Edited version of private advice

Authorisation Number: 1051528541596

Date of advice: 5 August 2019

Ruling

Subject: Tax-Exempt Body Entertainment Fringe Benefit - Expense Payment Fringe Benefit - Otherwise Deductible Rule

Question 1

Does the provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or continuing professional development course held during a lunch-time period (less than four hours) be considered 'entertainment' and therefore qualify as a 'tax-exempt body entertainment fringe benefit' under section 38 of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

Question 2

If the answer to Question One is 'No', will the provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or continuing professional development course held during a lunch-time period (less than four hours) qualify for the 'minor benefits' exemption in section 58P of the FBTAA?

Answer

No

Question 3

If the answer to Questions One and Two is 'No', will the provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or continuing professional development course held during a lunch-time period (less than four hours) be an 'expense payment fringe benefit', with a reduction in taxable value available under the 'otherwise deductible rule' pursuant to section 24 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following period:

1 April 20XX to 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The Employer is a tax-exempt body.

A number of Professional Bodies each hold a 'luncheon event', which generally consists of a panel discussion on a relevant continuing professional development (CPD) topic or presentation of a professional paper. The duration of each of these events is less than four hours. The event is generally held between 12:00pm and 2:00pm as it is easier for interested members to attend. A luncheon is also served.

Employees of the Employer who are members of the relevant Professional Body or whose work is directly related to the discussion paper being presented attend as part of their ongoing training and professional development. Attendance is not mandatory.

Payment for these events is made by the Employer. The cost of registering for/attending a 'luncheon event' session includes the luncheon. There is no splitting of costs allocated between the cost of the seminar and the lunch provided. That is, the registration fee does not allocate any specific costs to the luncheon, nor is the Employer able to pay for their employee to simply attend the CPD component of the 'luncheon event' session without having lunch.

The Professional Body 'luncheon event' sessions are held not just for the Employer, but for the industry as a whole. The Employer will only send a couple of their staff to any one event. The rest of the participants are from numerous other organisations and relevant agencies.

The events are always held in external conference centres or conference rooms given they are attended by member participants from many organisations.

The Employer employees attending the seminar/CPD luncheon event travel to the event directly from work, and return directly to work after the conclusion of the event.

The luncheon provided at the Professional Body 'luncheon event' sessions generally consist of a basic main meal (usually a small piece of fish or meat with vegetables) and a pre-prepared sweet (usually petit fours, cheesecake (or similar) or a small apple pie with a scoop of ice-cream). Alcohol is very rarely served.

The costs for the various luncheon events vary considerably, and can generally range from approximately $XX per employee to approximately $XXX per employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Division 10

Fringe Benefits Tax Assessment Act 1986 Section 33

Fringe Benefits Tax Assessment Act 1986 Section 38

Fringe Benefits Tax Assessment Act 1986 Section 39

Fringe Benefits Tax Assessment Act 1986 Section 40

Fringe Benefits Tax Assessment Act 1986 Section 41

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 32

Income Tax Assessment Act 1997 Section 32-5

Income Tax Assessment Act 1997 Section 32-10

Income Tax Assessment Act 1997 Section 32-20

Income Tax Assessment Act 1997 Section 32-25

Income Tax Assessment Act 1997 Section 32-35

Income Tax Assessment Act 1997 Section 32-55

Income Tax Assessment Act 1997 Division 50

Income Tax Assessment Act 1997 Section 50-25

Reasons for decision

Question 1

Does the provision of food and drink to an employee of the Employer (as part of their attendance at a Professional Body's seminar or continuing professional development (CPD) course held during a lunch-time period (less than four hours) be considered 'entertainment' and therefore qualify as a 'tax-exempt body entertainment fringe benefit' under section 38 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The provision of food and drink to certain employees of the Employer as part of their attendance at a Professional Body's seminar or CPD luncheon event held during a lunch-time period (less than four hours) does not constitute 'entertainment', and as such, does not constitute a 'tax-exempt body entertainment fringe benefit' under section 38 of the FBTAA.

Detailed reasoning

Section 38 of the FBTAA defines a 'tax-exempt body entertainment benefit' as:

Where, at a particular time, a person (in this section referred to as the provider) incurs non-deductible exempt entertainment expenditure that is wholly or partly in respect of the provision, in respect of the employment of an employee, of entertainment to a person (in this section referred to as the recipient) being the employee or an associate of the employee, the incurring of the expenditure shall be taken to constitute a benefit provided by the provider to the recipient at that time in respect of that employment.

Therefore, a 'tax-exempt body entertainment fringe benefit' will arise when the following conditions are satisfied:

·         the employer incurs a non-deductible exempt entertainment expenditure

·         the benefit is wholly or partly 'in respect of the employment of the employee', and

·         the benefits constitutes the provision of 'entertainment'.

Condition 1: 'Non-deductible exempt entertainment expenditure'

'Non-deductible exempt entertainment expenditure'is defined under subsection 136(1) of the FBTAA as 'non-deductible entertainment expenditure to the extent to which it is not incurred in producing assessable income.'

Subsection 136(1) of the FBTAA defines 'non-deductible entertainment expenditure'asa loss or outgoing to the extent to which:

(a)          section 32-5 of the Income Tax Assessment Act 1997 applies to it, or would apply if it were incurred in producing assessable income; and

(b)          apart from that section, it would be deductible under section 8-1 of that Act, or would be if it were incurred in producing assessable income;

(on the assumption that section 32-20 of the Income Tax Assessment Act 1997 had not been enacted).

Section 32-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that there is no deduction under section 8-1 of the ITAA 1997 for entertainment expenses. However, there are a number of exceptions to section 32-5 of the ITAA 1997, which are set out in Subdivision 32-B of the ITAA 1997. These are summarised in Chapter 14.15 of the ATO's publication entitled Fringe benefits tax - a guide for employers and include the following:

• The cost of food and drink that is reasonably incidental to a person's attendance at an 'eligible seminar'. This is a conference, convention, lecture and so on of at least four hours duration that is not held:

·      to conduct normal business discussions in relation to the particular business:

·      for the purpose of advertising the goods or services of a particular business

·      for the dominant purpose of providing entertainment.

• The cost of food and drink that is reasonably incidental to a person's attendance at an 'exempt training seminar' of at least four hours duration, organised by, or on behalf of, you solely for training employees. The session must be conducted in conference facilities operated by a business unrelated to you.

Item 2.1 of the table in section 32-35 of the ITAA 1997 provides that if the seminar goes for at least four hours and does not satisfy one of the specified exceptions, then any food or drink consumed by the employee that is 'reasonably incidental' to the attendance at the seminar is not precluded by section 32-5 of the ITAA 1997 from being deductible under section 8-1 of the ITAA 1997.

However, in the Employer's circumstances, the applicable seminars/CPD luncheon events are generally held between 12:00pm until 2:00pm. As such seminars/CPD luncheon events are always less than four hours, the expense is therefore not tax deductible.

On the consideration of the above factors, the Commissioner has determined that the applicable seminars/CPD luncheon events do not fall within the exceptions in Subdivision 32-B of the ITAA 1997, and thus the entertainment expense provided by the Employer is not deductible for income tax purposes.

Therefore, Condition 1 is satisfied.

Condition 2: The benefit is wholly or partly 'in respect of the employment' of the employee

As per subsection 136(1) of the FBTAA, the term '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:

·         whether or not the benefit also relates to some other matter or thing

·         whether the employment is past, present or future

·         whether or not the benefit is surplus to the recipient's requirements

·         whether or not the benefit is also provided to another person

·         whether or not the benefit is offset by any inconvenience or disadvantage

·         whether or not the benefit is provided or used, or required to be provided or used, in connection with any employment

·         whether or not the provision of the benefit is in the nature of income, and

·         whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee.

The full Federal Court in J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 (Knowles) examined the meaning of 'in respect of' an employee's employment. It was 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'. A similar view was also held in Essenbourne Pty Ltd v FC of T 2002 ATC 5201 and Starrim Pty Ltd v FCT (2000) 102 FCR 194; [2000] FCA 952; 2000 ATC 4460; (2000) 44 ATR 487.

It was also suggested by the full Federal Court in Knowles that it would be useful to ask 'whether the benefit is a product or incident of the employment'.

The particular seminar/CPD luncheon event held by the various Professional Bodies is only open to members of these bodies. A certain number of the Employer's employees are members of these Professional Bodies. An employee of the Employer who is a member of one of these Professional Bodies and attends one of their Professional Body's seminars/CPD luncheon events is provided with food and drink as part of their attendance. Employees of the Employer attending these seminars/CPD luncheon events do so in their capacity as employees of the Employer and thus the benefit is provided to these attendees in their capacity as employees.

Therefore, as the benefit is provided in respect of the employee's employment, Condition 2 is satisfied.

Condition 3: The benefit constitutes the provision of entertainment

'Entertainment' is defined in subsection 32-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and as being entertainment by way of food or drink or recreation, or accommodation or travel to do with providing that entertainment. Subsection 32-10(2) of the ITAA 1997 provides that if business discussions or transactions occur during entertainment events, the events are still considered to be entertainment.

As provided in paragraph 6 of Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17), the definition of 'entertainment' in section 32-10 of the ITAA 1997, and adopted in the definition of 'entertainment' in subsection 136(1) of the FBTAA, does not prescribe that entertainment occurs every time food or drink is provided.

Some examples of entertainment are provided in section 32-10 of the ITAA 1997, such as business lunches and staff social functions. In these examples, the provision of food or drink confers entertainment on the recipient.

TR 97/17 provides guidance on the concept of what is 'entertainment' as it relates to the provision of food or drink for the purposes of applying the relevant provisions of the FBTAA and the ITAA 1997. Paragraph 7 of the TR 97/17 states the following:

7. In order to determine when the provision of food or drink to a recipient results in the entertainment of that person, an objective analysis of all the circumstances surrounding the provision of the food or drink is required. In making this determination an employer should consider:

       why the food or drink is being provided;

       what type of food or drink is being provided;

       when that food or drink is being provided; and

       where the food or drink is being provided.

Food or drink which is determined by these criteria to constitute entertainment is taken to be 'meal entertainment'.

Paragraph 23 of TR 97/17 provides further details on the above four factors that should be considered when undertaking an objective analysis of the criteria.

Paragraph 24 of TR 97/17 indicates that no one of the paragraph 23 factors will be determinative; however, paragraphs (a) and (b) are considered the more important. The application of the above factors results in the determination for whether the food or drink amounts to meal entertainment.

Paragraph 18 of TR 97/17 takes the view that the mere provision of food or drink in any circumstance does not necessarily constitute 'entertainment'. An element of entertainment is required before the provision of food or drink becomes meal entertainment. However, it was noted that, in most cases, the mere provision of food or drink will satisfy the 'entertainment' test. It is only in a narrow category of cases where the mere provision of food or drink does not amount to 'entertainment' for the purposes of Division 32 of the ITAA 1997.

Paragraphs 19 and 20 of TR 97/17 contrasts the consideration of providing light meals with non-deductible entertainment expenses as follows:

19. We have expressed this view previously, for example, in Taxation Ruling IT 2675. That Ruling considers that the provision of morning and afternoon tea to employees (and associates of employees) on a working day, either on the employer's premises or at a worksite of the employer, is not entertainment. The provision of light meals (finger food, etc.), for example in the context of providing a working lunch, is not considered to be entertainment. The provision of food or drink in these circumstances does not confer entertainment on the recipient.

20. The provision of light meals can be contrasted with the examples of non-deductible entertainment given in the explanatory memorandum to Taxation Laws Amendment Bill (No 4) 1985, i.e., business lunches and drinks, dinners, cocktail parties and staff social functions. In these examples the provision of the food or drink confers entertainment on the recipient. The wording of section 32-10 of the ITAA shows a clear intention to treat food or drink consumed in these situations as entertainment, whether or not business discussions or business transactions occur at the same time.

In considering whether the Employer's provision of food and drink constitutes entertainment, it is necessary for an objective analysis of all the circumstances against factors provided in paragraphs 7 and 23 of TR 97/17. None of the factors are determinative, however (a) and (b) are the more important factors.

a) Why is the food and drink being provided?

TR 97/17 describes this test as a 'purpose test'. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation where the purpose of the function is for employees to enjoy themselves has the character of entertainment.

The Employer pays for a certain number of its employees who are members of relevant Professional Bodies to attend various seminars/CPD luncheon events held these Professional Bodies. The provision of food and drink is incidental to the delivery of the seminars/CPD luncheon events.

The Commissioner accepts that food and drink that is served at a seminar/CPD luncheon event run by a Professional Body - and that is consumed by members of the relevant Professional Body who attend, including employees of the Employer and staff from other organisations - have the purpose/nature of providing sustenance to these attendees.

It is also accepted by the Commissioner that another purpose of food and drink being provided at these seminars/CPD luncheon events is to entice attendance by Professional Body members, which include certain employees of the Employer. The enhanced professional knowledge and skills provided to the Employer's employees through attendance at these seminars/CPD luncheon events are beneficial to the Employer, and thus are not for entertainment purposes.

b) What type of food and drink is provided?

Morning and afternoon teas and light meals are generally not considered to constitute entertainment. However, as light meals become more elaborate, they take on more of the characteristics of entertainment. The reason for this is that the more elaborate a meal, the greater the likelihood that entertainment arises from the consumption of the meal. Therefore, the meals take on more of the characteristics of entertainment.

Similarly, paragraph 16 of Taxation Ruling IT 2675: Income tax and fringe benefits tax: entertainment - morning and afternoon teas; light meals; and in-house dining facilities (IT 2675) provides the following:

16. The provision of biscuits and drinks such as tea, coffee, soft drinks and fruit juices to employees or their associates on a working day for morning or afternoon tea cannot be said to provide amusement or even to be an agreeable occupation. It is merely the provision of refreshments to enable the employees or associates to complete the working day in comfort. The same may be said of light meals provided by a taxpayer to employees or their associates on a working day.

However, there is no definite guidelines as to when a light meal becomes more elaborate as expressed in paragraph 7 of IT 2675:

7. Light meals are treated in the same way as morning and afternoon tea. It is not the provision of entertainment to provide sandwiches and other 'hand food', salads, orange juice, etc...that are intended to, and can, be consumed on the taxpayer's premises or worksite. As 'light' meals become more elaborate, they take on more of the characteristics of entertainment. There is no particular point at which this will become obvious. Normal business practice will be the yardstick.

In the current circumstances, the food and drink that is provided at each seminar/CPD luncheon event is different. However, food and drink provided that these events generally include a basic main meal (usually a small piece of fish or meat with vegetables) and a pre-prepared sweet (usually petit fours, cheesecake (or similar) or a small apple pie with a scoop of ice-cream). Alcohol is very rarely served.

The Commissioner considers that the above food and drink that is generally provided at the 'luncheon event' sessions that certain employees of the Employer attend constitute 'light meals' and thus do not take on the characteristics of entertainment.

c) When is the food or drink being provided?

Food or drink provided during work time, during overtime or while an employee is travelling is less likely to have the character of entertainment. This is because in the majority of these cases food provided is for a work-related purpose rather than an entertainment purpose. This, however, depends upon whether the entertainment of the recipient is the expected outcome of the provision of the food or drink.

In the current circumstances, the food or drink that is provided at the luncheon events to employees of the Employer attending these events occurs during the lunch-time period. While this is not during work time, the Employer's employees attending the seminar/CPD luncheon event travel to the event directly from work, and return to work upon the conclusion of the event. The Commissioner considers the associated expense (the registration fee for the luncheon event) paid for by the Employer is more for a work-related purpose than an entertainment purpose, as that time of the day is easier for employees of the Employer (and employees from other organisations) to attend such events (of a professional development nature).

d) Where is the food or drink provided?

Food or drink provided on an employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment.

In the current circumstances, the various luncheon events held by relevant Professional Bodies to which certain employees of the Employer attend during a lunch-time period take place at external conference centres/function rooms outside of the Employer's work premises. Such facilities are required as members of these Professional Bodies who attend the various luncheon events are from a number of different organisations, including the Employer.

Therefore, while the food or drink provided to employees of the Employer who attend these luncheon events are not provided on the Employer's work premises, the Commissioner considers that the location at which the food or drink is provided to the Employer's employees at the lunch-time seminars/CPD luncheon events does not have the character of entertainment.

Conclusion

On the application of the above factors, the Commissioner has determined that the provision by the Employer of food and drink to its employees who attend such Professional Body luncheon events (through payment of a luncheon event registration fee) does not amount to entertainment.

The Commissioner gave particular weight to the following factors:

·         The food and drink provided to the Employer's employees at the various Professional Body luncheon events have the primary purpose/nature of providing sustenance while undertaking professional development.

·         A further purpose for providing food and drink at these luncheon events is to entice attendance by the Employer's employees (specifically those who are members of the relevant Professional Bodies) at these events, which purport to enhance the professional knowledge and skills of these employees of the Employer which would, in turn, ultimately benefit the Employer.

·         The food and drink that is generally provided at the luncheon events that certain employees of the Employer attend constitute 'light meals' and thus do not take on the characteristics of entertainment.

Therefore, as the third condition in section 38 of the FBTAA is not satisfied, the provision by the Employer (through payment of the registration fees for the Professional Body seminars/CPD luncheon events) of food and drink to its employees who attend such events does not constitute a 'tax-exempt body entertainment fringe benefit'.

Question 2

If the answer to Question One is 'No', will the provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or continuing professional development (CPD) course held during a lunch-time period (less than four hours) qualify for the 'minor benefits' exemption in section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

Paragraph 58P(1)(d) of the FBTAA will not apply to exclude the food and drink provided to an employee of the Employer as part of their attendance at a Professional Body's seminar or CPD luncheon event held during a lunch-time period (less than four hours) from being an exempt benefit. However, if the Employer satisfies the remainder of the requirements in section 58P of the FBTAA, the food and drink provided to an employee of the Employer as part of their attendance at a Professional Body's seminar or CPD luncheon event held during a lunch-time period (less than four hours) will be an exempt benefit.

Detailed reasoning

Section 58P of the FBTAA provides that a minor benefit may be an exempt benefit.

Subsection 58P(1) of the FBTAA specifies the tests for exemption and includes specific exclusions from the minor benefits exemption at paragraphs 58P(1)(c) and (d) of the FBTAA. Therefore, not all minor benefits will be exempt benefits.

Where:

(a)  a benefit (in this section called a minor benefit ) is provided in, or in respect of, a year of tax (in this section called the current year of tax ) in respect of the employment of an employee of an employer;

(b)  (Repealed by No 88 of 2013)

(c)  in the case of an expense payment benefit, a property benefit or a residual benefit - if the minor benefit were an expense payment fringe benefit, a property fringe benefit or a residual fringe benefit, as the case may be, in relation to the employer, the expense payment fringe benefit, the property fringe benefit or the residual fringe benefit, as the case requires, would not be an in-house fringe benefit;

(d)  in the case of a tax-exempt body entertainment benefit where the provider incurs non-deductible exempt entertainment expenditure that is wholly or partly in respect of the provision of entertainment to the employee or an associate of the employee:

                                        (i)    the provision of entertainment to the employee or the associate of the employee, as the case may be:

(A)   is incidental to the provision of entertainment to outsiders; and

(B)   neither consists of, nor is provided in connection with, the provision of a meal (other than a meal consisting of light refreshments) to the employee or the associate of the employee, as the case may be; or

                                       (ii)    the entertainment is provided to the employee or the associate of the employee, as the case may be:

(A)   on eligible premises of the employer; and

(B)   solely as a means of recognising the special achievements of the employee in a matter relating to the employment of the employee;

(e)  the notional taxable value of the minor benefit in relation to the current year of tax is less than $300; and

(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.

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12) sets out the Commissioner's views on the application of the minor benefits exemption in section 58P of the FBTAA. Paragraphs 157 to 175 of TR 2007/12 discusses and provides examples of the application of paragraphs 58P(1)(a) to 58P(1)(f) of the FBTAA.

In particular, paragraph 58P(1)(d) of the FBTAA specifically excludes from being an exempt benefit many minor entertainment benefits provided by tax-exempt bodies to their employees.

As explained in the response to Question One, the provision of food and drinks to the Employer's employees who attend the seminars/CPD luncheon events are not tax-exempt body entertainment benefits. As a result, the exclusion at paragraph 58P(1)(d) of the FBTAA will not apply.

However, if the Employer satisfies the remainder of the requirements in section 58P of the FBTAA, then section 58P will apply to the food and drinks provided to the Employer's employees who attend the Professional Body seminars/CPD luncheon events and the benefit will be an exempt benefit.

Question 3

If the answer to Questions One and Two is 'No', will the provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or continuing professional development (CPD) course held during a lunch-time period (less than four hours) be an 'expense payment fringe benefit', with a reduction in taxable value available under the 'otherwise deductible rule' pursuant to section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The provision of food and drink to an employee of the Employer as part of their attendance at a Professional Body's seminar or CPD luncheon event held during a lunch-time period (less than four hours) will be an 'expense payment fringe benefit'. However, the taxable value of such a benefit will be reducible to nil under the 'otherwise deductible rule' pursuant to section 24 of the FBTAA.

Detailed reasoning

An 'expense payment fringe benefit' is defined in subsection 136(1) of the FBTAA to mean a fringe benefit that is an expense payment benefit. That same provision defines an 'expense payment benefit' to mean a benefit referred to in section 20 of the FBTAA.

Section 20 of the FBTAA states that an 'expense payment benefit' may arise in either of two ways:

1.    where the provider makes a payment which wholly or partly discharges an obligation of the recipient to pay an amount to a third person, or

2.    where the provider reimburses the recipient wholly or partly for an amount of expenditure incurred by the recipient.

The benefit arises at the time the provider makes the payment discharging the obligation to the third party, or makes the reimbursement payment.

In the current circumstances, the Employer (the 'provider') makes a payment of the full registration fee directly to the relevant Professional Body holding the seminar/CPD luncheon event to which an employee of the Employer (the 'recipient') - who is also a member of that Professional Body - attends, thus discharging an obligation of the recipient to pay this amount. This therefore constitutes an 'expense payment fringe benefit' provided to the particular employee of the Employer pursuant to section 20 of the FBTAA.

Under section 24 of the FBTAA, the taxable value of an expense payment fringe benefit provided to an employee may be reduced to the extent to which the employee would have been entitled to a 'once-only' income tax deduction for the expenditure concerned had it not been paid or reimbursed by the benefit provider. This is known as the 'otherwise deductible rule'. A 'once-only' deduction is one that is wholly or partly allowable in one year for the expenditure, and not in any other year.

An expense payment fringe benefit is reduced by the 'notional deduction' which is, as specified in paragraph 24(1)(ba) of the FBTAA, the difference between the deduction that would be allowable if the employee had paid the whole of the expenditure incurred and had not been reimbursed for any part of it (the 'gross deduction') and the actual deduction allowable to the employee for the expenditure.

In the present circumstances, if a particular employee of the Employer were to incur the expense of a registration fee for attending a seminar/CPD luncheon event held by a Professional Body of which that employee is a member, such an expense would be incurred in gaining or producing their assessable income as it would be attributable to developing their professional knowledge and skills.

Hence, if such an expense had been incurred by the particular employee of the Employer in gaining or producing their assessable income, this expense (the registration fee for the seminar/CPD luncheon event) would be 'otherwise deductible' to that employee in their personal income tax return under section 8-1 of the Income Tax Assessment Act 1997 if the Employer had not paid, or reimbursed the employee for, that expenditure.

Therefore, as the Employer makes a payment of the full registration fee directly to the relevant Professional Body holding the seminar/CPD luncheon event to which an employee of the Employer - who is also a member of that Professional Body - attends, section 24 of the FBTAA applies to reduce the taxable value of this expenditure incurred by the Employer by the 'notional deduction' (being the value of the particular seminar/CPD luncheon event's full registration fee). This would effectively result in the taxable value of the expense payment fringe benefit provided in these circumstances being reduced to nil.

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