Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon. J. Kerin, M.P.)Chapter 1 FBT Assessment Act - Living Away From Home Allowance Benefits
Overview
Ensures that living-away-from-home-allowances paid to offshore oil and gas rig workers are treated as fringe benefits.
Summary of proposed amendments
1.1. The Bill will amend the fringe benefits tax law to ensure that living-away-from-home-allowances (LAFHAs) paid to offshore oil and gas rig workers are treated as fringe benefits.
Background to the legislation
1.2. When fringe benefits tax (FBT) was introduced in 1986, the Government's intention was that all LAFHAs would be subject to FBT. The need to amend the fringe benefits tax law arises because the wording of a LAFHA provision in an offshore oil industry award was not sufficiently clear to bring it within the LAFHA provision in the FBT law.
Explanation of proposed amendments
1.3. LAFHAs are defined in section 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as being allowances paid to compensate an employee for additional expenses incurred by the employee or additional expenses incurred by the employee and other additional disadvantages that the employee is subject to while required to live away from his usual place of residence in order to perform his work duties.
1.4. Some LAFHAs paid to offshore oil and gas rig workers are paid solely to compensate the employee for additional disadvantages of living away from home. Because these allowances do not include a component for additional expenses incurred by the employee they do not fall within the definition of a LAFHA in section 30 of the FBTAA.
1.5. The proposed amendment will widen the definition of a LAFHA to include those allowances paid to offshore oil and gas rig workers where they are only paid for additional disadvantages of living away from home.
1.6. Section 30 of the FBTAA will therefore be amended by inserting new subsection 30(2) to ensure that a LAFHA paid by an employer to an employee after the date of introduction of this Bill will be treated as a fringe benefit if-
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- the allowance is not already a fringe benefit under subsection 30(1);
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- the employee's usual place of employment is on an oil or gas rig;
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- the employee is provided with residential accommodation at or near the worksite; and
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- it could be concluded that the whole or part of the allowance is paid to compensate the employee for additional disadvantages of having to live away from home. [Clause 6]
1.7. When these conditions are satisfied, the whole of the allowance will be treated as a LAFHA fringe benefit.
1.8. Section 31 of the FBTAA will be amended so that the taxable value of those allowances described in new subsection 30(2) is the amount of the allowance. [Clause 7]
1.9. Section 74 of the FBTAA allows a FBT assessment to be amended within 3 years of the original assessment date. The Commissioner may amend assessments made after the Bill's introduction date, which were made on the basis of the existing law to give effect to these amendments. [Clause 8]
Commencement date
1.10. The amendment will apply to those LAFHAs within the expanded definition which are paid after date of introduction of the Bill.
Clauses involved in the proposed amendments
Clause 5: will facilitate references to the Fringe Benefits Tax Assessment Act 1986 for the purposes of amendments to that Act made by this Bill.
Clause 6: will amend section 30 of the FBTAA by inserting new subsection 30(2). The new subsection expands the definition of LAFHA fringe benefits.
Clause 7: will amend section 31 of the FBTAA to enable the taxable value of the LAFHA fringe benefit to be determined.
Clause 8: allows for assessments made after the date of introduction of the Bill to be amended to give effect to the amendments being proposed.