Edited version of your written advice

Authorisation Number: 1012936912355

Date of advice: 15 January 2016

Ruling

Subject: The provision of tickets by the Employer

Question 1

Are the tickets to sporting and entertainment events retained by the Employer, at minimal cost, and provided to employees and board members (at no-cost) an in-house fringe benefit?

Answer

Yes.

Question 2

Does paragraph 49(a) of the Fringe Benefits Tax Assessment Act 1986 ("FBTAA") apply to the provision of tickets?

Answer

Yes.

Question 3

Does Section 62 of the FBTAA apply to the provision of tickets?

Answer

Yes

This ruling applies for the following period:

1 April 2015 until the circumstances surrounding the provision of tickets changes.

The scheme commences on:

1 April 2015

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The applicant ("Employer") is a Trustee for a Trust that manages sporting facilities.

The Employer has control of these venues and self-manages some of these venues.

Under contractual arrangements with large sporting codes, venue managers and entertainment promotors, the Employer as the owner of the venues retains an inventory of seats for which complimentary tickets are provided by the Employer to Trust Board members and employees for business development and private purposes. This incurs a nominal printing cost. The seats are retained from the inventory of seats made available to the public and are subject to the same terms and conditions.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Fringe Benefits Tax Assessment Act 1986 Paragraph 49(a) and

Fringe Benefits Tax Assessment Act 1986 Section 62.

Reasons for decision

Question 1

Summary

The provision of tickets to employees and board members by the Employer for events held at the premises operated by the Employer satisfies the definition of an in-house fringe benefit.

Detailed reasoning

The definition of 'in-house fringe benefit' in subsection 136(1) of the FBTAA is:

"in-house fringe benefit" means:

                     (a)  an in-house expense payment fringe benefit;

                     (b)  an in-house property fringe benefit; or

                     (c)  an in-house residual fringe benefit.

In-house expense payment fringe benefit

The definition of 'in-house expense payment fringe benefit' in subsection 136(1) is:

"in-house expense payment fringe benefit" means:

                     (a)  an in-house property expense payment fringe benefit; or

                     (b)  an in-house residual expense payment fringe benefit.

Broadly, these definitions require that the employer either makes a payment in discharge of an obligation of the employee or reimburses the employee in respect of an amount of expenditure incurred by the employee. As neither of these occurred here, the ticket does not constitute an expense payment benefit. As such, it does not meet the definition of an expense payment fringe benefit, and is therefore not an in-house property expense payment fringe benefit.

As the ticket does not satisfy the definition of an expense payment fringe benefit, it does not satisfy the definition of an in-house residual expense payment fringe benefit. Therefore, paragraph (a) of the definition of "in-house fringe benefit" is not satisfied.

In-house property fringe benefit

As the ticket is a licence in respect of real property, it is not a 'good'. As such, the ticket does not satisfy the definition of tangible property, and therefore does not satisfy the definition of an in-house property fringe benefit.

In-house residual fringe benefit

An 'in-house residual fringe benefit' is defined in subsection 136(1) as:

"in-house residual fringe benefit " , in relation to an employer, means a residual fringe benefit in relation to the employer:

(a) where both of the following conditions are satisfied:

(i) the provider is the employer or an associate of the employer;

(ii) at or about the comparison time, the provider carried on a business that consisted of or included the provision of identical or similar benefits principally to outsiders; or

…

but does not include a benefit provided under a contract of investment insurance.

Section 45 of the FBTAA provides that a benefit will be a residual benefit if it is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). Division 5 and Division 11 may be relevant to this scheme, which apply to expense payment and property benefits respectively.

As the provision of the ticket to the employee does not constitute either an expense payment benefit or a property benefit, Divisions 5 and 11 do not apply.

Therefore, the benefit provided by the employer, does not fall within any of the provisions of Subdivision A of Divisions 2 to 11 and as such is a residual benefit as per section 45.

In order to satisfy the definition of an 'in-house residual fringe benefit', all conditions in the definition of an 'in-house residual fringe benefit' must be met.

As the provider of the ticket is the employer of the recipient, sub-paragraph (i) of paragraph (a) is satisfied. As the provider carries on the business of providing identical tickets principally to outsiders (i.e. the general public), sub-paragraph (ii) of paragraph (a) is satisfied.

Therefore the provision of the tickets to the employees satisfies the definition of an 'in-house residual fringe benefit'. Thus, the provision of the tickets is an 'in-house fringe benefit' as per the definition in Section 136(1) of the FBTAA.

Question 2

Summary

Section 49 applies to the provision of tickets as it looks at the taxable value of in-house period residual fringe benefits, and the provision of tickets meets the definition of an in-house residual fringe benefit.

Detailed reasoning
Section 49 deals with the taxable value of in-house period residual fringe benefits and provides:

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

                    (aa) if the benefit was provided to the recipient under a salary packaging arrangement-- an amount equal to the notional value of the benefit at the comparison time; or

                   (ab) if paragraph (aa) does not apply and the benefit is an airline transport fringe benefit--an amount equal to 75% of the stand-by airline travel value of the benefit at the comparison time; or

                     (a)  if neither paragraph (aa) nor (ab) applies and, at or about the comparison time, identical overall benefits were provided by the provider:

                              (i)  in the ordinary course of business to members of the public under an arm's length transaction or arm's length transactions; and

                             (ii)  in similar circumstances and subject to identical terms and conditions (other than as to price) as those that applied in relation to the provision of the recipients overall benefit;

                          an amount equal to 75% of the lowest amount paid or payable by any such member of the public in respect of the current identical benefit in relation to an identical overall benefit so provided; or

                     (b) in any other case--an amount equal to 75% of 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 tickets are not provided under a salary packaging arrangement, and are not an airline transport fringe benefit, paragraphs (aa) and (ab) will not apply.

As tickets are also provided to members of the public under arm's length conditions and are subject to the same terms and conditions as those provided to the employees, paragraph 49(a) will apply.

Question 3

Summary

Section 62 deals with reduction of aggregate taxable value of in-house fringe benefits. As the provision of tickets meets the definition of an in-house fringe benefit, section 62 will apply.

Detailed reasoning
Section 62 deals with reduction of aggregate taxable value of in-house fringe benefits and provides:

(1)  Where one or more in-house fringe benefits in relation to an employer in relation to a year of tax relate to a particular employee of the employer, the taxable value of that fringe benefit, or the

sum of the taxable values of those fringe benefits, as the case may be, in relation to that year

shall be reduced by:

                     (a)  if the taxable value or the sum of the taxable values does not exceed $1,000--an amount equal to the taxable value or the sum of the taxable values; or

                     (b)  in any other case--$1,000.

             (2)  Subsection (1) does not apply to an in-house fringe benefit provided under a salary

packaging arrangement.

As the provision of the ticket meets the definition of an in-house fringe benefit, and the tickets are not provided under a salary packaging arrangement, subsection 62(1) will apply. The taxable value of the tickets will determine if paragraph (a) or (b) is applicable for each employee.