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This edited version has been archived due to the length of time since original publication.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: 1051297813616

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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.

Date of advice: 6 November 2017

Ruling

Subject: Fringe benefits tax - internet connections

Question 1

Will the Commissioner use his remedial powers to modify the operation of subsection 58D(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to:

Answer

A. Invalid Private Ruling Question

B. Invalid Private Ruling Question

C. Invalid Private Ruling Question

Question 2

Can ‘internet services’ be classified similarly as ‘telephone services’ as per subsection 58D(1) of the FBTAA and therefore be an exempt benefit?

Answer

No

Question 3

If the answer to question 2 is no, will the provision of ‘internet services’ give rise to a fringe benefit under subsection 136(1) of the FBTAA?

Answer

Yes

Question 4

Will the instalment costs of internet hardware in a house provided to an employee be included in the market value of the housing fringe benefit under subsection 27(1) of the FBTAA?

Answer

No

Question 5

Will the instalment costs of computer hardware in a house provided to an employee give rise to a fringe benefit under subsection 136(1) of the FBTAA?

Answer

Yes

Question 6

Does the minor benefit exemption under section 58P of the FBTAA apply to the internet instalment/set up costs when the taxable value is below $300?

Answer

Yes

This ruling applies for the following periods:

1 April 2017 - 31 March 2018

1 April 2018 – 31 March 2019

1 April 2019 – 31 March 2020

The scheme commences on:

1 April 2017

Relevant facts and circumstances

Eligible employees are offered assistance with costs to relocate on appointment or transfer.

Employees must meet the eligibility requirements.

One of the entitlements for eligible employees is the full cost of connecting or reconnection of one telephone and internet connection at the new centre.

The organisation may also provide subsidised housing for eligible employees.

These benefits are provided as an incentive to attract and retain staff.

The employee enters into a tenancy agreement with the organisation as either a sole, individual or multi-tenancy arrangement. Furniture and equipment may be provided with the accommodation arrangement. The employee is required to pay a subsidised rental charge that is deducted from the employees’ fortnightly wage. Accommodation is located in remote and non-remote areas.

Internet hardware includes the following:

Proposal

The organisation is proposing to provide internet connectivity for its employee housing in rural and remote locations (the employer to cover the installation cost and the employee is responsible for ongoing monthly internet service charges).

This proposal is to ensure employees who are relocating and eligible for subsidised housing are provided with internet access with no additional installation costs.

Some work is encouraged to be done from home rather than on the work premises. This is also workplace health and safety considerations.

The organisation conducted an initial assessment of the available internet carriage types and communication providers with associated instalment plus setup costs for rural and remote locations.

The assessment identified a variety of internet carriage types: Asymmetric Digital Subscriber Line (ADSL) which uses existing telephone copper lines, Optical fibre (National Broadband Network), Hybrid optical fibre and coaxial cable, wireless broadband (mobile service) and Satellite. In certain areas the choice of internet carriage type is limited.

The proposal will adopt one or a combination of the following three internet service installation options:

Option A. Employee internet choice: The employee enters into an agreement (contract) directly with the internet service provider.

The organisation will reimburse the employee for the hardware installation and initial internet connections (setup costs).

Advantages:

Disadvantages:

Option B. The employer arranges and pays for the hardware installation. The organisation enters into an arrangement with an internet provider to only install the internet hardware in the dwelling. The employee then enters into an agreement directly with the internet provider for the monthly service charges.

Advantages:

Disadvantages:

Option C. The employer provides internet services to employee. The organisation enters into an arrangement with an internet provider to connect and provide internet services. The organisation will then on-charge the employee for a standardised monthly internet service charge as it currently does for electricity and gas in multi-tenant housing. The ongoing internet service arrangement is between the employee and the service provider as for the provision of other utilities.

Advantages:

Disadvantages:

Further General Facts

The organisation provides other fringe benefits to its employees. Some of these benefits could include the following:-

Some of these benefits listed above are exempt benefits.

The non-exempt benefits provided to employees have the following approximate taxable value.

Currently the majority of internet connection employee reimbursements relate to bundled packages which include both telephone / ADSL internet connection.

The organisation anticipates there will be less bundled telephone / ADSL and more NBN and satellite internet connections either arranged by the organisation or reimbursed by the organisation.

Relevant legislative provisions

Subsection 58D(1) of the Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Subsection 27(1) of the Fringe Benefits Tax Assessment Act 1986

Section 58P of the Fringe Benefits Tax Assessment Act 1986

Division 359 of Schedule 1 to the Tax Administration Act 1953

Division 370 of Schedule 1 to the Tax Administration Act 1953

Subsection 359-5(1) of the Schedule 1 of the Tax Administration Act 1953

Subsection 148(1) of the Fringe Benefits Tax Assessment Act 1986

Section 20 of the Fringe Benefits Tax Assessment Act 1986

Section 20A of the Fringe Benefits Tax Assessment Act 1986

Section 8-1 of the Income Tax Assessment Act 1997

Section 45 of the Fringe Benefits Tax Assessment Act 1986

Section 52 of the Fringe Benefits Tax Assessment Act 1986

Section 50 of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Question 1

Summary

Your question with respect to the Commissioner’s remedial power is invalid as private rulings relate to a particular taxpayer and their particular circumstances and the remedial power cannot be exercised in favour of a particular entity to make a determination only in respect of their particular circumstances.

Detailed reasoning

Division 359 of Schedule 1 to the Tax Administration Act 1953 (TAA) sets out the rules that are specific to private rulings.

A private ruling is the Commissioner's written expression of how a relevant provision applies, or would apply, to a particular taxpayer in relation to a specified scheme as outlined in subsection 359-5(1) of Schedule 1 to the TAA.

The Commissioner’s remedial power (CRP) is contained in Division 370 of Schedule 1 to the TAA. The Commissioner cannot provide a private ruling on the exercise of the CRP as:

The CRP simply cannot be exercised in favour of a particular entity to make a determination only in respect of their particular circumstances. The Tax and Superannuation Laws Amendment (2016) Measures No. 2 Bill 2016 explanatory memorandum explains this as follows:

In consideration of the above we think the law in this case operates as it was intended.

Question 2

Summary

No it is not possible to consider the internet connections as being the same as telephone lines under subsection 58D(1) of the FBTAA.

Detailed reasoning

The cost of connecting telephone services to accommodation occupied by an employee as a consequence of being relocated is exempt from fringe benefit tax (FBT) under subsection 58D(1) of the FBTAA.

At this stage subsection 58D(1) of the FBTAA which covers the exemption for telephone lines does not take into account internet connections.

It is not appropriate to consider the internet connection in the same light as a telephone connection. Whilst the internet connection may not be exempt under this section of the FBTAA it may be exempt under other sections of the act.

Question 3

Summary

The provision of internet services in both remote and non-remote areas will constitute a fringe benefit and in particular an expenses payment fringe benefit. The taxable value of the benefit cannot be reduced by the otherwise deductible rule.

Detailed reasoning

A ‘fringe benefit’ is defined in subsection 136(1) of the FBTAA, which holds that the following conditions must be satisfied:

A discussion is provided below in respect of whether each element or condition of the definition of a fringe benefit is satisfied.

A benefit is provided

Subsection 136(1) of the FBTAA provides a broad definition of a ‘benefit’ as including:

Based on the facts, under all three scenarios given to us, the organisation will be providing employees with an internet connection, by paying the internet provider directly or by reimbursing the employee for the internet connection costs.

The provision by the employer to pay for the internet connection falls within the definition of a ‘benefit’ as defined in subsection 136(1) of the FBTAA.

As such, the first condition (i.e. the provision of a ‘benefit’) of the definition of a ‘fringe benefit’ – as defined in subsection 136(1) of the FBTAA – would be satisfied.

The benefit is provided to an employee or an associate of the employee

An ‘employee’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employee.

The facts state that the internet connection is for employees to entice them to move to remote areas to work.

Therefore, as the benefit (internet connection) is provided to employees, the second condition (i.e. a benefit is provided to an employee) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided by an employer, an associate of the employer or a third party

‘Employer’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer.

The organisation is the current employer and the service is being provided by a third party (the internet service provider).

Therefore, the third condition (i.e. a benefit is provided by an employer) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided in respect of the employment of the employee

As per subsection 136(1) of the FBTAA, ‘in respect of’ in relation to the employment of an employee includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee:

In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 (Knowles), the full Federal Court – in examining the meaning of ‘in respect of’ an employee’s employment – held that the phrase required a ‘nexus, some discernible and rational link, between the benefit and employment’, though noted that ‘what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment’.

Based on the facts, the connection between the internet connections being received by employees while living in remote areas of Australia to perform their employment is material and sufficient, and not merely causal.

As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is not specifically excluded from the definition of a fringe benefit

With respect to paragraphs (f) to (s) of the definition of a ‘fringe benefit’ in subsection 136(1) of the FBTAA, the relevant paragraph to consider is paragraph (g) which provides that an exempt benefit will not be a fringe benefit.

In considering whether the internet benefits provided falls within any of the exempt benefits listed in Part III of the FBTAA, it is necessary to initially determine the types of fringe benefits that are applicable under the FBTAA.

In considering whether the benefit is a fringe benefit it is necessary to determine the type of benefit that has been provided.

Under the arrangement the organisation will either provide an internet connection to the employees via a third party or will reimburse the cost of an internet connection paid by the employees.

The provision of an internet connection to an employee who is living in either a remote area or a non-remote area will give rise to an expense payment benefit as outlined in section 20 of the FBTAA.

Section 20 of the FBTAA provides that an expense payment benefit will arise in two ways:

In the scenarios provided both of the above options are under consideration. As a result an expense payment benefit will arise.

The benefits may be an exempt benefit under section 20A of the FBTAA if they are covered by a no-private-use declaration.

Section 20A of the FBTAA exempts an expense payment fringe benefit that is covered by a ‘no-private-use’ declaration.

An expense payment fringe benefit is exempt if three conditions are satisfied:

This exemption is aimed at circumstances where an employer pays or reimburses only business expenses – in this case, the employer is able to provide an annual declaration stating that the benefits provided during the FBT year were only for employment-related purposes. Where the above mentioned conditions of section 20A of the FBTAA are satisfied, the benefits covered by the declaration are exempt benefits and the employer would not be required to obtain declarations from employees.

Section 20A of the FBTAA would not apply in these circumstances as it is likely that the internet connection will be used for both work and private related reasons.

Otherwise Deductible Rule

If the employer does not make a ‘no-private-use declaration’ pursuant to sections 20A of the FBTAA, the provision of such benefits will not be exempt.

As such, the provision of an internet connection benefit in these circumstances will be a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA.

However, in such circumstances, the Otherwise Deductible Rule (ODR) may still apply to reduce the taxable value of the associated fringe benefits to nil/by the amount that an employee would have been entitled to claim as a one-off income tax deduction had the employee incurred and paid unreimbursed expenditure in respect of the relevant fringe benefits.

The ODR only applies where the employee would have been entitled to a once-only deduction for the internet expenditure paid by the employer. A ‘once-only’ deduction is defined in subsection 136(1) of the FBTAA to mean one that is wholly or partly allowable under the income tax law in only one income year.

The above-mentioned ODR is stipulated in section 24 of the FBTAA in respect of expense payment fringe benefits.

For an employer to reduce the taxable value of a fringe benefit under the ODR, an employee would have had to incur the relevant expense solely relating to the performance of their employment-related duties and that expense would have to be wholly deductible to that employee for income tax purposes.

Under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) you can only claim deductions for work-related expenses where they were incurred in the course of gaining or producing your assessable income, and are not of a capital, private or domestic nature. You cannot claim a deduction for the cost of installing or connecting to the internet as it is a capital expense.

Therefore, where the above internet connection benefits are provided/funded by the employer, the taxable value of those benefits cannot be reduced to nil using the ODR.

Conclusion

Internet connection benefits provided by the organisation for employees in either remote or non-remote areas will constitute an expense payment fringe benefit and will be subject to FBT.

Question 4

Summary

Certain factors are disregarded in determining the market value of the right to occupy a unit of accommodation. The provision of an internet connection will not be included in the calculation when valuing a housing benefit.

Detailed reasoning

The valuation rules applying to a housing fringe benefit depend on whether the accommodation is outside Australia, in a non-remote part of Australia or in a remote area of Australia.

Miscellaneous Taxation Ruling MT 2025: Guidelines for Valuation of Housing Fringe Benefits (MT 2025) covers the methods used for valuing various types of accommodation provided to employees.

The valuation criteria for ascertaining the market rental value of houses, flats, apartments and home units located in residential areas of cities and towns are covered in paragraphs 12 to 16 of MT 2025 as follows:

Chapter 10 of the Fringe Benefit Tax: a guide for employers (NAT 1054) also provides guidance in calculating the taxable value of employee provided accommodation.

In summary of the above, in effect, that the right to occupy the unit of accommodation is valued according to what it would command for rent in an open market situation, without taking into account any special employment conditions or associated expenses of the occupant that might be paid by another person. The object is to ascertain the market rental value by reference to the occupied property, and to disregard any matters particular to the person or people who occupy it.

We consider the instalment of computer hardware into a house or unit of accommodation where the organisations employees will live will not be included in the calculation when determining the market value of the property.

Question 5

Summary

Cost of computer hardware and the installation of this equipment such as satellite dishes, modems and internal and external cabling that is paid for by the employer will give rise to a residual fringe benefit. As the Commissioner considers these to be capital expenses the ODR cannot be used to decrease the taxable value of the fringe benefit.

Detailed reasoning

The definition of a fringe benefit was discussed in detail at question 3.

A discussion is provided below to determine if the elements of the definition of a fringe benefit has been satisfied.

A benefit being provided

The term benefit is defined in subsection 136(1) of the FBTAA to include:

(a) an arrangement for or in relation:

The provision of computer hardware in houses occupied by employees satisfies the definition of a benefit.

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

The benefit is provided to an employee or an associate of the employee

An ‘employee’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employee.

The facts state that the computer hardware equipment is for employees to entice them to move to remote areas to work by providing them with good internet service.

Therefore, as the benefit (computer hardware equipment) is provided to employees, the second condition (i.e. a benefit is provided to an employee) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided by an employer, an associate of the employer or a third party

‘Employer’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer.

The organisation is the current employer and the service is being provided by a third party.

Therefore, the third condition (i.e. a benefit is provided by an employer) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is provided in respect of the employment of the employee

As per subsection 136(1) of the FBTAA, ‘in respect of’ in relation to the employment of an employee includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee:

In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 (Knowles), the full Federal Court – in examining the meaning of ‘in respect of’ an employee’s employment – held that the phrase required a ‘nexus, some discernible and rational link, between the benefit and employment’, though noted that ‘what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment’.

Based on the facts, the connection between the computer hardware equipment being received by employees while living in remote areas of Australia to perform their employment is material and sufficient, and not merely causal.

As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a ‘fringe benefit’ as defined in subsection 136(1) of the FBTAA would be satisfied.

The benefit is not specifically excluded from the definition of a fringe benefit

With respect to paragraphs (f) to (s) of the definition of a ‘fringe benefit’ in subsection 136(1) of the FBTAA, the relevant paragraph to consider is paragraph (g) which provides that an exempt benefit will not be a fringe benefit.

In considering whether the internet benefits provided by the organisation fall within any of the exempt benefits listed in Part III of the FBTAA, it is necessary to initially determine the types of fringe benefits that are applicable under the FBTAA.

In considering whether the benefit is a fringe benefit it is necessary to determine the type of benefit that has been provided.

Under the arrangement the organisation will pay a third party to install computer hardware in houses occupied by their employees.

Is the benefit a residual benefit?

Section 45 of the FBTAA states that:

The provision and use of computer hardware equipment in a house does not fall within any provision of Subdivision A of Division 2 to 11 inclusive of the FBTAA, thus section 45 of the FBTAA is met and it is a residual benefit.

Chapter 18 of the Fringe Benefit Tax: a guide for employers (NAT 1054) states there are two main types of residual fringe benefits, in-house residual fringe benefits and external residual fringe benefits.

In-house residual fringe benefits

A residual benefit is an in-house residual fringe benefit if the provider is the employer or an associate of the employer and the benefit is identical or similar to rights, services, facilities, etc. provided to the public in the ordinary course of business.

As the employer is not a provider of internet/computer hardware, the residual benefit will not be an in-house residual benefit.

External residual fringe benefits

Any residual fringe benefit that is not an in-house residual fringe benefit is an external residual fringe benefit.

An external residual fringe benefit arises where:

We consider that the provision of the computer hardware would constitute an external residual fringe benefit.

Taxable value and otherwise deductible rule

When the employer purchases and installs the computer hardware in the houses that their employees are living in, they will be providing a residual fringe benefit to their employees.

The fringe benefit will be an external non-period residual fringe benefit which means that its taxable value will be the amount the employer pays for the equipment. This is in accordance with section 50 of the FBTAA.

The taxable value of the residual fringe benefit may be reduced in accordance with the otherwise deductible rule under section 52 of the FBTAA. Broadly, this means that the taxable value may be reduced to the extent that your employee would have been entitled to an income tax deduction if you had not paid for the equipment.

The extent to which the equipment expense would be an allowable income tax deduction if incurred by an employee is determined under the general deduction provisions in section 8-1 of the ITAA 1997. The general deduction provisions allow a deduction for all losses and outgoings to the extent which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

The words 'incurred in gaining or producing your assessable income' mean in the course of gaining or producing such income. The occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if no assessable income is produced, what would have been expected to produce assessable income: Ronpibon Tin NL v FC of T (1949) 78 CLR 47 (Ronpibon Tin); Federal Commissioner of Taxation v Payne [2001] HCA 3; 2001 ATC 4027 (Payne).

In this case, the employer will be purchasing hardware to be installed in houses occupied by employees for their personal and private use and possibly for work related purposes also. It is considered these items are capital in nature, and their purchase is not an allowable deduction under paragraph 8-1(2)(a) of the ITAA 1997.

As it has been established that the benefits being provided/funded by the employer are capital in nature the taxable value of those benefits cannot be reduced to nil using the ODR.

Question 6

Summary

Expense payment benefits that have a notional taxable value of less than $300 can be classified as exempt minor benefits.

Detailed reasoning

Expense payment benefits can be exempt in certain circumstances where they meet the requirements of the minor benefits exemption contained in section 58P of the FBTAA.

Section 58P of the FBTAA states:

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits summarises the requirements of section 58P:

Fringe benefits tax: a guide for employers (NAT 1054) summaries:

Minor benefits are exempt benefits. A minor benefit is a benefit which is both:

In determining whether it is reasonable to treat a minor benefit as exempt, the provision of the relevant minor benefit cannot be considered in isolation. Section 58P(1)(f) of the FBTAA makes it clear that any "associated benefits" must also be taken into account. If an employee receives a minor benefit without any associated benefits, the benefit will almost certainly be exempt under section 58P. However, if an employee receives a number of benefits, each benefit provided to the employee may no longer be an exempt minor benefit if the value of all the benefits is aggregated.

The term "associated benefit" is defined in subsection 58P(2) of the FBTAA as being a benefit is an associated benefit in relation to a minor benefit if, and only if:

While neither "identical" nor "similar" are defined in the act, some guidance as to their meaning in the context of section 58Pof the FBTAA can be taken from the definition of "identical benefit" in subsection 136(1). Identical benefit is defined in relation to a residual fringe benefit to mean another benefit that is "the same in all respects, except for differences (if any) that are minimal or insignificant and do not affect the value". In the context of section 58P, a benefit would be identical to the minor benefit if it were either the same as the minor benefit or if any difference was too minimal to be significant or to affect its value. Identical benefits have the same value. Allowing that identical benefits may differ in some small respects, "similar" benefits need only be of the same kind. A benefit that is similar to a minor benefit must at least resemble the minor benefit in some respect. A gift of a bottle of wine at Christmas time may be similar to a minor benefit of a bottle of whiskey, but a bottle of perfume would not.

As stated above, this concept of an associated benefit recurs in the determination of whether it would be unreasonable to treat a minor benefit as a fringe benefit. In fact, in each of the matters that are specified as relevant, associated benefits must be taken into account.

TR 2007/12 provides further guidance on associated benefits. In particular at paragraph 190-191.

In determining whether a benefit provided to an employee qualifies for the minor benefits exemption in section 58P of the FBTAA 1986, the criteria set out in paragraph 58P(1)(f) requires a consideration of any other associated benefits that have been provided before concluding whether it would be reasonable to treat the minor benefit as a fringe benefit. All five criteria must be considered. No single criterion on its own will determine whether it is unreasonable to treat the benefit as a fringe benefit.

Each of the above five criteria is discussed further below.

i) Infrequency and irregularity

The terms 'infrequency' and 'irregularity' are not defined and therefore take their ordinary meanings.

The Macquarie Dictionary defines 'infrequent' as:

Also, 'irregular' is defined as:

not characterised by any fixed principle, method or rate: irregular intervals.

On the basis of this application, the provision of the expense payment fringe benefit by way of either reimbursing the employee or paying a third party on behalf of the employee to connect the internet to the house where employees live is provided on an irregular basis once a year or less. As such it is reasonably concluded that the benefit is provided as in infrequent and irregular basis. This criterion is satisfied.

ii) Value of the minor benefit and identical or similar associated benefits

Under this test we must consider the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of the minor benefit and any associated benefits, being benefits that are identical or similar to the minor benefit.

This criterion addresses the situation where there are multiple occasions where identical or similar benefits are provided to an employee.

This criterion addresses the situation where there are multiple occasions where identical or similar benefits are provided to an employee. In this case the total taxable value of the benefits provided are clearly stated and documented. Some of the expenses are over $300 and would not qualify for the minor benefits exemption; however some of the expenses are less than $300 and are clearly documented in the spreadsheet provided. The benefit is not provided as an ongoing entitlement in connection with identical or similar associated benefits in the year of tax, nor is it provided as a result of a salary sacrifice arrangement where the application of TR 2007/12 will make it a taxable benefit. This criterion is satisfied.

iii) Value of benefits connected with the minor benefit

This test addresses the situation where other benefits are provided in conjunction with or to facilitate the provision of the minor benefit. Also, the notional taxable value of the associated benefits in the current year as well as in any other year must be taken into account when determining the total value of benefits for the purposes of this criterion.

In summary, regard must be had to the likely taxable values of the minor benefit and benefits that are provided in connection with the provision of the minor benefit. The smaller the cumulative value of the other associated benefits the more likely that this unreasonableness criterion will be satisfied.

In this case more than one type of benefit is being provided. The Commissioner would regard the provision of the internet connection an associated benefit to the remote area housing benefit and the connection and re-connection of certain utilities (in this case being electricity and or gas and telephone). However as these benefits are exempt benefits they are not considered in these circumstances.

It is noted that the organisation does provide housing benefits in non-remote areas along with electricity and gas. In this situation the benefits provided are not exempt and are therefore considered associated benefits. Due to the large number of employees who receive these benefits at varying amounts it is difficult to give a specific value of the associated benefits that would be considered connected to the provision of the internet provided to the employees.

This criterion is satisfied for the remote areas that are receiving the benefit of the internet connection but not satisfied for the non-remote area housing that receives the same benefit.

iv) Practical difficulty

This test considers the practical difficulty for the employer in determining the notional taxable values of the minor benefit (if it is not a car benefit) and any associated benefits.

In this case the benefits provided are identified, have a specific total value, are properly recorded and can be accounted for as per your application. The employer cannot claim that it is practically difficult to determine the value of the benefits. However it is not reasonable to apply this test/criterion alone to exclude the benefit of being an excluded minor benefit.

v) Circumstances in which the benefit is provided

Under this test, we consider the circumstances surrounding the provision of the benefit and any associated benefits including, but without limiting criteria (i) to (iv), whether the benefit concerned was provided:

A benefit provided as a result of a contingency is more likely to be treated as an exempt benefit. Conversely, a benefit that is principally in the nature of remuneration is less likely to be treated as an exempt benefit.

Based on the present facts, the expense fringe benefits provided was not provided to assist employees dealing with an unexpected event. On the facts, it is not wholly or principally a reward for services. It is to entice employees to move to remote areas to undergo their employment.

This criterion is satisfied.

A minor benefit is a benefit which has a 'notional taxable value' of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit. We note that on the facts provided some internet connections being provided by the organisation cost more than $300 and therefore cannot be considered under the minor benefit exemption.

Conclusion

We applied the reasonable person test in order to make a decision that is fair and reasonable to the taxpayer. After considering all factors outlined in subparagraphs 58P(1)(f)(i)to(v) of the FBTAA and the weigh given to each criterion above, on balance we determine that the benefits provided by way of an internet connection for employees living in both remote and non-remote areas would be exempt benefits under section 58P.

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