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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your private ruling

Authorisation Number: 1012569485041

Ruling

Subject: Fringe Benefits Tax ~~ Expense payment fringe benefits

Question 1

For the purposes of establishing the extent to which a benefit is provided before 1 April 2014, are the taxpayer's 'Scenario 1' benefits provided when it credits to the retailer the salary sacrificed amount to the retailer?

Answer

Yes.

Question 2

For the purposes of establishing the extent to which a benefit is provided before 1 April 2014, are the taxpayer's 'Scenario 2' benefits provided when it reimburses its employee?

Answer

Yes.

Question 3

Where, pursuant to a salary packaging arrangement entered into before 22 October 2012, the taxpayer credits an amount to the employee's retailer before 31 March 2014, or reimburses an amount to the employee before 31 March 2014, is the taxable value of the fringe benefit an amount equal to 75% of the lowest price charged by the retailer to the public (as calculated under section 48 of the FBTAA) and further reduced by up to $1,000 per employee per year (as per section 62 of the FBTAA)?

Answer

Yes.

Question 4

Where, pursuant to a salary packaging arrangement entered into before 22 October 2012, the taxpayer credits an amount to the employee's retailer after 31 March 2014, or reimburses an amount to the employee after 31 March 2014, is the taxable value of the fringe benefit the 'notional value' in accordance with paragraph 48(aa) of the FBTAA?

Answer

Yes.

This ruling applies for the following periods:

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

The scheme commences on:

1 April 2013

Relevant facts and circumstances

The taxpayer allows its employees to salary sacrifice each FBT year towards the payment of their private expense accounts. The arrangement is an 'effective salary sacrifice' with the employee voluntarily choosing in advance to sacrifice an amount of future earnings.

The taxpayer has provided the benefit in substantially the same way for many years. All current arrangements with employees have been entered prior to 22 October 2012. No material alteration or variation has been made to any arrangement since 22 October 2012.

The benefit is administered in one of two ways.

Scenario 1:

Scenario 2:

The taxpayer currently treats the benefits in both scenarios above as 'in-house residual expense payment fringe benefits', with a taxable value reduced to nil through the operation of sections 48 and 62 of the FBTAA. This position has previously been confirmed in previously issued private binding rulings (PBR's).

No new salary packaging arrangements have been entered into since 22 October 2012 when amendments under Tax Law Amendment (2012 Measures No.6) Act 2013 were first announced. However, benefits as detailed in the two scenarios above continue to be provided for all existing salary packaging arrangements that were in place as at 22 October 2012.

As at 31 March 2014, it is expected that the majority of employees receiving 'Scenario 1' benefits will have an accumulated balance of 'unused' credits held by the retailer in their customer accounts.

Similarly, as at 31 March 2014, employees receiving 'Scenario 2' benefits will have 'unused' credits accumulated by way of fortnightly salary deductions made prior to 31 March 2014.

The taxpayer is likely to cease its benefit arrangements with employees from 1 April 2014.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 - section 20

Fringe Benefits Tax Assessment Act 1986 - section 48

Fringe Benefits Tax Assessment Act 1986 - section 62

Fringe Benefits Tax Assessment Act 1986 - section 147

Reasons for decision

Question 1

Summary

The taxpayer's 'Scenario 1' benefits are provided at the times when the taxpayer credits to the retailer amounts deducted from participating employees' fortnightly salaries.

Detailed reasoning

Section 20 of the FBTAA states:

Where a person (in this section referred to as the provider):

In the context of "… makes a payment in discharge, in whole or in part, of an obligation of another person …" under paragraph 20(a) of the FBTAA, section 147 of the FBTAA relevantly states:

Every time the taxpayer arranges for a participating employee's account to be credited with an instalment amount paid out of funds provided by it, a payment in discharge of an obligation of another person (either the relevant employee or their associate) is made. By virtue of section 147 of the FBTAA, and for the purposes of paragraph 20(a) of the FBTAA, a credit by the taxpayer to the retailer does not need to relate to an amount of expenditure incurred by the participating employee that is currently due for payment.

Therefore, for the purposes of paragraph 20(a) of the FBTAA, the taxpayer provides an expense payment benefit at the time it arranges for a participating employee's account to be credited with instalment amounts paid out of funds provided by it.

Question 2

Summary

The taxpayer's 'Scenario 2' benefits are provided at the times when it reimburses its participating employees.

Detailed reasoning

Section 20 of the FBTAA states:

Where a person (in this section referred to as the provider):

Paragraph 20(b) of the FBTAA is self-explanatory in that the taxpayer provides an expense payment benefit at the time it pays to (reimburses) the participating employee's bank account the amount of electricity charges they have been invoiced.

Question 3

Summary

Where, pursuant to a salary packaging arrangement entered into before 22 October 2012, the taxpayer credits an amount to the employee's retailer before 31 March 2014, or reimburses an amount to the employee before 31 March 2014, the taxable value of the fringe benefit is an amount equal to 75% of the lowest price charge by the retailer to the public (as calculated under section 48 of the FBTAA) that is further reduced by up to $1,000 per employee per year (as per section 62 of the FBTAA)?

Detailed reasoning

The effect of the transitional provisions included at Item 13 of Schedule 7 of the Tax Laws Amendment (2012 Measures No. 6) Act 2013, as relevantly stated below, are that in-house residual expense payment fringe benefits provided before 1 April 2014, pursuant to an existing salary packaging arrangement entered into by the employer and employee before 22 October 2012, continue to apply the law as it applied before the amendments were inserted into the FBTAA by the Tax Laws Amendment (2012 Measures No. 6) Bill 2012:

13 Application of amendments

(a) 1 April 2014; and

Therefore with respect to the in-house residual expense payment fringe benefits provided by the taxpayer to its participating employees before 31 March 2014, pursuant to existing salary packaging arrangements entered into before 22 October 2012:

Question 4

Summary

Where, pursuant to a salary packaging arrangement entered into before 22 October 2012, the taxpayer credits an amount to the employee's retailer after 31 March 2014, or reimburses an amount to the employee after 31 March 2014, the taxable value of the fringe benefit is the 'notional value' in accordance with paragraph 48(aa) of the FBTAA?

Detailed reasoning

As explained in the detailed reasoning under Question 3, the transitional provisions only apply to those in-house residual expense payment fringe benefits that are provided by the taxpayer before 31 March 2014 to its participating employees pursuant to existing salary packaging arrangements entered into before 22 October 2012.

In other words, the amendments were inserted into the FBTAA by the Tax Laws Amendment (2012 Measures No. 6) Bill 2012 will apply to those fringe benefits provided by Company X after 31 March 2014.

More specifically:


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