House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)

Employees employed in foreign locations

Overview

1.1 The Bill will amend section 58L of the Fringe Benefits Tax Assessment Act 1986 ('the FBTAA') to overcome administrative difficulties arising out of the present requirement that names of certain foreign localities be prescribed by regulation.

Summary of the amendments

Purpose of the amendments

1.2 Section 58L operates to exempt from FBT a benefit provided by an employer in meeting the cost of travel of an employee who must travel away from a workplace in a foreign location in order to obtain certain medical treatment. The exemption also applies to the spouse or child of the employee and, where an escort is necessary, to the escort of a sick person.

1.3 The amendment will remove the present requirement of section 58L that the foreign locations, in which an employee must be working for the exemption to apply, be prescribed by regulation.

Date of effect

1.4 The amendment applies to benefits provided on or after the date the Bill receives Royal Assent.

Background to the legislation

1.5 Section 58L of the FBTAA exempts from FBT a benefit provided by an employer to employees working in certain prescribed foreign locations for travel from their work place to obtain suitable medical treatment.

1.6 The exemption applies to the costs of transport, accommodation and meals consumed by the employee which are in connection with transport between their workplace and place of treatment.

1.7 Paragraph 58L(1)(f) extends the exemption to travel undertaken by the spouse or child of the employee to obtain such treatment. Under paragraph 58L(1)(g), where it is necessary for the employee or a family member receiving treatment to be accompanied or visited by a family member or to be escorted by another person, the costs of travel of the family member or escort may also be exempt.

1.8 Under paragraph 58L(1)(j) the exemption will only apply if the place at which the treatment takes place is either:

(a)

the place nearest to the overseas workplace at which suitable medical treatment could be provided; or

(b)

the place at which such medical treatment could be provided at least cost.

1.9 The relevant foreign locations to which the exemption applies are set out in paragraph 58L(1)(d) and include:

(i)

a prescribed foreign country;

(ii)

a prescribed part of a foreign country; or

(iii)

a prescribed territory, dependency or colony (however described) of a foreign country.

1.10 The Regulations to prescribe the foreign locations referred to in paragraph 58L(1)(d) are required to use the same categories listed in that paragraph. As such, the Regulations are required to specify in respect of each foreign locality whether it is a foreign country, a part of a foreign country or territory, colony or dependency of a foreign country.

1.11 The Explanatory Memorandum to the amending legislation which inserted section 58L made it clear that the qualifying foreign locations are intended to be developing countries.

1.12 Considerable administrative difficulties have arisen in relation to providing a list of foreign locations to be included in the Regulations. In particular, it is difficult to list foreign locations according to the categories listed in paragraph 58L(1)(d). Such difficulties arise because of changes in the description and territorial boundaries of a foreign location (e.g. the former Yugoslavia) and also from a change of names (such as Cambodia to Kampuchea to Cambodia).

Explanation of the amendments

1.13 This Bill will amend subparagraphs 58L(1)(d)(i)-(iii) to remove the requirement that the foreign locations referred to in those subparagraphs be prescribed [Clause 5].

1.14 The effect of the amendment will be that, subject to the conditions set out in section 58L, the exemption will apply in respect of any employee working outside of Australia, where there is no suitable medical treatment available at the overseas location where the work is carried out.

Transitional provision

1.15 A transitional provision will be inserted which removes the requirement that foreign locations be prescribed under section 58L from 1 July 1986 (which is the date from which section 58L became operative) to the date of assent of the amendment.

1.16 However, the transitional provisions will apply only where the benefit is in respect of medical treatment provided in a foreign country which is certified in writing by the Minister for Foreign Affairs to be a developing country [Clause 6].