a number of days off (but not the same days in consecutive weeks); and (ii) …….. The meaning of 'regular and rotational basis' is not defined in the FBTAA. Therefore, it is relevant to consider the ordinary meanings of the terms 'regular' and 'rotational' in the context in which they are used in the FBTAA. The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 (Macquarie Dictionary), defines 'regular' as: usual; normal; customary; conforming in form or arrangement; characterised by fixed principle, uniform procedure, etc; recurring at fixed times; periodic; adhering to rule or procedure. The word 'rotational' in the employment context is defined in the Cambridge Dictionaries Online as: relating to a system in which the person who does a particular job is regularly changed: The shifts work on a rotational basis. Depending on the department, some recruits will participate in rotational placements. Under the proposed arrangement, the employee will arrive at the beginning of their rostered shift and work for a number of days and reside at the work site. The employees will be scheduled on the standard roster to complete maintenance activities. The days worked by the employee would not be the same days in consecutive weeks. You propose that a typical roster would be Monday to Thursday during the first week and Tuesday to Friday during the second week. However, there will be occasions when planned maintenance is performed over the weekends if it is required. When this occurs, some of the staff will be asked to work each second weekend. On completion of the rostered working days, the employee will travel home from the work place to their normal place of residence. On completion of the rostered days off, the employee will return to their place of employment. In your case, it appears that the employee performs the duties of their employment on the basis that they alone are responsible for the day to day operations for which they are employed. You state an employee may be required to work weekends. In some instances, every second weekend. Furthermore, if unplanned maintenance arises on a weekend, existing staff will be called in. There exists an on-call system whereby staff on the roster may be called upon to perform on-call work. Based on the information available, the employee does not job share nor does anyone else perform the duties of that employee's employment when the employee completes their roster and returns to their normal place of residence. The employee remains solely responsible for performing the duties of their employment, and as such is not working on a regular and rotational basis. Accordingly the requirements of subparagraph 31E(a)(i) of the FBTAA have not been met. As you do not meet the requirements of subparagraph 31E(a)(i) of the FBTAA, your employees working under the proposed DIDO arrangement do not satisfy the requirements set out in section 31E of the FBTAA. | Summary: The accommodation provided by you to your employees working under the proposed arrangement would be exempt under section 47(5) of the FBTAA for the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she normally resides. However, after the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she normally resides the accommodation would not be exempt. | Detailed Reasoning - Detailed reasoning: A residual benefit will arise under section 45 of the FBTAA where a unit of accommodation is provided to an employee in respect of his or her employment. In your case, you are providing accommodation to your employees with residential accommodation in respect of their employment. Where the accommodation is provided to an employee and they are required to be away from their usual place of residence, the residual benefit maybe exempt under subsection 47(5) of the FBTAA if all the requirements of that subsection are met. Subsection 47(5) of the FBTAA states that where: (a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and (b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and (ba) the employee satisfies: (i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and (c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and (d) any of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii); (iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii); the benefit is an exempt benefit in relation to the year of tax. To maintain a house in Australia, section 31C of the FBTAA states: The employee satisfies this section if: (a) the place in Australia where the employee usually resides when in Australia: (i) is a unit of accommodation in which the employee or the employee's spouse has an ownership interest (within the meaning of the Income Tax Assessment Act 1997); and (ii) continues to be available for the employee's immediate use and enjoyment during the period that the duties of that employment require the employee to live away from it; and (b) it is reasonable to expect that the employee will resume living at that place when that period ends. Section 31D of the FBTAA states: 31D(1) The employee satisfies this section if the fringe benefit relates only to all or part of the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she usually resides when in Australia. 31D(2) Each of the following paragraphs applies for the purposes of subsection (1): (a) the employer may pause the 12-month period; (b) start a separate 12-month period if: (i) the employer later requires the employee to live at another location for the purposes of that employment; and (ii) it would be unreasonable to expect the employee to commute to that other location from an earlier location for which the employer provided a benefit of the same kind to the employee; (c) other changes in the nature of that employment are irrelevant; (d) treat as one employer any of the employee's earlier employers that is or has been an associate of the current employer. Under your proposed arrangement, you would be providing a benefit in the form of accommodation to your employees while they are working in the existing accommodation structures which are owned by you at no personal expense to the employee. You propose that the employees will have their own usual place of residence and travel to and from your place of employment by personal vehicle to fulfil their employment duties. The accommodation is not provided while the employee is undertaking travel in the course of performing their duties of that employment. On completion of the rostered working days, the employee will travel from the place of employment to their normal place of residence. On completion of the rostered days off, the employee will return to the place of employment. Based on the above information, the accommodation provided by you to your employees working under your proposed arrangement would be exempt under section 47(5) of the FBTAA for the first 12 months that the duties of that employment require the employee to live away from the place in Australia where he or she usually resides. However, after the first 12 months that the duties of that employment require the employee to live away from where they normally reside in Australia, the accommodation would not be exempt. Accordingly, subsection 47(5) of the FBTAA will apply (in part) for the first 12 months that the duties of that employment require the employee to live away from their normal place of residence. As discussed at Question 1, you did not meet all of the legislative requirements of section 31E of the FBTAA as a DIDO employee arrangement. As a result, the legislative provision of subparagraph 47(5)(ba)(ii) would not be met. | Summary: The meals provided to the employees in the dining room are property benefits that are exempt under section 41 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Under section 40 of the FBTAA where: …at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. Property benefit is defined in subsection 136(1) of the FBTAA to mean: … a benefit referred to in section 40 but does not include a benefit that is a benefit by virtue of a provision of subdivision A of Divisions 2 to 10 (inclusive) of Part III. The meals provided to the employees do not constitute entertainment are not benefits by virtue of a provision subdivision A of Divisions 2 to 10. The meals provided to the employees are property benefits. Food and drinks are considered to be tangible property as defined in subsection 136(1) of the FBTAA. Therefore its provision to the instructors is the provision of a property benefit. To be an exempt property benefit, subsection 41(1) of the FBTAA states where: (a) a property benefit is provided to a current employee of an employer in respect of his or her employment, and, (b) the property is provided to, and consumed by, the employee on a working day and on business premises of: (i) the employer, or (ii) if the employer is a company, of the employer or of a company that is related to the employer, the benefit is an exempt benefit. In paragraph 44 of Taxation Ruling TR 97/17 which discusses the application of section 41 of the FBTAA, it is noted that a working day is any 24 hour period during which work is usually performed by the employee. Under this arrangement, you will provide employees residing at the work place with one meal per day in the dining facility owned and operated by you. The benefit is provided to your current employee in respect of his or her employment with you and consumed by the employee on a working day on your business premises. Based on this information, the meals provided to your employees in your dining facility is an exempt fringe benefit as it meets the requirements of subsection 41(1) of the FBTAA. | Summary: The food allowance to be provided to your employees would be considered a living away from home allowance and exempt for the first 12 months that the duties of that employment require the employee to live away from their normal place of residence. However, after the first 12 months that the duties of that employment require the employee to live away from where the employee normally resides, the food allowance component would not be exempt from the taxable value calculation. | Detailed Reasoning - Detailed reasoning: A payment will constitute a LAFHA benefit under subsection 30(1) of the FBTAA: 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. According to Fringe benefits tax: a guide for employers a LAFHA is: • an allowance you (the employer) pay to an employee, and • to compensate for additional expenses incurred and any disadvantages suffered, because the employee is required to live away from their usual place of residence in order to perform their employment related duties. 'Allowance' is not defined in the FBTAA but paragraph 2 of Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement , provides the following guidance on the meaning of the term: A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance. In your case, you intend to provide your employees a food allowance to meet the additional costs to cover meals not provided by you. The food allowance will be in addition to the one meal provided per day in your dining facility. You state that the food allowance will be calculated with reference to Taxation Determination TD 2014/9 - Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit for the fringe benefits tax year commencing on 1 April 2014 and the allowance be apportioned for the number of meals it is intended to cover and prorated for days worked during a 7 day period. In this case, the amount is definite and predetermined. The nature and duties of your employees' employment will require them to live away from their normal place of residence. Based on the information provided, you propose to pay a food allowance to your employees to compensate them for the additional expenses incurred and any disadvantages suffered as the employee is required to live away from their usual place of residence in order to perform their employment related duties. As a result, the food allowance that you propose to pay your employees would be a living away from home allowance under subsection 30(1) of the FBTAA. However, in determining the taxable value of the living away from home allowance for employees, the food allowance exemption component must be calculated under section 31 of the FBTAA. Section 31 of the FBTAA states: 31(1) This section applies to a living-away-from-home allowance fringe benefit covered by subsection 30(1) in relation to a year of tax to the extent that the employee satisfies all of the following for the fringe benefit and the period to which it relates: (a) section 31C (about maintaining an Australian home); (b) section 31D (about the first 12 months); (c) section 31F (about declarations). 31(2) Subject to this Part, the taxable income of the fringe benefit in relation to the year of tax is the amount of the fringe benefit reduced by: (d) any exempt accommodation component; and (e) any exempt food component. 31(3) Paragraph (2)(b) does not apply to the extent that the fringe benefit relates to a period during which the employee resumes living at his or her normal residence. 31(4) Neither paragraph (2)(a) nor (b) applies to the extent that the period to which the fringe benefit relates happens while the 12-month period referred to in subsection 31D(1) is paused. As discussed at Question 2, it is accepted your employees would meet the requirements of section 31C of the FBTAA. It is accepted that you will meet the requirements of section 31F in that the employee will complete a declaration in a form approved by the Commissioner and the employee has provided this declaration form to you before the declaration date. The food allowance provided by you to your employees working under your proposed arrangement would be an exempt food component in order to calculate the taxable value amount for the first 12 months that the duties of that employment require the employee to live away from the place in Australia where the employee normally resides. However, after the first 12 months that the duties of that employment require the employee to live away from where they normally reside, the food allowance component would not be exempt as part of the taxable value calculation. Accordingly, subsection 31(1) of the FBTAA will apply (in part) for the first 12 months that the duties of that employment require the employee to live away under your proposed arrangement. As discussed at Question 1, you did not meet all of the legislative requirements of section 31E of the FBTAA as a DIDO. The legislative provision of paragraph 31A(1)(b) has not been met and would not apply to your particular circumstances.