Member Q&A – Providing temporary accommodation due to an employee’s relocation

Question

We have a staff member that has been  appointed to a new role. The staff member currently works in our Melbourne office but the new role is located on the Victorian-NSW border and so it would be impractical for the staff member to commute to work on an ongoing basis.

As a result, the staff member will move and take up the new role when their current rental accommodation lease expires at the end of this month.

We will reimburse accommodation expenses at the new location for up to six months while the staff member looks to secure long term rental accommodation at the new location.

Will the reimbursement of the temporary accommodation be exempt from FBT?

What happens if we go beyond the 6 month period?

Answer

Section 61C of the FBT Act operates to reduce (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. the employer reimburses rent;
• a housing fringe benefit — e.g. the employer is the lessee and allows the employee to occupy the housing; and
• a residual fringe benefit — the benefit is provided to the employee in some other way.

The reduction is generally limited to an occupancy period of four months, however, there are two exceptions where the employee:

(a) gives the employer a declaration detailing the efforts being made to find suitable long term accommodation, the reduction can apply for a maximum of six months; or

(b) owned a home at the former location, sold it within six months of starting work and is making attempts at buying a home in the new location, and gives a declaration to the employer to that effect, the reduction may apply for a maximum of twelve months.

In your case, provided the declaration requirement in paragraph (a) above is met, up to 6 months accommodation can be provided FBT free. At the very minimum, up to 4 months accommodation can be provided FBT free if no declaration is obtained.

If the relevant exemption period is exceeded, FBT applies to the period after the exemption period has expired (e.g. 4, 6 or 12 months as the case may be).

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.