Edited version of your written advice

Authorisation Number: 1051476678819

Date of advice: 23 January 2019

Ruling

Subject: Fringe benefits tax – residual benefits

Question 1

Is the provision of free membership of a health and wellness program an exempt minor benefit under section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Is the allocation of points to members of a health and wellness program a fringe benefit as defined in subsection 136(1) of the FBTAA?

Answer

No

Question 3

Is the receipt of free or discounted goods and services by members of a health and wellness program a fringe benefit as defined in subsection 136(1) of the FBTAA?

Answer

No

This ruling applies for the following periods

Year ending 31 March 2019

Year ending 31 March 2020

Year ending 31 March 2021

Year ending 31 March 2022

The scheme commenced on

1 July 2018

Relevant facts

An employer and its subsidiaries employ a significant number of staff.

An insurance company offers a range of insurance products to retail consumers, including life insurance.

Individuals covered by an eligible life insurance policy are able to join a health and wellness program operated by the insurance company.

The health and wellness program is a science based program based on behavioural-economic principles which encourages permanent lifestyle and behavioural changes through:

● Health checks, nutritional assessment and fitness assessments via a range of online and offline health assessments;

● Healthy eating, exercise and fitness and lifestyle and wellbeing through goal setting, discounts on gym memberships and fitness devices;

● Rewards – flights, entertainment and shopping vouchers to motivate participants with ongoing rewards.

Online health assessments offered through the health and wellness program include nutrition assessments, skin self-examination, health review, fitness assessment and mental wellbeing assessment.

Participants in the health and wellness program accumulate points through a range of non-employment related activities including completing health assessments, undergoing preventative health checks, attending gym/outdoor fitness sessions and tracking and achieving fitness milestones (via a fitness device).

Points are used to determine which program tier a participant is eligible for.

Different rewards are available for participants, with greater discounts and rewards available for participants who achieve a higher status during the year.

Rewards include discounts on a limited number of flights, discounts on gym membership and vouchers.

The number of rewards which are available at each status tier during each membership year is capped.

Points are not redeemed for rewards, they cannot be transferred to other participants, additional points cannot be purchased and at the start of each membership year each participant starts on zero points.

The health and wellness program has verified positive health outcomes with a positive correlation between higher participation levels and higher rates of health improvements.

Each member of the health and wellness program is bound by the terms and conditions of the health and wellness program which is an agreement between the insurance and the individual member (Membership Agreement). The employers are not a party to the Membership Agreement.

The Membership Agreement provides the insurance company with the ability to cancel or suspend membership of the health and wellness program for breaches of conditions.

The Membership Agreement provides that each member may be required to pay an annual membership contribution in respect of the health and wellness program membership.

The Recommended Retail Price for membership of the health and wellness program is under $300 per member per annum, if a particular insurance policy is purchased at the same time.

The Membership agreement also provides that where an annual membership contribution is required, the insurance company may agree with the member’s employer to pay the annual membership contribution or waive the annual membership contribution (at the insurance company’s discretion).

The health and wellness program is also offered through a corporate program for employers who maintain a group life insurance policy for their employees.

The employers offer life insurance to their employees via a group life insurance policy with the insurance company.

Offer to employees

The insurance company will offer a significant number of employers free health and wellness program membership.

The annual membership contribution will be waived by the insurance company for employees who become health and wellness program members.

Employees who wish to participate in the health and wellness program will need to contact the insurance company to activate their health and wellness program membership and some employees may choose not to do this.

Access to the health and wellness program is not provided under a salary sacrifice arrangement. Employees who choose to participate will not have any reduction in their remuneration and employees who choose not to participate will not have any increase in their remuneration.

Access to the health and wellness program is not provided to employees as a reward for services, rather it is part of a broader policy to improve the health and wellness of their employees.

The employer will pay a fee to the insurance company to allow all employees to access in the health and wellness program (Fee).

The Fee is calculated based on the total number of employees who will be allowed access to the health and wellness program.

The total cost of offering to the health and wellness program to all employees may vary depending on the number of employees who opt-in and the level of engagement amongst those employees.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 40

Fringe Benefits Tax Assessment Act 1986 Section 45

Fringe Benefits Tax Assessment Act 1986 Section 51

Fringe Benefits Tax Assessment Act 1986 Section 58P

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Is the provision of free membership of a health and wellness program an exempt minor benefit under section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

The definition of ‘fringe benefit’ is provided in subsection 136(1) of the FBTAA:

in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

in respect of the employment of the employee, but does not include:

(f) …

(g) a benefit that is an exempt benefit in relation to the year of tax; or

…

(s)…

It is accepted that the provision by the employers to their employees of free membership of a health and wellness program is a benefit.

The free membership is provided by an insurance company which is not the employer or an associate of the employer. The benefit will be a fringe benefit if provided by a third party under an arrangement between the third party and the employer or an associate of the employer, or the employer or an associate of the employer facilitates or promotes the scheme, under paragraphs (e) and (ea) above.

Paragraph (a) of the definition of ‘arrangement’ in subsection 136(1) of the FBTAA states:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable by legal proceedings;

This requirement will be satisfied as the free membership will be provided under an agreement between the employers and the insurance company.

The benefit is provided in respect of the employee’s employment as it is contingent upon the employee’s employment with the employers. If the employee ceases employment, the health and wellness program membership will cease.

The fringe benefit will be a taxable fringe benefit unless excluded by any of paragraphs (f) to (s) of the definition of ‘fringe benefit’ in subsection 136(1) of the FBTAA. One exclusion is paragraph (g) stating that an exempt benefit will not be a fringe benefit. An exempt benefit includes minor benefits under section 58P of the FBTAA. A benefit will be minor, and exempt, if its notional taxable value is less than $300 and it would be unreasonable to treat the minor benefit as a fringe benefit considering the criteria stated in subsection 58P(1)(f):

(f) having regard to:

(i) the infrequency and irregularity with which associated benefits, being benefits that are identical or similar to:

(A) the minor benefit; or

(B) benefits provided in connection with the provision of the minor benefit:

have been or can reasonably be expected to be provided;

(ii) 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, in relation to the current year of tax or any other year of tax;

(iii) the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of any other associated benefits in relation to the current year of tax or any other year of tax;

(iv) the practical difficulty for the employer in determining the notional taxable values in relation to the current year of tax of:

(A) if the minor benefit is not a car benefit – the minor benefit; and

(B) if there are any associated benefits that are not car benefits – those associated benefits; and

(v) the circumstances surrounding the provision of the minor benefit and any associated benefits including, but without limiting the generality of the foregoing:

(A) whether the benefit concerned was provided to assist the employee to deal with an unexpected event; and

(B) whether the benefit concerned was provided otherwise than wholly or principally by way of a reward for services rendered, or to be rendered, by the employee;

it would be concluded that it would be unreasonable to treat the minor benefit as a fringe benefit in relation to the employer in relation to the current year of tax:

the minor benefit is an exempt benefit in relation to the current year of tax.

In summarising these requirements, the benefit that arises from the provision of free membership of a health and wellness program will be an exempt minor benefit if:

(i) the notional taxable value of the benefit is less than $300; and

(ii) it can be concluded on the basis of the factors listed in paragraph 58P(1)(f) of the FBTAA that it would be unreasonable to treat the benefits as a fringe benefit.

Guidance as to the application of both of these requirements is provided in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12).

(i) Is the notional taxable value of the benefit less than $300?

The definition of ‘notional taxable value’ in subsection 136(1) of the FBTAA provides that the ‘notional taxable value’ of the benefit that arises from the free membership of the health and wellness program is the amount that would be the taxable value if the benefit was a fringe benefit.

The benefit will be a residual benefit under section 45 of the FBTAA as it is a benefit that does not fit within the specific categories contained in Divisions 2 to 11 of the FBTAA.

The method used to calculate the taxable value of a residual benefit depends upon whether the benefit is an in-house benefit and whether it is provided for a period of more than one day.

Will the provision of the free membership be an in-house or external residual fringe benefit?

In general terms, an in-house residual benefit requires the employer or an associate of the employer to be carrying on a business that consists of, or includes the provision of identical or similar benefits principally to outsiders. As neither the employers, nor an associate of the employers, carries on a business that consists of, or includes the provision of identical or similar benefits principally to outsiders the benefit will be an external residual benefit.

Will the provision of the free membership be a period, or non-period residual fringe benefit?

The benefit will be provided for more than one day, and therefore the benefit will be an external period residual benefit.

The valuation of an external period residual fringe benefit

The methods that are used to calculate the taxable value of an external period residual benefit are contained within section 51 of the FBTAA which states:

Subject to this Part, the taxable value of an external period residual fringe benefit in relation to an employer in relation to a year of tax is:

(a) where the provider was the employer or an associate of the employer and the recipients overall benefit was purchased by the provider under an arm’s length transaction – the amount paid or payable by the provider in respect of the recipients current benefit;

(b) where the provider was not the employer or an associate of the employer and the employer, or an associate of the employer, incurred expenditure to the provider under an arm’s length transaction in respect of the provision of the recipients current benefit – the amount of that expenditure; or

(c) in any other case – the notional value of the recipients current benefit;

reduced by the amount of the recipients contribution insofar as it relates to the recipients current benefit.

As the provider is neither the employer, nor an associate of the employer, paragraph 51(a) will not apply. Paragraph 51(b) will apply because the employer will incur expenditure to the insurance company (the provider).

The Fee the employer pays to the insurance company includes payments for items other than the recipient’s current benefit, such as corporate program set up expenses and other administration costs.

In ATO Interpretative Decision ATO ID 2001/333 Fringe Benefit Tax: Administrative costs of salary packaging (ATO ID 2001/333) it was held that the costs incurred by the employer for the administration of employee salary packaging arrangements do not constitute the provision of a fringe benefit as defined under subsection 136(1) of the FBTAA. They are administrative costs consequently incurred externally to another company.

The retail price of membership of the health and wellness program for an ordinary member of the public who is covered by an eligible life insurance policy is less than $300. The membership benefits which are available to an ordinary member of the public who pays an annual membership contribution are the same as for employees who receive free membership of the health and wellness program.

Thus it is reasonable to conclude that the component of the Fee payable by the employer which is in respect of the free membership of the health and wellness program is less than $300 per employee.

Is the benefit specifically excluded from section 58P?

In-house fringe benefits and tax-exempt body entertainment benefits are specifically excluded from being minor benefits, and as the free membership of the health and wellness program is not either of these types of benefits, it is not specifically excluded from section 58P of the FBTAA.

(ii) The criteria used to determine if it is unreasonable to treat the benefit as a fringe benefit

The infrequency and irregularity with which associated identical or similar benefits are provided

Paragraphs 187 to 189 of TR 2007/12 discuss what is meant by ‘associated benefits’.

Paragraph 188 states:

For the purposes of the minor benefits exemption the term ‘associated benefits’ is defined in subsection 58P(2) to mean a benefit that is any of the following:

● identical or similar to the minor benefit;

● provided in connection with the provision of the minor benefit; or

● identical or similar to a benefit provided in connection with the provision of the minor benefit.

Paragraph 189 goes on to state:

In addition:

● the associated benefit and the minor benefit must relate to the same employment of a particular employee, and

● an associated benefit does not include a benefit that is an exempt benefit under any provision of the FBTAA other than this section (that is, section 58P).

Paragraph 190 explains what is meant by the phrase ‘in connection with’ as follows:

A benefit that is provided ‘in connection with’ the minor benefit is one that is provided in conjunction with the minor benefit. For example if accommodation, board and electricity benefits are provided in conjunction with the payment of minor telephone expenses, these benefits are provided in connection with the telephone expenses payment benefit.

Paragraphs 200 to 208 discuss the terms ‘infrequent and irregular’ and ‘identical’ and ‘similar’ as follows:

200. The first criterion to be considered is the infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit or benefits that are given in connection with the minor benefit, are provided, or can reasonably be expected to be provided.

201. It is important to note that although this is the first criterion listed, it is not the main, or only, criterion and ‘regard must be had to all factors, even if only to consider that a particular factor is irrelevant in the circumstances’.

202. ‘Infrequency and irregularity’ and ‘identical or similar’ are not defined in the FBTAA and therefore take their ordinary meaning.

203. The Macquarie Dictionary defines ‘infrequent’ as:

1. happening or occurring at long intervals or not often

2. not constant, habitual or regular

and ‘irregular’ as:

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

204. The Macquarie Dictionary defines ‘identical’ as:

1. (something followed by to or with) corresponding exactly in nature, appearance, manner, etc.: this leaf is identical to that.

2. The very same: I almost bought the identical dress you are wearing

and ‘similar’ as:

1. having a likeness or resemblance, especially in a general way.

205. The decision in the NAB case is of some assistance in interpreting the meaning of the words ‘infrequency and irregularity’, as they are used in section 58P. In reaching a conclusion under section 58P, Ryan J said that the notional taxable value of the minor benefit, being the travel by taxi on a particular day was ‘small’. Ryan J then held that:

… on a broad view of the matters specified in paragraphs (F) of s58P(i) of the Act I am not able to conclude that it would be unreasonable to treat the presumptively minor benefit provided to Mr Brewster on 29 March 1988 as a fringe benefit in relation to the relevant year of tax.

206. Ryan J was able to find, on the evidence, that the associated benefits, being each journey by taxi cab undertaken in similar circumstances in the relevant tax year, were provided infrequently or irregularly to the employee. This was based on the facts before Court, including the facts that the employees were ‘shift workers’ and that they were entitled to the provision of transport by taxi cab at the end of afternoon shifts, both before and after night shifts, and before and after weekend shifts.

207. In Case 2/96 the term ‘infrequent and irregular’ was considered further. The AAT stated:

27. We do not think that the examples set out in the Draft Taxation Determination TD 94/D33 are of much assistance. Those examples focus on the ‘infrequency and irregularity’ factors set out in the section. Example 1 would have it that one taxi fare home (costing between $10 and $15) in each month would be sufficiently frequent and regular [sic] we think that this example is unlikely to be correct. It seems to us that there is a clear distinction to be drawn between benefits which are isolated or rare and benefits which are infrequent and irregular, and that the worked examples may have equated these concepts.

28. Taxation Determination TD 93/76 issued on 29 April 1993 focus [sic] on each of the tests in 58P(1)(f) in relation to redeemable vouchers; we do not think that the worked examples are of assistance in the present case.

29. Nor do we consider that, while accepting that the relevant employees are not shift workers, the ‘balance of probabilities’ test contended for by the applicant can be the correct test; the wording of paragraph (f)(i) does not suggest to us that such a test was intended for this purpose. There were some employees who performed overtime work regularly, and must reasonably have expected that taxi fares would be provided; they would naturally have been aware of the fact that they were covered for this purpose by a relevant award.

…

34. The Tribunal has come to the conclusion having regard to the test laid down in section 58P(1) that a benefit and its associated like benefits will be minor if, in relation to any given employee and in respect of each FBT year, the number of Total Trips is less than 48, or, on a monthly averaging basis, less than 4 per month. This view (which is inevitably somewhat arbitrary) is based on the view that that number of trips is likely to be infrequent, and having regard to the evidence as to the ad hoc nature of the applicant’s requirements, irregular; further the employee could not reasonably have expected them.

208. Having regard to the above, it is clear that the words ‘infrequent and irregular’ do not mean ‘isolated or rare’.

The benefit provided to an employee is the waiving of the annual membership fee. Associated identical or similar benefits are the waiving of annual membership fees in subsequent years. The provision of the benefit is potentially regular, being every year.

The benefit will be provided infrequently, being once a year. Employees may choose to use the membership for one year, or for several years. Whether the benefit is received regularly will depend on individual circumstances.

The sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar to the minor benefit in the current year of tax or any other year of tax

This criterion is discussed at paragraphs 218 to 224 of TR 2007/12 which state:

218. The second criterion to be considered is 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, in relation to the current year or any other year of tax.

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

220. In the NAB case Ryan J found that:

The sum of the presumptively minor benefit and all the associated benefits to Mr Brewster both in the current year of tax (amounting on the evidence to about $8,000) was substantial in the current tax years and might reasonably be expected to be similarly substantial in subsequent tax years.

221. The greater the value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit.

222. The value of the 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.

223. This will apply to identical or similar benefits that have been provided in the past and are likely to be provided in the future.

224. Even if the value of each benefit is below the minor benefits threshold, the sum of the values of the benefits provided, being identical benefits in the current year of tax, the previous year and those that are reasonably expected to be provided in the future, are all taken into consideration under this criterion.

The notional taxable value of the minor benefit will be the annual membership fee of less than $300. The annual membership fee charged in all subsequent years of the agreement between the employers and the insurance company will be associated benefits which are identical or similar to the minor benefit in the current year or any other year of tax. The sum of the notional taxable value of the minor benefit and associated benefits that are identical or similar to the minor benefit will be the sum of the annual membership fee for each year of the agreement between the employer and the insurance company.

The sum of the notional taxable value of the minor benefit and associated benefits that are identical or similar to the minor benefit may differ between different employees depending on the number of years the benefit is provided. The greater the value of the minor and associated benefits the less likely it is the minor benefit will qualify as an exempt benefit.

If an employee is provided with the benefit for one or two years, the sum of the notional taxable value will be below $300 and would be considered of low value. If an employee is provided with the benefit for three or more years, the notional taxable value will be more than $300, and this greater value is taken into consideration when determining if it is unreasonable to treat the benefit as a fringe benefit.

This criterion is discussed at paragraphs 225 to 231 of TR 2007/12 which state:

225. The third criterion to be considered is the amount that is, or might reasonably be expected to be, the sum of the notional taxable of any other associated benefits provided in relation to be current year of tax or any other year of tax.

226. Other associated benefits will include benefits which themselves may also be minor benefits.

227. This criterion has regard to any other associated benefits; that is, associated benefits which are not identical or similar to the minor benefit. This will include those associated benefits which are provided in connection with the minor benefits and benefits which are identical or similar to a benefit provided in connection with the minor benefit.

Example 16: other associated benefits

228. A meal, which is a minor benefit, is provided in connection with a night’s accommodation and taxi travel. Each benefit under these circumstances is a separate benefit.

229. The total of the taxable values of the night’s accommodation and taxi travel, and any other accommodation or taxi travel provided in the current year, in a previous year and those that are reasonably expected to be provided in the future must be considered.

230. The ‘any other accommodation and taxi travel’ being identified as associated benefits for this purpose do not have to be provided in connection with meals. They only have to be identical or similar benefits to the accommodation and taxi travel that is provided in connection with the meal (minor benefit).

231. The greater the total value of the other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit, being the meal, will qualify as an exempt benefit. The other criteria used to determine if it is unreasonable to treat the minor benefit as a fringe benefit would need to be considered before any conclusion could be reached that the benefit is a minor benefit.

There are no other associated benefits in the current year of tax or any other year of tax.

The practical difficulty in determining the notional taxable values of the minor benefit and any associated benefits

The benefit will be provided to several thousand employees. When provided in the first year, the taxable value will be less than $300 and will be provided once. The value will be under $300 and will be provided infrequently and irregularly. The benefit will be accepted as an exempt minor benefit.

Whether the benefit remains an exempt minor benefit will depend on whether the benefit is provided on a recurring basis. Individual employees may choose to renew the membership over several years. The sum of the notional taxable value of the minor benefit and associated benefits that are identical or similar to the minor benefit, being the annual membership fee, will be of greater value, and be provided regularly, once a year, making it less likely the minor benefit will qualify as exempt.

In the first year of the provision of the benefit, employers would need to make an assessment of whether the benefit will be an exempt minor benefit, or a fringe benefit. A one year membership would be an exempt minor benefit. A recurring benefit, of three or more years, may be a fringe benefit.

For employers to correctly assess whether the benefit is exempt or not from the first year, they would need to know how many annual benefits each of several thousand employees intended to receive the benefit of the annual membership fee.

The employers would need to obtain information from each of several thousand employees of their intention of how many annual benefits they wished to receive, and make a judgment on each individual employee of whether the benefit will be exempt or taxable. Employees may change their stated intentions, dropping out of the program after a year or two after initially stating their intention to remain in the program for a longer period.

The administration required to record several thousand employees receiving a benefit, and then obtain further information from each of those employees of how many annual benefits they wished to receive, to make a judgment call on the benefit provided to each individual employee whether it is exempt or taxable, would be difficult and onerous.

The circumstances surrounding the provision of the minor benefit and any associated benefits, including whether it was provided to the employee to assist with an unexpected event, and whether it was wholly or principally as a reward for services rendered by the employee

Consideration of the circumstances surrounding the provision of the minor benefit, indicate that the free membership is not provided to assist an employee to deal with an unexpected event.

Whether a benefit has been provided wholly or principally for services rendered or to be rendered will depend on the circumstances.

In some instances it is clear the benefit has been provided wholly or principally for services rendered or to be rendered, where for example, an employee enters into a salary sacrifice arrangement (SSA), because the benefits have been provided in substitution for salary and wages.

Other instances are less clear and require a careful consideration of the facts as illustrated by the example in TR 2007/12 at paragraph 241:

241 …On the other hand, although a Christmas party provided to employees and their families may be considered to be a reward for services rendered or to be rendered, it would not necessarily be considered to have been provided wholly or principally by way of reward for services rendered or to be rendered by the employee.

Under the offer, the provision to employees of free membership to the health and wellness program is part of the broader employer policy to improve the health and wellness of their employees. It is offered to all employees and their choice to participate or not has no effect on their remuneration. It is not provided as part of a SSA. As it is not part of an SSA and the health and wellness of the employee is one of the reasons the benefit is provided it cannot be said the benefit was provided ‘wholly or principally’ as a reward for services rendered or considered to have been provided as a substitute for salary, wages or bonuses.

In considering these factors, as the benefit is not provided to assist with an unexpected event, it is not provided as part of a SSA, nor is it provided wholly or principally as a reward for service, this criterion has been satisfied.

Conclusion

The benefit of the provision of the free membership fee to the health and wellness program is infrequent, being once a year, but may be regular if provided on a recurring basis.

The sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar to the minor benefit in the current year of tax or any other year of tax will be the sum of the notional taxable value of the minor benefit, being the annual membership fee of less than $300, added to the annual membership fee in all years that the annual membership fee is provided. The sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar to the minor benefit in the current year of tax or any other year of tax will depend on the number of years that the benefit is provided, which may vary between individual employees. If an employee is provided with the benefit for one or two years, the notional taxable value will be below $300. and therefore of low value. If an employee is provided with the benefit for three or more years, the notional taxable value will be more than $300, and will be of a greater value.

There are no other associated benefits to the minor benefit.

There will be practical difficulty in the administration of providing a benefit to several thousand employees, especially when it is not known with certainty in the first year whether individual employees will be provided with the benefit on a recurring basis or not.

The benefit is not provided to assist an employee to deal with an unexpected event, nor is it provided wholly or principally as a reward for services rendered or to be rendered.

On balance, having regard to the following factors:

● the benefit is provided infrequently (although possibly regularly);

● the notional taxable value may vary between individuals depending on the recurring nature of the benefit;

● the large number of employees involved requiring difficult and onerous administration;

● the benefit is not provided wholly or principally as a reward for services;

it is concluded that it would be unreasonable to treat the benefit as a fringe benefit. The benefit is accepted as an exempt minor benefit.

Is the allocation of points to members of a health and wellness program a fringe benefit as defined in subsection 136(1) of the FBTAA?

Employees can accumulate health and wellness program Points by undertaking various activities. The points are calculated taking into account the activity being undertaken, the employee’s health goals and risk factors, and the terms of the employee’s membership.

The number of health and wellness program Points can be viewed by an employee at any time on the member portal.

Health and wellness program Points are a way of measuring an employee’s participation and progress in the health and wellness program. The points do not have any cash value and are not convertible into cash. Points do not give an employee contractual rights and are not property or currency.

Points cannot be purchased and are not transferrable to any other person. Points expire at the end of an employee’s membership year and on termination of their health and wellness program Membership.

The allocation of points is a benefit to an employee. The benefit will be a fringe benefit if the benefit was provided to the employee in respect of his or her employment.

The allocation of points is determined by the health and wellness program under the Membership Agreement between the member and the insurance company based on the level of achievement by the member. The health and wellness program solely calculates and allocates the points based on the member’s achievements. The points are not allocated by reason of employment with the employers, and the employers do not facilitate the allocation of points to members.

Is the receipt of free or discounted goods and services by members of a health and wellness program a fringe benefit as defined in subsection 136(1) of the FBTAA?

Entitlement to benefits to members resulting from health and wellness program Points includes vouchers, discounts, cashbacks, rewards and other products and services.

An employee will receive a benefit of free or discounted goods and services by being a member of the health and wellness program and accumulating sufficient points. The benefit will be a fringe benefit if the benefit was provided to the employee in respect of his or her employment.

The provision of free or discounted goods and services arises out of a personal contract between the employee and the insurance company as a result of levels of achievement reached through the program. They do not arise out of their employment, and the employers do not facilitate the acquisition of points by enabling employees to complete the tasks required to reach certain levels of benefits.

Taxation Ruling TR 1999/6 Income tax and fringe benefits tax: flights received under frequent flyer and other similar consumer loyalty programs (TR 1999/6), provides that flight rewards received under a consumer loyalty program are not subject to Fringe Benefits Tax as they result from a personal (that is, non-employment) contractual relationship.

The two exceptions outlined in TR 1999/6, namely, where the person with the personal contract is also an employer and provides the flight reward received to an employee in respect of employment, or in respect of the employment of an employee, and where a flight reward is provided to an employee, or the employee’s associate, under an ‘arrangement’ for the purposes of the FBTAA, that results from business, do not apply.

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