Member Q&A: FBT relocation exemptions for new employee

Question

We are seeking guidance on relocation reductions for temporary accommodation and transport to understand if the taxable value of these benefits can be reduced to nil where an employee relocates from one city to another to take up a new employment role.

We wish to understand if these concessions only apply to existing employees or if they can also apply to new employees once the contract of employment is signed?

The guidance defines an employee as “someone who receives, or is entitled to receive, salary and wages in return for work or services provided, or for work under a contract that is wholly or principally for the person’s labour.”

If the employee has not yet commenced, however they have signed an employment contract, do they still meet the definition of an employee and therefore the concessions apply?

Answer

Section 61C of the FBT Act reduces to nil the taxable value of benefits arising from the provision of temporary accommodation to an employee who changes his or her usual place of residence in the course of employment or in order to commence employment. The reduction applies in respect of:

• an expense payment fringe benefit — e.g. employer reimburses rent;
• a housing fringe benefit — e.g. the employer is the lessee and allows the employee to occupy the unit;
• a residual fringe benefit — the benefit of the lease or licence is provided to the employee in some other way.

Relocation transport provided to an employee and family members as a consequence of an employee being required to relocate his/her usual place of residence or to live away from home temporarily to perform employment duties is an exempt benefit under section 58F of the FBT Act.

You are correct in stating that an employee for FBT purposes is a person who receives, or is entitled to receive, salary or wages. This is actually the definition for a “current” employee.

However, the definition of employee for FBT purposes also includes a future employee or former employee. A “future” employee means a person who will become a current employee.

Based on the facts described, arguably the individual is a current employee once they sign the employment agreement on the basis they will be entitled to receive salary or wages.

In any case, the individual is also a future employee and therefore an employee for the purposes of applying both the temporary accommodation (section 61C) and relocation transport (section 58F) concessions.

We are not aware of anything that specifically prevents an employer accessing these concessions in respect of a future employee provided the person is required to relocate their usual place of residence or (to live away from home temporarily in the case of relocation transport) to perform employment duties.

However a person who was already residing where the new workplace will be located and then accepted new employment in that location is not likely to satisfy the requirements for a reduction in taxable value.

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This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.