Member Q&A: FBT treatment of reimbursed relocation costs (or salary packaged)?

Question

We have a new staff member who was offered a $3,000 reimbursement amount for relocation costs on her offer of employment letter.

The staff member subsequently purchased a property at her new location and moved into the new property. She has since provided invoices for reimbursement for conveyancing costs and household removal costs. What are the FBT implications of these reimbursements?

Answer

It appears the $3,000 was an agreed reimbursement amount towards the employee’s relocation costs as opposed to an allowance.

On that basis, the household removal costs may be exempt from FBT pursuant to section 58B of the FBT law. In broad terms, section 58B provides an exemption for removal or storage costs incurred as a consequence of an employee temporarily or permanently relocating his/her residence to perform employment duties. (Note – section 58B may also apply to a living away from home scenario).

Regarding the conveyancing costs on the property purchase, where an employer reimburses an employee’s incidental costs incurred in buying or selling a home because of the need to relocate to perform employment duties, section 58C provides that these benefits may be exempt. It should also be noted that the ATO accept stamp duty payable on purchase of a home (arising as a result of a relocation) is within the scope of section 58C.

However, the section 58C exemption will only apply where:

• the employee sold their home in the previous location and purchased their home in the new location solely because they changed their usual place of residence to carry out the employment duties;
• the former home was owned by the employee when they were advised of the need to relocate;
• the former home was, and the new home will be, the employee’s usual place of residence;
• the sale contract was made within two years of commencing employment in the new location; and
• the purchase contract was made within four years of commencing employment in the new location.

As can be seen, there is a requirement for the employee (or their associate) to have had an ownership interest in a dwelling in the former location for section 58C exemption to be available.

Further enquiry is therefore needed to ensure the section 58C exemption is available.

It should also be noted that an employee could enter into a salary sacrifice arrangement to access exemption for relocation/storage and incidental buying/selling costs which may be advantageous where an employer will only reimburse a set amount which may be less than actual costs incurred.

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