DESCRIPTION
Sometime after arriving in Australia a foreign national seeks employment in Australia through a labour hire firm ('LHF'). 2. A contract is entered into between the LHF and an end user for the provision of labour. The contract usually specifies the hourly rate of remuneration, for example $A120 per hour, to be paid to the LHF. 3. A contract is entered between the LHF and the foreign national. This contractual relationship is usually one where the LHF is paying the foreign national under a contract wholly or principally for their labour. Generally, payment is based on an hourly rate of remuneration, for example $A100 per hour. The A$20 difference between the amount paid to the LHF (A$120) and the amount paid by the LHF to the foreign national (A$100) represents a fee to the LHF. The contract does not provide for the payment of a living away from home allowance ('LAFHA'). 4. The foreign national performs work under the contract in Australia. 5. The employment arrangements in the contract between the LHF and the foreign national are substituted by agreements with a special purpose company ('SPC'), under the control of a promoter that is interposed between the LHF and foreign national. 6. The SPC receives all the money that, but for it being interposed, would have been received by the foreign national. Based on the above example that would be $A100 per hour. The SPC deducts a fee, for example, 10%. The balance of $A90 is paid as salary of $A50 and as a LAFHA of $A40. PAYG instalments are only deducted from the 'salary' component by the SPC. 7. The end user of the labour remains the same and there is no change in its contract with the LHF. 8. In a variation to this arrangement the foreign national enters into an agreement with the SPC before contracting the LHF. The foreign national is not employed at any stage by the LHF and is only employed by the SPC. 9. It is contended that the LAFHA is exempt income to the foreign national employee through the operation of section 23L of the Income Tax Assessment Act 1936 (ITAA 1936). 10. The SPC, as the relevant employer, contends that it has no liability to fringe benefits tax in respect of the LAFHA provided to the foreign national employee. It is contended that the taxable value of the LAFHA ascertained under section 31 the Fringe Benefits Tax Assessment Act 1986 (FBTAA) is nil.