Edited version of your private ruling

Authorisation Number: 1012135453059

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Subject: exempt minor benefit

Question 1

Are store vouchers offered as a reward for employees who participate in fitness tests by-yearly, an exempt minor benefit pursuant to section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

FBT year ended 31 March 2008

FBT year ended 31 March 2009

FBT year ended 31 March 2010

FBT year ended 31 March 2011

The scheme commences on:

1 April 2007

Relevant facts and circumstances

Your employees are offered store vouchers (voucher), which are redeemable at sporting goods stores, for participating in fitness tests by-yearly.

The face value of the vouchers is less than $300 each.

The entitlement to a voucher differs between administrative employees and operational employees:

For the administrative employees, their entitlement to a voucher is part of an Enterprise Bargaining Agreement (EBA) and is conditional upon the employee participating in the non-compulsory fitness test at least once every 2 years.

For the operational employees, their entitlement to a voucher is conditional upon the employee participating in the non-compulsory fitness test at least once every 2 years, but their entitlement does not arise under an EBA.

The fitness tests involve testing the employee's blood pressure before and after exercise, blood tests, etc to determine the level of fitness of the employee.

Your employees are entitled to only one voucher per year.

The reason the voucher is a sporting goods store voucher is to encourage employees to enhance their health and fitness.

No other identical or similar benefits are provided by you.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 58P

Fringe Benefits Tax Assessment Act 1986 Paragraph 58P(1)(f)

Fringe Benefits Tax Assessment Act 1986 Paragraph 58P(1)(v)

Fringe Benefits Tax Assessment Act 1986 Subsection 58P(2)

Fringe Benefits Tax Assessment Act 1986 Section 132

Reasons for decision

Section 58P of the Fringe Benefit tax Assessment Act 1986 (FBTAA) exempts certain benefits from Fringe Benefit Tax (FBT) that can be characterised as minor. Minor benefits are benefits that are less than $300 in value, and which are provided infrequently and/or are difficult to record and value.

Apart from the requirement that the value is less than $300, it is necessary to consider the requirements according to paragraph 58P(1)(f) of the FBTAA to determine whether it would be unreasonable to treat the benefit as a fringe benefit. The requirements in this paragraph also consider the provisions of associated benefits. Associated benefits are defined in Subsection 58P(2) to include benefits which are identical or similar to the minor benefit or a benefit that is provided in connection with the minor benefit.

Associated benefits are defined in subsection 58P(2) of the FBTAA as:

For the purposes of this section, a benefit is an associated benefit in relation to a minor benefit if, and only if:

(a) any of the following subparagraphs applies:

(i) the benefit is identical or similar to the minor benefit;

(ii) the benefit is provided in connection with the provision of the minor benefit;

(iii) the benefit is identical or similar to a benefit provided in connection with the provision of the minor benefit;

(b) the benefit and the minor benefit both relate to the same employment of a particular employee; and

(c) the benefit is not an exempt benefit by virtue of a provision of this Act other than this section.

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits sets out the Commissioner's views on the application of this.

As stated in paragraph 8 of TR 2007/12:

A minor benefit is an exempt benefit under section 58P where:

· the notional taxable value of the minor benefit is less than $300; and

· it would be concluded that it would be unreasonable, having regard to the specified criteria in paragraph 58P(1)(f), to treat the minor benefit as a fringe benefit.

In respect of paragraph 58P(1)(f) of the FBTAA, paragraphs 194 to 198 of TR 2007/12 state:

194. Paragraph 58P(1)(f) contains five specific criteria to which regard must be had in reaching a conclusion.

195. All five criteria must be considered. No single criterion on its own will determine whether it is unreasonable to treat the benefit as a fringe benefit.

196. In considering the scope of the exemption it will be necessary to look to the nature of the benefit provided and give due weight to each of the criteria.

197. The weight given to each criterion will vary depending on the circumstances surrounding the provision of each benefit.

198. The conclusion that must be reached after having considered the five criteria is an objective one. It is a 'reasonable person' test. That is, what would a reasonable person conclude after having regard to all the relevant circumstances surrounding the provision of the minor benefit? The provision does not give the Commissioner discretion.

The five specific criteria are:

· infrequency and irregularity with which associated identical or similar benefits are provided;

· sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar to the minor benefit;

· sum of the notional values of any other associated benefits;

· practical difficulty in determining the notional taxable values of the minor benefit and any associated benefits; and

· circumstances surrounding the provision of the minor benefit and any associated benefits.

Each of the above five criteria is discussed further below.

i) Infrequency and irregularity

The terms 'infrequency' and 'irregularity' are not defined and therefore take their ordinary meanings.

The Macquarie Dictionary defines 'infrequent' as:

1. happening or occurring at long intervals or not often.

2. not constant, habitual or regular: infrequent visits and "irregular" as not characterised by any fixed principle, method or rate: irregular intervals.

Also, 'irregular' is defined as:

not characterised by any fixed principle, method or rate: irregular intervals.

The more frequently and regularly small benefits of an identical or similar kind are provided, the less likely they are to qualify as minor benefits. If the minor benefits are confined to a few special occasions like Christmas and other special occasions this would be a factor in favour of the unreasonableness test criterion being satisfied.

On the basis of the applicant's submission, the provision of each benefit by way of a store voucher for participating in by-yearly fitness tests, is provided on an irregular basis once a year. As such it is reasonably concluded that each benefit is provided infrequently and on an irregular basis.

This criterion is satisfied.

ii) Value of the minor benefit and identical or similar associated benefits

Under this test we must consider the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of the minor benefit and any associated benefits, being benefits that are identical or similar to the minor benefit.

This criterion addresses the situation where there are multiple occasions where identical or similar benefits are provided to an employee.

In this case the total value of the benefits provided are clearly stated and documented.

Furthermore, this benefit is not provided as an ongoing entitlement in connection with identical or similar associated benefits in the year of tax, nor is provided as a result of a Salary Sacrifice Agreement (SSA) where the application of TR 2007/12 would determine it a taxable benefit.

This criterion is satisfied.

iii) Value of benefits connected with the minor benefit

This test addresses the situation where other benefits are provided in conjunction with or to facilitate the provision of the minor benefit. Also, the notional taxable value of the associated benefits in the current year as well as in any other year must be taken into account when determining the total value of benefits for the purposes of this criterion.

Example

A meal, which is a minor benefit, is provided in connection with a night's accommodation and taxi travel. Each benefit under these circumstances is a separate benefit.

The total of the taxable values of the night's accommodation and taxi travel, and any other accommodation or taxi travel provided in the current year, in a previous year and those that are reasonably expected to be provided in the future must be considered.

In summary, regard must be had to the likely taxable values of the minor benefit and benefits that are provided in connection with the provision of the minor benefit. The smaller the cumulative value of the other associated benefits the more likely that this unreasonableness criterion will be satisfied.

In this case only one type of benefit is provided with specific value and is not connected to values of any other benefits.

This criterion is satisfied.

iv) Practical difficulty

This test considers the practical difficulty for the employer in determining the notional taxable values of the minor benefit (if it is not a car benefit) and any associated benefits.

An employer must keep records that record and explain all transactions and acts that are relevant for the purposes of ascertaining the employer's liability under section 132 of the FBTAA. Regard must be had to the practical difficulty an employer might encounter in determining what would be the taxable value of the minor benefit and any associated benefits. This includes the difficulty of keeping the necessary records and of assigning a mathematical value to something which may not be easily quantifiable. The greater the difficulty that the employer will suffer in monitoring the minor benefits the more likely that this unreasonableness criterion will be satisfied.

In this case the benefits provided are identified, have a specific total value, are properly recorded and can be accounted for. The employer cannot claim that it is practically difficult to determine the value of the benefits. However it is not reasonable to apply this test/criterion alone to exclude the benefit of being an excluded minor benefit.

v) Circumstances in which the benefit is provided

Under this test, we consider the circumstances surrounding the provision of the benefit and any associated benefits including, but without limiting criteria (i) to (iv), whether the benefit concerned was provided:

· to assist the employee to deal with an unexpected event; and

· otherwise than wholly or principally by way of a reward for services rendered, or to be rendered, by the employee (paragraph 58P(1)(v)).

When considering point (a), whether a benefit is provided to assist the employee to deal with an unexpected event will always be a question of fact. Based on the information provided, it is reasonably concluded that the benefit is not provided to assist the employee deal with an unexpected event.

In relation to point (b), where a benefit is not included in a SSA, it may be difficult to determine whether the benefit is a reward for services. TR 2007/12 at paragraph 241 highlights the fact that, although the analysis of this criterion is difficult, this is merely one criterion to be considered when determining whether a benefit is a minor benefit.

The Commissioner's view is that where a SSA is in place, it is clear that any benefits provided under the SSA by the employer to the employee are wholly or principally by way of a reward for services rendered. This is because the benefits have been provided in substitution for salary and wages. On the other hand, some benefits provided to employees and their families may be considered to be a reward for services rendered or to be rendered, for example a Christmas party, but it would not necessarily be considered to have been provided wholly or principally by way of a reward for services rendered or to be rendered by the employee.

Based on the present facts, the vouchers are not provided under a SSA. Although the administrative employee's potential entitlement to the benefit arises from an EBA, participation in the fitness tests is not compulsory, and does not directly relate to their employment services. Furthermore, the benefit is consistent with the intention of encouraging staff to manage their health and fitness, rather than for remuneration for services rendered or to be rendered. In this case, it can not be concluded that the benefit has been provided wholly or principally by way of a reward for services rendered or to be rendered by the employee. This analysis is also relevant for the operational staff, although their potential entitlement to the benefit does not arise under an EBA.

As such, the voucher would not be considered to be provided to an employee as a substitute for salary, wages or bonuses for services rendered or to be rendered.

This criterion is satisfied.

Overall conclusion

The benefit provided under this arrangement will be treated as an exempt minor benefit because its notional taxable value is less than $300 for the relevant FBT years of tax and most of the criteria in paragraph 58P(1)(f) of the FBTAA are satisfied.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).