Private ruling: Exempt Fringe Benefits – airline travel
Date of advice: 26 April 2019
Published: June 2019
Ruling period: Year ending 31 March 201A
Date scheme commenced: 2X January 201A

Ruling: Q1: Is the expense incurred by the company on the cost of flights between the employee’s ordinary place of residence and work exempt from fringe benefits tax under subsection 47(7) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | 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. The employee’s usual place of residence is in a city in a state or territory of Australia where he maintains a home with his family. The employee’s place of work is a town in another state or territory of Australia. The town of employment is Zone B, less than 28,000 population and more than 100kms away from a town with census population of 130,000 or more. The employment started on 2X January 201A. The employee works a Y weeks on, Z weeks off roster, flying home between periods of work. The employer provides accommodation during the Y weeks the employee spends at work. The employer organises and purchases flights between the city of residence and the town of employment. Travel is between his ordinary place of residence and work. All expense invoices are in the name of the employer. The time spent traveling is not deemed as occurring during working hours and the employee is not paid for the time spent traveling.

Relevant legislative provisions: subsection 47(7) Fringe Benefits Tax Assessment Act 1986 | section 45 Fringe Benefits Tax Assessment Act 1986

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 provision of airline travel to the employee is a residual benefit as per section 45 of the FBTAA. The residual benefit that arises from the provision of airline travel to the employee is an exempt benefit under subsection 47(7) of the FBTAA. | Detailed Reasoning - Detailed reasoning: The provision of the travel will give rise to a benefit as defined in subsection 136(1) of the FBTAA. The benefit will be a fringe benefit where it meets the definition of 'fringe benefit' as defined in subsection 136(1) of the FBTAA. The definition of fringe benefit in subsection 136(1) of the FBTAA excludes at paragraph (g) a benefit that is an exempt benefit in relation to the year of tax. For the purposes of this Ruling, the relevant exemption is the exemption provided under subsection 47(7) of the FBTAA for a residual benefit that consists of the provision of airline travel to the employee. | Detailed Reasoning - Is the benefit a residual benefit?: As section 47 of the FBTAA provides the exempt residual benefits, it is necessary to consider whether the benefit is a residual benefit. Section 45 of the FBTAA provides that a benefit will be a residual benefit if it is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive) of Part III of the FBTAA. Divisions 2-4 and 6-10 are not relevant to your circumstances. Division 5 and Division 11 may be relevant to your circumstances. | Detailed Reasoning - Expense payment benefits: Division 5 of Part III of the FBTAA applies to expense payment fringe benefits. Section 20 of the FBTAA states that an expense payment benefit will arise where the provider either: (a) makes a payment in discharge, in whole or part, of an obligation of another person to pay an amount to a third person in respect of an amount of expenditure incurred by the recipient; or (b) reimburses the recipient, in whole or part, in respect of an amount of expenditure incurred by the recipient. Under this arrangement, the flight is booked through the employer, rather than the employee incurring the expense directly. The travel supplier issues an invoice to the employer in the name of the employer. The cost of the flight is paid by the employer, hence they are discharging their own obligation. The employer is, therefore, not discharging an obligation of another person to pay a third person, nor providing a reimbursement to another person in respect of expenditure incurred by that person. The benefit is therefore not an expense payment benefit under section 20 of the FBTAA. | Detailed Reasoning - Property benefits: Division 11 of Part III of the FBTAA applies to property fringe benefits. Section 40 of the FBTAA states: 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. Subsection 136(1) of the FBTAA provides the following definitions relevant to property benefits: 'property' means: (a) intangible property; and (b) tangible property. 'tangible property' means goods and includes: (a) animals, including fish; and (b) gas and electricity.' 'intangible property' means: (a) real property; (b) a chose in action; and (c) any other kind of property other than tangible property; but does not include: (a) a right arising under a contract of insurance; or (b) a lease or licence in respect of real property or tangible property. 'property benefit' means a benefit referred to in section 40 of the FBTAA, but does not include a benefit that is a benefit by virtue of a provision of Subdivision A or Divisions 2 to 10 (inclusive) of Part III of the FBTAA. The term 'goods' is not defined in the FBTAA and therefore takes its ordinary meaning. The Macquarie Dictionary Online, 2017, Macquarie Dictionary Publisher, an imprint of Pan Macmillan Australia Pty Ltd, www.macquariedictionary.com.au (the Macquarie Dictionary) defines the term 'goods' relevantly at paragraphs 1 and 2 as: 1. (plural) possessions, especially movable effects or personal belongings. 2. (plural) articles of trade; wares; merchandise, especially that which is transported by land. The airline ticket therefore does not meet the definition of 'goods' and is therefore not tangible property. Paragraph 136(1)(e) of the FBTAA relevantly excludes from the definition of intangible property leases or licences in respect of real property or tangible property. Licence is not defined in the FBTAA, the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997. It therefore takes on its ordinary meaning. The Macquarie Dictionary defines the term 'licence' (as relevant here) as: 1. formal permission or leave to do or not to do something. 2. formal permission from a constituted authority to do something, as to carry on some business or profession, to be released from jail for part of one's sentence under specific restrictions, etc. 3. a certificate of such permission; an official permit.... The ticket provides the employee with the formal permission to receive transport on the aeroplane and is therefore not intangible property. As the airline ticket is neither tangible nor intangible property, the provision of the ticket is not a property benefit. Therefore, the benefit provided by the employer, does not fall within any of the provisions of Subdivision A of Divisions 2 to 11 of Part III of the FBTAA and as such is a residual benefit per section 45 of the FBTAA. | Detailed Reasoning - Is the benefit exempt under subsection 47(7)?: As the benefit is a residual benefit, consideration needs to be given as to whether the benefit is an exempt residual benefit under subsection 47(7) of the FBTAA. Subsection 47(7) states Where, during a period of employment with an employer: (a) an employee's usual place of employment is: (i) on an oil rig, or other installation, at sea; or (ii) at a location in a State or internal Territory but not in, or adjacent to, an eligible urban area; or (iii) at a remote location that is not in a State or internal Territory; and (b) the employee is provided with residential accommodation, at or near that usual place of employment, by: (i) the employer; or (ii) an associate of the employer; or (iii) a person (in this subparagraph referred to as the 'arranger' ) other than the employer or an associate of the employer under an arrangement between: (a) the employer or an associate of the employer; and (b) the arranger or another person; and (c) the employee, on a regular basis: (i) works for a number of days and has a number of days off; and (ii) on completion of the working days, travels from that usual place of employment to his or her usual place of residence and, on completion of the days off, returns from his or her usual place of residence to that usual place of employment; and (d) the employee is provided with transport on a regular basis in connection with the travel referred to in subparagraph (c)(ii) and that transport is provided by: (i) the employer, or (ii) an associate of the employer; or (iii) a person (in this subparagraph referred to as the 'arranger') other than the employer or an associate of the employer under an arrangement between: (a) the employer or an associate of the employer; and (b) the arranger or another person; and (e) it would be unreasonable to expect the employee to travel on a daily basis on work days between: (i) that usual place of employment; and (ii) the location of the employee's usual place of residence; having regard to the location of those places; the residual benefit constituted by the provision of transport referred to in paragraph (d) is an exempt benefit. | Detailed Reasoning - (a) Is the employee's usual place of employment at a remote location in Australia or overseas, or on oil rigs or other installations at sea?: A remote location is one that is not located in or adjacent to an eligible urban area as per section 140 of the FBTAA. The employee's usual place of employment is not situated in or adjacent to an eligible urban area for the purposes of section 140. | Detailed Reasoning - (b) Is the employee provided with accommodation at or near the worksite on working days by the employer, an associate of the employer or an arranger?: The employee is provided with accommodation at or near the worksite on working days by the employer. (c) Does the employee, on a regular basis, work for a number of days followed by a number of days off, and return to their usual place of residence on their days off? The employee works for a number of days on, Y weeks, and has a number of days off, Z weeks. On completion of the work days, the employee travels from the usual place of employment to their usual place of residence. On completion of the days off, the employee returns from their usual place of residence to that usual place of employment. | Detailed Reasoning - (d) Is the employee regularly provided with transport between their usual place of residence and place of employment?: The employee is provided with transport to and from their usual place of residence and place of employment, a town in another state or territory in Australia, on a regular basis by their employer. | Detailed Reasoning - (e) Having regard to the location of the two places, is it unreasonable to expect the employee to travel to and from work on a daily basis?: It would be unreasonable to expect the employee to travel on a daily basis on work days between the employee's usual place of employment and their usual place of residence, having regard to the location of these places. | Detailed Reasoning - Conclusion: The requirements of subsection 47(7) of the FBTAA are met and the provision of the airline travel to the employee is therefore exempt from fringe benefits tax.