Private ruling: Fringe Benefits Tax – Accommodation Benefits and per diem allowances
Date of advice: 21 June 2017
Published: October 2017
Ruling period: 1 April 2016 – 31 March 2017 | 1 April 2017 – 31 March 2018 | 1 April 2018 – 31 March 2019 | 1 April 2019 – 31 March 2020
Date scheme commenced: 2016

Ruling: Q1: Is Fringe Benefits Tax (FBT) payable on accommodation benefits provided to non-resident employees temporarily working in Australia on a short term assignment for up to 4 months duration? | A1: No Issue 2 The treatment of a daily cash per diem paid to in-bound employees whilst working in Australia on a short term contract for no longer than 4 months. | Q2: If the company provides daily cash per diem for accommodation, food and incidentals to inbound employees working in Australia on a short term assignment for up to 4 months is the per diem subject to FBT as living-away- from-home-allowance? | A2: No | Q3: Is the per diem included as assessable income as travel allowance for in-bound employees who are working in Australia from a foreign country on a short term assignment for no longer than 4 months? | A3: No | Q4: Does an amount of PAYG have to be withheld for in-bound employees who are working in Australia from a foreign country on a short term assignment for no longer than 4 months? | A4: No | Q5: Will the per diem need to be reported on PAYG payment summaries of in-bound employees who are working in Australia from a foreign country on a short term assignment for no longer than 4 months? | A5: No

Relevant facts and circumstances: The company is an Australian resident company. You are part of a global network outsourcing services to clients in more than 55 countries. You have sister companies situated overseas and you are and controlled by the same common parent. You source skills on a global basis. You have a number of client projects underway at any given time. Your employees will work on these projects at your offices or at your client’s site. The nature of consulting work is project based and its business model matches the right skills to the project to appropriately serve its clients. A client project in Australia may require you to source employees from your global network on a temporary basis. When a foreign resident comes to work in Australia they have a secondment agreement (a Cross-Border Agreement) that governs the terms of the secondment. This is the extent of the relationships between you and your sister companies located in foreign countries. Each employee may be required to travel for a different length of time depending on the role they play in the project All employees who are the subject of this ruling are required to travel to Australia for no more than 4 months but in some instances this may be extended. You arrange the accommodation for the employees while they are in Australia. Accommodation is in the form of hotels or serviced apartments. Employees cannot choose their own accommodation. Overseas based employees who work on Australian based projects will travel to Australia to work for a short period of time to complete their part of the project. The amount of time that the employee will work in Australia is typically pre-determined as a part of a project plan. Employees may work in Australia for the whole period that they are required on the project, or in cases where the home location is close to Australia, may travel frequently between their home location and Australia during the period of the project. Fact Pattern The descriptions of the employees to which this private ruling applies are the employees who: ● are travelling to Australia to work on a project for a relatively short period of time; ● A secondment agreement is entered in to with you in relation to the work undertaken during that period; ● are required to work in Australia for the entire period they are away from their home country; ● are typically present in Australia for a period of less than 99 days; ● do not bring their family to Australia with them; ● typically retain a permanent home in their home country ● at law, continue to be employees of their home country employer whilst seconded ● continue to be paid salary and wages by their home employer; ● has the company in Australia pay the relevant taxes and secondment costs; ● are non-tax residents of Australia and will be subject to income tax in Australia and PAYG which is withheld at the foreign resident rates; ● has the company in Australia facilitate the PAYG obligations through a 'shadow payroll’ arrangement; ● has their accommodation arranged by you in accordance with your temporary accommodation guidelines (e.g. the accommodation is as close as practically possible to the project site); ● are provided with accommodation benefits. The accommodation is arranged and paid for by you. In some cases the employee pays for the accommodation and then you will reimburse the employee; ● is provided with per diems paid by you to offset the costs associated with the assignment costs e.g. meals and incidentals, when they are provided within the reasonable rates deemed by the Commissioner; ● any accommodation costs are in addition to their usual requirements in their home location. The employees are drawn from various locations overseas. In some cases the employees may currently be non-resident Australian citizens or permanent residents (who are not returning permanently to Australia). Conditions of Business Travel to Australia The employees travel to Australia to work on projects in Australia. They provide a short term resource to fill a gap that could not be filled by local based employees. The conditions of business travel to Australia are stated as follow: Policy: The employees are sent to Australia and the assignment is subject to the company policy, specifically the Business Trip and Short-term Assignment policy . Employment: All employees remain legally employed by their home employer. Salary: Salary is paid by the home location employer the entire time that the employee works in Australia. Home Location Housing: Employees typically retain their place of residence in the home location and are living in temporary accommodation such as hotels or serviced apartments whilst in Australia. Home Country Tax and Social Security Liability: Employees remain tax residents of their home country and are subject to tax and social security in their home country. Visas: Employees are temporarily in Australia on either a subclass 400, 457 or a business visitor visa. Relationship between You and the Home Country Employer The primary objective of the travel is to meet project needs in Australia. The arrangement between you and the Home country entity is explained in this manner: Policy Globally, all business trips and short term secondment arrangements are governed by a secondment policy. For employees coming to Australia, the home country employer is not an Australian resident entity and does not have a permanent establishment in Australia. The employees have employment contracts with their home country employer before they travel from their home to Australia. The relevant inbound employees have a secondment agreement (a Cross Border Agreement) for the period they are working on the project in Australia. The Cross Border Agreement is necessary for meeting the management requirements and to comply with certain legal and immigration requirements. In providing the employees with a Cross Border Agreement there is no intention to create a formal direct financial contractual relationship between the Australian or overseas company and the employee. Terms relating to remuneration, leave entitlements and termination are based on the employees’ home country employment contract and also comply with labour law standards in the host country (Australia). Direction and Control You provide the relevant employees with instructions as to the activities to be undertaken which will be carried out at either the work premises or client premises, under the control and responsibility of you in Australia. While working away from their home location the employees will need to comply with the Australian or local entities’ regulations, risk management and quality control protocols. Employees will undertake work for you, or for the clients in Australia. You bear the responsibility for any work produced by the employees and would be responsible for claims arising out of any defective work produced by the employees or for any act of fraud or negligence while the employee is working in their jurisdiction. The home location employer is responsible for any losses that may arise from the work activities of the employees who have been assigned to work in Australia. Costs and Allowances The home country employer will continue to pay the employee’s salary into their home country bank account and meet home country social security costs. The host country (Australia) typically bears the cost of the employees, being salaries that are recharged as well as meeting additional costs such as visa costs, travel and accommodation etc. You will secure temporary accommodation that is as close as practically possible to the project site for the duration of the employee’s stay in the Australia as well as allocate per diems. You will either meet the accommodation costs or the employee will pay the costs and seek reimbursement.

Relevant legislative provisions: Paragraph 20(b) of the Fringe Benefits Tax Assessment Act 1986 Section 20A of the Fringe Benefits Tax Assessment Act 1986 | Section 21 of the Fringe Benefits Tax Assessment Act 1986 | Section 45 of the Fringe Benefits Tax Assessment Act 1986 | Subsection 47(5) of the Fringe Benefits Tax Assessment Act 1986 | Section 47A of the Fringe Benefits Tax Assessment Act 1986 | Section 52 of the Fringe Benefits Tax Assessment Act 1986 | Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 | Section 137 of the Fringe Benefits Tax Assessment Act 1986 | Subsection 148(1) of the Fringe Benefits Tax Assessment Act 1986 | Subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 | Section 24 of the Fringe Benefits Tax Assessment Act 1986 | Section 8-1 of the Income Tax Assessment Act 1997 | Subsection 15-2(1) of the Income Tax Assessment Act 1997 | Section 6-1 of the Income Tax Assessment Act 1997 | Section 23L of the Income Tax Assessment Act 1936 | Section 12-35 of Schedule 1 of the Taxation Administration Act 1953

Reasons for decision: Summary: The benefit in respect of accommodation is a fringe benefit. The taxable value of the fringe benefit can be reduced to nil by applying the otherwise deductible rule. Therefore, you will not be liable to pay FBT on accommodation provided to employees who travel in-bound to Australia to work on short term assignments for up to four months. | Detailed Reasoning - Detailed reasoning: In order to determine whether you are liable for FBT in respect of accommodation provided to employees who travel to Australia to work on short-term assignments for up to four months, it is necessary to firstly consider whether the provision of accommodation to such employees constitutes a 'fringe benefit’ as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). A 'fringe benefit’ is defined in subsection 136(1) of the FBTAA, which holds that the following conditions must be satisfied: 1. A benefit is provided at any time during the year of tax. 2. The benefit is provided to an employee or an associate of the employee. 3. The benefit is provided by: a. their employer; or b. an associate of the employer; or c. a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or d. a third party other than the employer or an associate of the employer, if the employer or an associate of the employer: i. participates in or facilitates the provision or receipt of the benefit; or ii. participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so; 4. The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1) of the FBTAA. A discussion is provided below in respect of whether each element or condition of the definition of a fringe benefit is satisfied. | Detailed Reasoning - A benefit is provided: Subsection 136(1) of the FBTAA provides a broad definition of a 'benefit’ as including: any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; … Based on the facts, you provide employees with accommodation when travelling on business. This accommodation is arranged by you and the costs are met by you. Alternatively, where employees pay for accommodation out of their personal funds while travelling on business, you will reimburse employees for those accommodation expenses. The provision by you of accommodation to employees – where accommodation expenses are either paid for directly by you or are reimbursed to employees – falls within the definition of a 'benefit’ as defined in subsection 136(1) of the FBTAA. As such, the first condition (i.e. the provision of a 'benefit’) of the definition of a 'fringe benefit’ – as defined in subsection 136(1) of the FBTAA – would be satisfied . | Detailed Reasoning - The benefit is provided to an employee or an associate of the employee: An 'employee’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employee. The salaries of the non-resident employees are paid by their home country employers whilst they work in Australia. As the home country employers are not Australian entities and do not have a permanent establishment in Australia, the home country will not have a withholding obligation in relation to their salary or wages. However, section 137 of the FBTAA extends the circumstances in which a person will be deemed to be employee. Based on the facts, you bear the cost of the employees (being salaries that are re-charged and meeting additional costs such as visa costs, travel and accommodation). In applying section 137, the employees are considered employees in respect of the additional benefits you provide because the company would have had with-holding obligations if it made a cash payment to the employees instead. Therefore, it follows that these employees are treated as employees for the purposes of the FBTAA in respect of the provision of accommodation or reimbursement of accommodation expenses. Therefore, as the benefit (accommodation) is provided to employees, the second condition (i.e. a benefit is provided to an employee) of the definition of a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied . | Detailed Reasoning - The benefit is provided by an employer, an associate of the employer or a third party: 'Employer’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer. Internationally-based employees travelling to Australia are employed by you for the purposes of the FBTAA. Therefore, the third condition (i.e. a benefit is provided by an employer) of the definition of a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied . | Detailed Reasoning - The benefit is provided in respect of the employment of the employee: As per subsection 136(1) of the FBTAA, 'in respect of’ in relation to the employment of an employee includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment. Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee: ● whether or not the benefit also relates to some other matter or thing; ● whether the employment is past, present or future; ● whether or not the benefit is surplus to the recipient's requirements; ● whether or not the benefit is also provided to another person; ● whether or not the benefit is offset by any inconvenience or disadvantage; ● whether or not the benefit is provided or used, or required to be provided or used, in connection with any employment; ● whether or not the provision of the benefit is in the nature of income, and ● whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee. In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 ( Knowles ), the full Federal Court – in examining the meaning of 'in respect of’ an employee’s employment – held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment’, though noted that 'what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment’. Based on the facts, the connection between the accommodation benefits received while travelling to Australia for business and their employment is material and sufficient, and not merely causal. As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied . | Detailed Reasoning - The benefit is not specifically excluded from the definition of a fringe benefit: With respect to paragraphs (f) to (s) of the definition of a 'fringe benefit’ in subsection 136(1) of the FBTAA, the relevant paragraph to consider is paragraph (g) which provides that an exempt benefit will not be a fringe benefit. In considering whether the accommodation benefits provided by you fall within any of the exempt benefits listed in Part III of the FBTAA, it is necessary to initially determine the types of fringe benefits that are applicable under the FBTAA. In considering whether the benefit is a fringe benefit it is necessary to determine the type of benefit that has been provided. Under the arrangement you will either provide accommodation to the employees or will reimburse the accommodation expenses paid by the employees. The provision of accommodation to an employee who is living away from their usual place of residence will be a residual benefit as defined in section 45 of the FBTAA as it does not come within a provision of Subdivision A of Divisions 2 to 11 of the FBTAA. Alternatively, a reimbursement will be an expense payment benefit as it comes within paragraph 20(b) of the FBTAA. A benefit is either an expense payment or a residual benefit and may be an exempt benefit where it is provided to an employee who is required to live away from his or her normal residence to perform their duties of employment. For the purpose of the Ruling the relevant exemptions are contained within subsection 47(5) of the FBTAA (residual benefit) and section 21 of the FBTAA (expense payment benefit). Alternatively, the benefits may be an exempt benefit under either section 47A or section 20A of the FBTAA if they are covered by a no-private-use declaration. | Detailed Reasoning - Exempt Residual Fringe Benefit: Subsection 47(5) of the FBTAA Subsection 47(5) of the FBTAA states: Where: (a) a residual benefit consisting of the subsistence, during a year of tax, of a lease or licence in respect of a unit of accommodation is provided to an employee of an employer in respect of his or her employment; and (b) the unit of accommodation is for the accommodation of eligible family members and is provided solely because the duties of that employment require the employee to live away from his or her normal residence; and (ba) the employee satisfies: (i) sections 31C (about maintaining an Australian home) and 31D (about the first 12 months); or (ii) section 31E (about fly-in fly-out and drive-in drive-out requirements); and (c) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment; and (d) any of the following conditions is satisfied: (i) subsection (7) applies in relation to the provision of transport for the employee in connection with travel in the period in the year of tax when the lease or licence subsisted, being travel between the employee's usual place of residence and the employee's usual place of employment; (ii) if the employee satisfies sections 31C and 31D - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(a)(i) to (iii); (iii) if the employee satisfies section 31E - the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out the matters in subparagraphs 31F(1)(b)(i) to (iii); the benefit is an exempt benefit in relation to the year of tax. Hence, for subsection 47(5) of the FBTAA to apply, the following conditions must be satisfied: ● accommodation is leased or licensed to an employee; ● accommodation is required solely because the duties of employment require the employee to live away from home; ● the employee maintains a home in Australia or works on a fly-in fly-out (FIFO)/drive-in drive-out (DIDO) basis (this element applies from 1 October 2012); ● accommodation is not provided while the employee is undertaking business travel, and ● the employee provides the employer with a declaration unless provided in connection with a FIFO transport arrangement. With respect to determining whether an accommodation benefit is provided to an employee who is travelling for business, or whether that employee is required to live away from home, the principles encapsulated in Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) serve as guidance. In particular, paragraphs 37 to 43 of MT 2030 outline various factors that may be considered in distinguishing between 'travelling for business’ and 'living away from home’. Based on the facts provided and in line with the principles embodied in MT 2030, the Commissioner considers the employees (those that are the subject of this private ruling) to be travelling in the course of performing their duties of employment. The Commissioner’s view in this regard is on the basis of the following: 1. Internationally-based employees that work on a project in Australia on a work visa for a period of up to four months do not change their employment location. The employment location for the employees remains in their home country. The itinerant nature of the employees’ work requires that these employees travel in order to carry out the requirements of their job/the particular project. 2. During the periods that internationally-based employees work in Australia on a short-term basis, the employees typically retain their usual place of residence in their home country, and their spouse/family (if any) does not accompany them to Australia. The nature of the accommodation whilst in Australia is characteristically short-term (i.e. hotels, serviced apartments), and is as close as practically possible to the employee’s work place in Australia. 3. The Commissioner accepts that the period that internationally-based employees are in Australia can be considered a short period of time. The following factors are considered relevant in establishing this conclusion: ● the nature of the business in providing management consulting, technology and outsourcing services ● the nature of the duties performed by employees regularly involves performing those duties at another locality ● travelling is a regular incident of their occupation, and ● their business travels (in terms of the employees that are the subject of this private ruling) typically do not exceed four months. | Detailed Reasoning - Conclusion in respect of subsection 47(5) of the FBTAA: An exemption under subsection 47(5) of the FBTAA would not apply as, based on the facts, internationally-based employees working in Australia for a short term: ● do not maintain a home in Australia or work on a FIFO/DIDO basis, and ● are provided with accommodation while undertaking employment duties. | Detailed Reasoning - Section 21 of the FBTAA: Section 21 of the FBTAA provides that an expense payment benefit that relates to the provision of accommodation may be an exempt benefit where the accommodation is required solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of employment. Section 21 states: Where - (a) an expense payment benefit is provided in a year of tax to a current employee of an employer in respect of his or her employment; (b) the recipients’ expenditure is in respect of accommodation for eligible family members; (ba) the accommodation is not provided while the employee is undertaking travel in the course of performing the duties of that employment: (c) the accommodation is required solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment; and (d) the employee gives to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out - (i) the employee’s usual place of residence; and (ii) the place at which the employee actually resided while living away from his or her usual place of residence, the benefit is an exempt benefit in relation to the year of tax. In considering these requirements: | Detailed Reasoning - (a) Is an expense payment benefit provided in a year of tax to a current employee of an employer in respect of his or her employment?: Section 20(b) of the FBTAA states that an expense payment benefit occurs when a provider reimburses another person, a recipient, in whole or in part, in respect of an amount of expenditure incurred by the recipient. You reimburse employees who are required to pay for their accommodation expenses. We have previously determined that an expense payment benefit is provided in a year of tax to a current employee of an employer in respect of their employment. | Detailed Reasoning - (b) Is the recipient’s expenditure in respect of accommodation for eligible family members?: No, the employee’s expenditure is in respect of rental accommodation for them-self. It is not normal practice for employees to take their families with them on these short term assignments to Australia. | Detailed Reasoning - (ba) Is the accommodation provided while the employee is undertaking travel in the course of performing the duties of that employment?: The accommodation is provided while the employee is undertaking travel in the course of performing the duties of their employment. (c) Is the accommodation required solely by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of employment? As discussed above in answer to question 1, the employee is living away from their usual place of residence in order to perform the duties of their employment. (d) Has the employee given to the employer, before the declaration date, a declaration, in a form approved by the Commissioner, purporting to set out - | Detailed Reasoning - (ii) the place at which the employee actually resided while living away from his or her usual place of residence?: Subsection 136(1) of the FBTAA defines the declaration date as the date of lodgement of the FBT return or such later date as the Commissioner allows. The ruling application indicates that the required declarations will be submitted for the relevant FBT years. | Detailed Reasoning - Conclusion: As all the conditions required by section 21 of the FBTAA have not been satisfied, the accommodation expense payment benefit is not an exempt expense payment benefit under section 21 of the FBTAA. | Detailed Reasoning - Exemption No-Private-Use Declaration: Section 47A of the FBTAA Section 47A of the FBTAA provides the following: 47A(1) [Exempt benefit] A residual fringe benefit that is covered by a no-private-use declaration is an exempt benefit. 47A(2) [No-private-use declaration] An employer may make a no-private-use declaration that covers all the employer's residual fringe benefits for an FBT year that are covered by a consistently enforced policy in relation to the use of the property that is the subject of the benefit that would result in the taxable value of the benefit being nil. 47A(3) [Form of declaration] The declaration must be in a form approved in writing by the Commissioner and be made by the declaration date. A consequence of making a 'no-private-use’ declaration is that the employer is not required to obtain specific declarations from employees for any fringe benefit covered by the declaration. The declaration must be in a form approved by the Commissioner and be given by the declaration date, which is defined in section 136(1) of the FBTAA as the date the employer lodges the FBT return for the relevant FBT year or such later date as allowed by the Commissioner. The condition in section 47A of the FBTAA would be met if, for example, the benefits were used only for employment-related purposes so that the taxable value of the benefit would be reduced to nil under the Otherwise Deductible Rule (ODR). Under the ODR in section 52 of the FBTAA (pertaining to residual fringe benefits), the taxable value of a residual fringe benefit is reduced to nil/reduced by the amount that an employee would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the accommodation benefit. The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only’ deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year. For an employer to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee who has travelled to Australia to work for no more than four months would have had to incur the accommodation expense solely relating to the performance of their employment-related duties and that expense would have to be wholly deductible to that employee for income tax purposes. Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing incurred in gaining or producing assessable income. However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the ITAA 1997. For any deduction to be allowable under section 8-1 of the ITAA 1997, an employee must be able to demonstrate that there is a real and direct connection between an outgoing (in this case, the accommodation expense) and the gaining of assessable income, so that the outgoing is incidental and relevant to the actual activities that gain assessable income. The extent to which accommodation expenses would be an allowable income tax deduction if incurred by an employee is determined under the general deduction provisions in section 8-1 of the ITAA 1997. An expense is deductible under section 8-1 of the ITAA 1997 when the essential character is that of an income-producing expense. As stated in Taxation Ruling TR 95/33 Income tax: subsection 51(1) – relevance of subjective purpose, motive or intention in determining the deductibility of losses and outgoings , the essential character of an expense is a question of fact to be determined by an objective analysis of all the surrounding circumstances. The 'essential character’ test was applied in FC of T v Cooper 91 ATC 4415, where Hill J stated: Food and drink are ordinarily private matters, and the essential character of food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those of work-related entertainment or entertainment incurred while away from home. Further, the deductibility of meal expenses where an employee is required by the circumstances of their employment to live temporarily away from home was considered by the Federal Court in Roads and Traffic Authority of New South Wales v. Federal Commissioner of Taxation (1993) 43 FCR 223; 93 ATC 4508; (1993) 26 ATR 76 (RTA case). Hill J stated (at FCR 240; ATC 4521; ATR 92): 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 indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character. The RTA case was discussed in paragraph of Tax Determination TD 93/230 Income tax and fringe benefits tax: is a camping allowance assessable under section 30 of the Fringe Benefits Tax Assessment Act 1986 or under Division 6 of the Income Tax Assessment Act 1997 , which stated that the following factors were taken into account by Hill J in determining whether expenses incurred by an employee were in respect of gaining assessable income: (a) the employee was required by the employer, as an incident of their employment, to live close by their work (b) the employee was only living away from home for relatively short periods of time (c) the employee did not choose to live at the places where the camp sites were located, and (d) the employee had a permanent home elsewhere. Furthermore, paragraph 4 of Taxation Determination TD 96/7 Fringe Benefits Tax: is fringe benefits tax payable on meals and accommodation provided to employees who work at remote construction sites, where the accommodation is not the usual place of residence of the employee? (TD 96/7) provides guidance as to whether the ODR applies to reduce the taxable values of meals provided to employees who are not travelling for work purposes. The following factors are stated as being relevant for consideration: (a) Is the employee required to live close by work? (b) Does the employee have a permanent residence away from the work site? (c) Does the employee live away from home for a relatively short period of time? (d) Does the employee have any choice as to the location of the accommodation provided? These factors are examined below in light of the scheme for the purposes of this private ruling. | Detailed Reasoning - (a) Is the employee required to live close by work?: The purpose of certain internationally-based employees travelling to Australia for a period of up to four months is to meet short-term resource requirements on specific projects located in Australia. Employees are required to move from their overseas homes to Australia to work in Australian offices (or the relevant client’s office) and consequently live close to the particular work location for the duration of the short-term assignment as it is not practical for the employees to travel to and from Australia on a daily basis | Detailed Reasoning - (b) Has the employee a permanent residence away from the work site?: Employees come to Australia for up to four months on a visa to work. These employees only come to Australia temporarily and are not accompanied by their families. Employees maintain their overseas residence to which they return upon completion of their project work in Australia. | Detailed Reasoning - (c) Does the employee live away from home for a relatively short period of time?: Paragraph 41 of MT 2030 provides a practical general 21-day rule that can be used to determine whether an employee is travelling or living away from home. In providing this 21-day rule, paragraph 41 of MT 2030 states that the rule is to be used in circumstances where it is not possible to conclude whether the employee is travelling or living away from home. In applying this guideline, the fact that the employees are in Australia for more than 21 days (though no longer than four months) is not sufficient to conclude that the cost of the accommodation will not be deductible. As stated in Boral Resources (WA) Limited v DFC of T 98 ATC 2158 and Minproc Engineers Limited v DFC of T 98 ATC 2170 , the 21-day rule in MT 2030 is 'purely an administrative guide rather than a set rule.’ | Detailed Reasoning - (d) Does the employee have a choice as to the location of the accommodation provided?: When travelling to Australia to work on short-term projects for a maximum of four months, employees do not choose their accommodation. This is done for them by you in accordance with their temporary accommodation guidelines and is as close as possible to the project location. Based on the above analysis, it can be said that the 'essential character’ of an accommodation expense – had it been incurred by an internationally-based employee who has come to work in Australia for a short term is that of an income-producing expense. Such an expense would have been incurred to gain assessable income. Therefore, had the employee incurred and paid unreimbursed expenditure in respect of their short-term accommodation while working in Australia, they would have been entitled to claim such an expense as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997. It follows that the ODR in section 52 of the FBTAA would apply such that you would be able to reduce the taxable value of the residual fringe benefit by the amount that an employee would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the accommodation benefit. | Detailed Reasoning - Conclusion in respect of section 47A of the FBTAA: The Commissioner considers that – in circumstances where you makes a 'no-private-use’ declaration by the declaration due date each FBT year, where such a declaration covers all of your residual fringe benefit for the FBT year which are covered by a consistently enforced policy in relation to the provision of accommodation to employees in-bound to Australia to work the exemption under section 47A of the FBTAA would apply to render such accommodation benefits an exempt benefit. | Detailed Reasoning - Exempt Expense Payment Fringe Benefits: The relevant provision in respect of exempt expense payment fringe benefits is section 20A of the FBTAA. Section 20A of the FBTAA exempts an expense payment fringe benefit that is covered by a 'no-private-use’ declaration. An expense payment fringe benefit is exempt if three conditions are satisfied: 1. the employer has made a declaration (the 'no-private-use’ declaration) covering all the expense payment fringe benefits for the FBT year for which the employer will only pay or reimburse such an amount as would result in the taxable value of the benefit being nil. In other words, the employer will reimburse or pay only employment-related expenses (this would result in the ODR reducing the taxable value of the benefit to nil) 2. the declaration is in a form approved in writing by the Commissioner, and 3.the declaration is made before the 'declaration date’. The 'declaration date’ is the date of lodgement of the FBT return for a particular year. This exemption is aimed at circumstances where an employer pays or reimburses only business expenses – in this case, the employer is able to provide an annual declaration stating that the benefits provided during the FBT year were only for employment-related purposes. Where the above mentioned conditions of section 20A of the FBTAA are satisfied, the benefits covered by the declaration are exempt benefits and the employer would not be required to obtain declarations from employees (which would otherwise be required under the ODR in respect of the benefits covered by the 'no-private-use’ declaration. Under the ODR in section 24 of the FBTAA (pertaining to expense payment fringe benefits), the taxable value of an expense payment fringe benefit (reimbursement of accommodation expenses) is reduced to nil/reduced by the amount that an employee would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the meals and accommodation benefit. The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only’ deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year. For an employer to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee who has travelled to Australia to work for no more than four months would have had to incur the accommodation expenses solely relating to the performance of their employment-related duties and those expenses would have to be wholly deductible to that employee for income tax purposes (pursuant to section 8-1 of the ITAA 1997). For the same reasons as discussed above (in relation to exempt residual fringe benefits), the 'essential character’ of accommodation expenses – had they been incurred by an internationally-based employee who has come to work in Australia for a short term (where the expenses were paid out of the employee’s personal funds) – is that of an income-producing expense. Such expenses would have been incurred to gain assessable income. Therefore, had an internationally-based employee incurred and paid unreimbursed expenditure in respect of their meals and accommodation while working in Australia for a short term, they would have been entitled to claim such expenses as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997. It follows that the ODR in section 24 of the FBTAA would apply such that you would be able to reduce the taxable value of the expense payment fringe benefits by the amount that an internationally-based employee would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the accommodation benefit. | Detailed Reasoning - Conclusion in respect of section 20A of the FBTAA: The Commissioner considers that – in circumstances where you make a 'no-private-use’ declaration by the declaration due date each FBT year, where such a declaration covers all of your expense payment fringe benefits (reimbursement of accommodation expenses) for the FBT year – the exemption under section 20A of the FBTAA would apply to render such accommodation benefits an exempt benefit. Therefore, with respect to the provision of residual fringe benefits (accommodation expenses) and expense payment fringe benefits (reimbursement of an employee’s accommodation expenses), the fifth condition (i.e. the benefit provided is not specifically excluded) of the definition of a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA would not be satisfied in circumstances where you makes a 'no-private-use’ declaration pursuant to sections 20A and 47A of the FBTAA. Conversely, this fifth condition would be satisfied if you choose not to make a 'no-private-use’ declaration each FBT year in relation to the relevant residual fringe benefits and expense payment fringe benefits. The FBT implications (if any) of such circumstances are discussed in the section below entitled 'Otherwise Deductible Rule’. | Detailed Reasoning - Otherwise Deductible Rule: If you do not make a 'no-private-use declaration’ pursuant to sections 20A (for residual fringe benefits (accommodation provided) or 47A (for expense payment fringe benefits (reimbursement of accommodation expenses)) of the FBTAA, the provision of such benefits by you will not be exempt. As such, the provision of accommodation benefits in these circumstances will be a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA. However, in such circumstances, the ODR rule may still apply to reduce the taxable value of the associated fringe benefits to nil/by the amount that an employee would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the relevant fringe benefits. The ODR only applies where the employee would have been entitled to a once-only deduction for the accommodation expenditure paid by the employer. A 'once-only’ deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year. The above-mentioned ODR is stipulated in sections 24 (in respect of expense payment fringe benefits), and 52 (in respect of residual fringe benefits) of the FBTAA. For an employer to reduce the taxable value of a fringe benefit under the ODR, an internationally-based employee who has travelled to Australia to work for no more than four months would have had to incur the relevant expense solely relating to the performance of their employment-related duties and that expense would have to be wholly deductible to that employee for income tax purposes. The heading above entitled 'The benefit is not specifically excluded from the definition of a fringe benefit’ included a discussion on the applicability of the ODR specifically in relation to residual fringe benefits and expense payment fringe benefits. It was considered that the 'essential character’ of accommodation expenses – had they been incurred by an internationally-based employee who has come to work in Australia for a short term (where the expenses were paid out of the employee’s personal funds) – is that of an income-producing expense. Such expenses would have been incurred to gain assessable income. Therefore, had an internationally-based employee incurred and paid unreimbursed expenditure in respect of their accommodation while working in Australia for a short term, they would have been entitled to claim such expenses as a one-off income tax deduction pursuant to section 8-1 of the ITAA 1997. It follows that the ODR in sections 24 and 52 of the FBTAA would apply such that you would be able to reduce the taxable value of the residual/expense payment fringe benefits by the amount that an employee would otherwise have been entitled to claim as a once-only income tax deduction had that employee incurred and paid unreimbursed expenditure in respect of the relevant accommodation benefit. Therefore, where the above accommodation benefits are provided/funded by you, the taxable value of those accommodation benefits may be reduced to nil using the ODR, provided an 'Otherwise Deductible’ declaration is obtained from the employee. | Detailed Reasoning - Conclusion: Accommodation benefits provided by you to internationally-based employees who have come to work in Australia for a period of no more than four months are not subject to FBT on the following basis: | Detailed Reasoning - Residual fringe benefits (accommodation provided) and expense payment fringe benefits (reimbursement of accommodation expenses): ● Where you make a 'no-private-use’ declaration pursuant to sections 20A and 47A of the FBTAA in respect of the provision of residual fringe benefits (accommodation provided) and expense payment fringe benefits (the reimbursement of an employee’s accommodation expenses), these benefits would not satisfy the definition of a 'fringe benefit’ under subsection 136(1) of the FBTAA as they constitute an exempt benefit. ● Alternatively, if you do not make a 'no-private-use’ declaration pursuant to sections 20A and 47A of the FBTAA, then the associated accommodation benefit would constitute a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA. However, the taxable value of the benefit can be reduced to nil using the ODR under sections 24 and 52 of the FBTAA provided an 'Otherwise Deductible’ declaration is obtained from the applicable employee. | Summary: The analysis of the facts in these circumstances distinguishes that the per diem allowance paid to in-bound employees to Australia for short term accommodation, food and incidentals whilst performing their employment duties will not constitute LAFHA. | Detailed Reasoning - Detailed reasoning: Subsection 30(1) of the FBTAA deals with LAFHA benefits under an employee/employer relationship where the payment is in respect of the employee’s employment. A LAFHA (subsection 30(1)) of the FBTAA exists where it is reasonable to conclude from all the surrounding circumstances that the allowance is in the nature of compensation to the employee for additional expenses incurred, (or additional expenses incurred and other disadvantages suffered), because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment. Additional expenses do not include expenses for which the employee would be entitled to an income tax deduction (deductible expense’ is defined in subsection 136(1) of the FBTAA, as an expense incurred by the employee in respect of which a deduction is allowable to the employee under section 8-1 of the ITAA 1997). An employee is regarded as living away from their usual place of residence if they are required by their employer to perform employment-related duties temporarily in a different locality. An employee would have continued to live at his or her usual place of abode if he or she did not have to change residence in order to work temporarily for his or her employer at another locality. The presumption is an employee will usually reside close to his or her employer’s premises and if he or she is living way from home, then he or she will return to the former place. The term 'normal residence’ is defined in subsection 136(1) of the FBTAA. For a person residing in Australia, his or her normal place of residence is where he or she usually resides, which is his or her usual place of abode/residence. Normal residence refers to where the employee usually resides for income tax and fringe benefits tax purposes. MT 2030 sets out the Commissioner’s treatment of a LAFHA. MT 2030 and paragraph 11.12 of the Tax Office publication 'Fringe Benefits Tax: A guide for Employers’ explains the distinction between a LAFHA and a travelling allowance. It is important to determine what type of allowance is being paid as the tax treatment for a travelling allowance and LAFHA are different in the hands of the employee. A bona-fide travelling allowance (which includes accommodation, meals and incidentals) is paid because an employee is travelling in the course of performing their duties, does not involve a change of job location, is paid for shorter periods, and where the employee has a family they normally do not accompany them. A bona-fide travelling allowance is included in the employee’s income tax return as assessable income (under subsection 15-2(1) of the ITAA 1997). The employee can then claim an income tax deduction against the taxable allowance, for the employment related expenses incurred (expended) under the positive limbs of section 8-1 ITAA 1997 (the negative limbs do not apply). Furthermore, the employee must be able to substantiate the expense incurred and retain the relevant receipts and documentation. A LAFHA on the other hand is paid where an employee has taken up temporary residence away from their usual place of residence (normal residence) to perform their employment duties, is considered to have changed their job location, the employees family will usually accompany them and the allowance is paid for longer periods. A LAFHA will not be included in the employee’s assessable income because it is a fringe benefit as stated in section 23L of the ITAA 1936. The definition of a fringe benefit in subsection 136(1) of the FBTAA excludes salary and wages. As the employer pays FBT, the employee cannot claim an income tax deduction for additional employment related expenses as the LAFHA is payment for non-deductible expenses, which generally includes accommodation and food. In both situations, the employer can claim a business related company tax deduction. However, if it cannot be determined that the allowance is a LAFHA or a travelling allowance, the tax office accepts that if the period away is less than 21 days, the payment will be a travelling allowance. MT 2030 provides further guidelines on LAFHA. Paragraphs 37 to 43 of MT 2030 outline factors which may indicate an employee is travelling in the course of performing their duties of their employment including: (a) no change to their employment location; (b) generally not accompanied by spouse or family; (c) stay away from their employment location and residence for short periods of time; and (d) no change to their place of residence Below is an application of these factors to the current circumstances: | Detailed Reasoning - (a) No change to their employment location: At all times internationally-based employees travelling to Australia remain in the one employment location once in Australia. | Detailed Reasoning - (b) Generally not accompanied by spouse or family: Internationally-based employees travelling to Australia are not ordinarily accompanied by their family and return to their permanent home once the project is completed. | Detailed Reasoning - (c) Stay away from their employment location and residence for a short period of time: Paragraph 40 of MT 2030 states that 'the nature of the allowance is not to be determined by reference solely to the period for which it is paid’. Paragraph 41 of MT 2030 states: There will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from-home allowance. For longer periods, it will be necessary to determine the nature of the allowance with the guidance provided by this Ruling. Paragraph 39 of MT 2030 provides the example of academics studying on sabbatical leave travelling in the course of their employment rather than living away from home and thus could receive a travelling allowance over an extended period of time. The standard duration for internationally-based employees travelling to Australia to perform their employment duties is for no longer than 4 months. The Commissioner accepts that this standard period to perform their employment duties can be considered a short period of time. | Detailed Reasoning - (d) No change to their place of residence: Internationally-based employees travelling to Australia usually maintain a place of residence in their home country whilst performing their employment duties in Australia. Employees ordinarily obtain short-term accommodation such as a hotel or serviced apartments when performing their employment duties because of a requirement of their employment to reside close to the relevant employment location. Employees are not accompanied by family members and typically return to their permanent home at the completion of the project. Internationally-based employees travelling to Australia to perform their employment duties continue to maintain their employment in their home country and return to that location upon conclusion of the project they are undertaking. | Detailed Reasoning - Conclusion: The Commissioner accepts that internationally-based employees travelling to Australia are travelling in the course of their employment when performing their duties and not living-away-from-home. Accordingly, the per diem allowance paid to the internationally-based employees travelling to Australia, to cover short term accommodation, food and incidentals whilst performing their employment duties in Australia will not qualify as a LAFHA under section 30 of the FBTAA. | Summary: The per diem allowance paid to employees will constitute assessable income for the employees. | Detailed Reasoning - Detailed reasoning: As outlined in Question 1 the Commissioner does not consider the per diem allowance for accommodation and incidental expenses paid to internationally-based employees travelling to Australia to be LAFHA. As stated previously a per diem allowance is included in the employee’s income tax return as assessable income (under subsection 15-2(1) of the ITAA 1997). Therefore, the per diem allowance paid to internationally-based employees travelling to Australia to cover short term accommodation, food and incidentals whilst performing their employment duties will constitute assessable income of the employee under section 6-1 of the ITAA 1997. | Summary: You will not be required to withhold an amount of tax on the per diem allowance paid to internationally-based employees travelling to Australia to perform employment duties. | Detailed Reasoning - Detailed Reasoning: As outlined in Question 2 the per diem allowance for accommodation and incidental expenses paid to internationally-based employees travelling to Australia is considered to be assessable income of the employee under section 6-1 of the ITAA 1997. Under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) an entity must withhold an amount from allowances it pays to an individual as an employee (whether of that or another entity). Accordingly, you will have an obligation to withhold tax under section 12-35 of Schedule 1 to the TAA 1953 because the allowance is paid by you to its employees. ATO Fact Sheet – Withholding for allowances (QC 51680) at Table 2 states that where allowances are paid in relation to domestic or overseas travel involving an overnight absence from an employee’s ordinary place of residence, and those allowances do not exceed the reasonable allowances amount published by the Commissioner, no withholding is required and the allowance amount does not need to be included on payment summaries. Taxation Determination TD 2016/13 Income Tax: what are the reasonable travel and overtime meal allowance expense amounts for 2016-17 income year (TD 2016/13) details the amounts that the Commissioner deems reasonable for the application of travel allowances. Therefore, you will not be required to withhold an amount of tax on the per diem allowance paid to internationally-based employees travelling to Australia to cover short term accommodation, food and incidentals whilst performing their employment duties in Australia, where they continue to be based on, and do not exceed, the reasonable amounts published by the Commissioner from time to time. | Summary: The per diem allowance paid to internationally-based employees travelling to Australia does not need to be included on PAYG summaries. | Detailed Reasoning - Detailed Reasoning: As outlined in Question 4 above, Table 2 of QC 51680 states that where allowances are paid in relation to domestic or overseas travel involving an overnight absence from an employee’s ordinary place of residence, and those allowances do not exceed the reasonable allowances amount published by the Commissioner, the allowance amount does not need to be included on payment summaries. Consequently, the amounts paid for per diem allowances will not be required to be reported on your employees’ PAYG payment summaries.

Issue 1: Accommodation benefits provided to employees coming to Australia to work (in-bound employees) on short term contracts for no longer than 4 months.