Edited version of your written advice

Authorisation Number: 1051222373732

Date of advice: 23 May 2017

Ruling

Subject: Excluded Fringe Benefits

Question 1

Is the provision of additional security measures at an employee's private residence a fringe benefit pursuant to subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Question 2

If yes, is the provision of additional security measures at an employee's private residence reportable on the employee's payment summary pursuant to section 5E of the FBTAA?

Answer

No.

This ruling applies for the following periods

1 April 2017 to 31 March 2018

1 April 2018 to 31 March 2019

1 April 2019 to 31 March 2020

1 April 2020 to 31 March 2021

The scheme commences on

1 April 2017

Relevant facts and circumstances

Scenario

Protective modification of residential premises due to terrorism threat

The employer is a law enforcement agency.

The Relevant Assessment Centre has assessed the threat level of law enforcement agencies across Australia as 'Probable'.

An employee has received threats of personal harm from an identified source because of their duties.

The employer has sought advice from a security expert.

This security expert is recognised as being competent to make threat assessments by the relevant industry body or government body.

The security consultant has advised that there is a significant risk to this employee's personal safety.

The consultant has recommended that the threatened officer's residential home have the following improved security measures:

1. Steel security gates and fencing

2. Telescopic aviators

3. Wrought iron security screen doors and window grills

4. Floodlights

5. Electric bell

6. Deadlocks and padlocks for perimeter gates and doors

7. Security letter box, and

8. A guard dog.

The employer will pay for the above modifications.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 5E

Fringe Benefits Tax Assessment Act 1986 section 135P

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Detailed reasoning

Subsection 136(1) of the FBTAA defines fringe benefit as;

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;

(d) an associate of the employer; or …

Guidelines on the application of benefits provided in respect of employment are included in Miscellaneous Taxation Ruling MT 2016.

MT 2016 states at paragraph 2, that:

An essential element of the definition of fringe benefit is that the benefit must be one provided in respect of the employment of the employee. Unless a benefit is provided in the context of an employer-employee relationship the tax has no application.

An employee is defined in subsection 136(1) of the FBTAA to mean:

(a) a current employee;

(b) a future employee; or

(c) a former employee.

The definitions of future and former employee refer to the definition of current employee. Current employee is defined in subsection 136(1) of the FBTAA to mean:

a person who receives, or is entitled to receive salary or wages.

Providing personal security measures at the private residence of an employee to protect against a threat of personal harm will be a fringe benefit. Depending on the specific details of the arrangement, it will be categorised as an expense payment fringe benefit, property fringe benefit, or residual fringe benefit and subject to FBT. The FBT reporting exclusions may apply to any of these categories.

Question 2

Detailed reasoning

Generally, an employer is required to record the value of the fringe benefits provided to each of their employees. When an employee receives certain fringe benefits with a total taxable value of more than $2000 in an FBT year, under section 135P of the FBTAA 1986, an employer must report the grossed-up taxable value of the benefits on the employee's payment summary for the corresponding year.

To calculate the value of fringe benefits reported on the payment summary, the individual fringe benefit amount needs to be allocated to the relevant employee.

Subsection 5E(2) of the FBTAA defines the individual fringe benefits amount as:

the sum of the employees' share of the taxable value of each fringe benefit that relates to the year of tax and is provided in respect of the employment other than an excluded fringe benefit.

Certain benefits are excluded from these reporting requirements by section 5E(3) of the FBTAA 1986, including those related to personal security.

Subsection 5E(3)(l) of the FBTAA 1986 states that an excluded fringe benefit is a fringe benefit:

(l) that is provided to address a security concern:

(i) relating to the personal safety of an employee, or an associate of an employee; and

(ii) that arises in respect of the employee's employment.

As a result, employers who provide personal security services to employees who receive threats due to their line of work are not required to report these fringe benefits on the employee's payment summary.

A further requirement under subsection 5E(6) of the FBTAA, is the fringe benefit provided must be consistent with a threat assessment made by a person who is recognised as competent to make threat assessments.

Subsection 5E(6) states that:

a fringe benefit referred to in paragraph (3)(l) is an excluded fringe benefit only to the extent that its provision is consistent with a threat assessment in relation to the employee or associate made by a person who is recognised by:

(a) a relevant industry body or government body; or

(b) the Commissioner;

as competent to make threat assessments.

In this case concerns for personal safety have arisen from the nature of the employee's work. The employee has received threats of personal harm from an identified source because of their employment duties. The employer has provided additional security measures to an employee's residence to address the security concerns and these constitute a fringe benefit.

A security expert was engaged to undertake a threat assessment. They are recognised as being competent to make threat assessments by the relevant industry body or government body. This security consultant has advised that there is a significant risk to an employee's personal safety and therefore has recommended that the threatened employee's residential home have improved security measures. The employer pays for the recommended modifications to the employee's residence.

Therefore, as all the requirements of this exclusion are satisfied and the threat assessment is made by a relevant industry or government body who is competent to make threat assessments, the fringe benefit tax reporting exclusion for personal security measures applies.

As a result there is no requirement to report fringe benefits on the employee's payment summary at label 'Reportable fringe benefits amount' as it is deemed to be an excluded fringe benefit.