It is very common in the modern workforce for employees to be temporarily stationed in a town or city that is a considerable distance from where they and their family currently live. In the majority of these cases the employee will rent accommodation or is provided with accommodation rented by their employer in the new locality.
Employees temporarily relocated in such scenarios are considered to be living away from home for FBT purposes and, provided certain conditions are met, a number of benefits can be provided to them by their employer without a FBT liability arising.
Where the employee rents accommodation and has their rent either reimbursed or directly paid by their employer an expense payment benefit will arise. Section 21 of the FBTAA provides an exemption for such a benefit where:
- The expenditure is on accommodation for eligible family members;
- The accommodation is not provided while the employee is undertaking business travel ;
- The accommodation is required solely because the duties of employment require the employee to live away from home;
- The employee maintains a home in Australia; and
- The employee provides the employer with a declaration.
Rather than renting, the employee may see this as an opportunity to acquire a dwelling in the new locality that they can retain for investment purposes once their work relocation assignment has finished.
If such a purchase is made, can the costs of that accommodation paid for or reimbursed by the employer qualify for the s. 21 exemption?
The ATO’s view is that the exemption is not available.
Their reasoning is that the term ‘in respect of accommodation’ contained in s. 21(b) of the FBTAA does not include the reimbursement or payment by the employer of mortgage expenses in respect of a dwelling purchased by an employee and used as a dwelling by the employee and members of the employee’s family while they are living temporarily away from their usual place of residence Australia.
Such expenditure is essentially incurred in respect of acquiring the dwelling and is not expenditure in in accommodating the employee.