Hello, Has anyone had experience with providing accommodation to staff in remote locations? My understanding is the business can rent a house for the staff member to live in, claim the rent as a business expense and not have any FBT costs? This is a for a for profit sole trader, not for a not for profit. If this is right can the employer then deduct the rent from the employees’ wages pretax? Does this sound right? Cheers, Smallbuyer.
First issue. Sole trader wont be subject to FBT so wont apply. However if the employer was a company or trust then a remote area housing is FBT exempt under Section 58ZC FBT Act Remote area housing in Australia is exempt from FBT if (all conditions): for the whole of the tenancy period the accommodation is occupied by a current employee, and the usual place of employment of the employee is in the remote area the nature of business requires employees to move residence locations frequently there is insufficient suitable residential accommodation otherwise available at or near the place(s) of employment A “remote area” is an area more than 40 kilometres from an eligible urban area with a census population of 14,000 to less than 130,000, or more than 100 kilometres from an eligible urban area with a census population of 130,000 or more. Tax Zone A or Zone B If the accommodation is in zone A or B (for income tax purposes), to be treated as remote it must be located: at least 40 kilometres from an eligible urban area with a census population of 28,000 to less than 130,000, and at least 100 kilometres from an eligible urban area with a census population of 130,000 or more.
By sole trader, I assume 'you', and 'employee' is someone who is employed by the ST who is coveted by wirkers comp insurance effected in the name of the ST. If the ST and employee are the same entity see @MikeLivingTheDream
understand. you as sole trader are employing other workers who will receive the remote area housing benefit. ok see my response above
Remote locations need to be separated from issues around staff being asked to work away from home in cities or regional areas or overseas (which may or may not be remote areas as the ATO define it in which refer to Mike's explanation) who are paid a allowance to cover their own accommodation, meals and other incidental costs. One is a FBT issue and the other not. I used to be involved in telecommunications (think NBN and fibre optic) and we had 50+ staff who needed to stay in locations around the state. We found the industry standard and was financially beneficial (incentive ?) to staff was to pay a daily allowance that complies with Tax Ruling TR 2004/6. Annually the acceptable limits are published ie TD 2016/13. Alternatively we could rent a place and provide them with accom but based on industry practice this was not beneficial to them or us. Not an incentive for them to be away !! We would pay a daily allowance expecting staff stayed in a hotel, motel or similar accommodation. (Tents and sleeping rough do not comply). They could do this alone or collectively. They could then choose how they would deal with deductions personally. If they wished they could include the amount received as assessable income and claim a daily amount for their reasonable expenses based on the annual TD. This waives many of the substantiation and record keeping issues and in many cases allows a deduction greater than the allowance received.
One of the key issues with the non-remote and housing FBT issues is that it needs to be the occupants usual place of residence. Not transitory. That ties in with FI-FO workers etc. So if there is a project that requires a crew in broken hill for 21 days that is not a FBT concern. Charge them to stay there ? See what Fair Work or Union may say .....Likely a concern. Deducting money from a employee to provide housing would require tax advice. It may seriously affect outcomes
might be worth considering a LAFHA rather than a remote area housing benefit. Rules for LAFHA are a lot more complex now. If the employee does not work on a fly in fly out or drive in drive out basis and is not eligible for the transitional rules 1. the employee must maintain a home in Australia ; 2. the home must be for their immediate use and enjoyment while receiving the LAFHA 3. the concessional valuation rules for certain LAFH-based fringe benefits will be limited to the first 12 months that the employee is actually LAFH at the one location 4. have to provide a declaration if fly in fly out then 1. the employee must have residential accommodation at or near their usual place of employment; 2. the employee must give you a declaration about living away from home substantiation rules also more complex. Under the new rules, an employer is only entitled to reduce the taxable value of the accommodation component of a LAFHA for the ‘substantiated’ accommodation costs incurred by the employee. It is important to note that employers are not entitled to reduce the taxable value of the accommodation component of a LAFHA unless the employee has provided substantiation, which identifies the entire expense incurred by the employee. a LAFHA will need to be included in salary and wages for workers comp in VIC, NSW, SA, WA, ACT and NT. If you are in QLD or TAS then all good a LAFHA is not included in the workers compensation wages. reducing the taxable value to nil would mean no FBT payable by employer. the LAFHA wont appear as taxable income or a taxable allowance on the PAYG summary. it would be a reportable fringe benefit
Thanks for your replies. Sounds rather tricky, perhaps someone looking at this maybe better servered talking to locals businesses/accountants to determine what is normal in their area. If heaps of companies the area are doing it then its normal practice
Personal tax advice is always the correct approach. What you think one business is doing may be very different from how their mates describe it at a BBQ. Take care with the "everyone does it"...
