An employer’s reimbursement of an employee for the costs of relocating to a new residence closer to the job could attract Fringe Benefits Tax (FBT) if the relocation is not formally required as part of the job in an employment agreement. This uncertainty has now been cleared up with a refreshing dose of common sense from the Australian Tax Office (ATO) in their review of a particular case.
The facts in question were that an employee accepted a promotion the duties of which had to be performed over 3,000 kilometres from the employee’s usual place of residence. The applicable Enterprise Bargaining Agreement did not permit the employer to require the employee to move their usual place of residence closer to the new place of employment. However, the employee was not permitted to perform their new duties from the former place of employment and the employer would not provide transport between the employee’s usual place of residence and their new place of employment. Moreover, the employee was required to be on call at certain times, and had to sign on for duty within 2 hours of being contacted by the employer.
The ATO has confirmed in ATO ID 2013/8 that an employee who changes their usual place or residence, to be closer to where they perform the duties of their employment, may be regarded as being required to change their usual place of employment for the purposes of sub para 58B(1)(b)(iii) of the Fringe Benefits Tax Assessment Act 1986 (see HERE), even though the move was not formally ‘required’ by the employer. This meant that the employer’s reimbursement of the employee for the costs of relocating to the new residence could be regarded as an exempt expense payment benefit.
ATO ID 2013/8 is available HERE.
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