Legislative reference: section 58PExternal Link of the FBTAA.
Minor benefits are exempt benefits. A minor benefit is a benefit which is both:
- less than $300 in value (before 1 April 2007 the amount was less than $100), and
- unreasonable to treat as a fringe benefit.
Less than $300 in value
A minor benefit is a benefit which has a ‘notional taxable value’ of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit.
Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night’s accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.
When determining if the notional taxable value of the benefit is less than $300, benefits provided to associates are not included.
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Special rules that apply to car benefits
There are different rules for car benefits. The notional taxable value of a car benefit is determined by applying the residual fringe benefit rules – that is, to determine whether a car benefit is less than $300, you may either:
- apportion the operating costs of the vehicle, or
- apply the cents-per-kilometre method.
If the notional taxable value of a benefit is less than $300, you then need to determine if it would be unreasonable to treat the benefit as a fringe benefit.
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Criteria for determining whether it would be unreasonable to treat the minor benefit as a fringe benefit
The following five criteria need to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit:
The infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit and benefits given in connection with the minor benefit, are provided. The more frequently and regularly associated benefits are provided, the less likely that the minor benefit will qualify as an exempt benefit.
The total of the notional taxable values of the minor benefit and identical or similar benefits to the minor benefit. The greater the total value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit.
The likely total of the notional taxable values of other associated benefits – that is, those provided in connection with the minor benefit. For example, where a meal, which 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. The greater the total value of other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit will qualify as an exempt benefit.
The practical difficulty in determining what would be the notional taxable value of the minor benefit and any associated benefits. This would include consideration of the difficulty for you in keeping the necessary records in relation to the benefits.
The circumstances in which the minor benefit and any associated benefits were provided. This would include consideration as to whether the benefit was provided as a result of an unexpected event, and whether or not it could be considered principally as being in the nature of remuneration.
If, after considering the five criteria, you conclude that it would be unreasonable to treat the benefit as a fringe benefit, the benefit will be an exempt benefit.
In determining if the minor benefit exemption applies, you need to examine the nature of the benefit provided and consider each of the various criteria – value, frequency and regularity of provision, and recording and valuation difficulties – before concluding whether the exemption should apply to a minor benefit.
When the minor benefits exemption doesn't apply
The exemption doesn't extend to airline transport fringe benefits or other in-house fringe benefits, the taxable values of which are, in any case, reducible by $1,000 under the concession explained in the respective chapters for these types of fringe benefits.
The exemption also does not apply to minor entertainment benefits provided to employees of income tax-exempt organisations, unless they are incidental to the provision of entertainment to persons who are neither employees of the employer nor associates of employees. However, even in those circumstances, the exemption doesn't apply to meals or benefits provided in connection with meals.
This later exclusion doesn't prevent minor entertainment benefits provided by a tax-exempt organisation to recognise a special achievement of an employee from being exempt as long as they are provided on the employer's premises or a place where the employee performs their employment-related duties. For example, a meal given to the family of a professional footballer in the club's dining room to mark a milestone such as selection in a representative team, or being awarded best and fairest player, may be exempt under this rule.
The exemption doesn't apply to meal entertainment where you elect to use the meal entertainment provisions and calculate the taxable value under the 50:50 split method. If you elect to use this valuation rule, all of your expenditure on meal entertainment must be included when calculating your total meal entertainment expenditure for the FBT year.
Similarly, where you elect to use the 50:50 split method for valuing entertainment facility leasing expenses, the minor benefits exemption doesn't apply.
Where you elect to use the 12-week register method for valuing meal entertainment, the minor benefits exemption can apply.
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The minor benefits exemption will not apply to benefits that are provided under an effective salary sacrifice arrangement. Benefits provided under a salary sacrifice arrangement are provided principally as part of a remuneration package. When all of the criteria are considered, and in particular the circumstances in which benefits are provided under a salary sacrifice arrangement, it would be reasonable to conclude that all such benefits are not exempt minor benefits.
It is common practice for employers to give employees gifts on special occasions, such as at Christmas time. A single gift to each employee of, say, a bottle of whisky or perfume would be an exempt benefit, where the value was less than $300. If the gift is provided at a Christmas party, the gift needs to be considered separately to the Christmas party when considering the minor benefits threshold.
Flowers given to employees on special occasions would be given on an irregular and infrequent basis – this could include flowers given to an employee on the birth of a child, for a birthday, or as a get well gift. These would be an exempt benefit where each individual benefit had a notional taxable value of less than $300 because, looking at the five factors, it would be unreasonable to treat the benefit as a fringe benefit.
By contrast, flowers given to an employee each fortnight would be given on a frequent and regular basis and would not be an exempt benefit, even where the value of each individual benefit is less than $300.
The occasional use of one of your vehicles by an employee for a special purpose, such as rubbish removal or for travel from home to work during a transport strike, would be an exempt benefit provided the employee in question doesn't have a general entitlement to use the vehicle for private purposes.
Subject to the above criteria being satisfied, the following are further examples of benefits that are likely to be exempt under the minor benefits rules:
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- a welcome gift provided to a new employee – for example, a food hamper
- meals provided on an ad hoc basis to an employee three times in the year, where on each occasion the value is $75
- tolls provided to an employee through an e-tag facility 20 times during the year, where each benefit has a value of $7
- a short-term advance to help an employee pay unexpected debts
- the recovery of overpaid salary by instalment arrangements
- permitting staff to have waste or leftover materials of a business, such as packing cases or fabric remnants.