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Edited version of your written advice

Authorisation Number: 1012686900158

Ruling

Subject: Fringe benefits tax - exempt fringe benefits - residual fringe benefits

Question 1

Is the provision by the Council of the use of facilities at sporting and leisure centres to its employees under a valid salary sacrifice arrangement, exempt under subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Does the exemption under subsection 47(2) of the FBTAA apply if the employees do not enter a salary sacrifice arrangement and instead pay a discounted membership fee directly to the provider of the leisure facility services?

Answer

Yes

This ruling applies for the following period

1 April 20XY to 31 March 20XZ

The scheme commences on

1 April 20XY

Relevant facts and circumstances

The Council is a local government body which owns sports and leisure centres.

These facilities are managed on behalf of Government body by another body (the Contractor) under contract. For the operation and management of the leisure centres, the Council pays a management fee. A subsidy is also paid in addition to the management fee if the centre performs at a loss.

The contract commenced on 1 July 20XM and has an initial term of three years ending 30 June 20XY with an option, at Council's discretion, to renew the contract for a further two terms of three years each. Council has approved the first extension for three years commencing 1 July 20XY. The contract sets out the objectives, service levels, standards and other operating requirements that Council seeks to achieve through this arrangement.

The contractor responsibilities during the term of the contract include:

The Council is responsible for the overall policy development and strategic planning for the leisure and aquatic facilities, to ensure that the programs, activities and services provided meet community needs and expectations and provide a financial return to the community.

Specific responsibilities of the Council regarding the leisure and aquatic centres are:

There is a fitness assistance policy which provides discount membership opportunities in relation to facilities at the aquatic and leisure centres owned by Council. The policy has application only to the Council's aquatic and leisure centres and applies to all permanent full time and part-time employees and to councillors during their term of office.

There are two payment options available. Where staff members and councillors pay for their membership as a post-tax deduction they are not required to pay for their membership at the full rate and the fee does not involve Council reimbursement. The fee charged is at 50% or the normal rate.

In addition, employees are able to pay their membership fees through payroll deductions. In that case the employee's recreation facility membership fees will be covered by a valid salary sacrifice arrangement.

The Leisure end Cultural Services Department is responsible for recommending to the Chief Executive Officer the level of discounts available to employees and councillors.

Relevant legislative provisions

Fringe Benefits Tax Assessment 1986 section 45

Fringe Benefits Tax Assessment 1986 subsection 47(2)

Fringe Benefits Tax Assessment 1986 subsection 136(1)

Reasons for decision

Question 1

Summary

The benefit which is the discounted leisure and aquatic centre membership paid through a salary sacrifice arrangement is a residual fringe benefit and is exempt under the provision of subsection 47(2) of the FBTAA

Detailed reasoning

Sub section 47(2) of the FBTAA states that where:

Having regard for the above there is a number of criteria that must be satisfied for the provision of the use of a recreational facility to be classed as an exempt benefit.

These criteria are as follows:

Is a benefit being provided to the employees?

The term 'benefit' defined in subsection 136(1) of the FBTAA 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 an arrangement for or in relation to the provision of, or the use of, facilities for entertaining or recreation.

The provision of recreational facilities to employees satisfies the definition of a benefit.

The above requirement is only satisfied if the facility is provided to current employees, and not any third parties.

Residual benefit

Under section 45 of the FBTAA a residual benefit is defined as:

The provision of recreational facilities does not fall under the umbrella of a specific benefit as outlined in Divisions 2 to 11(inclusive).

You have indicated the following:

The residual benefit criterion is satisfied.

Current employee

You have indicated that the benefit is only available to current Council employees and councillors with records being continually updated to reflect any changes in relation to cessation of employment.

The current employee criterion is satisfied.

Recreational facility

Subsection 136(1) of the FBTAA defines a recreational facility as a facility for recreation, but does not include a facility for accommodation or a facility for drinking or dining. The term recreation as defined in subsection 136(1) of the FBTAA includes:

The recreational facility criterion is satisfied.

Provision or use of a recreational facility by employees

The centres in question offer a wide range of recreational pursuits to the general public. The Council in line with its employee health and wellbeing policy offers discounted membership to eligible employees.

This criterion is satisfied.

Business Premises

Business premises are defined in subsection 136(1) of the (FBTAA) as being premises, or a part of premises of the person (or entity), used, in whole or in part, for the purposes of business operations of the person, but does not include:

The fundamental issue in this instance is to determine that the premises or part of the premises in question are of the person (the Council) and used by the person whether in whole or part for business operations. Subsection 136(1) the FBTAA defines the term business operations in relation to a government body as includes any operations or activities carried out by that body

Paragraphs 4 to 13 inclusive of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises' fully explores the requirements in relation to premises of the person and business operations.

It is considered that the business premises on which the leisure activities are conducted are the business premises of the Council because:

This business premises criterion is satisfied.

Conclusion

The provision of discounted membership for the use of recreation and leisure centres to employees and councillors by the Council under a valid salary sacrifice arrangements is an exempt benefit under subsection 47(2) of the FBTAA as all the required conditions have been met.

Question 2

Summary

The benefit which is the discounted recreation and leisure centre membership is a residual fringe benefit and is exempt under the provision of subsection 47(2) of the FBTAA.

Detailed reasoning

It has been established in question one that there has been a benefit (as defined in subsection 136(1) of the FBTAA) provided to the employees as a result of the provision of leisure and recreational facilities at the premises owned by the Council even though they employ another organisation to operate the leisure and sporting facilities.

The difference between the two questions is the method of payment of the discounted membership by the eligible employees or councillors. The payments can be made by a salary sacrifice arrangement (as discussed in question one) or by payment directly to the facility operator. The amount payable in both instances is determined by the employer/benefit provider which is equal to 50% of that paid by members of the public.

In summary:

Conclusion

As all of the requirements are met, the fringe benefit that arises from the discounted fees paid for the use of the leisure facilities by an employee directly or through a salary sacrifice arrangement are exempt benefits under subsection 47(2) of the FBTAA.

ATO view documents

ATO Interpretative Decision ATO ID 2008/60

Taxation Ruling TR 2000/4


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