Australia: Fly in fly out arranged extended to remote overseas locations

Last Updated: 13 April 2011
Article by Michael van Schaik

Under the operation of the former section 23AG, fly in fly out benefits to remote locations overseas were exempt from FBT because no FBT liability arose in relation to benefits provided to employees whose salary or wages were fully exempt from income tax. Removing the section 23AG exemption for affected individuals has brought these individuals within the FBT regime effective 1 July 2009.

In his Press Release of 18 November 2010, the Assistant Treasurer, the Honourable Bill Shorten said "The operation of the current FBT exemption for fly-in/fly-out arrangements, which apply for work in Australia, will be extended and applied to Australian workers in similar situations overseas."

Treasury issued draft legislation Tax Laws Amendment (2011Measures No.2)Bill: FBT exemption for fly-in fly-out and sought comment. (Fly In Fly Out Submission) We believe that our submission highlights a number of inconsistencies and as a result, Australian residents earning employment income (whether within Australia or overseas) continue to be treated unequally.

The term "remote overseas location" is not defined in the draft legislation. Rather the draft explanatory memorandum states that whether a location overseas is remote will need to be considered on a case-by-case basis, having regard to the location of the work place and a number of related factors.

The status of the employer may have an important bearing on the FBT exposure. It needs to be reviewed in light of TD 2011/1 which deals with PAYG withholding obligations and FBT associated with non resident employers. (Beyond Numbers 2/03/2011)

As per TD 2011/1, fringe benefits received in situations where there is no obligation to withhold from payments made to an employee may be Australian assessable income in the hands of that employee. The employee would be denied a tax deduction based on the Australian Taxation Office's view contained Taxation Ruling IT 112 that travel between home and a person's regular place of employment or business is ordinarily private travel.


Paragraph 1.32 of the draft explanatory memorandum lists a number of factors to be utilised in determining whether a location can be considered 'remote', the following factors should be considered:

  • the distance and time it takes to travel from the worksite to the nearest urban area;
  • the population of the nearest urban area;
  • accessibility of the overseas site;
  • safety and the crime rate, adequacy of local law enforcement, or health risks in the surrounding areas to the worksite (and whether the nearest urban area is reasonably safe if adequate precautions are taken, the ability to take safety precautions);
  • location of the worksite relative to the arrival destination in the foreign country (for example, an international airport);
  • the quality of the roads between the nearest urban area and the worksite; and
  • amenities and facilities available in surrounding areas (in close proximity to the worksite), such as (but not limited to):
    • public transport;
    • availability of accommodation/housing;
    • a library, public park or other recreational facilities;
    • places for buying a variety of foods;
    • suitable schooling;
    • a reliable electricity supply and access to clean drinking water/running water and a sewage system; and
    • availability of access to the internet, mobile phone reception and access to facilities such as banks and medical supplies and facilities.

The determination of whether a location is "remote" needs to be made on a case by case basis.

The problematic nature of self-assessing a remote location is clearly highlighted in the typical scenario where an employer engages employees to provide support services to Australian Defence Force (ADF) personnel at a foreign location.  Under this arrangement, the employer will need to consider the following:

  • If the employees have been posted to locations such as Afghanistan (i.e. Kabul) or Sudan (i.e. Khartoum), would these locations be considered to be remote overseas locations given the level of danger present? The Department of Foreign Affairs and Trade advises against all travel to these locations, yet employers contracted to the ADF will have staff present in these locations.
  • The income tax and FBT implications in relation to the employees if these locations are not considered to be remote overseas locations, as they are not entitled to the same relief as ADF personnel under section 23AG and FBT regime

The stated objective of Tax Laws Amendment (2009 Budget Measures No.1) Act 2009 and Tax Laws Amendment (2011 Measures No.2) Bill: FBT exemption for fly-in fly-out is to improve the fairness and integrity of Australia's tax system by better targeting the tax exemption for income earned by Australians overseas.

TD 2011/1 makes a clear distinction between the tax treatments afforded to fringe benefits where the non resident employer has a sufficient connection with Australia as compared to a non resident employer with no connection to Australia.

  • Provided the non resident employer who has a sufficient connection to Australia  is satisfied that the location can be viewed as remote, the provision of transport to and from the worksite from an employee's usual place of residence in Australia, provided by the employer, would be exempt from FBT.
  • Where the employer has no connection with Australia, the employee would be required to include the value of transport to and from the worksite as assessable. The employee would be denied a tax deduction because travel between home and a person's regular place of employment or business is ordinarily private travel. While travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income.

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2009 Moore Stephens Australia Pty Limited. All rights reserved.

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