ATO Interpretative Decision
ATO ID 2003/458
Fringe Benefits Tax
Fringe benefits tax - employee benefits obtained through fraudulent activityFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does a benefit obtained through fraudulent activity by an employee, give rise to a fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
No. Providing the employer does not condone the actions of the employee, the obtaining of a benefit through fraudulent activity does not give rise to a fringe benefit.
Facts
An employee uses employer funds for the payment of their private expenses without the knowledge of the employer.
The action of the employee in obtaining these benefits is later proven to be a criminal offence by a Court of Law.
The unauthorised use of the employer's funds by the employee is not condoned by the employer.
Reasons for Decision
'Fringe Benefit' is relevantly defined at subsection 136(1) of the FBTAA as 'a benefit provided to the employee ... by the employer'. In relation to a benefit, 'provide' is relevantly defined to include something, which is 'allowed, conferred, given, granted or performed.'
The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, defines these terms in the following manner:
- Allow - 'permit (a practice, a person to do something, a thing to happen etc)'
- Confer - 'grant or bestow'
- Give - 'transfer the possession freely'
- Grant - (see Confer)
- Perform - 'carry into effect'
What is common to the definition of each of these terms is that a decision is consciously made by a person to do something for or to another person.
Where no decision is consciously made by a person to allow, confer, give, grant or perform something for or to another person, for the purposes of the FBTAA, a benefit is not 'provided' by an employer.
Thus where a benefit is obtained from an employer through fraudulent activity by an employee, in the absence of a conscious decision by the employer to provide the benefit, the benefit obtained will not be a 'fringe benefit' for the purposes of subsection 136(1) of the FBTAA.
Conversely, where an employer condones an employee obtaining a benefit through fraudulent activity, the condoning of the activity will be regarded as a conscious decision by the employer to provide the benefit.
Date of decision: 12 May 2003Year of income: Year ended 31 March 2004
Legislative References:
Fringe Benefits Tax Assessment Act 1986
subsection 136(1)
Other References:
NTLG Subcommittee Minutes December 1994
Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne
Keywords
Fringe benefits
Fringe benefits tax
Losses from fraud, theft & embezzlement
Date reviewed: 14 April 2015
ISSN: 1445-2782
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