• Determining whether it is unreasonable to treat the benefit as a fringe benefit

    To determine whether it is unreasonable for the benefit to be treated as a fringe benefit, the employer needs to look at five factors. None of the factors on their own will determine if the benefit is an exempt benefit - all factors need to be looked at.

    Factors to consider

    Explanation

    How often benefits identical or similar to the minor benefit (or benefits given in connection with the minor benefit) are provided.

    The more frequently and regularly associated benefits are provided, the less likely it is that the benefit will qualify as an exempt benefit.

    The sum of the values of the minor benefit and other identical or similar benefits to the minor benefit.

    The greater the total of the benefit and other identical or similar benefits, the less likely it is that the benefit will be an exempt benefit.

    The likely total of the values of other associated benefits, that is, those provided in conjunction with the minor benefit.

    The greater the total of other associated benefits, the less likely it is that the minor benefit will qualify as an exempt benefit.

    The practical difficulty for the employer in determining what would be the taxable value of the minor benefit and any associated benefits if they were treated as fringe benefits. This includes how difficult it is for the employer to keep the necessary records in relation to the benefit.

    The more difficult it is for the employer to determine the value, the more likely it is that the benefit will be an exempt benefit.

    The more difficult it is for the employer to keep the necessary records in relation to the benefit, the more likely it is that the benefit will be an exempt benefit.

    The circumstances in which the benefit and any associated benefits were provided. This would include consideration of the purpose of an occasion for which the benefit was given.

    If the benefit was provided as a result of an unexpected event, such as overtime, it is more likely to be an exempt benefit.

    If the benefit is mainly given to the employee as a reward for services (that is, it is remuneration), it is less likely to be an exempt benefit.

    Further Information

    For an explanation of how the minor benefits exemption operates, see Taxation Ruling TR 2007/12.

    End of further information
      Last modified: 17 Jul 2012QC 21998