Hartley v FC of T

Members:
R Reitano SM

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2021] AATA 2622

Decision date: 2 August 2021

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R Reitano (Senior Member)

1. This case is about a claim that monies paid as salary and declared to the Commissioner of Taxation (Commissioner) as salary over seven tax years between 2008 and 2014 should not be treated as salary and taxable as income but rather as payments of remote area housing benefits or expense payment benefits so that they will be treated as being wholly or partly exempt from the payment of income tax.

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How did the matter come to the Tribunal?

2. Between about 8 April 2016 and 7 March 2017, the Commissioner issued Notices of Amended Assessments in respect of tax returns lodged by Todd Hartley (Mr Hartley) for each of the seven years ending 30 June 2008 until the year ending 30 June 2014.

3. On 30 August 2019 Mr Hartley objected to those Notices of Amended Assessments because he said that he '[had] been advised that due to the Public Benevolent Institution status of my employer and due to Cairns being recognised as a Remote Area by the Australian Taxation Office that I have been eligible for the Remote Area Housing Benefit since 2008'.

4. In dealing with the objection Mr Hartley made clear to the Commissioner that he considered payments he made on his mortgage in the relevant years should be treated as remote housing benefit under s.58ZC of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTA Act) and interest payments on his mortgage, body corporate fees, rates, electricity payments and water rates treated as remote area housing reductions as a reference to expense payment benefits under s.60 of the FBTA Act.

5. On 13 November 2019 the Commissioner decided to allow the objection to be treated as having been made within time even though it had been lodged out of time. On the same day, the Commissioner decided to disallow the objection.

6. On 14 November 2019 Mr Hartley applied to the Tribunal to have the Tribunal review the Commissioner's decision disallowing the objection.

What have I decided?

7. I have decided to affirm the Commissioner's decision because it is correct. I have set out my reasons for that decision below.

What is the issue?

8. The issue is whether payments to Mr Hartley made by his employer Choice Australia Management Ltd (Choice) in the tax years ending 30 June 2008 to 30 June 2014 were payments of salary, and so part of Mr Hartley's taxable income or whether they were payments of a 'remote housing benefit' or 'expense payment benefit' which are both benefits known to the FBTA Act and which are exempt from taxation or partly exempt from taxation.

9. In particular, Mr Hartley claims that mortgage payments he made were a remote housing benefit and that expenses related to his property, being interest payments, body corporate fees and water rates were expense payment benefits. Although he says that electricity payments were expense payment benefits they can only have been remote housing benefits because of the terms of the FBTA Act, but for present purposes that matters little because of the conclusion I have come to, namely that none of the payments were remote housing benefits or expense payment benefits.

What are the circumstances?

10. From 1 February 2007 until after the end of the 2014 tax year Mr Hartley lived in a unit which he owned in Woree in suburban Cairns in Queensland. I will refer to the unit as 'Mr Hartley's property' although at times in various documents that I have quoted from it is referred to as 'the unit' or 'Mr Hartley's unit' as well.

11. On 1 October 2007 Mr Hartley started employment with Choice working as its Chief Executive Officer.

12. On 18 August 2008 Mr Hartley and Choice signed a document that was headed 'Contract of Employment Chief Executive Officer'. I will refer to that document as the 'employment agreement'. The employment agreement was expressed to commence on 1 October 2007. The employment agreement contained the terms on which Mr Hartley was employed. Clause 5 of the employment agreement included a term that said that Mr Hartley would:

In consideration of the Employee performing the duties of the position to the highest possible standard, the Employee shall be entitled to the remunerations (sic) set out in Schedule B which will include both monetary remuneration and employment benefits.

13. Clause 5 also said that:

The parties agree that in determining the Employee's Remuneration Package, the Employee may take advantage of salary packaging providing that the cost to the Employer is not adversely affected.

14.

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Although the words 'Employee's Remuneration Package' appeared to be referring to a defined term of some kind, because of the capitalization of the first letter of each word, there was no defined term in the employment agreement that informed those particular words. It probably does not matter much as it is obvious that the reference to 'Employee's Remuneration Package' is a reference to the remuneration set out in Schedule B.

15. Schedule B to the employment agreement stipulated that '[t]he gross salary for this position is $110,000.00 per annum'. The term that recorded the gross annual salary to be paid went on to say:

In accordance with current taxation law, the salary can be packaged so that a portion is paid as benefits on behalf of the Employee and the remainder is paid fortnightly by electronic transfer to the Employee's bank account. The Employer and the Employee will agree on the portion of salary to be received as benefits within the allowable limits and may vary the portion from time to time. In the event of Choice securing Charitable Institution status and thereby securing further employee taxation concessions, the Employee agrees that this contract will be renegotiated without financial prejudice to the Employee in order to secure financial benefits to the Employer. (The underlining is my own)

16. Schedule B also referred to Mr Hartley being provided with a fully maintained motor vehicle together with dealer and on road costs as being part of the 'remuneration package'. Private use of the vehicle was expressly 'approved at company expense'. Similarly, a fully maintained mobile phone was included in the 'remuneration package'. Private use of the mobile phone was expressly 'approved at company expense'.

17. Schedule B also set out other benefits that Mr Hartley was to receive which included things like performance bonuses, superannuation contributions, various forms of leave and so on.

18. Schedule B did not contain anything about Choice providing housing to Mr Hartley, paying any amounts to Mr Hartley that were in some way referable to his property, about Choice lending or giving any money to Mr Hartley for housing related purposes or reimbursing Mr Hartley for house related expenses. The closest it got to saying anything about the property was a reference to 'home office' which said that 'No recognition is given to home office expenses and thereby the Employer is not liable for any home office expenses incurred by the Employee.' The employment agreement more generally contained nothing about any of those things either.

19. Clause 15 of the employment agreement provided amongst other things that:

This contract supersedes and replaces all other contracts, agreement communications and arrangements, whether written or verbal, between the parties. This Contract of Employment shall not be altered or modified except by instrument in writing signed by both parties. In the event of an agreed change to this Contract by instrument, the provisions of this document unaffected by the change will remain in force.

20. There was at no time any other document that was in writing signed by the parties that altered or modified the employment agreement.

21. On 14 September 2012 Mr Hartley received an email that told him that with effect from 1 July 2012 his salary package would be '$125,000 per annum, exclusive of statutory superannuation' and '$16,250 in lieu of the fully maintained vehicle.' There was no instrument in writing signed by both parties that reflected that alteration to the employment agreement, but it appears that the parties acted upon it.

22. There is nothing to suggest that Mr Hartley ever 'packaged' his 'salary' as contemplated by cl.5 of the employment agreement or by reference to Schedule B to the employment agreement. In particular, there is nothing that indicates that Mr Hartley agreed with Choice that an identified portion of his salary would be received as 'benefits within the allowable limits.' There is nothing by way of any spoken words that indicates that there was an oral agreement made between Mr Hartley and Choice about either the 'packaging' of salary or that any

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portion of salary would be received as 'benefits within the allowable limits'. There is no identification of any particular benefits that might fall within those 'allowable limits'. There is certainly no instrument in writing as contemplated by cl.15 of the employment agreement that varies the employment agreement to take into account anything about salary packaging or an agreement about 'the portion of salary to be received as benefits within the allowable limits.'

23. Mr Hartley suggested in addressing the Tribunal that there was a capped threshold for fringe benefit tax purposes of $16,050. He did not indicate where that threshold was derived from, but in any event, there was no evidence about any benefits or any agreement about Mr Hartley taking $16,050 as a portion of his salary as some identified fringe benefit or as 'a benefit within allowable limits'. There was simply nothing that suggested that any such agreement was ever entered into by Mr Hartley with anyone from Choice. Of course, this case is about the two kinds of benefits I have referred to, namely remote housing benefits or expense payment benefits under s.58ZC and s.60 of the FBTA Act and there was nothing referable to those kinds of benefits in the employment agreement.

24. There was evidence given by Ricky Lawford (Mr Lawford) who in 2007 provided Choice with some advice about various matters to do with governance and to draft an 'employment and remuneration package and contract' in respect of Mr Hartley. Mr Lawford specifically included in the draft 'employment and remuneration packaging offer for Todd, access to salary packaging taxation benefits by way of exempt fringe benefits associated with charitable and public benevolent institution (PBI) status.' Mr Lawford discussed with various people from Choice including Mr Hartley the benefits that would derive from having access to salary packaging arrangements because of their fringe benefits tax exempt status.

25. Mr Lawford did not participate in the making of the employment agreement, such as conversations or document exchanges concerned with Mr Hartley in fact receiving his salary or any part of it as a package or otherwise or as 'benefits' that would take the place of salary or some part of it. Mr Lawford did not have any discussion with Mr Hartley about Mr Hartley's salary or any part of it being treated as a remote housing benefit or expense payment benefits. Even if Mr Lawford had authority on behalf of Choice, and there was nothing to suggest he did, there was nothing he said or did to implement or agree to Mr Hartley accessing or taking advantage of the terms of his contract that related to salary packaging or accessing benefits that would or might derive tax exempt status.

26. The employment agreement permitted salary packaging or for some of the salary to be taken as 'benefits' but there was nothing that was done to give effect to salary packaging or to taking some of the salary as 'benefits'. There was nothing done to identify any part of Mr Hartley's salary as remote housing allowance or as expense benefits.

27. Mr Hartley's response to enquiries made by the Commissioner, or more accurately those representing him in investigating the matter, is instructive so far as what was really happening is concerned. He said that Choice:

. . .provided an administration service to employees (like most employers do) on payday, that is by, as an employee we could nominate numerous payees, for example, saving (sic) account, savings account no 2, child's saving account, mortgage, rent, loan, car loan etc and have our fortnightly pay allocated accordingly, or simply it could go to 1 nominated account. There have been times in the past when I have had portions of my pay allocated to various payees for the sake of convenience, that is, it gave me more time when I was working long hours in the field.

28. The availability of an 'administration service to employees' or something provided 'for the sake of convenience' to employees serves only to confirm that the payments made were not part of any salary packaging arrangement or an agreement about 'the portion of salary to be received as benefits within the allowable limits'.

29. Mr Hartley also said in his response to those enquiries that he 'personally paid general expenses relating to the unit - these being:

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rates, electricity, body corporate fees, water, sewerage and gas.' Mr Hartley confirmed that Choice did not reimburse him for those expenses, pay them on his behalf or give him the funds so that he could pay them directly. Mr Hartley's statements in this regard were at odds with his statement that it was 'part of [his] employment contract that the employer would pay/reimburse you for the unit's expenses' although he qualified that by saying that the 'contract…confirms access to all taxable concessions'. Mr Hartley told the Tribunal that:

So when this question was asked of me two and-a-half years later, then the reason why I had submitted my application, Member Reitano, was because those benefits were incorrectly included in gross salary, so they didn't reimburse me as they should have - they didn't pay them on my behalf, as they possibly should have, and they didn't give me the funds to make the payments directly. So those answers were correct at that point in time because if it hadn't have been for the reporting or the recording or the software issue those three things would've occurred. So, at that point in time that answer was correct because there was an issue that all of my money went into gross salary.

30. I have set out the terms of the employment agreement earlier and I need only repeat that there is no term of the employment agreement that creates an obligation upon Choice to pay or reimburse Mr Hartley for expenses relevant to his property.

31. Mr Hartley's answer to the Commissioner, or his representative who was making the enquiries of Mr Hartley, was consistent with the terms of the employment agreement. If Choice 'should have' re-imbursed Mr Hartley there needed to be some agreement creating such an obligation; if Choice 'possibly should have' paid them again there needed to be an obligation for it to do so; and of course Choice did not give any funds directly to Mr Hartley to make the payments, again, for the same reason that there was no obligation to do so.

32. All of the tax returns lodged in each of the relevant financial years, which were lodged by Mr Hartley, all characterized the amounts subject of the objections as 'salary or wages' and not as a remote housing allowance or as expense benefits. Choice when it paid the amounts to Mr Hartley, Mr Hartley when he lodged his income tax returns in each of the relevant years and the Commissioner at the time the assessments were made all treated and characterized the payments as 'salary or wages'.

33. Finally, I should note that there was a 'letter' produced to the Commissioner on the letterhead of Choice dated 28 August 2019 which was unsigned, and which did not identify the author or the source of the statements in the letter, addressed to Mr Hartley that recorded that 'your PAYG payment summaries from 2008-2014 have been reviewed and our findings conclude that your payroll records have not included the appropriate payroll entitlements. This oversight does not take into consideration the non-reportable exempt Fringe Benefit, Remote Area Housing Benefit for the financial years ending 2008 through to 2014'. The 'letter' said that the 'oversight is regrettable'.

What is the argument?

34. Mr Hartley says that there was an 'oversight' that resulted in the remote housing benefit and expense benefit being included in his gross salary from 2008 to 2014'. He says that he should be permitted to amend his tax returns for those years to correct that 'oversight'. Mr Hartley says that the amounts that were paid as repayments of his mortgage over his property and some expenses related to that property were fringe benefits and not salary. He says that Choice made a mistake when it paid those amounts to him as salary, and he did too when he lodged his tax returns for those years. In particular, Mr Hartley says that the repayments on the mortgage over his property were remote area housing benefits under s.58ZC of the FBTA Act and interest, body corporate fees, council rates, electricity and water rates over that property are 'expense' payment benefits under s. 60 of the FBTA Act.

35. The Commissioner says that the assessments were based upon the fact that the payments made were always payments of salary. The Commissioner says that there is nothing in the employment agreement that activated the facility of salary packaging or the taking of salary as benefits such that would

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allow the salary paid or some part of it to be treated as exempt or partially exempt income. The Commissioner says in any event that money paid to Mr Hartley cannot be characterised as exempt income because none of the amounts claimed fall within the criteria in s.58ZC and s.60 of the FBTA Act.

The payments were payments of salary

36. Mr Hartley's objection confronts two significant difficulties both of which lead inexorably to the same conclusion, namely that his objection must be disallowed.

37. The first difficulty concerns the issue of fact that so far as the payments made to Mr Hartley are concerned they were paid to him as payments of salary. The employment agreement provided an entitlement to payment of salary, a payment instead of a motor vehicle allowance for some of the time, payment of performance bonuses and payment for various forms of leave. There were no other benefits under the employment agreement which were required to be paid by Choice to Mr Hartley. There was no obligation on Choice to make any other payments to Mr Hartley. In particular there was no entitlement referred to in the employment agreement concerning remote housing benefits or expense payment benefits or anything that could even look like those things. There was no obligation on Choice to make payments of those kinds to Mr Hartley.

38. The amounts paid to Mr Hartley that are characterised as salary equate to the amounts to which he was entitled to receive under the employment agreement as salary. The fact that everyone, Mr Hartley and Choice, treated and characterised the payments at the times they were paid as salary is hardly surprising given the obligation to pay an amount as salary and the absence of an obligation to pay other things such as remote housing benefits or expense payment benefits.

39. The fact that there was an administrative arrangement that permitted the direction of salary to various other accounts and sources, as Mr Hartley identified in the passage I quoted earlier, did not change what was being paid to Mr Hartley into something other than salary. That was just as Mr Hartley explained when answering the Commissioner's enquiries a convenient way of doing things.

40. In one sense that is the end to the matter, but it is necessary to deal with the claim that the existence of the facility of salary packaging or the fact that the parties 'will agree on the portion of salary to be received as benefits within the allowable limits' changed that. As I said earlier there was at no time any salary packaging. Nor did Mr Hartley and Choice at any time, to borrow the express words of Schedule B 'agree on the portion of salary to be received as benefits.' Nor did they agree about any proportion of salary that would be taken as remote housing benefits or expense payment benefits. In the absence of any agreement the salary packaging facility or an agreement about what benefits would be received within allowable limits it is not possible to say that some amount, whether it be the entire salary or part of it became something other than salary and if so what its tax treatment would be.

41. I reject the suggestion that there was some oversight involved in the events such that the payments to Mr Hartley should have been treated as remote housing benefits or expense payment benefits. The objective evidence that I have referred to, the employment agreement obligation to pay amounts as salary (or as payments instead of a motor vehicle or as performance bonuses) and the fact that the amounts paid equal the amounts for those things does not suggest oversight. The fact that there is no obligation to pay things such as remote housing benefits or expense payment benefits does not support a contention that there was an oversight in not paying them as such. The fact that no salary packaging or other agreement about paying all or some of the salary as an amount within 'allowable limits' does not suggest an oversight. The unsigned letter to Mr Hartley does not at all cast any light on any oversight or explain it and, in any event, absent at the very least a signature and the identification of an author I would not regard it as evidence of anything at all.

42. The fact that some unidentified person later said there was an 'oversight' does not change the words of the employment agreement such that it create an obligation to pay things that are not referred to in it such as remote housing benefits and expense payment benefits. There was no agreement about those things between Mr Hartley and Choice at any

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time so that payments to him could not have been referable to them. The absence of an obligation deprives them of any such character.

43. As I have found the amounts paid to Mr Hartley that he wants treated as remote housing benefits or expense payment benefits were paid to him as salary it is, strictly unnecessary to deal with the other obstacle in Mr Hartley's way. I will do so in deference to the fact that it was argued. Also considering the other obstacle that stands in Mr Hartley's way puts paid to the suggestion that any oversight affects the outcome of his objection.

The payments are not benefits within s.58ZC or s.60

44. The second difficulty is a legal one and concerns whether the amounts claimed by Mr Hartley to be fringe benefits are in fact fringe benefits at all. It is necessary to deal with the remote area housing benefit and the expense payment benefit separately.

45. So far as the remote area housing benefit is concerned, s.58ZC of the FBTA Act informs what qualifies as such benefit. The section so far as relevant provides:

58ZC Exempt benefits-remote area housing benefits

Remote area housing benefit to be exempt

• (1) A housing benefit that is a remote area housing benefit is an exempt benefit.

What constitutes remote area housing benefit

• (2) A housing benefit in relation to an employer for a year of tax and for a unit of accommodation, being a benefit provided to an employee of the employer in respect of the employee's employment, is a remote area housing benefit if:
  • (a) during the whole of the tenancy period, the unit of accommodation was located in a State or internal Territory and was not at a location in, or adjacent to, an eligible urban area; and
  • (b) during the whole of the tenancy period, the recipient was a current employee of the employer and the usual place of employment of the recipient was not at a location in, or adjacent to, an eligible urban area; and
  • (d) it would be concluded that it was necessary for the employer, during the year of tax, to provide, or to arrange for the provision of, residential accommodation for employees of the employer because:
    • (i) the nature of the employer's business was such that employees of the employer were liable to be frequently required to change their places of residence; or
    • (ii) there was not, at or near the place or places at which the employees of the employer were employed, sufficient suitable residential accommodation for those employees (other than residential accommodation provided by or on behalf of the employer); or
    • (iii) it is customary for employers in the industry in which the recipient was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy or use the accommodation concerned; and
  • (e) the recipients overall housing right was not granted to the recipient under:
    • (i) a non-arm's length arrangement; or
    • (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section.

46. As can be seen the term 'remote area housing benefit' is defined by a series of cumulative requirements found in s.58ZC(2)(a) to (e) noting, of course, that there

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is no s.58ZC(2)(c). Each one of those requirements must be satisfied, although there are alternative ways within s.58ZC(2)(d) and s.58ZC(2)(e) about how those requirements can be satisfied. If each of the criteria are not satisfied an amount is not a remote area housing benefit.

47. Sub-sections 58ZC(2)(a) and (b) open with the words 'during the whole of the tenancy period…'. The phrase 'tenancy period' is defined by s.136 and means 'the period during the year of tax when the housing right to which the benefit relates subsisted'. Section 58ZC(2)(e) also opens with the words 'the recipients overall housing right'. The phrase 'housing right' is also defined by s.136 and means:

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.

48. Immediately the obstacle for Mr Hartley is that that he owned the house in respect of which he says he is entitled to the remote housing benefit. He did not have a right by reason of a lease or licence granted to him to occupy or use the house. Even if the repayments to Mr Hartley's mortgage could be said to have been made by Choice, they could not be a remote area housing benefit because of the absence of any lease or licence to occupy or use the property that Mr Hartley needed to have in order for any such payments to be characterised that way. It is unnecessary to consider whether the payments that Mr Hartley says were made satisfy the other criteria in s.58ZC(2) because he cannot satisfy the first two of them. The amounts for that reason cannot be remote area housing benefits.

49. So far as Mr Hartley's claim for expense payment benefits s.60 of the FBTA Act provides:

60 Reduction of taxable value-remote area housing

• (1) Where:
  • (a) the recipient of a loan fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;
  • (b) the loan is a remote area housing loan connected with a dwelling; and
  • (c) the recipient occupied or used the dwelling as his or her usual place of residence during a period in the year of tax (in this section referred to as the occupation period) during which the recipient was under an obligation to repay the whole or a part of the loan;

  the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of that amount as relates to the occupation period.

• (2) Where:
  • (a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;
  • (b) the recipients expenditure is in respect of interest in respect of a remote area housing loan connected with a dwelling;
  • (c) the recipient occupied or used the dwelling as his or her usual place of residence during a period (in this section referred to as the occupation period) during which the interest accrued; and
  • (d) the fringe benefit was not provided under:
    • (i) a non-arm's length arrangement; or
    • (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

  the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of that amount as relates to the occupation period.

• (2A) Where:
  • (a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer;

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  • (b) the recipients expenditure is in respect of remote area housing rent connected with a unit of accommodation;
  • (c) the recipient occupied or used the unit of accommodation as his or her usual place of residence during a period (in this subsection called the occupation period) during which the rent accrued; and
  • (d) the fringe benefit was not provided under:
    • (i) a non-arm's length arrangement; or
    • (ii) an arrangement that was entered into by any of the parties to the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section;

  the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50% of so much of the recipients expenditure as relates to the occupation period.

• (3) Where:
  • (a) the recipient of a property fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and
  • (b) the recipients property is remote area residential property;

    the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

• (4) Where:
  • (a) the recipient of an expense payment fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and
  • (b) the recipients expenditure is in respect of remote area residential property;

    the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

• (5) Where:
  • (a) the recipient of a property fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and
  • (b) the recipients property is a remote area residential property option fee;

    the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

• (6) Where:
  • (a) the recipient of a property fringe benefit in relation to an employer in relation to a year of tax is an employee of the employer; and
  • (b) the recipients property is remote area residential property repurchase consideration;

    the amount that, but for this subsection, would be the taxable value of the fringe benefit in relation to the year of tax shall be reduced by 50%.

• (7) Where:
  • (a) subsection (6) applies to a property fringe benefit; and
  • (b) the amount paid by the provider of the fringe benefit by way of consideration for the purchase of the estate or interest concerned exceeds both:
    • (i) the market value of the estate or interest at the time of the purchase; and
    • (ii) the guideline price of the estate or interest at the time of the purchase;

  a reference in subsection (6) to the taxable value of the fringe benefit is a reference to so much of the taxable value as is attributable to the amount of the guideline price.

50. Section 20 informs what an 'expense payment benefit' is:

20 Expense payment benefits

Where a person (in this section referred to as the provider):

• (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred

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  to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or
• (b) reimburses another person (in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

51. Section 40 informs what a property fringe benefit is:

40 Property benefits

Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.

52. The only basis upon which the expense fringe benefits might be exempt is if any one of the criteria in ss.60(1) to 60(7) is satisfied. Unlike s.58ZC only one of the subsections needs to be found to apply for the benefit to be regarded as a remote area housing benefit. It is unnecessary to deal with each and every aspect of each of the subsections and their potential application as the essential components, that is the essential nature of the benefits with which they deal are not in Mr Hartley's circumstances satisfied. I will deal with them in turn.

53. Sub-section 60(1) is not relevant as Mr Hartley has not suggested that there was any loan from his employer to him. The existence of a loan from employer to employee is an essential component of s.60(1).

54. Sub-section 60(2) does not apply because Choice had no obligation to pay Mr Hartley's interest repayments or to re-imburse him for them. The payments that were made were payments of salary that was owed by Choice to Mr Hartley and were not made by Choice to discharge an obligation that Mr Hartley had to pay interest on his loan. To the extent that Mr Hartley re-directed his salary to pay such things those re-directions did not make them payments by Choice to discharge Mr Hartley's loan interest repayments. They were payments of salary that Mr Hartley directed his employer, for reasons of convenience, to pay elsewhere. There is no document that evidences any suggestion that Choice considered the payments that it was making at the time as anything other than the payment of salary. Nor were they reimbursements because, again, there was no obligation on Choice to make any reimbursements to Mr Hartley for housing interest loan re-payments. The payments at all times retained their character as payments of salary. Mr Hartley confirmed so much in his answers to the Commissioner, or his representatives, in December 2019 when he said they were not reimbursements, were not paid by Choice on his behalf and not payments to him for those debts to be discharged.

55. Sub-section 60(2A) has no application as there was no rent paid in relation to Mr Hartley's property.

56. Sub-section 60(3) cannot be satisfied because the definition of 'property fringe benefit' in that sub-section requires that property be provided by one person to another as referred to in s.40. The property here was not provided to Mr Hartley if only because it was his own property and not Choice's. Choice had no interest, legal or beneficial in Mr Hartley's property so it could not provide it to him.

57. Sub-section 60(4) requires there to be an 'expense payment fringe benefit' which is, as I have noted, informed by s.20. Mr Hartley disavowed any suggestion that Choice paid those expenses or reimbursed him for them. The reasons why this sub-section has no application are the same as why s.60(2) has no application.

58. Sub-section 60(5) cannot apply as there is no suggestion that there was option fee relevant to the matter. Sub-sections 60(6) and 60(7) have no application because there was no suggestion that there was any amount paid by Choice for the purchase of the property.

Conclusion

59. The amounts subject to Mr Hartley's objection were salary and therefore income. They were not remote housing benefits or expense payment benefits within s.58ZC or s.60 of the FBTA Act.

60. I affirm the Commissioner's decision disallowing the objection.