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Edited version of your written advice
Authorisation Number: 1051445496412
Date of advice: 26 October 2018
Ruling
Subject: Fringe benefits tax – exempt residual benefits
Question
Is the provision of childcare to your employees under a salary sacrifice arrangement an exempt benefit under subsection 47(2) of the Fringe Benefits Assessment Act 1986 (FBTAA)?
Answer
Yes
This ruling applies for the following periods:
1 April 2017 – 31 March 20XX
1 April 2018 – 31 March 20XX
1 April 2019 – 31 March 20XX
1 April 2020 – 31 March 20XX
1 April 2021 – 31 March 20XX
1 April 2022 – 31 March 20XX
The scheme commences on:
20XX
Relevant facts and circumstances
You own and operate childcare centres. Each childcare centre is operated as a business, provides childcare to at least two children under the age of six years old and is open to the general public as well as employees.
The provision of childcare is provided to current your employees under a salary sacrifice arrangement. Your employees do not incur the child care fees.
You had a private ruling stating that the provision of childcare in these child care facilities under a salary sacrifice arrangement is an exempt benefit under subsection 47(2) of the FBTAA. You have confirmed that the facts of the arrangement have not changed.
Relevant legislative provisions
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)
Reasons for decision
All references made in these reasons for decision are to the Fringe Benefits Assessment Act 1986 unless otherwise stated.
Summary
The provision of childcare to your employees at one of your child care centres is an exempt benefit under subsection 47(2).
Detailed reasoning
Subsection 47(2) provides that:
Where
(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. the care of children of the employee in a childcare facility; and
(b) the recreational facility or childcare facility, as the case may be, is located on 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 is an exempt benefit.
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)...'.
The provision of childcare to employees does not fit within any of the specific benefits in Divisions 2 to 11. Therefore, it is considered to be a residual benefit.
Subsection 136(1) defines a child-care facility:
Means a facility at which a person receives, or is ready to receive, 2 or more children under the age of 6, not being associates of the person, for the purpose of minding, caring for or educating them for a day or part of a day without provision for residential care buy does not include a facility at the place of residence of any of these children.
You own and operate childcare centres that cater for more than two children under the age of six and therefore meet the definition of a child-care facility.
As the residual benefits involve the care of children in a childcare facility paragraph 47(2)(a) is satisfied.
To satisfy paragraph 47(2)(b) the centres must be located at your business premises. 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 childcare centres are located on premises that you own and their operation is part of your business operations, therefore they are located at your business premises.
As all of the conditions in subsection 47(2) are satisfied the provision of childcare to your employees at the childcare centres is an exempt benefit.
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