ATO Interpretative Decision
ATO ID 2001/761
Fringe Benefits Tax
Fringe Benefits Tax: Remote Area Housing Exempt BenefitsFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Whether the novation of an existing rental agreement for a house in a remote area, (between the employer, employee and landlord), creates the provision of an exempt remote area housing benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Decision
No, the novated lease between the relevant parties will not result in the provision of a remote area housing benefit which is exempt under section 58ZC of the FBTAA.
Facts
As part of salary packaging, an arrangement (being a tripartite contract involving the employee, landlord and employer) was proposed that would shift the rights and obligations of the tenancy agreement, including the obligation to make the rental payments, from the employee to the employer.
This proposal was made in recognition of the earlier decision that as an employer in a remote area, something would have to be done if it were to successfully compete for and retain its better staff.
As a result of the novation, the employer would have the right to use the unit of accommodation but allow the employee to live in it rent free until such time as the employee ceases to be in employment.
In the event of a termination of the employment of the employee, the novated lease between the employer and the landlord would be extinguished and the original rental lease between the landlord and the employee resurrected.
The employee and the employee's family have resided in the rented accommodation prior to commencing employment with the employer.
Reasons for Decision
For a remote area housing benefit to be exempt it is necessary that all of the requirements of section 58ZC of the FBTAA be satisfied.
Whilst:
- (1)
- the unit of accommodation and the employee's usual place of employment are not at a location in, or adjacent to an eligible urban area
- (2)
- the provision of such housing is commonplace within the industry and would be in accordance with the term 'customary in the industry' as explained in Taxation Determination TD 94/97 and
- (3)
- it is necessary for the employer to provide the employee such accommodation because it is customary for employers in the industry to provide such a housing benefit,
the overall housing right must not represent an arrangement that was granted for the purpose or for the purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section.
It is considered that the creation of a housing right as an exempt benefit, emanating from the decision to novate a lease, is an arrangement which would be inclusive of the purposes to obtain the benefit of the application of this section.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 13 February 2015 | Reason for Decision | (1) Delete "as explained in Practice Statement PS2000/6" |
| Other references | Delete "Practice Statement PS2000/6" |
Legislative References:
Fringe Benefits Tax Assessment Act 1986
section 58ZC
Related Public Rulings (including Determinations)
TD 94/97
Keywords
Fringe benefits
Housing benefit
Remote area housing exemption
Novated rental agreement
Date reviewed: 24 January 2018
ISSN: 1445-2782
| Date: | Version: | |
| 23 August 2001 | Original statement | |
| You are here | 13 February 2015 | Updated statement |