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Edited version of your written advice
Authorisation Number: 1051273499645
Date of advice: 24 August 2017
Ruling
Subject: Fringe benefits tax
Question 1
Is the provision of recreational facilities to employees an exempt benefit under subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986?
Answer
Yes
This ruling applies for the following periods:
Year ended 31 March 2018
Year ended 31 March 2019
The scheme commences on:
2017
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You own and operate recreation centres.
The centres are open to the public. You charge a fee for entrants to the centres. You will be paying all the costs of operating the centres.
Access to the facilities is through daily user fees or membership subscriptions.
Under salary sacrifice arrangements employees will authorise you to make deductions from their salary to pay membership fees for use of the centres.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 section 20,
Fringe Benefits Tax Assessment Act 1986 section 38,
Fringe Benefits Tax Assessment Act 1986 section 45,
Fringe Benefits Tax Assessment Act 1986 subsection 47(2),
Fringe Benefits Tax Assessment Act 1986 subsection 136(1) and
Income Tax Assessment Act 1997 section 32-10.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.
Summary
The use of the recreational facilities by way of membership of the Centres is an exempt benefit under subsection 47(2).
Detailed reasoning
As provided for in subsection 47(2) a benefit will be an exempt benefit where it is:
(a) a residual benefit provided to a current employee in respect of his or her employment consists of:
(i) the provision, or use, of a recreational facility; or
(ii) ….
(a) the recreational facility…is located at the business premises of:
(i) the employer; or
(ii) if the employer is a company, of the employer or of a company that is related to the employer;
The benefit provided must be a residual benefit which according to section 45 '…is a benefit that … is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive)...'. Residual benefits are benefits that remain or are left over because they are not one of the more specific categories of benefit.
The benefit that you will be providing under the salary sacrifice arrangement is to allow your employees to use facilities at the centres. This will be achieved by the employees taking up membership.
Having considered Subdivision A of Divisions 2 to 11 (inclusive), it is concluded that the benefits will be residual benefits under section 45. Since the residual benefits involve the use of the centres by your employees paragraph 47(2)(a) will be satisfied.
To satisfy paragraph 47(2)(b) the centres must be located at your business premises. According to subsection 136(1) business premises:
in relation to a person, means premises or part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include:
(a) premises, or part of premises, used as a place of residence of an employee of the person or an employee of an associate of the person; or
(b) a corporate box; or
(c) boats or planes used primarily for the purpose of providing entertainment unless the boat or plane is used in the person's business of providing entertainment; or
(d) other premises used primarily for the purpose of providing entertainment unless the premises are used in the person's business of providing entertainment.
Paragraph 12 of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of ‘business premises’, provides guidance concerning the two requirements that must be satisfied for premises to be classified as business premises of the employer. These requirements are:
● the control the employer has over the premises and
● the consistency of an employer's actions and activities on the premises with those of normal business practices.
The centres are located on premises that you own. The operation of the centres is part of your business operations. Therefore the centres are located at your business premises.
As all of the conditions in subsection 47(2) will be satisfied the provision of recreational facilities to your employees by way of membership of the centres will be an exempt benefit.
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