Private ruling: Fringe benefits tax
Published: March 2016
Ruling period: FBT year ended 31 March 2016
Date scheme commenced: The scheme has commenced

Ruling: Q1: Where Employer X pays the costs of a 457 visa nomination for an employee, is the payment a 'fringe benefit' pursuant to section 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. The payment of costs of a 457 visa nomination is an exempt expense payment benefit. A fringe benefit does not include a benefit that is an exempt expense payment benefit pursuant to paragraph 136(1)(g) of the FBTAA. | Q2: Where Employer X pays the costs for an immigration vendor in relation to a 457 visa nomination for an employee, is the payment a 'fringe benefit' pursuant to section 136(1) of the FBTAA? | A2: No. The payment of costs for an immigration vendor in relation to a 457 visa nomination is an exempt expense payment benefit. A fringe benefit does not include a benefit that is an exempt expense payment benefit pursuant to paragraph 136(1)(g) of the FBTAA. | Q3: If the payments in Questions 1 and 2 are considered fringe benefits, will the payments be subject to fringe benefits tax (FBT) under the FBTAA? | A3: Refer to the answers to Questions 1 and 2 above. Consequently, the payment of costs for an immigration vendor and a 457 visa nomination will not be subject to FBT.

Relevant facts and circumstances: Employer X is an Australian resident. Employer X made an offer of employment to a non-resident employee who required a current employer sponsored 457 visa to work for Employer X in Australia. The employee had worked in Australia in a prior year for another employer. The other employer has no association to Employer X. In the prior year, the employee was granted a 457 visa in order to work for the other employer. The 457 visa was granted for several years. At the end of the prior year, the employee finished working for the other employer and returned overseas. In a latter year, Employer X contacted the employee about the prospect of employment. The employee travelled to Australia to attend an interview and was deemed a successful applicant. In order to take up a role with Employer X, the employee's existing 457 visa had to be transferred to Employer X as the employee's new sponsor. Employer X paid for a 457 visa nomination and immigration vendor's fee on behalf of the employee which were necessary for the employee to commence work in Australia with Employer X. The immigration vendor's fees are the costs associated with hiring an immigration consultant to assist Employer X in submitting the employee's visa nomination. The nomination fees are costs that Employer X is required to pay to the relevant government department on submission of the visa nomination. Once the 457 visa nomination had been successfully transferred, the employee travelled to Australia to commence work with the Employer.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 20 | Fringe Benefits Tax Assessment Act 1986 section 58F | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Fringe Benefits Tax Assessment Act 1986 paragraph 136(1)(g) | Fringe Benefits Tax Assessment Act 1986 section 142A | Fringe Benefits Tax Assessment Act 1986 section 143A

Reasons for decision: Summary: An employer who pays the costs of a 457 visa nomination and immigration vendor's fee in respect of relocation transport expenses of an employee will be exempt for FBT under section 58F of the FBTAA . | Detailed Reasoning - Detailed reasoning: Transport provided to an employee as a consequence of an employee being required to relocate his/her usual place of residence to perform employment duties are an exempt benefit under section 58F of the FBTAA which states: Where: (a) a car benefit, an expense payment benefit, a property benefit or a residual benefit is provided in, or in respect of, a year of tax in respect of the employment of an employee of an employer; (b) the benefit is in respect of relocation transport; and (c) in the case of an expense payment benefit: (i) the benefit is not constituted by the reimbursement of the recipient, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the recipient in relation to a car owned by, or leased to, the recipient, being a reimbursement calculated by reference to the distance travelled by the car; and (ii) documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date; the benefit is an exempt benefit in relation to the year of tax. The benefit is exempt if it fulfils the conditions in subsections 58F(a), (b) and (c) of the FBTAA. Condition 1: An expense payment benefit (subsection 58F(a) of the FBTAA) With reference to subsection 136(1) of the FBTAA, section 20 of the FBTAA defines 'expense payment benefit' as: Where a person (in this section referred to as the provider ): (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient ) to pay an amount to a third person in respect of expenditure incurred by the recipient; or (b) reimburses another person (in this section also referred to as the recipient ), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. In these circumstances Employer X is the provider, making payments in discharge of visa costs to third parties, in respect of an employee. Consequently, the expense payment benefit satisfies paragraph (a) of section 20 of the FBTAA. Condition 2: The benefit is in respect of relocation transport (subsection 58F(b) of the FBTAA). The circumstances in which a benefit will be treated as a benefit 'in respect of relocation transport' are specified in section 143A of the FBTAA. Broadly, such benefits are transport, meals or accommodation provided to an employee who is required to live away from, or change, their usual place of residence in order to perform the duties of their employment. Subparagraph 143A(a)(ii) of the FBTAA stipulates that relocation costs include an expense payment benefit where the recipient's expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport. Subparagraph 143A(c)(i) of the FBTAA stipulates that the transport is required solely because the employee is required to live away from their usual place of residence in order to perform the duties of employment. Transport is not defined in the FBTAA but by virtue of subsection 142A(1) of the FBTAA expenditure by an employee on accident insurance, airport or departure tax, a passport, a visa, a vaccination or any similar matter 'in connection with transport' is taken to be 'in respect of the provision of, or to consist of, transport'. The meaning of the phrase 'in connection with' was discussed in Burswood Management Ltd v. Attorney-General (Cth) (1990) 23 FCR 144. In a joint decision the court said: The words "in connection with" are words of wide import; and the meaning to be attributed to them depends on their context and the purpose of the statute in which they appear. The Explanatory Memorandum to the Tax Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 (EM) which introduced section 143A of the FBTAA discusses the intended meaning of 'benefit in respect of relocation transport': The circumstances in which a benefit will be treated as a "benefit in respect of relocation transport" are specified in proposed section 143A. Broadly, such a benefit is one that is provided to an employee who moves from one locality to another in the course of employment or in order to commence new employment where the benefit meets travel costs (i.e., transport costs and accommodation and meals en route) incurred by the employee (or a family member) for the purpose of taking up residence in the locality of the new work place. The EM makes it clear that a benefit in respect of relocation transport is intended to cover travel costs incurred for the purpose of an employee taking up residence in the locality of a new work place. Therefore, the words 'in connection with' in subsection 142A(1) of the FBTAA should be read such that only visa application costs that are incurred for the purpose of an employee taking up residence in the locality of a new work place will be 'in connection with transport'. In these circumstances, the employee was living overseas at the time Employer X approached the employee with regard to employment in Australia. The employee required Employer X to take over the 457 visa sponsorship in order to travel to Australia to work. The visa nomination and immigration vendor costs were incurred for the purpose of the employee taking up residence in the locality of a new work place. Therefore, the costs are 'in connection with transport' for the purposes of subsection 142A(1) of the FBTAA or 'in respect of the provision of transport' for the purposes of subparagraph 143A(a)(ii) of the FBTAA and the transport is required solely because the employee is required to live away from their usual place of residence in order to perform the duties of employment pursuant to subparagraph 143A(c)(i) of the FBTAA. Conclusion The 457 visa nomination and immigration vendor costs paid by Employer X is a benefit provided 'in respect of relocation transport' and therefore is an exempt benefit under section 58F of the FBTAA as all conditions are satisfied. A 'fringe benefit' does not include a benefit that is an exempt expense payment benefit pursuant to paragraph 136(1)(g) of the FBTAA. Accordingly, Employer X is not liable for fringe benefits tax for the provision of benefits to the employee in respect of payments for a 457 visa nomination and immigration vendor costs.