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Travel and accommodation costs – The Commissioner’s opinions

The Commissioner has released 3 documents covering the income tax and FBT issues that arise from travel and accommodation costs.

These three documents are:

TR 2021/D1 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses, travel allowances, and living-away-from-home allowances

TR 2021/1 Income tax: when are deductions allowed for employees’ transport expenses?

PCG 2021/D1 Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location – ATO compliance approach

Over a series of blogs I am going to cover all the issues raised in them so sit back and enjoy the travel (so you get the joke… travel… travel deductions… yes it is a Dad joke.

Issue 1 – Am I traveling or am I Living Away From Home?

In Draft Practical Compliance Guideline PCG 2021/D1 the Commissioner provides guidance to help us determine if allowances or benefits provided to an employee relate to “travelling on work” or “living at a location”. Why is this important?

Expenses for living at a location, or while an employee is living away from home, are usually not deductible. However, expenses incurred on accommodation and food and drink are usually deductible, or otherwise deductible, where an employee is travelling on work.

So if the employer pays for accommodation costs, if the employee is traveling on work there is no FBT, but if they are living at a location FBT may apply (subject to the LAFH concessions). If the employee pays for costs while travelling on work, they may get a deduction but they don’t if they are living at the location.

In this Practical Compliance Guideline the Commissioner states you can treat an employee as traveling for work if the employee:

  • is away from their normal residence for work purposes
  • does not work on a fly-in fly-out or drive-in drive-out basis
  • is away for a short-term period being no more than 21 days at a time continuously, and an overall aggregate period of fewer than 90 days (that is, the most being 89 days) in the same work location in an FBT year
  • must return to their normal residence when their period away ends.

So the old rule of thumb of 21 days or less is traveling is now in a draft Practice Statement, with a few other conditions around it (like the 89 days in an FBT year rule).

I should say this Practice Statement only applies if the employer does not provide the reimbursement or payment as part of a salary-packaging arrangement and the employee is not given the option to elect to receive additional remuneration in lieu. Also, subject to the Commissioner’s rules on travel allowances, the travel allowance may have to be shown on the employee’s payment summary and PAYGW may apply.

Here is an example the Commissioner gives…

Louise works in Brisbane and is employed by engineering company Employer Co.

Employer Co gives Louise a three-month assignment in a remote work location in Western Australia to perform duties for Employer Co. As part of the agreement, Louise works during the three-month assignment for:

  • three weeks in Western Australia, returning to Brisbane for two weeks to perform duties in the Brisbane office
  • another three weeks in Western Australia in the same work location, returning to Brisbane to again perform duties in the Brisbane office, this time for a week, and
  • another three weeks in Western Australia in the same work location.

In effect, during the three-month assignment, Louise works in the same work location in Western Australia for nine weeks and is home for three weeks in between. She is away for no more than 21 days at a time continuously and is away for a period of fewer than 90 days in the same work location in total. Louise does not return to work again in the same work location in Western Australia at the end of the three-month assignment.

Employer Co pays Louise’s accommodation and food and drink expenses while she is in Western Australia. The accommodation and food and drink expense amounts are not provided to Louise as part of a salary packaging arrangement. Louise cannot claim the accommodation and food and drink expenses as a deduction in her tax return as they have been paid for by Employer Co.

Employer Co is able to rely on this Guideline as the requirements in paragraph 10 of this Guideline are met. The Commissioner would accept that Louise is travelling on work. Employer Co is not liable for FBT on the accommodation and food and drink expense payment benefits it provides as the otherwise deductible rule applies. 

One down two more documents on travel deductions and FBT to go…

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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