Private ruling: FBT - Reduction of taxable value - remote area housing and residential fuel
Published: June 2013
Ruling period: 1 July 2013 to 31 March 2017

Ruling: Q1: Is the employer entitled to reduce the taxable value of expense payment fringe benefits provided to its employees that arise from the payment of interest on remote area housing loans by 50% under subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes | Q2: Is the employer entitled to reduce the taxable value of expense payment fringe benefits provided to its employees that arise from the payment of remote area housing rent by 50% under subsection 60(2A) of the Fringe Benefits Tax Assessment Act 1986 ? | A2: Yes Issue 2 Reduction of taxable value - remote area residential fuel | Q3: Is the employer entitled to reduce the taxable value of expense payment fringe benefits provided to its employees that arise from the payment of remote area residential fuel by 50% where the residential fuel is for use in connection with a dwelling used by the employee as his usual place of residence and was under an obligation to pay a remote area housing loan under subsection 59(2) of the Fringe Benefits Tax Assessment Act 1986 ? | A3: Yes | Q4: Is the employer entitled to reduce the taxable value of expense payment fringe benefits provided to its employees that arise from the payment of remote area residential fuel by 50% where the residential fuel is for use in connection with a unit of accommodation used by the employee as his usual place of residence and remote area housing rent accrued under subsection 59(3) of the Fringe Benefits Tax Assessment Act 1986 ? | A4: Yes

Relevant facts and circumstances: You propose to offer salary packages to current and future employees who have their usual place of residence in a remote area and provide them with remote area housing assistance in the form of: · a payment of interest expense on a remote area housing loan; and · rental payments connected with a unit of accommodation. You also propose to offer salary packages to current and future employees who have their usual place of residence in a remote area and provide them with remote area residential fuel assistance in the form of: · residential fuel expenses relating to remote area housing as stated above. The purpose of having the arrangement included in the salary sacrifice arrangement or as part of the after tax allowance is to ensure that the arrangement is cost neutral to you, while providing a benefit/incentive to your employees. Your district is in a remote location. The employees' place of residence in each case is or will be in an area which is classed as not being near or adjacent to an eligible urban area. Therefore, they are located: · At least 100 kilometres from the closest town with a census population of 130,000, and · At least 100 kilometres from the closest town with a census population of between 14,000 to less than 130,000. The employees to whom the payments are provided will be current employees at the time of the payments. The employees will carry out their duties in the remote location. No employee in respect of whom the housing assistance will be provided works within 100 kilometres of any large regional centre. Other employers in your industry provide housing assistance to employees. The accommodation is provided because of the employment relationship between you and the employees. There will be no other connection between you and the employees that may lead to a conclusion that they are not acting independently in relation to this matter. The arrangements are not being entered into for the purpose of enabling you to obtain the benefit of the application of subsection 60(2) or 60(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986).

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 subsection 59(2) | Fringe Benefits Tax Assessment Act 1986 subsection 59(3) | Fringe Benefits Tax Assessment Act 1986 subsection 60(2) | Fringe Benefits Tax Assessment Act 1986 subsection 60(2A) | Fringe Benefits Tax Assessment Act 1986 subsection 142(1) | Fringe Benefits Tax Assessment Act 1986 subsection 142(1A) | Fringe Benefits Tax Assessment Act 1986 subsection 142(2E)

Reasons for decision: Detailed Reasoning - Issue 1: Reduction of taxable value - remote area housing | Detailed Reasoning - Question 1: Subsection 60(2) of the FBTAA 1986 provides for a 50% reduction of the taxable value of expense payment fringe benefits in respect of remote area housing loan interest payments where all the following conditions are met: 1. The recipient of the relevant expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer. 2. The recipient's expenditure is in respect of interest in respect of a remote area housing loan connected with a dwelling. 3. The recipient occupied or used the dwelling as his or her usual place of residence during the period the interest accrued. 4. The fringe benefit was not provided under a non-arm's length arrangement or under an arrangement that was entered into by any of the parties to the arrangement to enable the employer to obtain the benefit of the application of this section. | Detailed Reasoning - Condition one:: You will pay interest expenses that your employees incur in relation to their housing loans. Therefore you are providing expense payment fringe benefits to your employees. Condition one is met. | Detailed Reasoning - Condition two:: The expenditure that the employees incur must be for interest 'in respect of a remote area housing loan connected with a dwelling'. Under subsection 142(1) of the FBTAA 1986 a 'remote area housing loan connected with a dwelling' is a reference to a housing loan related to a dwelling where the following requirements are satisfied: 1. During the whole of the period in the year of tax when the employee occupied or used the dwelling as his or her usual place of residence: · the dwelling was not at a location in, or adjacent to, an eligible urban area, and · the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area (that is, the relevant employment is in a remote area). 2. The common conditions set out in subsection 142(2E) of the FBTAA 1986 are satisfied in relation to the occupation period. The aforementioned common conditions are: (a) it was customary for employers in the industry in which the employee was employed to provide housing assistance to their employees at the relevant times. (b) It would be concluded that it was necessary for the employer to provide or arrange for the provision of housing assistance to its employees because either: · There was not, at or near, the place where the employees were employed sufficient suitable residential accommodation for them (other than that provided by or on behalf of the employer). · It was customary for the employers in the industry in which the employee was employed to provide housing assistance to their employees at the relevant times. 3. The loan was not made to the employee pursuant to a non-arm's length arrangement nor under an arrangement that was entered into by any of the parties to enable the employer to obtain the benefit of the application of section 60 of the FBTAA. You will pay employees' interest expenses they incur on homes loans: · for dwellings that they occupy as their usual place of residence · where the dwellings are in a location that is not adjacent to an eligible urban area, and · whilst they are current employees with a usual place of employment that is at a location not adjacent to an eligible urban area. It has been customary for local government to provide subsidised housing to employees in remote areas. It has been necessary to provide subsidised housing because of the remote location and often there is a lack of suitable housing. You have stated that the housing assistance is provided because of the employment relationship with your employees and that there is no other connection between you and your employees that would lead to the conclusion that the employees were not acting independently in relation to the housing assistance. This indicates that the benefits will be provided in respect of loans made at arm's length and not entered into in order to obtain the benefit of the concession in section 60 of the FBTAA. Since the home loans meet the requirements of a remote area housing loan in connection with a dwelling under subsection 142(1) of the FBTAA, you satisfy condition two of subsection 60(2) of the FBTAA. | Detailed Reasoning - Condition three:: Since employees are only eligible for housing assistance for accommodation that is their usual place of residence, this condition is satisfied. | Detailed Reasoning - Condition four:: You will provide housing assistance as part of your strategy for attracting and retaining staff. Consequently, the benefits will be provided under arm's length arrangements and there is nothing to indicate that they will be provided so that you would receive the benefit of the concession. You therefore meet this condition. As all of the conditions in subsection 60(2) of the FBTAA have been met, the taxable value of any expense payment fringe benefits that you provide in relation to interest incurred on a remote area housing loan may be reduced by 50%. This will be the case regardless of when the loan was made. | Detailed Reasoning - Question 2: Subsection 60(2A) of the FBTAA, provides for a reduction of the taxable value of expense payment fringe benefits by 50% of the gross rent incurred by the employee in respect of remote area housing rent where all the following conditions are met: 1. The recipient of the relevant expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer. 2. The recipient's expenditure is in respect of remote area housing rent connected with a unit of accommodation. 3. The recipient occupied or used the unit of accommodation as his or her usual place of residence during the period the rent accrued. 4. The fringe benefit was not provided under a non-arm's length arrangement or under an arrangement that was entered into by any of the parties to the arrangement to enable the employer to obtain the benefit of the application of this section. | Detailed Reasoning - Condition one:: This condition is met as you will pay rent for residential housing incurred by your employees. | Detailed Reasoning - Condition two:: The expenditure that the employee incurs must be for remote area housing rent connected with a unit of accommodation. The necessary requirements for the existence of 'remote area housing rent connected with a unit of accommodation' are set out in subsection 142(1A) of the FBTAA, as follows: (i) During the whole of the period in the year of tax when the employee occupied or used the unit of accommodation as his or her usual place of residence: · the dwelling was not at a location in, or adjacent to, an eligible urban area, and · the employee was a current employee of the employer and the usual place of employment of the employee was not at a location in, or adjacent to, an eligible urban area (that is, the relevant employment is in a remote area). (ii) The common conditions set out in subsection 142(2E) of the FBTAA are satisfied in relation to the occupation period. (iii) The lease or licence was not granted to the employee pursuant to a non-arm's length arrangement nor under an arrangement that was entered into by any of the parties to enable the employer to obtain the benefit of the application of section 60 of the FBTAA. You will pay employees expenses they incur: · on rent on units of accommodation that they occupy as their usual place of residence · where the accommodation is in a location that is not adjacent to an eligible urban area, and · whilst they are current employees with a usual place of employment that is at a location not adjacent to an eligible urban area. As with question one you satisfy all of the common conditions set out in 142(2E) of the FBTAA. You have stated that the housing assistance is provided because of the employment relationship with your employees and that there is no other connection between you and your employees that would lead to the conclusion that the employees were not acting independently in relation to the housing assistance. This indicates that the benefits will be provided in respect of leases or licenses granted at arm's length and that the employees will not enter into leases or licenses in order for you to obtain the benefit of the concession in section 60 of the FBTAA. Condition two of subsection 60(2) of the FBTAA is therefore met because the rent incurred by your employees in respect of a unit of accommodation satisfies the requirements of subsection 142(1A) of the FBTAA. | Detailed Reasoning - Condition three:: As stated in Issue 1 Question 1, this condition is satisfied. | Detailed Reasoning - Condition four:: As stated in Issue 1 Question 1, this condition is satisfied. As all of the conditions in subsection 60(2A) of the FBTAA have been met, the taxable value of any expense payment fringe benefits that you provide in relation to remote area housing rent may be reduced by 50%. This will be the case regardless of when the employee commenced to rent the unit of accommodation. | Detailed Reasoning - Issue 2: Reduction of taxable value - remote area residential fuel | Detailed Reasoning - Question 1: Subsection 59(2) of the FBTAA 1986 provides for a 50% reduction of the taxable value of expense payment fringe benefits in respect of remote area housing loan in respect of the supply of residential fuel where any of the following conditions are met: 1. (a) the recipients' expenditure in relation to an expense payment fringe benefit in relation to a year of tax is in respect of the supply of residential fuel; (b) the recipients' property in relation to a property fringe benefit in relation to a year of tax is residential fuel; (c) the recipients' benefit in relation to a residual fringe benefit in relation to a year of tax is the benefit of the consumption of residential fuel; and 2. the residential fuel is for use in connection with a dwelling during a period in the year of tax when the recipient occupied or used the dwelling as his usual place of residence and was under obligation to repay the whole or part of the remote area housing loan connected with the dwelling; and 3. the fringe benefit was not provided under a non-arm's length arrangement or under an arrangement that was entered into by any of the parties to the arrangement to enable the employer to obtain the benefit of the application of this section. | Detailed Reasoning - Condition one: You will be providing an expense payment benefit, property benefit and/or residual benefit when you supply or reimburse your employees for the whole or part of the cost of electricity, gas or other residential fuel. | Detailed Reasoning - Condition two: As previously stated at Issue 1 Question 1, your employee's accommodation is their usual place of residence and that their housing loan is considered to be remote area housing loan. | Detailed Reasoning - Condition three: As stated in Issue 1 Question 1, this condition is satisfied. As all of the conditions in subsection 59(2) of the FBTAA 1986 have been met, the taxable value of any expense payment fringe benefit that you provide in relation to residential fuel incurred on a remote area housing loan may be reduced by 50%. | Detailed Reasoning - Question 2: Subsection 59(3) of the FBTAA 1986 provides for a 50% reduction of the taxable value of expense payment fringe benefits in respect of remote area housing loan in respect of the supply of residential fuel where any the following conditions are met: 1. (a) the recipients' expenditure in relation to an expense payment fringe benefit in relation to a year of tax is in respect of the supply of residential fuel; (b) the recipients' property in relation to a property fringe benefit in relation to a year of tax is residential fuel; (c) the recipients' benefit in relation to a residual fringe benefit in relation to a year of tax is the benefit of the consumption of residential fuel; and 2. the residential fuel is for use in connection with a unit of accommodation during a period in the year of tax when the recipient occupied or used the unit of accommodation as his usual place of residence and remote area rent connected with the unit of accommodation accrued; and 3. the fringe benefit was not provided under a non-arm's length arrangement or under an arrangement that was entered into by any of the parties to the arrangement to enable the employer to obtain the benefit of the application of this section. | Detailed Reasoning - Condition one: You will be providing an expense payment benefit, property benefit and/or residual benefit when you supply or reimburse your employees for the whole or part of the cost of electricity, gas or other residential fuel. | Detailed Reasoning - Condition two: As previously stated at Issue 1 Question 1, your employees' accommodation is their usual place of residence and that their expenditure on their housing rent is considered to be remote area housing rent. | Detailed Reasoning - Condition three: As stated in Issue 1 Question 1, this condition is satisfied. As all of the conditions in subsection 59(3) of the FBTAA 1986 have been met, the taxable value of any expense payment fringe benefit that you provide in relation to residential fuel incurred on a remote area housing rent may be reduced by 50%.