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Edited version of your private ruling
Authorisation Number: 1012555270354
Ruling
Subject: Fringe benefits tax
Question 1
Are the benefits provided to the company's employees exempt benefits under subsection 57A(1) of the FBTAA?
Answer
Yes
This ruling applies for the following periods:
1 April 2013 - 31 March 2014
1 April 2014 - 31 March 2015
1 April 2015 - 31 March 2016
The scheme commences on:
1 April 2013
Relevant facts and circumstances
· The company is a registered public benevolent institution with the Australian Charity and Not-for-Profits Commission.
· The company is endorsed as a public benevolent intuition with the Australian Taxation Office and has access to the fringe benefits tax exemption available to endorsed public benevolent institutions.
· The company is currently inactive.
· The company is a wholly owned subsidiary of a non-profit association.
· The non-profit association currently undertakes a range of community services including aged care services.
· The non-profit association is proposing to transfer some of the employees engaged in aged care services to the company.
· The employees are currently employed by the non-profit association and will be employed under the same award at the same level and pay point when their employment is transferred to the company.
· The non-profit association will then subcontract the company to perform its aged care services
· Funding will be provided to the non-profit association and then paid to the company.
· New employment contracts will be drawn up between the company and the transferring employees.
· The company will be responsible for the employee's salaries, PAYG withholding, superannuation, fringe benefits and other employee entitlements.
· The employees that will be transferred to the company will have their employment with the non-profit association terminated.
· Fringe benefits that may be provided to the employees include:
· home mortgage repayments
· personal loan payments
· credit card payments
· meal entertainment
· other personal expenses.
Relevant legislative provisions
Subsection 57A(1) of the FBTAA
Section 123C of the FBTAA
Subsection 136(1) of the FBTAA
Reasons for decision
Under subsection 57A(1) of the FBTAA, where the employer of an employee is a 'registered public benevolent institution endorsed under section 123C, a benefit provided in respect of the employment of the employee is a exempt benefit'.
Section 123C provides that the Commissioner must endorse an entity as a public benevolent institution if:
· The entity is entitled to endorsement as a public benevolent institution and
· The entity has applied for that endorsement in accordance with Division 426 in schedule 1 to the Taxation Administration Act 1953.
The conditions for endorsement as a public benevolent institution are provided for in subsection 123C(2) of the FBTAA which are:
· The entity is a registered public benevolent intuition
· The entity has an ABN
· The entity is not an employer in relation to step 2 of the method statement in subsection 5B(1E) of the FBTAA.
In this case, the Commissioner has endorsed the company as a public benevolent institution in accordance with section 123C of the FBTAA as the company satisfies the following conditions:
· It is a registered public benevolent institution
· It has an ABN
· It is not an employer in relation to step 2 of the method statement in subsection 5B(1E) of the FBTAA.
Therefore, as a public benevolent institution, the company is entitled to the fringe benefits exemption in subsection 57A(1)of the FBTAA in relation to benefits provided to employees.
Employee
In order for the exemption under subsection 57A(1) to apply, a benefit must be provided to an employee.
Under subsection 136(1) of the FBTAA, an 'employee' includes a 'current employee' 'previous employee', and 'future employee', if they are entitled, have been entitled or will be entitled to 'salary or wages'.
'Salary or wages' is defined in subsection 136(1) of the FBTAA as a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 of the Tax Administration Act 1953.
From the employment contract, the company will become the employer of the transferring employees and will be responsible for the employee's remuneration, PAYG withholding payments, superannuation and other employee entitlements.
The transferring employees will satisfy the definition of an 'employee' under the subsection 136(1) of the FBTAA.
Benefit
As employees of a public benevolent institution, benefits provided to them by the company will be exempt from fringe benefits tax. However, this is only in relation to 'benefits' provided to the employee. Subsection 136(1) of the FBTAA defines 'benefit' as:
benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:
(a) an arrangement for or in relation to:
(i) the performance of work (including work of a professional nature), whether with or without the provision of property;
(ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;
(b) a contract of insurance; or
(c) an arrangement for or in relation to the lending of money.
The following benefits may be provided to the employees of the company:
· home mortgage repayments
· personal loan payments
· credit card payments
· meal entertainment
· other personal expenses.
It is considered that the above benefits will come under the definition of 'benefit' in subsection 136(1) of the FBTAA in particular paragraph (a) and (c) above.
Consequently, the benefit's provided by the company to its new employees will be exempt benefits under subsection 57A(1) of the FBTAA.
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