Date of advice: 29 June 2016
Published: March 2017
Ruling period: 20xx | 20yy

Ruling: Q1: Are the following allowances paid to touring employees as specified in Table 1 of the Relevant facts and circumstances a Living-Away-From-Home allowance (LAFHA) benefit under subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? ● DTA X ● DTA Y ● DTA Z. | A1: No. | Q2: Are the following allowances paid to touring employees as specified in Table 1 of the Relevant facts and circumstances a travel allowance (under subsection 900-30(3) of the Income Tax Assessment Act (ITAA 1997)) for the purposes of PAYG withholding? ● DTA X ● DTA Y ● DTA Z. | A2: Yes.

Relevant facts and circumstances: 1. The taxpayer is a proprietary limited company, hereafter called W. It provides services throughout Australia including a remote place called Z. 2. Due to the type of industry W is in; its employees operate on a scheduled roster. Common rosters that exist at W include: Employee type Example 1 Example 2 Example 3 A 2 x aa hr days, 2 x bb hr nights and, then c days off dd hrs on, dd hrs off (e cycles) and then a further e days off ff days on and then gg days off B Monday to Friday ff days on and then gg days off hh days and then ii days off 3. Z is used as the base for a few clients' contracts as it is common industry practice for contracts to be operated in a base as near as possible. 4. Due to the remoteness of Z, it is not possible for the Home Base of personnel to be within the same locale as the Z operating base. Employee type Roster on days (including transit) Roster off days Explanation A hh jj Employees will travel from their Home Base to Z operating base and remain at the operating base for up to hh days. They will then return to their Home Base and remain there for jj days before completing for roster again. B ff gg Employees will travel from their Home Base to the Z operating base and remain at the operating base for up to ff days. They will then return to their Home Base and remain there for gg days before completing the roster again. C ff gg 5. Touring employees are assigned to Z based on the following roster: 6. The 'Home Base' for employees touring to Z may be in various locations within Australia. The travel arrangements associated with these touring employees are detailed below: ● The company will book all travel arrangements (including flights) and accommodation for employees; ● Any changes to an employee's roster is at the discretion of W; ● Employees are flown from their Home Base airport to an airport where they take a connecting flight to Z to carry out their duties. The company provides for all the flights; ● Employees are bound by the company's 'code of conduct policy' and 'drug and alcohol management plan' from the commencement of the tour of duty. That is, from their Home Base to the end of the tour of duty back at their Home Base; ● During the tour of duty, employees are provided with very basic housing/apartment style accommodation. Aspects of this accommodation include: ● Employees cannot choose their accommodation; ● Employees are allocated to whichever room is available; ● Employees are not allocated a fixed room, i.e. the rooms change with each tour of duty; ● The accommodation is provided with basic furnishings including items such as a bed and linen; ● The accommodation is shared with other W employees who are also on a tour of duty at Z; ● Laundry services are not provided at the location. Employees are required to undertake their own laundry whilst on site; ● Apart from television, no formal entertainment is provided at the accommodation; ● Employees are required to depart the accommodation upon cessation of their roster; ● Employees are unable to leave personal belongings in the accommodation when they vacate after each tour of duty; ● Family members are unable to join the employees on Z; ● Meals are not provided throughout the stay on Z. ● The work hours at Z base vary from z hour shifts to bb hours on duty with aa hours off. The nature of the arrangement is determined by the requirements of the client for the day and is not regular in nature. An employee can be required to perform an z hour shift one day and then be required to undertake a bb hour shift with aa hours off on other days; ● Upon completion of their tour of duty, employees are flown back to the airport at C. And from there, employees are then flown to the domestic airport nearest their Home Base; ● At the end of each tour of duty, employees are unable to remain at the Z base or in the accommodation and must return to their Home Base. 1. Where an employee is required to travel to Z to complete their employment duties, they are paid a Daily Travel Allowance (DTA). 2. Table 1 below provides a summary of the allowances: Allowance Rate paid: How the allowance is paid: DTA X Based on ATO reasonable limit as per Tax Rulings of relevant year. Paid on a per day basis from departure until return from home base. Where travelling part day, such meals will be deducted. DTA Y Based on ATO reasonable limit as per Tax Rulings of relevant year. Paid from departure until return from home city at ATO daily travel rates divided by dd hours and multiplied number of hours. DTA Z Based on ATO reasonable limit as per Tax Rulings of relevant year. Paid on a per day basis from departure until return from home base. Where on a part day, those meals will be deducted. 3. The above DTAs are provided in anticipation of the employee bearing the increased costs of food, drink and incidentals while travelling on work. 4. Employees travelling in the course of employment do not move and take up a new place of residence away from their usual place of residence in the home location.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Subsection 30(1) | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1) | Income Tax Assessment Act 1997 Section Subsection 900-30(3) Case law | Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 | Other relevant documents | Taxation Ruling MT 2030, Fringe Benefit Tax: Living-Away-From-Home Allowance

Reasons for decision: Detailed Reasoning - Detailed reasoning: Subsection 136(1) of the FBTAA defines a 'living-away-from-home allowance benefit' as the benefit referred to in section 30 of the FBTAA. Section 30 of the FBTAA sets out the circumstances in which an allowance paid by an employer to an employee will qualify as a living-away-from-home allowance (LAFHA) benefit. Subsection 30(1) of the FBTAA 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. Thus, an allowance is a LAFHA under subsection 30(1) of the FBTAA if it satisfies the following 3 conditions: 1. the allowance is paid by an employer to an employee in respect of the employee's employment; 2. the duties of employment require the employee to “live away from his or her normal residence”; and 3. the allowance is wholly or partly to compensate the employee for additional non-deductible expenses and other disadvantages of living away from home. | Detailed Reasoning - Condition 1: Allowance is paid in respect of the employee's employment: A LAFHA benefit can only arise on the payment of an allowance by an employer to an employee. The allowance must be paid in respect of the employee's employment which includes by reason of, by virtue of, or for or in relation directly or indirectly to that employment. In the present case, the three allowances are paid in relation to the employment and, thus this condition is satisfied. | Detailed Reasoning - Condition 2: Employment duties require employee to live away from normal residence: LAFHA is paid to employees who are required to 'live away from their normal residence' as required by the employer in performing their employment duties. Generally, an employee is considered to be in receipt of LAFHA if the employee would have continued to live in their usual home, but for the requirement to temporarily reside elsewhere. In the present case, the employees will be living away from their normal residence while on tour working in Z. Thus, this condition is also satisfied. | Detailed Reasoning - Condition 3: Compensation for non-deductible expenses: The LAFHA must be in the nature of compensation for additional non-deductible expenses incurred during a period of employment, or additional non-deductible expenses so incurred and “other additional disadvantages” to which the employee is subject during the period, because the duties of employment require the employee to live away from his or her normal residence. 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 (ITAA 1997). If an expense is deductible under section 8-1 of the ITAA 1997 by an employee for a loss or outgoing incurred in gaining or producing assessable income, it will not give rise to a LAFHA benefit. In Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 (the RTA case), Hill J noted that where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance or other necessary matters which, if the taxpayer had been living at home, would be private expenditure, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character. In that case, camping allowances were paid to employees. There are two components to the allowance being an amount to compensate for the disadvantageous conditions of living in a camp, and part compensation for additional costs of food and other expenses caused by camping. Hill J held that as the camping allowances were paid to meet deductible amounts, they were not LAFHA. Similarly, the employees in the present case are required to live away from their normal place of residence while working in Z; the employees are provided with accommodation, except for part-day travelling; and travel allowances are provided in anticipation of the employees bearing the increased costs of food, drink and incidentals while travelling on work. Thus, the allowances in question are not a living-away-from-home allowance benefit under subsection 136 FBTAA. Therefore, the allowances paid to touring employees as specified in Table 1 of the Relevant facts and circumstances are not LAFHA under subsection 30(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Subsection 900-30(3) of the ITAA 1997 defines a travel allowance as: an allowance your employer pays or is to pay to you to cover losses or outgoings: (a) that you incur for travel away from your ordinary residence that you undertake in the course of your duties as an employee; and (b) that are losses or outgoings for accommodation or for food or drink, or are incidental to the travel. The travel may be within or outside Australia. As concluded above, the allowances are not LAFHA, and thus not fringe benefits. Taxation Ruling MT 2030, Fringe Benefits Tax: Living-Away-From-Home Allowance (MT 2030) sets out characteristics of a travelling allowance as discussed below: ● Employees stay away from their usual residence for short periods of time: In the present case, the touring employees travel to site for periods between ff and hh days including travel. The duties are performed on an 'as necessary' basis and are temporary in nature. The individuals do not take any significant personal effects to site, other than requisite clothing. ● Employment location remains unchanged / Employees do not change their place of residence: In the present case, the employee's job location does not change. In addition, the employee maintains their home residence. ● Employees travelling in the course of employment ordinarily would not be accompanied by their spouse and family: In the present case, the employees do not travel to site with family members. In addition, the allowances are paid with reference to the ATO's reasonable travel and overtime meal allowances for employees who are travelling on business and the allowances are paid on an hourly basis. As illustrated above, the allowances in the present case exhibit the characteristics of a travel allowance under subsection 900-30(3) of the ITAA 1997.