Edited version of private advice

Authorisation Number: 1052330595858

Date of advice: 18 December 2024

Ruling

Subject: Fringe benefits tax - in respect of employment

Question 1

Is the Tuition Fee Rebate received by employees a fringe benefit under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer 1

No

This ruling applies for the following periods:

Fringe Benefits Tax (FBT) Year ended XX March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Employer provides education to members of the public. The institution charges fees for education services provided to enrolled students.

Employees of the institution are entitled to a staff concession on the fees for enrolment in the institution. The institution has always treated such staff concessions as liable for Fringe Benefits Tax.

The institution also operates a Tuition Fee Rebate program that provides financial assistance to institution families facing financial difficulties in relation to the payment of their institution fees. Any person with enrolment in the institution is eligible to apply. If an application is approved, a discount is applied to the applicant's institution fees account.

The terms and conditions of the Tuition Fee Rebate program confirm that the rebate is applied equally to employees of the institution with those enrolled at the institution.

The Application Form confirms that eligibility for the Tuition Fee Rebate program is determined solely on financial considerations relating to income, expenses, assets and liabilities. There is no distinction between employees of the institution and others enrolled at the institution. Eligibility for the Tuition Fee Rebate program needs to be applied for on an annual basis.

The methodology in which the rebate is calculated does not vary between employees and others enrolled. The financial information provided on the Application Form is means-tested against that of the pool of applicants, following which a score is assigned to the applicant. A rebate percentage is applied depending on the score assignment.

The institution treats employees who choose to apply for a tuition fee rebate as it would for any other institution family applying for the rebate. There is no priority given to employees in the application process.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986, subsection 136(1)

Detailed reasoning

The definition of a 'fringe benefit' in subsection 136(1) of the FBTAA requires that the following conditions are satisfied:

1.              A benefit is provided at any time during the year of tax.

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

3.              The benefit is provided by:

a.              their employer; or

b.              an associate of the employer; or

c.              a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or

d.              a third party 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.

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

5.              The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of the fringe benefit in subsection 136(1) of the FBTAA.

Is a benefit provided?

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

any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is or is to be, provided under:

(a)           an arrangement for or in relation to:

(i)             the performance of work (including work of a professional nature), whether with or without the provision of property;

(ii)            the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

(iii)           the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;

(b)           a contract of insurance; or

(c)            an arrangement for or in relation to the lending of money.

Yes, the Tuition Fee Rebate provided to employees attending the institution is considered to be a benefit. Therefore, the first condition (i.e. the provision of a benefit) is satisfied.

Is the benefit provided to an employee or an associate of the employee?

An employee is defined in subsection 136(1) of the FBTAA to include a current, future and former employee.

The definition of 'current employee' includes a person who receives 'salary or wages' (subsection 136(1) of the FBTAA).

The employees of the institution would receive salary and wages and therefore would be considered current employees.

Thus, the benefit (the Tuition Fee Rebate) is provided to current employees, the second condition (i.e. a benefit is provided to an employee) has been met.

Is the benefit provided by the employer, an associate of the employer or a third party?

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

The definition of 'current employer' being a person liable to pay 'salary or wages' (subsection 136(1) of the FBTAA).

The Employer would pay salary and wages to employees of the institution and would be considered a current employer.

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

Is the benefit provided in respect of the employee's employment?

"In respect of" is defined in subsection 136(1) of the FBTAA as in relation to the employment of an employee, including by reason of, by virtue of, or for or in relation directly or indirectly to, that employment. Subsections 148(1) and 148(3) of the FBTAA extend this meaning. Miscellaneous Taxation Ruling MT 2016 Fringe benefits tax: benefits not taxable unless provided in respect of employment explains that these do not remove, in any circumstances, the fundamental requirement that, before there can be a tax liability, the benefit under consideration has to be provided in respect of the employment of the employee.

In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22, 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'.

In this case, the employees as well as others of the institution can apply for the Tuition Fee Rebate. The methodology in which the rebate is calculated does not vary between employees and others. The institution treats employees who choose to apply for a Tuition Fee Rebate as it would for any other institution family applying for the rebate. There is no priority given to employees in the application process.

As such it is reasonable to conclude that the Tuition Free Rebate is not provided in respect of the employment of the employee and therefore the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) would not be satisfied.

Conclusion

As the Tuition Fee Rebate in not provided in respect of the employment of the employee, it is not a fringe benefit as per the definition in subsection 136(1) of the FBTAA.

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