A minor benefit is exempt from FBT where it is both:
- less than $300 in notional taxable value (that is, the value if it was taxable), and
- unreasonable for it to be treated as a fringe benefit.
The notional taxable value is the value of the benefit if it was taxable. The notional taxable value must be less than $300 for the minor benefit exemption to apply.
When you provide an employee with separate benefits that are connected with each other (such as a meal, a night’s accommodation and taxi travel), the $300 threshold applies separately to each benefit.
When determining if the notional taxable value of a benefit is less than $300, benefits provided to associates are not included.
The notional taxable value of a car benefit is determined by either:
- apportioning the operating costs of the vehicle
- applying the cents-per-kilometre method.
A benefit with a notional taxable value of less than $300 is exempt if it would be unreasonable to treat the benefit as a fringe benefit.
To determine this, you need to look at the nature of the benefit and consider the following criteria:
- The frequency and regularity of the minor benefit – the more frequently and regularly the benefit is provided, the less likely it will qualify as an exempt benefit.
- The total of the notional taxable values of the minor benefit and identical or similar benefits – the greater the total value of minor benefits, the less likely they are to qualify as exempt benefits.
- The likely total of the notional taxable values of other associated benefits – that is, those provided in connection with the minor benefit.
- For example, when a meal that is a minor benefit is provided in connection with a night’s accommodation and taxi travel, which themselves may or may not be a minor benefit, the total of their taxable values must be considered in determining if it is unreasonable to treat the benefit as a fringe benefit. The greater the total value of other associated benefits, the less likely it is that the minor benefit will qualify as an exempt benefit.
- The practical difficulty in determining the notional taxable value of the minor benefit – this includes consideration of the difficulty for you in keeping the necessary records for the benefit.
- The circumstances in which the minor benefit and any associated benefits were provided – this includes considering whether the benefit was provided as a result of an unexpected event or whether it could be considered principally as remuneration.
Example: unreasonable to treat small gift as a fringe benefit
Kate sends chocolates and flowers to Jane, an employee, on the birth of her daughter. The chocolates and flowers have a taxable value of $105.
This is an exempt minor benefit because the chocolates have a taxable value of less than $300 and, looking at the criteria above, it would be unreasonable to treat the chocolates and flowers as a fringe benefit.End of example
Example: minor benefit not exempt as it is provided frequently and regularly
Every Friday, Angela takes her 2 employees to a local hotel for lunch. The lunch for each employee usually consists of a main course and a couple of drinks, and costs on average $45.
This is not an exempt minor benefit. Even though the value of the Friday lunch is only $45, the lunch is provided regularly and the total value of the similar benefits (the weekly lunches) is high. Therefore it is reasonable to treat the lunches as a fringe benefit.End of example
Generally, the minor benefits exemption doesn't extend to such benefits as:
- in-house fringe benefits (see FBT guide: 19.5 Other reductions)
- tax-exempt body entertainment fringe benefits, unless the minor benefit is either:
- incidental to entertainment for outsiders and does not include a meal other than light refreshments
- a function on work premises to recognise one or more staff members for something to do with their work, and the minor benefit is provided to the staff members being recognised (see Entertainment exemptions and reductions for not-for-profit and government organisations)
- meal entertainment where you elect to use the meal entertainment provisions and calculate the taxable value under the 50:50 split method (see Calculating the taxable value of entertainment-related benefits)
- benefits provided under a salary sacrifice arrangement.
For more information and detailed examples of minor benefits, see:
- Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits
- FBT guide: 20.8 Other exemptions – Minor benefits