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Significant development for FBT on Remote area housing benefits

09 October 2019

Judy White , Associate Director, Tax |

Does your organisation rely on the Fringe Benefits Tax (FBT) concessions for the provision of housing to employees in remote areas?

It’s been nearly twenty years since any significant developments in this area, but changes are currently being contemplated.

So what is new? 

The Productivity Commission has released a draft report on Remote Area Tax Concessions and Payments.  The key recommendations affecting the FBT remote area concessions are:

  1. Employer-provided housing (100% to 50%) – reduction from a 100% exemption to 50%
  2. Employer-provided housing (certain employers extension removal) – removal of the extension of the exemption to additional areas for certain regional employers (eg for police, public hospital workers, private not-for-profit hospital workers, ambulance officers)
  3. Employer-provided housing (removal of customary condition) – removal of the provision that enables employers to claim the concession because it is ‘customary’ to provide housing
  4. Employee-sourced housing (removal) – removal of the current 50% concession
  5. Residential fuel (employer-provided housing) – limit access to the concession to instances where there is an operational requirement to provide the fuel
  6. Holiday transport (removal) – removal of the current 50% concession
  7. Meaning of remote (fewer areas) – potential changes to the meaning of ‘remote’, which has the potential to reduce the number of areas eligible for the FBT remote area concessions.

Note that these are only recommendations by the Productivity Commission to the Government. The Government has not yet announced any proposed changes.

What does this mean for you? – A few comments:

  • Potential removal of employer-provided housing concession: Where the proposed changes are made (including the customary condition per point 3 above), this will result in the removal of the employer-provided housing FBT exemption in that area completely
  • No housing concession then no residential fuel concession: It also follows that where the employer is no longer eligible for the remote area housing exemption, the employer will also be ineligible for the Residential Fuel 50% concession, since it requires a remote area housing benefit to exist
  • Employer and Employee impacts: We note that the proposed changes may impact employers in relation to FBT liabilities, and possibly also employees in relation to reportable fringe benefits tax implications (depending on whether the current reporting exclusions are extended to any changes made).  Employees may also be impacted, as employers may no longer provide such benefits due to increased costs (FBT cost and cost of administering FBT compliance).

If you disagree with the following or have any comments you’d like to raise, please don’t hesitate to get in touch with your local BDO adviser

Please note that BDO is currently working on a submission to be lodged 11 October, and the final report is due to be completed in February 2020. We will keep you informed of its recommendations.

Reference:  Australian Government Productivity Commission – Draft Report August 2019 – Remote Area Tax Concessions and Payments.