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Employer Alert: Remote area housing – Final report on changes to the FBT concessions (but there is good news!)

28 February 2020

Judy White , Associate Director, Tax |

The Productivity Commission issued a final report on 26 February 2020, maintaining the proposed changes to remote area housing benefits concessions contained in the draft report. The Productivity Commission released the draft report on Remote Area Tax Concessions and Payments in August/September 2019.

This is an Employer Alert for employers who provide housing to employees in remote area locations. The Productivity Commission issued a final report on 26 February 2020, which maintains the proposed changes to Remote area housing benefits concessions contained in the draft report. The Productivity Commission released the draft report on Remote Area Tax Concessions and Payments in August/September 2019. The key recommendations are outlined in our previous article, Significant development for FBT on Remote area housing benefits which can be found here

So, what's the good news for employers?

The good news for employers providing housing benefits to employees is that the Government will not be acting on the Productivity Commission’s recommendations.

The Minister for Housing and Assistant Treasurer, The Hon Michael Sukkar MP, issued a media release on 26 February 2020 stating:

'Were they to be implemented, the Productivity Commission’s recommendations would result in significant disruption to existing arrangements. This was confirmed by the volume of submissions which the Productivity Commission received in response to its draft report, the overwhelming majority of which were not supportive of the proposed changes.

Given the challenges faced by regional Australia, including as a result of the impacts of the recent drought, bushfires and now Coronavirus, the Government will not be acting on the Productivity Commission’s recommendations.'

The media release can be found here.

What does the final report from the Productivity Commission say?

The final report from the Productivity Commission retains these recommendations despite submissions that raised significant concerns on the impact of these proposed changes on employers and employees. These submissions, including the BDO submission as a post-draft submission, can be found here.

In addition to the previously announced recommendations in the draft report, this final report also provides:

1. Employer-provided housing: In terms of valuing such benefits for calculating the 50 per cent concession (previously 100% exemption), the Productivity Commission acknowledges the difficulty in determining the value of housing in such regions. Therefore, it recommends that the Australian Government develop simplified valuation methodologies in consultation with stakeholders, with the view to limit compliance burdens. It further recommends that the Australian Taxation Office collect data on the use of the employer-provided housing concession (however we note that this may be limited since this is an exemption and therefore no data provided in Fringe Benefits Tax returns of its use).

2. Boundaries for the concession: The final report provides for changes in the basis for determining boundaries, such that the boundaries be updated to reflect populations as of the 2016 census (instead of the 1981 census), and for contemporary road infrastructure (instead of road distances in 1986). It is also suggested in the final report that subsequent updates should be preceded by a ‘two strikes’ system, by which eligibility is only adjusted after confirmation in two consecutive censuses.

3. Delayed start date for changes: The Productivity Commission recommends that the Australian Government introduce legislative changes with a delayed start date and suggests two years from when they are legislated. It is suggested in the final report that this would provide time for employers to adjust and restructure their business affairs.

What to do from here?

As noted above, the Government will not be acting on the Productivity Commission’s recommendations. However, given the extensive analysis and conclusions in the Productivity Commission reports, we recommend that affected employers continue to monitor this area for any further announcements and developments.

If you have any questions please get in touch with your local BDO adviser.