Did you know that employees can salary package FIFO costs?

The recent John Holland v ATO case surrounding the deductibility to Fly-In-Fly-Out costs has put the whole FIFO sector back in the headlines. With the ruling overturned, it’s highlighted how companies can benefit when applying the Fringe Benefit Tax (FBT) rules properly and in a compliant way.

While this decision, and subsequent successful High Court appeal, does not affect the majority of FIFO arrangements, this case has highlighted a number of rules that need to be adhered to when providing these benefits to your employees.

The place of work must be designated as Remote as per s140. Interestingly, this was a major argument in the ATO’s case against John Holland, that Geraldton WA is an Eligible Urban Area and as such is Non-Remote
The employee’s work roster must be variable or rotating. Not simply fly-in Monday and fly-out on Friday.
A full list of remote and non-remote towns appears on the ATO website.

Do you know that your employees can salary package FIFO costs?

A common question posed by employers is to how best to meet the costs for employees living outside the FIFO base/point of embarkation.

For example:

Dave works for ABC Mining Pty Ltd in Newman, WA. He works a variable six weeks on, two weeks off roster. His employer meets the cost of travel from Perth to Newman as per industry custom. While his FIFO base is Perth, Dave and his family live in Adelaide. As such, Dave must make his own way from Adelaide to Perth to meet the obligations of his contract.

Note: Travel expenses do not include public transport costs, taxi fares or cents per km charge for travel to the airport from usual place of residence if located in or around the FIFO point of embarkation.

Q: Are the travel costs for Dave’s Adelaide-Perth-Adelaide trips exempt from FBT?

A: Yes. If done the right way!

Section 47(7) FBTAA (1986)

Employees designated as FIFO workers under their employment contract who live outside the FIFO base can also salary package their travel costs as an FBT exempt item as stated in s47(7)

having regard to the location of that usual place of employment and the location of the employee’s usual place of residence, it would be unreasonable to expect the employee to travel between those places on work days on a daily basis, the residual benefit constituted by the provision of the transport referred to is an exempt benefit.
Note: Travel expenses do not include public transport costs, taxi fares or cents per km charge for travel to the airport from usual place of residence if located in or around the FIFO point of embarkation.

The process

For an employee’s travel costs to be FBT exempt as a Residual Fringe Benefit, the following process must be followed:

The employer, ABC Mining Pty Ltd., must book the flights on behalf of the employee
The employee cannot purchase the tickets off the Internet and pay on their personal credit card
The employer then passes on the cost to the employee
The employee can salary package this cost from their pre-tax income as an FBT exempt item.
Strategic advice

Process and record-keeping that ensures full compliance with the legislation are critical to the continued use of these tax exemptions.

Trinitas Salary Packaging & Advisory team can review all your existing arrangements and offer practical strategic advice on how to establish an efficient, workable, tax effective and compliant benefit regime for your Company and your employees.

Please contact me if you’d like any further information.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the Trinitas to discuss these matters in the context of your particular circumstances. Trinitas their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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