Remote area housing: reduction of taxable value - remote area housing rent

Is the taxable value of the expense payment fringe benefit reduced by 50% of the gross rent incurred by the employee when the rent relates to a unit of remote area accommodation under subsection 60(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Yes, because the gross rent is the amount of the 'recipients expenditure as relates to the occupation period'.

The employee leases a house and lives in the house which is the employee's usual place of residence.

The employee pays rent to the landlord under the terms of the lease.

The employee is a current employee of the employer. The dwelling is situated in a 'remote area'. The employee works in a 'remote area'. In the employer's industry it is customary to provide 'housing assistance' to employees.

During the year the employee incurs rent of $5,000. The employer reimburses the full amount of the $5,000 rent expense incurred. This reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'.

There is no 'recipients contribution' made by the employee to the employer.

Paragraph 60(2A)(d) of the FBTAA is about not allowing non-arms length arrangements or arrangements entered into for the purposes of obtaining the tax concessions available under section 60. Paragraph 60(2A)(d) of the FBTAA does not apply to this arrangement.

The facts as above continue to apply with the following exception.

Instead of the employer reimbursing the full amount of the $5,000 rent expense incurred, the employer only reimburses (in part), half of the $5,000 rent expense incurred. This reimbursement, $2,500, is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

The recipient of the $5,000 (or $2,500) 'expense payment fringe benefit' is the employee of the employer. Paragraph 60(2A)(a) of the FBTAA is satisfied.

'Recipients expenditure', as defined in section 136(1) of the FBTAA means, in relation to an 'expense payment benefit', the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA.

The expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA is the amount of rent incurred by the employee. That is, the amount of the gross rent incurred before reimbursement, which is $5,000 in both factual situations.

The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'.

During the year, the rent expense accrues and the employee lives in the accommodation as his or her usual place of residence. Paragraph 60(2A)(c) of the FBTAA is satisfied.

Paragraph 60(2A)(d) of the FBTAA does not apply.

Subsection 60(2A) of the FBTAA is satisfied. Accordingly, the employer is entitled to a reduction in taxable value equal to 50% of the gross rent incurred by the employee as relates to the occupation period.

Based on the facts (and alternative facts) contained above, the reduction in taxable value of the 'expense payment fringe benefit' would be calculated as follows: $(facts) $(alternative facts) Expense payment fringe benefit 5,000 2,500 Less 'recipients contribution' Nil Nil Taxable value before reduction 5,000 2,500 Less subsection 60(2A) reduction, 50% of gross rent (50% x $5,000) 2,500 2,500 Reduced taxable value 2,500 Nil

$(facts) | $(alternative facts)

Expense payment fringe benefit | 5,000 | 2,500

Less 'recipients contribution' | Nil | Nil

Taxable value before reduction | 5,000 | 2,500

Less subsection 60(2A) reduction, 50% of gross rent (50% x $5,000) | 2,500 | 2,500

Reduced taxable value | 2,500 | Nil

Note: Unlike the reduction contained in subsection 60(2) of the FBTAA the 50% reduction contained in subsection 60(2A) of the FBTAA refers to 50% of the employee's expenditure (the gross rent) not to 50% of the taxable value. ATO Interpretative Decision ATO ID 2003/157 contains an example of the application of subsection 60(2)of the FBTAA in relation to remote area housing interest.

Date of Amendment Part Comment 6 April 2018 Issue, Reason for Decision, Example calculation Minor punctuation and grammar amendments

Date of Amendment | Part | Comment

6 April 2018 | Issue, Reason for Decision, Example calculation | Minor punctuation and grammar amendments