Private ruling: Living away from home allowance
Date of advice: 4 June 2024
Published: 15 July 2024
Ruling period: Fringe Benefits Tax (FBT) Year Ended 31 March 2023 | FBT Year Ended 31 March 2024 | FBT Year Ending 31 March 2025 | 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
Date scheme commenced: 1 April 2022

Ruling: Q1: Would an employee of the Employer be considered a 'Commonwealth employee' for the purposes of the living away from home reportable fringe benefits exclusion under subsection 11(2) of the Fringe Benefits Tax Assessment Regulations 2018 ( FBTAR)? | A1: Yes.

Relevant facts and circumstances: The Employer is established as a body corporate and operates as a corporate Commonwealth entity. As a corporate Commonwealth entity, the Public Governance, Performance and Accountability Act 2013 applies to the Employer. The Employer discharges governmental functions for the State. The employees are often required to live away from their normal residence to fulfill their employment duties as part of their function. As a result, the Employer pays FBT on living away from home allowances provided to their employees performing governmental functions.

Relevant legislative provisions: Fringe Benefits Tax Assessment Regulations 2018 Subsection 11(2) | Fringe Benefits Tax (Application to the Commonwealth) Act 1986 Section 3 | Fringe Benefits Tax Regulations 1992 (Repealed) Regulation 9 | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1 | A New Tax System (Australian Business Number) Act 1999 Section 41 | Public Governance, Performance and Accountability Act 2013 | Public Service Act 1999

Reasons for decision: Summary: Yes, the Employer is part of the Commonwealth, and as such its employees are employees of the Commonwealth for the purposes of subsection 11(2) of the FBTAR. | Detailed Reasoning - Detailed reasoning: In accordance with subsection 11(2) of the FBTAR, any of the following benefits provided in relation to a Commonwealth employee is an excluded fringe benefit: a. a living-away-from-home allowance fringe benefit; or b. an expense payment fringe benefit that: i. is not exempt under section 21 of the Act; and ii. relates to accommodation that is required solely because the duties of the employee's employment require the employee to live away from the employee's normal residence; or c. a residual fringe benefit that: i. is not exempt under subsection 47(5) of the Act; and ii. relates to accommodation that is required solely because the duties of the employee's employment require the employee to live away from the employee's normal residence. Section 3 of the Fringe Benefits Tax (Application to the Commonwealth) Act 1986 defines a 'Commonwealth employee' to be an employee of the Commonwealth. The Commonwealth is not further defined in this Act, nor in the FBTAR or the Fringe Benefits Tax Assessment Act 1986 (FBTAA). ATO Interpretative Decision ATO ID 2007/200 Fringe Benefits Tax- Liability to fringe benefits tax: Commonwealth Statutory Agency ( ATO ID 2007/200) states that the meaning of the 'Commonwealth' in the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) and in the FBTAA are the same. Paragraph 6 of Goods and Services Tax Ruling GSTR 2006/5 Goods and services tax: meaning of 'Commonwealth, a State or a Territory' (GSTR 2006/5) states that the Commonwealth includes a department, agency or organisation of the type referred to in the definition of 'government entity' in section 195-1 of the GST Act. As stated at paragraph 7 of GSTR 2006/5, section 195-1 of the GST Act adopts the meaning of 'government entity' given by section 41 of the A New Tax System (Australian Business Number) Act 1999. This means that the Commonwealth includes any of the following: a. a Department of State of the Commonwealth; b. a Department of the Parliament; c. an Executive Agency, or Statutory Agency, within the meaning of the Public Service Act 1999 ; and d. an organisation that: i. is not an entity; and ii. is established by the Commonwealth (whether under a law or not) to carry on an enterprise or established for a public person by an Australian law; and iii. can be separately identified by reference to the nature of the activities carried on through the organisation or the location of the organisation. The Employer is established as a body corporate, noting the Public Governance, Performance and Accountability Act 2013 applies to the Employer as a corporate Commonwealth entity. Consequently, the Employer does not fall into the any of the entities described at paragraph 7 of GSTR 2006/5. Paragraph 8 of GSTR 2006/5 states that, in the context of Corporations, the Commonwealth is not limited to the departments, agencies and organisations described at paragraph 7 of the ruling and may include a corporation that is not a "government entity" as defined in section 195-1 of the GST Act. In determining whether a corporation is the 'State' as relevant to the definition of 'government entity' in section 195-1 of the GST Act, paragraph 11 of GSTR 2006/5 states that the fundamental question to be addressed is whether the corporation is discharging governmental functions for the State (that is, where the State is carrying on the relevant business or other function through the corporation, the corporation is the State). Paragraph 12 of GSTR 2006/5 sets out 14 principles which may indicate when a corporation is the 'State': 1. whether a corporation is the State requires consideration of every feature relevant to its relationship within the State; 2. it is the ownership and management of a corporation, and the purposes it is required to pursue, that will most often reveal whether the corporation is the State. If examination of those features reveals that the corporation is wholly owned and controlled by the State, and must act solely in the interests of the State, the conclusion that it is the State will readily follow; 3. it follows that it is not sufficient to demonstrate a government policy of favouring or facilitating the creation of the corporation in pursuit of some aspect of the public interest. If the State does not control the conduct of the affairs of the corporation, the State cannot be said to be carrying on activities of government through the corporation; 4. a provision that the corporation must pursue the interests of the State or the public or that its policies could be determined by the executive government of the State is an indicator that the corporation is the State; 5. conversely, a provision that positively permits the corporation to take account of other external interests is a contrary indicator. An example would be such provision in relation to the interests of shareholders who do not represent the State; 6. a corporation may be the State even though its functions are not traditional and inalienable functions of government but extend to commercial functions. However, that a corporation's functions may assist in forming the view that the corporation is an instrument of the State; 7. the participation of the executive government in formulating policy and making decisions in an indicator that the corporation is the State. For example, a power for a Minister of the Executive Council to override decisions of the board is indicative that the corporation is an instrument of the State. For example, a power for a Minister or the Executive Council to override decisions of the board is indicative that the corporation is an instrument of the State; 8. conversely, the absence of control by the executive, and the absence of guidelines in the exercise of its functions, point to the corporation not being the State. However, the weight to be given to the absence of a power to interfere with the day to day control of the corporation's activities will depend upon the occasion for the exercise of such a power. The absence of the power will be of little significance where the occasion for the exercise of it would be rare, for example, where a duty to pursue the interests of the State or the public is imposed on the Board in any case; 9. the absence of corporators (shareholders) has been held to be a relevant factor indicating that the corporation may be the State; 10. the ability of the executive government to control the appointment and, more particularly, the removal of directors is an indicator that the corporation is the State; 11. the financial arrangements for the corporation are likely to be indicative. These include whether there is a requirement that the corporation's accounts are to be audited by the State Auditor-General and the results reported to the State's Treasurer, whether the corporation's borrowings are guaranteed by the State or may only be made with the consent of the Treasurer, and the destination of the profits of the corporation, that is, whether they are distributed to the State; 12. a regulatory role, even a modest one, such as the power to make by-laws, is an indicator that the corporation is an instrument of the State; 13. in the consideration of whether a corporation is the Commonwealth, a requirement for the corporation to pay income tax is unlikely to be relevant. It may increase the Commonwealth's participation in profits of the corporation, but otherwise it merely assimilates the financial accounts of the corporation or those of other non-government corporations. The Commissioner considers that similar comments apply in respect of an obligation to pay income tax equivalents under National Compensation Policy arrangements; and 14. while it may be that there is no impediment to a corporation established under the general corporations or associations incorporation law being the State, the Commissioner is not aware of any decided case where such a corporation has been held to the State. A submission that such a corporation is the State would require careful consideration by the Commissioner. This is so whether the corporation's shares are owned directly by the State, such as through a Minister of the Crown, or by another corporation controlled by the State. When applying the guidance at paragraph 12 of GSTR 2006/5 to the Employer, it is reasonable to conclude that the characteristics of the Employer indicate that the Employer is considered the State for the purposes of the GST Act, and by extension the FBTAA. Furthermore, the Explanatory Statement to the Fringe Benefit Benefits Tax Amendment Regulation 2013 , which introduced regulation 9 to the (former) Fringe Benefits Tax Regulations 1992 (that regulation is now subsection 11(2) of the FBTAR) states: These amendments reflect that the unique nature of Commonwealth postings requires these duties, such as law enforcement duties or foreign service, to be carried out by individuals employed by the Commonwealth, at particular locations, utilising particular accommodation, subject to strict safety and regulatory procedures, and the duties cannot be outsourced to non-Commonwealth employees. Employees of the Employer are required to live away from home to fulfill their employment duties as part of the function of the Employer and would be in a class of employees intended to be within the scope of former regulation 9 (now subsection 11(2)) of the FBTAR. Therefore, it is reasonable to conclude that the Employer is part of the Commonwealth, and as such its employees are employees of the Commonwealth for the purposes of subsection 11(2) of the FBTAR.