Private ruling: Remote area housing benefits
Date of advice: 15 May 2015
Published: May 2015
Ruling period: Year ended 31 March 2015 | Year ended 31 March 2016 | Year ended 31 March 2017 | Year ended 31 March 2018
Date scheme commenced: 1 April 2014

Ruling: Q1: Are housing benefits provided to certain employees of a registered charity exempt benefits under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes

Relevant facts and circumstances: The employer is a registered charity and is located in Australia. The employer offers housing benefits to the certain employees. Employee X It is a requirement, and it is customary within the industry, to designate a residence for employees in this position to occupy during their appointment. Employee X is a current employee and the residence is provided free of charge. Other employees Other employees are provided with accommodation free of charge at locations that are more than 100 kilometres from an eligible urban area for the purposes of subsection 140(1A). These employees are required to live in the accommodation as part of their employment. They are current employees. The usual place of employment is at the same location as the accommodation that is provided to them. The residences are unfurnished. The accommodation is the usual place of residence for all of the above mentioned employees.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986, section 25 | Fringe Benefits Tax Assessment Act 1986, section 58ZC | Fringe Benefits Tax Assessment Act 1986, section 136 | Fringe Benefits Tax Assessment Act 1986, section 140

Reasons for decision: Summary: Under section 58ZC(1) a housing benefit that is a remote area housing benefit will be an exempt benefit. Subsection 58ZC(2) sets out what constitutes a remote area housing benefit and requires that all of the following conditions be met: A housing benefit in relation to an employer for a year of tax and for a unit of accommodation, being a benefit provided to an employee of the employer in respect of the employee's employment, is a remote area housing benefit if: (a) during the whole of the tenancy period, the unit of accommodation was located in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and (b) during the whole of the tenancy period, the recipient was a current employee of the employer and the usual place of employment of the recipient was not a location in, or adjacent to, an eligible urban area; and (c) … (d) it would be concluded that it was necessary for the employer during the year of tax, to provide, or to arrange for the provision of, residential accommodation for employees of the employer because: (i) the nature of the employer's business was such that employees of the employer were liable to be frequently required to change their places of residence; or (ii) there was not, at or near the place or places at which the employees of the employer were employed, sufficient suitable residential accommodation for those employees (other than accommodation provided by or on behalf of the employer); or (iii) it is customary for employers in the industry of which the employer was a participant to provide residential accommodation for their current employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned; and (e) the recipient's overall housing right was not granted to the recipient under: (i) a non-arm's length arrangement; or (ii) an arrangement that was entered into by any of the parties to the arrangement for the purposes, or for the purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section. 'Housing benefit' is defined in subsection 136(1) as meaning a benefit referred to in section 25. Under section 25 a benefit will arise where a person grants a 'housing right' to another person. 'Housing right' is defined in subsection 136(1) to mean: a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence. 'Unit of accommodation' is defined in subsection 136(1) to include (among other things) accommodation in a house, flat, or home unit. The employer is providing some of its current employees with accommodation at locations where it conducts its business, and those employees will occupy such premises as their usual place of residence at the relevant time. Therefore, such arrangements constitute housing benefits that the employer provides to its employees. There are four conditions in subsection 58ZC(2) which must be satisfied for the remote area housing benefits exemption to apply. | Detailed Reasoning - 1. Accommodation must be located in a remote area: The unit of accommodation for the whole of the tenancy period must not have been at a location in or adjacent to an "eligible urban area". Subsection 140(1A) sets out what is an eligible urban area and what is a location that is adjacent to an eligible urban area (using the 1981 Census population figures) for specific types of employers including registered charities. For registered charities, a location will be adjacent to an eligible urban area only if it is within 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of at least 130,000. Consequently, in the circumstances outlined in subsection 140(1A), an area will be remote where it is at least 100 kilometres by the shortest practicable route from a centre with a census population of 130,000 more. The ATO website (www.ato.gov.au) (QC 25906, Last modified 23 January 2014) lists certain locations as being remote. In these circumstances, all of the locations at which the employer is providing accommodation are not in or adjacent to an eligible urban area. | Detailed Reasoning - 2. Employee must be employed in a remote area for the whole tenancy period: The employees who are receiving the housing benefits are all current employees of the employer. Their usual place of employment is in the same location as their accommodation and therefore is not in or adjacent to an eligible urban area. | Detailed Reasoning - 3. Provision of accommodation is necessary: The employer has indicated that subparagraphs 58ZC(2)(d)(i) and (ii) do not apply to their situation. It is subparagraph 58ZC(2)(d)(iii) that must be satisfied. Taxation Determination TD 94/97 provides guidance on what the phrase 'customary for employers in the industry' means in relation to the provision of fringe benefits to employees. It states at paragraph 2: A benefit will be accepted as being customary where it is normal or common for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary. The employer provides the accommodation to Employee X because it is customary in that industry to designate a residence for such an employee to occupy during the term of their appointment. It is arguable that this would also apply to the accommodation to the other employees as it is likely that free or subsidised accommodation would also be provided to people in similar positions in that industry. For example, employees who are required to undertake similar duties would also be required to live on site. | Detailed Reasoning - 4. The arrangement is bona fide: The employees who are receiving the housing benefits are receiving them because of their duties of employment. Their positions require that they are provided with accommodation. There is no indication that the benefits are provided under a non-arm's length arrangement. Since all of the conditions in section 58ZC are met, the housing benefits provided to the employees will be exempt benefits.

Subject: Remote area housing benefits: All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.