STATEMENT
From 1 April 2000 all housing benefits defined as 'remote area housing benefits' provided by an employer or an associate will be exempt from fringe benefits tax (FBT) under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 . [F1]
EXPLANATION
Previously the FBT exemption for remote area housing under section 58ZA was limited to employers carrying on a business of primary production. From 1 April 2000, section 58ZA has been repealed and all 'remote area housing benefits' will be exempt from FBT under section 58ZC.
It is therefore useful to reiterate the law in relation to what is a remote area housing benefit. Section 25 considers a 'housing right' to be a housing benefit when an employee or an associate is granted a right to occupy, as a usual place of residence, a unit of accommodation provided by an employer or other provider. It does not include the reimbursement or payment of rent where that expenditure is incurred by an employee or an associate of an employee.
A unit of accommodation will be treated as being in a remote area if it is not in or adjacent to an eligible urban area (paragraph 58ZC(2)(a)).
Paragraph 140(1)(a) provides that an eligible urban area is a reference to an area that is an urban centre with a census population of not less than 14,000 (or 28,000 for an urban centre located in Zone A or B for Income Tax purposes).
Paragraph 140(1)(b), which relates to housing benefits provided to most employees, defines a location that is adjacent to an eligible urban area to be either: (i) situated less than 40 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000, or (ii) situated less than 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of at least 130,000.
Consequently, a location will be in a remote area (and not near an eligible urban area) where it is: • 40 kilometres or more from a town or city with a census population of 14,000 or more, if that town is not in Zone A or B for Income Tax purposes • 40 kilometres or more from a town or city with a census population of 28,000 or more, if that town is in Zone A or B for Income Tax purposes, and • 100 kilometres or more from a town or city with a census population of 130,000 or more.
Subsection 140(1A) now allows, in relation to housing benefits, a different definition of 'a location which is adjacent to an eligible urban area'. This alternative definition is only relevant to: (a) the following employers (subsection 140(1B)): (a) a public hospital; (b) (Repealed by No 142 of 2003) (c) a hospital carried on by: (i) a society that is a non-profit society for the purposes of section 65J; or (ii) an association that is a non-profit association for the purposes of section 65J; (d) an employer that is a charitable institution. (b) an employee (subsection 140(1C)): (a) whose employer is a government body; and (b) whose duties of employment are exclusively performed in, or in connection with: (i) a public hospital; or (ii) (Repealed by No 142 of 2003) (iii) a hospital carried on by a society that is a non-profit society for the purposes of section 65J or by an association that is a non-profit association for the purposes of section 65J. (c) an employee (subsection 140(1CA): (a) whose employer provides public ambulance services or services that support those services; and (b) who is predominantly involved in connection with the provision of those services. (d) an employee (subsection 140(1D)): (a) whose employer is a government body; and (b) whose duties of employment are performed in a police service.
In the above circumstances, a location will be adjacent to an eligible urban area only if it is within 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of at least 130,000. Consequently, in the limited circumstances outlined in subsection 140(1A), an area will be remote where it is 100 kilometres or more, by the shortest practicable surface route, from a centre with a census population of 130,000 or more.
Subsection 140(2) provides that the distance by the shortest practicable surface route between a location (in this subsection referred to as the 'tested location' and the centre point of an eligible urban area is: (a) where there is only one location within the eligible urban area from which distances between the eligible urban area and other places are usually measured - the distance, by the shortest practicable surface route, between the tested location and that location, and (b) where there are two or more locations within the eligible urban area from which distances between parts of the eligible urban area and other places are usually measured - the distance, by the shortest practicable surface route, between the tested location and the one of those locations that is in the principal one of those parts.
In relation to the FBT year commencing 1 April 2007 and subsequent years, subsection 140(2A) provides that where the shortest practicable surface route between a tested location and an eligible urban area includes a route by water, the total kilometres of the surface route that are by water are doubled for the purposes of determining whether a location is remote. From this date, in applying subsection 140(2), if the shortest practicable surface route between the tested location and the location mentioned in that subsection includes a route by water, the distance between those locations is taken to be the amount worked out using the following formula: [Total kilometres of the surface route * 2 that are by water] + [Total kilometres of the surface route that are by land
For example, ABC Island is situated 18 kilometres by water and an additional 6 kilometres by land by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000. Therefore, in applying the formula as shown above (18km ? 2) + 6km, ABC Island will be considered to be located in a remote area, as it will be taken to be 42km from the eligible urban area.
Subsection 140(3) defines 'census population' in relation to an urban centre to mean the census count on an actual location basis of the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981.
Subsection 58ZC(2) requires the following conditions to be satisfied before a housing benefit provided in respect of an employee's employment in a remote area can qualify as an exempt '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 (c) (Repealed by No 77 of 2005) (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.
This remote area housing exemption should not be confused with the other remote area benefits (for example section 60) which allows a reduction in the taxable value of those benefits.
Attachment 1 contains a listing of towns establishing whether or not they are in or adjacent to an eligible urban area, as defined in paragraph 140(1)(b). Attachment 2 contains a listing of towns establishing whether or not they are in or adjacent to an eligible urban area, as defined in subsection 140(1A). These listings should not be seen as exhaustive and should only be used as a guide. For towns that are not mentioned in the lists, the rules above should be applied to determine whether they are in a remote or non-remote area for FBT purposes.