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Ruling

Subject: Fringe benefits tax - minor benefits

Question 1

Is the payment of a fee a taxable fringe benefit pursuant to the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No. However, a fringe benefit may arise when an employee becomes a registered user.

Question 2

Will the benefit that arises from the employee being a registered user be an exempt benefit as a minor benefit pursuant to section 58P of the FBTAA?

Answer

A ruling can not be given in relation to this question as the answer will depend upon the factual circumstances. However, guidance to assist you is provided in the attached Reasons for decision.

Question 3

Are the discount benefits accruing to employees from accessing the Gateway and obtaining the discounts, special prices or rebate taxable fringe benefits pursuant to the FBTAA?

Answer

No

Question 4

If the answer to question 4 is yes, what is the taxable value of the benefit of discounts, special prices or rebate received by an employee?

Answer

Not applicable

Question 5

If the answer to question 3 is yes, what is the taxable value of any benefit of a rebate received by an employee?

Answer

Not applicable

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Relevant facts and circumstances

You are considering a proposal to enter into an arrangement with an unrelated party for the provision of an employee benefits program.

Under the proposal you will pay a set-up fee and an annual fee for various services including enabling employees access to discounts and special prices on a range of goods and services.

Under the proposal the unrelated organisation will ensure:

· the website and any other communications media match the employer's corporate colours;

· the employer's logo is displayed on every page, not just on the registration screen;

· the employer's brand logo is included in every piece of employee communications;

· registration validation criteria fits the employer's needs perfectly; and

· using the employer's own images or design specific imagery to make the program feel like home.

By using the Gateway, employees are able to receive discounts on the purchase of food, petrol, travel, insurance, mobile phones and fashion. The employee purchases the products directly from the retailer, and pays the retailer directly.

Alternatively, the employee may receive a cash rebate on their purchase. Under this arrangement the employee pays the full retail price to the retailer. The retailer pays the rebate being the discount otherwise receivable, into the employee's account where it can be withdrawn by the employee by directly transferring the balance to a bank account.

If an employee ceases employment with you, their account will remain open for a period of six weeks from their termination date to allow time to withdraw the rebate balance in their account.

Employees access the Gateway through the internet

To become a registered user an employee has to the validated. While the arrangements for doing this may vary between employer clients, generally the unrelated organisation will validate on first registration using a payroll number and then manage movements in employees by means of a regular (usually monthly) upload from the employer's payroll of all valid payroll.

Once a user is registered, log in is by username (email) and a password of at least 8 characters which the user must set.

Relevant legislative provisions

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)

Fringe Benefits Tax Assessment Act 1986 Subsection 149(1)

Reasons for decision

Will a fringe benefit arise from the arrangement?

A fringe benefit is defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as follows:

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 …

This definition was considered by the Full Federal Court in Federal Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236 (Indooroopilly) which concluded that a 'benefit' could only be a 'fringe benefit' if it was provided by one of four possible 'providers' to one of two possible 'recipients'.

The four possible providers as listed in paragraphs (c) to (ea) of the 'fringe benefit' definition are:

· the employer;

· an associate of the employer;

· a person other than the employer or an associate of the employer under an arrangement with either the employer or an associate of the employer; and

· a person other than the employer or an associate of the employer in a situation that comes within paragraph (ea) of the 'fringe benefit' definition.

The two possible recipients are an employee or an associate of an employee.

The Full Court also concluded that where the identity of the employees capable of receiving the benefit at the time it was provided was not known at the 'provision time' then the benefit could not be a 'fringe benefit'.

Therefore, to determine whether a 'fringe benefit' will arise from the arrangement it is necessary to consider the following questions:

Will a 'benefit' be provided to an employee, or an associate of an employee?

If a 'benefit' is provided to an employee or an associate of an employee, is it provided by one of the four listed providers?

If a 'benefit' is provided to an employee or an associate of an employee by one of the four listed providers is it provided in respect of the employment of the employee?

If a 'benefit' is provided to an employee or an associate of an employee by one of the four listed providers and is provided in respect of the employment of the employee does it come within paragraphs (f) to (s) of the 'fringe benefit' definition?

Will a 'benefit' be provided to an employee, or an associate of an employee?

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

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:

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

· the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

· 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.

· In your ruling application you requested a ruling in relation to the following:

· the payment of the fee;

· the goods or services purchased at a discount; and

· the Rebate received.

Each of these can come within the definition of 'benefit' as money can be a 'property benefit', the provision of goods will be a 'property benefit' and the provision of services will be a 'residual benefit'.

In addition, the provision of the right to access the discounts and receive a rebate will be a 'benefit'.

Although each of these is a 'benefit', only some of them are provided to an employee, or an associate of an employee. They are:

· the goods or services purchased at a discount;

· the rebate; and

· the right to purchase the goods or services at a discount and receive a rebate.

The payment that you make to Unrelated organisation is a payment for services that Unrelated organisation will provide to you. As Unrelated organisation is not an employees, or an associate of an employee the payment of the fee does not involve the provision of a benefit to an employee or an associate of an employee. Therefore, it will not be a 'fringe benefit'. Similarly, the services provided to you by Unrelated organisation will not be a 'fringe benefit'.

Are the benefits provided to an employee provided by one of the four listed providers?

As set out above, the four listed providers are:

· the employer;

· an associate of the employer;

· a person other than the employer or an associate of the employer under an arrangement with either the employer or an associate of the employer; and

· a person other than the employer or an associate of the employer in a situation that comes within paragraph (ea) of the 'fringe benefit' definition.

Each of the benefits is provided by Unrelated organisation which is neither the employer, nor an associate of the employer. Therefore, for the benefits to be a 'fringe benefit' the provision needs to come within either paragraph (e) or paragraph (ea) of the 'fringe benefit' definition.

In considering these paragraphs, the provision of the right to purchase goods and services at a discount and receive a Rebate will come within paragraph (e) as it is provided under an arrangement that you will have with Unrelated organisation.

The other two benefits will be provided by the retailer from whom the employee purchases the goods and/or services. As the transaction for the purchase of the goods and/or services is between the employee and the retailer without any employer involvement, paragraph (e) will not apply.

However, paragraph (ea) will apply as the employer in paying the fee and providing the employee details to Unrelated organisation is participating in, facilitating and promoting a scheme which the employer knows will enable participating employees to receive discounts and Rebate.

Therefore, each of the three identified benefits that may be provided to an employee or an associate of an employee under the arrangement will be provided by one of the four listed providers.

If a 'benefit' is provided to an employee or an associate of an employee by one of the four listed providers is it provided in respect of the employment of the employee?

The term 'in respect of' is defined in subsection 136(1) to include by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

In J & G Knowles & Associates Pty Ltd v. FCT 2000 ATC 4151; 44 ATR 22 (Knowles), the Full Federal Court in discussing whether a benefit was provided in respect of employment stated at ATC 4158:

... 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.

While the width of the definition of 'fringe benefit' was designed to capture benefits that, in truth, were other than remuneration, the stated purpose suggests that asking whether the benefit is a product or incident of the employment will be helpful. If it is not then the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been a causal factor in the provision of the benefit.

The meaning of the term 'in respect of' was also considered in the context of the former paragraph 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936) by the Federal Court in Payne v. FC of T (1996) 66 FCR 299; 96 ATC 4407; (1996) 32 ATR 516 (Payne). In Payne, Mrs Payne joined a consumer loyalty program without her employer's knowledge. Mrs Payne was unable to cash in the flight reward (airline tickets) or transfer it to anyone else, but she was able to have the flight reward made out in the name of family members. The reward points Mrs Payne accrued from employer-paid travel (and some privately-paid travel) were used to acquire airline tickets in the name of her parents who travelled from England to visit her. The Commissioner assessed Mrs Payne on the value of the airline tickets that accrued from employer-paid travel. The Federal Court held Mrs Payne was not assessable in respect of the flight reward as she received the flight reward as a result of the personal contact she established with the airline on payment of the membership fee. In so doing, the Federal Court decided if there was a benefit given, it was given as a result of the personal contract between the taxpayer and the consumer loyalty program provider, notwithstanding the benefit arose as a 'consequence' of the employment.

In applying these decisions, the provision of the right to obtain the goods and services at a discount and a rebate has the necessary material connection with the employment of the employee as:

· the employee's participation in the scheme is initiated by the employer;

· the right is only provided to employees nominated by the employer;

· the reason for the employee being nominated to receive the right is that they are an employee;

· the right is withdrawn when the employee ceases employment; and

· the right is not available to the public in general.

Therefore, the provision of the right is considered to be a benefit provided to an employee in respect of the employee's employment.

By contrast, the other benefits depend upon the employee being a registered user. Although this registration depends upon the user being an employee, the discounts, etc arise from the contractual rights the user receives on becoming a registered user.

In Taxation Ruling TR 1999/6 Income tax and fringe benefits tax: flight rewards received under frequent flyer and other similar consumer loyalty programs, it was concluded that flight rewards received under a consumer loyalty program, with two exceptions that do not exist in this arrangement were not subject to FBT as they result from a personal (that is, non-employment) contractual relationship.

In considering the views and reasoning set out in TR 1999/6, where the employee exercises the right as a registered user to purchase goods or services at a discount, the discount will arise from the personal contractual rights the employee has as a registered user, rather than from the employment relationship. Therefore, a fringe benefit will not arise from the benefits that arise from the purchase of goods and/or services at a discount and the receipt of a Rebate as these benefits are not provided in respect of the employment of the employee.

Does the entitlement to receive a discount and/or Rebate come within paragraphs (f) to (s) of the 'fringe benefit' definition?

For the purposes of this ruling the relevant paragraph to consider is paragraph (g) which provides that an exempt benefit will not be a fringe benefit.

A benefit that is a minor benefit will be an exempt benefit where the requirements of section 58P of the FBTAA are satisfied.

Section 58P states:

Where:

· (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;

· the benefit is not an airline transport benefit;

· 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;

· 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:

· the provision of entertainment to the employee or the associate of the employee, as the case may be:

· is incidental to the provision of entertainment to outsiders; and

· 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

· the entertainment is provided to the employee or the associate of the employee, as the case may be:

· on eligible premises of the employer; and

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

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

· having regard to:

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

· the minor benefit; or

· benefits provided in connection with the provision of the minor benefit;

· have been or can reasonably be expected to be provided;

· 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;

· 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;

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

· if the minor benefit is not a car benefit - the minor benefit; and

· if there are any associated benefits that are not car benefits - those associated benefits; and

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

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

· 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 the right to obtain the discounts and Rebate will be an exempt minor benefit if:

· the notional taxable value of the benefit is less than $300; and

· 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 benefit 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).

Was the notional taxable value of the minor benefit less than $300?

'Notional taxable value' is defined in subsection 136(1) of the FBTAA to mean:

the amount that, if it were assumed that:

· in all cases - the benefit was a fringe benefit in relation to the employer in relation to the year of tax;

· would be the taxable value of the fringe benefit in relation to the year of tax.

That is, in calculating the 'notional taxable value' it is necessary to determine what the taxable value will be if the benefit is a 'fringe benefit'. The taxable value of a fringe benefit is established from a series of valuation rules contained within the FBTAA. To determine the appropriate method it is necessary to initially determine the type of benefit provided. For the purpose of this Ruling the most relevant benefits are property benefits and residual benefits.

Under section 40 a property benefit will arise when a person provides property to another person. The term 'provide' is defined in subsection 136(1) of the FBTAA in relation to property to mean:

· dispose of (whether by sale, gift, declaration of trust or otherwise):

if the property is a beneficial interest in property but does not include legal ownership - the beneficial interest; or

in any other case - the legal ownership of the property.

In providing an employee with a right to obtain a discount, Unrelated organisation does not dispose of either a beneficial interest, or the legal ownership of property. Therefore, the benefit will not be a property benefit.

Accordingly, the benefit will be a residual benefit which is defined in section 45 of the FBTAA as being 'a benefit that is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive)'.

The taxable value of a residual fringe benefit will be calculated in accordance with the valuation rules provided by sections 48 to 51. These sections provide different valuation rules depending upon whether the residual benefit is:

· an in-house, or external residual fringe benefit; and

· a period, or non-period residual fringe benefit.

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

The definition of 'in-house residual fringe benefit' in subsection 136(1) provides different requirements depending upon whether the provider is the employer or an associate of the employer.

Where the provider is not the employer or an associate of the employer it is necessary to consider the application of paragraph (b) of the definition 'in-house residual fringe benefit' within subsection 136(1). For subparagraphs (b)(ii) and (iii) to be satisfied:

· the provider must have purchased the benefit from the employer or an associate of the employer; and

· at or about the comparison time, both the provider and the seller must have carried on a business that consisted of, or included the provision of identical or similar property.

As neither of these requirements will be satisfied the provision of the right to obtain discounts and Rebate will not be an in-house residual fringe benefit.

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

In determining whether the benefit provided is a period benefit, subsection 149(1) states that a benefit shall be taken to be provided during a period if the benefit is provided during a period of more than one day and is not deemed by a provision of the FBTAA to be provided at a particular time or on a particular day. As the benefits are available for a period of more than one day the benefits will be a period residual benefit.

The valuation of an external period residual fringe benefit

Section 51 provides two alternative valuation rules for determining the taxable value of an external period residual fringe benefit that is not provided by the employer or an associate of the employer.

The relevant method will depend upon whether 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 benefit. Where the agreement involves the employer incurring expenditure in respect of the provision of the benefit the taxable value under paragraph 51(b) will be the amount of that expenditure.

As you will pay a fee to Unrelated organisation for the provision of the right to an employee, the taxable value of the benefit will be the amount paid to Unrelated organisation. Where this is less than $300 the requirements of paragraph 58P(1)(e) of the FBTAA will be met.

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

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 expense 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'.27

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

203. The Macquarie Dictionary28 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. (sometimes 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.29

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 not provided infrequently or irregularly to the employee. This was based on the facts before the 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 tests 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'.

From the information provided it appears the right will be provided once a year on an ongoing basis. This would be considered to be regular, but not frequent.

Sum of the notional taxable values of the minor benefits and associated benefits which are identical or similar to the minor benefit

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.³¹

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.

As discussed at paragraphs 215 to 217 of a benefit will be identical to another benefit when it is the same in all respects except for differences (if any) that are minimal or insignificant and do not affect the value of the other benefit. By contrast, a similar benefit as discussed in paragraph 204 of TR 2007/12 is a benefit that has a likeness or resemblance, especially in a general way.

As set out in paragraph 218 of TR 2007/12, this criterion requires a consideration of the sum of the taxable values in relation to both the current year and any other year of tax. From the information provided it is not possible to make a conclusion about this criterion as it is a question of fact for which no information has been provided.

Sum of the notional taxable values of any other associated benefits

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 values of any other associated benefits provided in relation to the 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 benefit 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.

As with the previous criteria it is not possible to make a conclusion about this criterion as it is a question of fact for which no information has been provided.

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

Given you know the amount paid for the right and know which employees have received the right there would appear to be no practical difficulty in determining the notional taxable values of the minor benefit and any associated benefits.

Circumstances surrounding the provision of the minor benefit and any associated benefits

This criterion is discussed in paragraphs 236 to 244 of TR 2007/12. These paragraphs state:

236. The fifth criterion requires consideration of the circumstances surrounding the provision of the minor benefit. Without limiting the generality of the circumstances to be considered surrounding the provision of the benefit, it is necessary to consider specifically whether the benefit was provided as a result of an unexpected event and whether or not it could be regarded to be provided wholly or principally as a reward for services rendered, or to be rendered, by the employee.

237. Whether a benefit is provided to assist the employee to deal with an unexpected event will always be a question of fact. The EN³⁴ included an example of an employer providing a short term loan to an employee to pay unexpected debts. This would be an example where this requirement of this criterion would be satisfied.

238. Whether a benefit was provided otherwise than wholly or principally by way of a reward for services rendered, or to be rendered, by the employee, will in some instances be clear (for example where the benefit is provided as part of a SSA). In other instances, whether a benefit has been provided wholly or principally as a reward for services will be less clear.

239. The difficulties associated with reaching a decision on this point are highlighted in the NAB case and Case 2/96. As noted by Ryan J in the NAB case, it can be difficult to determine whether the requirements of this criterion are satisfied in some situations:

It is debatable whether the aggregate of such benefits was provided wholly or principally by way of a reward for services to Mr Brewster but however the consideration indicated in s. 58P(2)(f)(v)(B) [sic] be evaluated, it would not in view of the preponderance the other way of the considerations to which I have just adverted, lead to the conclusion that it would be unreasonable to treat the benefit of 29 March 1988 as a fringe benefit in relation to Mr Brewster for the relevant tax year.³⁵

240. Also in Case 2/96, whilst the AAT was inclined to the view that taxi fares are likely to relate to services rendered or to be rendered, the AAT noted that this conclusion was debatable.

241. Whether a benefit has been provided wholly or principally for services rendered or to be rendered will depend on the circumstances. As the two cases illustrate, this can be difficult to determine and that it should be noted that this is merely one criterion to be considered when determining whether a benefit is a minor benefit. The Commissioner's view is that where a SSA is in place it is clear that any benefits provided under the SSA by the employer to the employee are wholly or principally by way of a reward for services rendered because the benefits have been provided in substitution for salary and wages. 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 a reward for services rendered or to be rendered by the employee. In most instances a Christmas party would not be considered to be provided to an employee as a substitute for salary, wages or bonuses.

242. The definition of a 'salary sacrifice arrangement' as per TR 2001/10 paragraph 19 is:

...an arrangement under which an employee agrees to forego part of his or her total remuneration, that he or she would otherwise expect to receive as salary or wages, in return for the employer or someone associated with the employer providing benefits of a similar value.

243. The provision of benefits through a SSA forms part of the total remuneration package of an employee. Therefore, it is clear that, under these arrangements, benefits (together with salary) are provided wholly or principally as a reward for services rendered.

244. In considering the criteria in paragraph 58P(1)(f), and in particular the circumstances in which a benefit is provided under a SSA, a reasonable conclusion would be that all such benefits are not exempt benefits under section 58P.

In considering the two circumstances set out in subparagraph 58P(1)(f)(v) the provision of the benefits is not to assist the employee to deal with an unexpected event. However, it is noted that the purpose of the Agreement is stated as being:

The Client wishes to offer the Services described below to its Employees as a part of its employee benefits programme.

This indicates the benefit may be being provided as a reward for services rendered.