The Australian Taxation Office (“ATO”) makes it more difficult for Australians working overseas

In a recent Tax Determination, TD 2011/1 the ATO has made it clear that the Fringe Benefits Tax (“FBT”) Act will not apply to non-resident employers who employ Australian residents.

An example is where an Australian resident employee of a multi-national group is seconded to work overseas for the group’s non-resident global parent company.  Where the employee is employed and paid by the non-resident parent company, the parent company will have no PAYG withholding or FBT obligations in respect of any benefits provided to the Australian resident.  Whilst in the first instance this appears to be giving the employer a tax break the ATO does clearly state that the value of any benefits received whilst overseas has to be included in the employee’s assessable income.

For example where the employee receives free accommodation whilst overseas the value of that benefit is included in assessable income.  On the other hand if the employee was employed by an Australian resident company it would have been subject to the FBT Act. However, under that FBT Act, accommodation provided whilst living away from home is exempt from FBT, and, the value of accommodation does not have to be included in the employee’s assessable income.

The Tax Determination TD 2011/1 does not give any practical guidance of how an employee should value such benefits and unlike the FBT Act does not provide any exemption for employees that have to live away from their usual home

This Tax Determination will make it less attractive for Australian residents to work for non-resident companies overseas.  It will also substantially increase a person tax compliance burden, especially where an employee has to calculate the “value” of “benefits” they receive.