A commonly encountered travel scenario is where an employee is required to work concurrently in more than one work location. For example, an employee who ordinarily resides in Melbourne is required to work from his employer’s Melbourne office from Monday to Wednesday and then from the Sydney office for the remainder of the week. Traditionally, these arrangements have been ineffective from an income tax and Fringe benefits tax (FBT) perspective. However, according to ATO updated guidance (TR 2017/D6) issued in June 2017, this type of travel is referred to as “co-existing work locations travel”, which provides a significant FBT win for employees.

ATO’s NEW approach under updated guidance

The new approach in the ATO updated guidance now accepts that travel to ‘co-existing work locations’ will be deductible where “it is reasonable to conclude that the travel is undertaken in performing the employee’s work activities because of the requirement to work in more than one location.” The requirements to deduct transport costs, accommodation and meals that generally must be satisfied are listed as follows.

Requirements to deduct transport costs:

  1. The work activities must require the travel to be undertaken. The ATO will generally accept that the travel is part of an employee’s work if the employee is required to work concurrently in more than one work location and the distance between the work locations means that the employee is reasonably required to stay overnight near the ‘alternative’ location.
  2. The employee must be paid to undertake the travel.
  • The employee must be subject to the direction and control of their employer (i.e., the employer’s orders or directions) for the period of the travel, whether or not those orders or directions are actually exercised.

Requirements to deduct accommodation and meals:

  1. The work activities must require the travel to be undertaken. The ATO will generally accept that the travel is part of an employee’s work if the employee is required to work concurrently in more than one work location and the distance between the work locations means that the employee is reasonably required to stay overnight near the ‘alternative’ location.
  2. The work must require the employee to sleep away from home overnight.
  • The employee must have a permanent home near their regular place of employment (being residential accommodation where the employee ordinarily lives when not absent for work).
  1. The employee must not be considered to be Living Away From Home (LAFH), or to have relocated to the ‘alternative’ work location.

 

Example for employee working concurrently between two offices

John works for one employer who has two offices, one in the country close to John’s home where he lives with his family and the other in the city approximately 200 KMs away. He is required to work in the country office on Monday, Tuesday and Wednesday, and in the city office on Thursday and Friday. John travels to the city office directly from home on Thursday mornings, using his own car, and his employer pays for the fuel for each trip using a company card. Regarding the accommodation, John stays in a hotel (paid by the employer) on Thursday nights when he works in the city office to avoid having to travel 200 kilometres back home after work. The employer also reimburses him for the cost of his evening meal on Thursday night. John’s salary package recognises all aspects of his position, including the requirement for him to travel regularly between his home and the city office. In details, he is subject to the direction and control of his employer for the periods of the travel (i.e., John will monitor and respond to any work calls or texts during breaks in the journey).

Based on the traditional rules, none of the transport or accommodation costs associated with this arrangement would be deductible. In contrast, according to the ATO updated guidance, John’s travel arrangement constitutes ‘co-existing work place travel’. As such, the transport, accommodation and meal costs are treated as follows:

  • Transport – All relevant requirements are satisfied in relation to the transport costs (i.e., the ‘co-existing work place travel’ is taken to be part of John’s work, John is under the direction and control of his employer whilst travelling and he is paid to undertake the travel). Therefore, John’s travel between home and the city office is considered to be business kilometres for the purpose of applying the ‘otherwise deductible’ rule.
  • Accommodation and meals – All relevant requirements are satisfied in relation to the accommodation and meal costs. Therefore, the accommodation and meal costs are ‘otherwise deductible’ and no FBT liability arises in respect of the employer’s payment of these costs. Specifically, the ‘co-existing work place travel’ is part of John’s work, John is required to sleep away from his usual residence, and he is not considered to be LAFH.

 

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