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This edited version has been archived due to the length of time since original publication.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 written advice

Authorisation Number: 1012940073050

Date of advice: 29 January 2016

Ruling

Subject: In-house Fringe Benefit

Question 1

Will an in-house residual fringe benefit arise from your proposed arrangement with your employees?

Answer

Yes

Question 2

If an in-house residual fringe benefit arises from the arrangement will the taxable value of the fringe benefit be calculated under section 49 of the Fringe benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 3

If a fringe benefit arises from the provision of the arrangement can the taxable value of the fringe benefit be reduced under section 62 of the FBTAA?

Answer:

Yes.

This ruling applies for the following periods:

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

The scheme commences on:

1 April 2015

Relevant facts and circumstances

You provided us with a copy of the proposed arrangement.

The benefit will not be provided as part of a salary packaging arrangement.

Relevant legislative provisions

Fringe Benefit Assessment Act 1986 subsection 136(1),

Fringe Benefit Assessment Act 1986 section 49 and

Fringe Benefit Assessment Act 1986 section 62.

Reasons for decision

Question 1

The definition of the term 'in-house residual fringe benefit' in subsection 136(1) of the FBTAA defines 'in-house residual fringe benefit' to mean:

Is the benefit a fringe benefit?

Subsection 136(1) of the FBTAA contains an inclusive definition of 'benefit' which states:

The definition of fringe benefit in subsection 136(1) of the FBTAA provides that a fringe benefit will arise when:

It is accepted the provision of benefit in your proposed arrangement fits within the definition.

A benefit will be a residual benefit under section 45 of the FBTAA if it comes within the definition of 'benefit' in subsection 136(1) of the FBTAA, but is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive).

For the purpose of this ruling, the relevant Divisions are Division 5 which deals with expense payment benefits and Division 10 which deals with property benefits.

A benefit will be an expense payment benefit under section 20 of the FBTAA if the employee is reimbursed for expenses the employee has incurred, or if the employer pays a third party in satisfaction of expenses incurred by an employee. Neither of these applies to the arrangement being considered as the employee will not incur an amount of expenditure.

A property benefit will arise under section 40 of the FBTAA if the employee receives property. Section 40 of the FBTAA states:

Subsection 136(1) of the FBTAA defines property as intangible property and tangible property.

Tangible property is defined in subsection 136(1) to mean:

The benefit does not come within this definition.

Intangible property is defined in subsection 136(1) to mean:

Based on the information you provided, the benefit is neither tangible property, nor intangible property. Therefore, it is accepted that the benefit will be a residual fringe benefit.

Is the provider of the residual fringe benefit the employer or an associate of the employer?

You are the provider of the benefit.

Did you at or about the comparison time carry on a business that consisted of or included the provision of identical or similar benefits principally to outsiders?

Given the size, scale and permanency of these activities and the businesslike manner in which they are organised it is accepted that you are carrying on a business that includes the provision of identical or similar benefits principally to outsiders.

Question 2

Will the taxable value of the fringe benefit be calculated under section 49 of the FBTAA?

The taxable value of an in-house residual fringe benefit will be calculated under section 49 of the FBTAA where the benefit is provided during a period. Alternatively, where the benefit is not provided during a period, the taxable value will be determined under section 50 of the FBTAA.

Section 149 of the FBTAA provides that a benefit shall be taken to be provided during a period if the benefit is provided, or subsists during a period of more than one day and is not deemed by a provision of the FBTAA to be provided at a particular time or on a particular day.

Therefore, as the benefit will be provided on an ongoing basis for the period that the recipient is an employee, section 49 is the relevant section for determining the taxable value.

Section 49 of the FBTAA states:

It is agreed that your proposed valuation method is reasonable in the circumstances.

Question 3

Can the taxable value of the fringe benefit be reduced under section 62 of the FBTAA?

Section 62 of the FBTAA states:

Subsection 136(1) defines in-house fringe benefit to mean:

As the benefit is an in-house residual benefit which is not provided under a salary packaging arrangement it is agreed that section 62 of the FBTAA will apply to reduce the taxable value.


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