FBT – Remote area housing concessions – (Part 1 of 3)

It is stated in the ‘Productivity Commission 2020, Remote Area Tax Concessions and Payments, Study Report(Feb 2020), that remote Australia accounts for more than 85 per cent of Australia’s landmass but just 2 per cent of Australia’s population.

Despite the Government announcing it would not proceed with proposed FBT changes recommended by the Productivity Commission that would have limited FBT exemptions and concessions for remote area related benefits there remains some misunderstanding of how the existing exemptions and concessions apply.

In this series of articles, we examine the remote area housing exemptions and concessions available to employers operating in remote areas of Australia.


Many TaxEd members operate in remote areas of Australia. Various remote area housing concessions are provided for in the Fringe Benefits Tax Assessment Act 1986 (‘FBTAA’).

The specific remote area housing concessions available are:

  1. Remote area housing benefit
  2. Remote area housing loan
  3. Remote area mortgage interest
  4. Remote area rent
  5. Remote area property
  6. Remote area property expense payment
  7. Remote area residential property option fee
  8. Remote area residential property repurchase consideration
  9. Remote area residential fuel

In this, the first article of a series of three, we focus on some fundamental concepts and the specific remote area housing benefit exemption in section 58ZC FBTAA. The remaining concessions will be explored over the next two TaxEd monthly Updates.

What constitutes a ‘remote area’?

Prior to launching into the specifics of the remote area requirements, we advise that the ATO have compiled a listing of various cities and towns across Australia and have classified these locations as remote v non-remote accordingly. This is a handy reference for employers and can be found here.

There are three ways to determine whether accommodation in particular place is a remote area. The third method is only relevant to certain employers providing remote area housing benefits and remote area fuel benefits.


  1. By reference to proximity to an eligible urban area

A remote area is a location that is not in – or adjacent to – an eligible urban area. The term ‘eligible urban area’ is defined in s.140 FTAA.

Based on that definition, accommodation is classified as being near or adjacent to an eligible urban area and therefore not remote where it is situated either:

  • less than 40 kilometres from an eligible urban area with a census population of 14,000 to less than 130,000
  • less than 100 kilometres from an eligible urban area with a census population of 130,000 or more.
  1. By reference to proximity to Zone A or Zone B areas

If the accommodation is in zone A or B (for income tax purposes), to be remote it must be located:

  • at least 40 kilometres from an eligible urban area with a census population of 28,000 to less than 130,000, and
  • at least 100 kilometres from an eligible urban area with a census population of 130,000 or more.

The eligible urban area population figures above are based on the 1981 census data and the distances are measured by the shortest practical surface route.

Where the shortest practical surface route includes water, the following formula applies:

(total kms of the surface route that are by water x 2) + total kms of the surface route that are by land

  1. A special rule for certain employer types

A third category of remote area applies solely for the employer types listed below and solely for the purposes of the remote area housing exemption and remote area fuel reduction.

The eligible employer types are:

  • a public hospital
  • a hospital carried on by a non-profit society or a non-profit association
  • a government body where the duties of employment are exclusively performed in, or in connection with, a public hospital or a non-profit hospital
  • a charitable institution
  • an employer who provides public ambulance services or services that support those services where the employee is predominantly involved in connection with the provision of those services
  • a government body where the employee’s duties are performed in a police service.

For these employers, the accommodation must be in a location that is at least 100 kms from an urban centre that in the 1981 Census had a population of 130,000 or more.

Remote area housing benefit

The exemption for remote area housing benefits can be found in section 58ZC of the FBTAA.

The fundamental requirement that must exist before the exemption can apply is that the employee is provided with a housing fringe benefit.

A housing fringe benefit arises where an employer provides their employee with a ‘housing right’. A housing right, in relation to a person, means a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person’s usual place of residence.

A unit of accommodation includes any of the following:

  • a house, flat or home unit
  • accommodation in a hotel, motel, guesthouse, bunkhouse or other living quarters
  • a caravan or mobile home
  • accommodation on a ship or other floating structure.

A taxable value for such a housing fringe benefit arises where the accommodation is provided rent-free or at a reduced rent. This will normally be the case in a remote area housing arrangement.

However, for a remote area housing fringe benefit, a full exemption applies where the following conditions are satisfied:

  1. For the whole of the tenancy period, the unit of accommodation is in a remote area (that is, it is not located in or adjacent to an eligible urban area).
  2. For the whole of the tenancy period, the accommodation is occupied by a person who is your current employee, and the usual place of employment of the employee is in the remote area.
  3. It would be concluded that it must be necessary for you to provide accommodation for employees or to arrange to provide such accommodation for any of the following reasons:
    1. the nature of your business is such that employees are liable to move frequently from one residential location to another,
    2. there is insufficient suitable residential accommodation otherwise available at or near the place or places where the employees are employed, or
    3. it is customary for employers in that industry to provide free or subsidised accommodation for employees.
  4. The benefit was not provided to the employee under either:
    1. a non-arm’s length arrangement, or
    2. an arrangement that was entered into by any of the parties for the purpose, or partial purpose, to obtain the concession.

The most common queries we receive from members through the Q&A service focus on item 3(c) above.

Meeting the ‘customary’ requirement

The term ‘customary’ is not defined in the FBTAA. Common dictionary definitions of customary include:

  1. according to or depending on custom; usual; habitual.
  2. of or established by custom rather than law.

The Australian Taxation Office state at paragraph 2 of Taxation Determination TD 94/97 that:

“A benefit will be accepted as being customary in the industry where it is normal for employees of that class or job description in the industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where the provision of the benefit is unique, rare or unusual within an industry it would not be accepted as being customary.”

Former Income Tax Ruling IT 67 that dealt with subsidised housing benefits under former provisions of the Income Tax Assessment Act 1936, provided a non-exhaustive list of examples of classes of employees whose employers were considered to meet the ‘customary’ requirement. These included:

  • miners
  • sugar mill employees
  • bank employees
  • police
  • prison employees
  • school teachers
  • hospital employees
  • farm workers
  • hotel and motel staff
  • civil engineering workers, e.g., on bridge or dam works.

Income Tax Ruling IT 67 was archived by the ATO back in June 1994 and subsequently withdrawn in September 1997.  As such, members should revert to the paragraph extract from TD 94/97 which is still current and has been recently reiterated in a recent ATO fact sheet.

The focus of TD 94/97 is based on employees of a class or job description ‘in that industry’ to be provided with housing benefits.

The focus for members therefore must be based on the industry they operate within and whether employees, or a class of employees thereof, are normally or commonly provided with subsidised housing.

If housing is not normally provided to employees and approaches are made to implement salary sacrifice arrangements focusing on the remote area housing concessions, caution re the customary requirement must be exercised. If unsure, as always, we recommend members approach the matter by way of a private binding ruling request from the ATO.

Next edition we will focus on the following benefits:

  1. Remote area housing loan
  2. Remote area mortgage interest
  3. Remote area rent
  4. Remote area residential fuel
This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.