Edited version of your written advice

Authorisation Number: 1051373273730

Date of advice: 16 May 2018

Ruling

Subject: Fringe benefits tax – tax-exempt body entertainment benefits and exempt benefits

Issue 1

Question 1

Is the provision of food and drink at the employee Christmas lunch an exempt benefit?

Answer

No

Issue 2

Question 1

Will the financial planning reimbursement be an exempt benefit?

Answer

No

Question 2

Will the rental reimbursement be an exempt benefit?

Answer

No

Question 3

Will the home purchase payment be an exempt benefit?

Answer

No

Question 4

Will the home improvement incidental allowance be an exempt benefit?

Answer

No

Question 5

Will the school reimbursement be an exempt benefit?

Answer

No

Question 6

Will the child care reimbursement be an exempt benefit?

Answer

No

This ruling applies for the following periods:

For a number of fringe benefits tax years commencing in the relevant fringe benefits tax year.

The scheme commences on:

During the FBT year ended 31 March 201X

Relevant facts and circumstances

Issue 1 – Christmas lunch

You are an income tax-exempt body and in the relevant FBT year you made an election under section 37AA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to apply Division 9A of the FBTAA in determining the taxable value of any meal entertainment fringe benefits that may have been provided during the fringe benefits tax (FBT) year.

In the relevant FBT year you held a lunch for some of your staff members prior to the Christmas holiday break (Christmas lunch). You hold a similar event every year.

You have significantly more staff than you can accommodate at one time at any of your employees usual places of work. For this reason you held the Christmas lunch at an external location.

Employees are not required to attend the Christmas lunch.

Employees that are interested in attending are required to register their interest and places are offered to employees as they register with no priority for certain employees (e.g. employees being specifically recognised). Some employees may attempt to register to attend once all of the places have been filled and miss out.

Only employees are eligible to attend. Employees are unable to bring family members or associates as guests.

Senior staff members and management attend the lunch and a senior staff member will address the attendees for approximately 10-15 minutes thanking the staff for their contribution and discussing their achievements over the year.

Attendees at the lunch are provided with vouchers which entitle them to receive the food and drink on offer. The vouchers do not have a monetary value disclosed on them but entitle the employee to the food and drink on offer.

Employees can use the vouchers at the event to receive food and drink. If they do not use the voucher or only use part of the voucher (e.g. only food, no drink) the voucher or unused part of the voucher is forfeited and cannot be used towards anything else and no monetary balance is paid to the employee.

At the event in the relevant year vouchers provided to the employees entitled them to one can of soft drink and one serve of lunch consisting of bread, salad and roast meat.

No alcohol was served at the lunch.

The lunch was held from 12noon until 2pm.

Employees were expected to return to work after the event concluded at 2pm and if they wanted to leave work for the day following the event they needed to negotiate leave with their team leader/manager and apply for leave using an approved leave form.

Issue 2 – Relocating employees

A number of your employees work at a place of employment which is expected to close in a number of years’ time at which point your employees will lose their jobs.

When your employees take up employment elsewhere they will cease to be your employees.

Given the skill set of these employees and the location of their current place of employment, many of your employees may need to move from their current place of residence to obtain employment in their industry.

To assist your employees to transition to new employment you have developed a scheme (the scheme) which sets out the arrangements and entitlements of the affected employees.

The scheme provides for the following entitlements to be provided to employees:

● financial planning reimbursement – reimbursement of the professional costs of obtaining advice from a financial advisor in relation to the benefits set out in the scheme, up to a maximum of $X

● rental reimbursement for rent payments incurred by an employee who moved a certain distance away from the current usual place of residence in order to take up new employment, up to a maximum of $X

● home purchase payment – reimbursement of $X in relation to the purchase of a home by an employee who moved a certain distance away from their current usual place of residence in order to take up new employment

● incidental home improvements – reimbursement for incidental costs incurred preparing the employee’s home for sale on the open market where an employee is selling their home to move a certain distance away from their current usual place of residence in order to take up new employment, up to a maximum of $X. Examples of the types of expenses that may be reimbursed are new locks, safety switches, globe replacement, hot water replacement or plumbing jobs to fix leaks

● school reimbursement – reimbursement of up to $X relating to school expenses

● child care reimbursement – reimbursement of up to $X

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 section 38

Fringe Benefits Tax Assessment Act 1986 section 58P

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 section 148

Income Tax Assessment Act 1997 section 32-5

Income Tax Assessment Act 1997 subsection 32-10(1)

Reasons for decision

Issue 1

Question 1

Summary

The food and drink provided at the Christmas lunch will be a tax-exempt body entertainment benefit. As no exemptions apply the benefit will be a fringe benefit.

Detailed reasoning

When you provided your employees with food and drink at the Christmas lunch the provision of the food and drink is a benefit as defined in section 136(1) of the FBTAA.

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a ‘fringe benefit’:

fringe benefit, 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) …

…

in respect of the employment of the employee, but does not include:

(f) …

(g) a benefit that is an exempt benefit in relation to the year of tax; or

(h) …

As you provided the food and drink to your employees in respect of their employment, the food and drink is a benefit that will be a fringe benefit as long as it is not an exempt benefit.

In order to determine whether any exemptions apply and if not, to calculate the taxable value of the benefit, it is necessary to initially consider the type of benefit that is provided. The FBTAA is divided into 13 types of benefits and each type has its own valuation rules.

There is no specific ‘entertainment fringe benefit’ category. As you are an income tax-exempt employer, if the food and drink is considered to be entertainment the most relevant type of benefit in relation to the provision of the food and drink is a tax-exempt body entertainment benefits. If the food and drink is not considered to be entertainment it will fall into another category of benefit.

Tax-exempt body entertainment benefits

Tax-exempt body entertainment benefits are defined in section 38 of the FBTAA, which states:

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.

The term ‘non-deductible exempt entertainment expenditure is defined in subsection 136(1) of the FBTAA as follows:

‘non-deductible exempt entertainment expenditure means non-deductible entertainment expenditure to the extent to which it is not incurred in producing assessable income.

‘Non-deductible entertainment expenditure’ is also defined in subsection 136(1) of the FBTAA as:

…a 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

Section 32-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states:

To the extent that you incur a loss or outgoing in respect of providing *entertainment, you cannot deduct it under section 8-1. However, there are exceptions, which are set out in subdivision 32-B.

Therefore, applying these provisions, a tax-exempt body entertainment benefit will arise where the following conditions are satisfied:

(i) entertainment is provided to an employee (or an associate of an employee),

(ii) the expenditure incurred in providing the entertainment was not incurred in producing assessable income, and

(iii) section 32-5 of the ITAA 1997 would have prevented the person who incurred the expenditure from claiming an income tax deduction for the expenditure under section 8-1 of the ITAA 1997 if it had been incurred in producing assessable income.

Each of these requirements is considered below:

(i) Does the food and drink provided to your employees constitute the provision of entertainment?

All attendees at the Christmas lunch were your employees at the time of the party.

Subsection 136(1) of the FBTAA provides that ‘entertainment’ within the FBTAA has the meaning given by section 32-10 of the ITAA 1997.

The ITAA 1997 defines ‘entertainment’ in subsection 32-10(1) as:

(a) entertainment by way of food, drink or *recreation; or

(b) accommodation or travel to do with providing entertainment by way of food, drink or *recreation.

Taxation Ruling TR 97/17 Income Tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17) discusses the concept of what is entertainment as it relates to the provision of food or drink for the purposes of the FBTAA and the ITAA 1997 and provides guidance on how to identify whether the provision of food or drink is entertainment. Relevantly, TR 97/17 states:

6. The definition of ‘entertainment’ contained in section 32-10 of the ITAA, and adopted by the FBTAA in the definition of ‘entertainment’ in subsection 136(1), does not prescribe that entertainment occurs every time food or drink is provided.

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’.

…

23. It can be seen that the determination of whether or not the provision of food or drink constitutes entertainment requires an objective analysis of all the circumstances surrounding that provision. We are of the view that the following are relevant factors that should be considered in undertaking any objective analysis:

(a) Why is the food or drink being provided. This test is 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.

(b) What food or drink is being provided. As noted above, 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.

For example, when an employer provides morning or afternoon teas or light meals, that food or drink does not usually confer entertainment on the employee. By contrast, a three course meal provided to an employee during a working lunch has the characteristics of entertainment. The nature of the food itself confers entertainment on the employee.

(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 or the food or drink. For example, a staff social function held during work time still has the character of entertainment.

(d) Where is the food or drink being provided. Food or drink provided on the employer’s business premises or at the usual place of work of the employee is less likely to have the character of entertainment; refer to the reasons in (b) and (c) above. However, food or drink provided in a function room, hotel, restaurant, café, coffee shop or consumed with other forms of entertainment is more likely to have the character of entertainment. This is because the provision of the food or drink is less likely to have a work-related purpose.

24. None of the above factors will be determinative; however, paragraphs (a) and (b) are considered the more important…

Why is the food or drink provided?

As set out in TR 97/17, this is a purpose test. It looks at whether the provision of food or drink is for the purpose of refreshment or for entertainment.

At the Christmas lunch the provision of the food and drink had both work related purposes (opportunity to thank staff for their work over the past year and for employees to meet colleagues they usually work with remotely with an aim of improving productivity) and social objectives (celebrating the end of the year and Christmas time with food and drink with work colleagues and friends).

What food or drink is being provided?

As discussed above TR 97/17 states that morning or afternoon teas or light meals will not usually confer entertainment on the employee whereas a three course meal has the characteristics of entertainment - this is because the more elaborate a meal, the greater the likelihood that entertainment arises from the consumption of the meal.

Taxation Ruling IT 2675 Income tax and fringe benefits tax: entertainment – morning and afternoon teas; light meals and in-house dining facilities (IT 2675) considers that provision of morning/afternoon tea and light meals generally consists of biscuits, and drinks such as tea, coffee, soft drinks and fruit juice which cannot be said to provide amusement or even to be an agreeable occupation. The ruling further provides that provision of sandwiches and other 'hand food', salads, orange juice, etc., does not constitute the provision of entertainment.

Although you are not providing a sit down three course meal, the food and drink you are providing consisting of bread, salad and roast meat along with a soft drink is considered to be more substantial than a light meal and more likely to confer entertainment on the employee.

When is the food or drink being provided?

TR 97/17 states that food or drink provided during work time, overtime or while an employee is travelling is less likely to be entertainment. This is because, in the majority of these cases, food provided is for a work-related purpose rather than an entertainment purpose. However, this depends on whether the entertainment of the person is the expected outcome of the food or drink. For example, a staff social function held during work time still has the character of entertainment.

The Christmas lunch is held during work hours from 12noon until 2pm however, as discussed above the food and drink is not being provided purely for the purposes of refreshment during the working day and it is reasonable to conclude that there is an expectation of entertainment of the recipients of the food and drink.

Where is the food or drink provided?

TR 97/17 states that food or drink provided on the employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment. While we acknowledge that at least part of the reason the food and drink is provided away from the usual place of work of the employees is because the number of attendees is greater than the maximum capacity at any of the suitable rooms in your offices, providing the food and drink away from the employees usual place of work contributes to a social setting and the provision of entertainment.

Considering the factors set out in TR 97/17 as discussed above, we consider that the provision of the food and drink at the Christmas lunch constitutes the provision of entertainment for the purposes of the FBTAA and the ITAA 1997.

(ii) Was the entertainment expenditure incurred in producing assessable income?

As you are an income tax exempt body, the entertainment expenditure was not incurred in producing assessable income.

(iii) If the expenditure had been incurred in producing assessable income would section 32-5 of the ITAA 1997 have prevented an income tax deduction being claimed for the expenditure?

The tables in sections 32-30 to 32-50 of the ITAA 1997 set out the situations in which section 32-5 of the ITAA 1997 does not prevent a deduction being claimed for entertainment expenses. From the information provided, none of these exceptions appear to apply.

Conclusion – tax-exempt body entertainment benefit

Therefore, a tax-exempt body entertainment benefit will arise from the provision of the food and drink to your employees.

Does an exemption apply?

As discussed above, the definition of ‘fringe benefit’ in subsection 136(1) of the FBTAA provides that a benefit will only be a fringe benefit if no exemptions apply.

In relation to tax-exempt body entertainment benefits, section 58P states:

Section 58P Exempt benefits – minor benefits

58P(1) 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) …

(c) …

(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 minor benefit is an exempt benefit in relation to the current year of tax.

That is, even if the other criteria for the minor benefits exemption are met, the minor benefits exemption will only apply if either:

● the entertainment provided is incidental to the entertainment provided to outsiders and does not consist of a meal other than light refreshments; or

● a function is held on your business premises solely as a means of recognising the special achievement of your employee in a matter relating to their employment.

As neither of these circumstances applies the benefit will not be exempt as a minor benefit.

No other exemptions are relevant. You have provided the benefit to your employees in respect of their employment and therefore the benefit will be a tax-exempt body entertainment fringe benefit.

Issue 2

Question 1

Summary

The financial planning reimbursement will be an expense payment benefit. The minor benefits exemption contained in section 58P of the FBTAA is unlikely to apply. If the minor benefits exemption does not apply no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning in Issue 1 Question 1 above.

When you reimburse the costs that an employee has spent on financial planning the reimbursement is a benefit as defined in section 136(1) of the FBTAA and as it is provided in respect of your employee’s employment, will be a fringe benefit as long as it is not an exempt benefit.

It is relevant to note that section 148 of the FBTAA provides that where an employee is provided with a benefit in respect of their employment, they will be considered to be provided with the benefit regardless of whether or not the benefit is also provided because of or in relation to something else, even when the benefit is not wanted or needed by the employee and even where the benefit offsets an inconvenience or disadvantage.

Specifically section 148 states:

Section 148 Provision of Benefit

148(1) A reference in this Act to the provision of a benefit to a person in respect of the employment of an employee is a reference to the such a benefit:

(a) whether or not the benefit is also provided in respect of, by reason of, by virtue of, or for or in relation directly or indirectly to, any other matter or thing;

(b) whether the employment will occur, is occurring, or has occurred;

(c) whether or not the benefit is surplus to the needs or wants of the recipient;

(d) whether or not the benefit is also provided to another person;

(e) whether or not the benefit is, to any extent, offset by any inconvenience or disadvantage;

(f) whether or not the benefit is provided or used, or required to be provided or used, in connection with that employment;

(g) whether or not the provision of the benefit is, or is in the nature of, income; and

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

Expense payment benefits

Expense payment benefits are defined in section 20 of the FBTAA as:

SECTION 20 EXPENSE PAYMENT BENEFITS

20 Where a person (in this section referred to as the provider):

(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b) reimburses another person (in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

When you reimburse your employees for the professional costs of obtaining advice from a financial advisor about any benefits set out in the scheme up to a maximum of $X, the employee incurs the expense and when you make the reimbursement you will be providing the employee with an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

Exemptions

There are no exemptions contained within the FBTAA that work to specifically exempt a benefit of financial planning.

Minor benefits exemption

Section 58P of the FBTAA provides that a benefit is exempt if it is considered to be a minor benefit. Broadly speaking, the minor benefits exemption exempts benefits from being fringe benefits if the value of the benefit is less than $300 and it is considered unreasonable to treat the benefit as a fringe benefit according to the factors provided in paragraph 58P(1)(f) of the FBTAA.

Paragraph 58P(1)(f) of the FBTAA states that regard is to be had to various criteria in concluding if it would unreasonable to treat a minor benefit as an exempt benefit. The criteria which paragraph 58P (1)(f) of the FBTAA requires to be considered are:

● the infrequency and irregularity with which associated benefits, being identical or similar benefits, are provided;

● the sum of the notional taxable values of the benefit and any associated benefits which are identical or similar to the minor benefit in relation to the current year of tax or any other year of tax;

● 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 in determining the notional taxable values of the benefit and any associated benefits; and

● the circumstances surrounding the provision of the benefit and any associated benefits.

Whether the benefit is a minor benefit must be determined on a case by case basis and the decision can be made when you are making a decision to provide a benefit contained in the scheme. However, based on the information you have provided, it is likely that the value of individual benefits provided under the scheme will be greater than $300 and that numerous associated benefits will be provided around the same time and therefore it is unlikely that they minor benefits exemption will apply.

Guidance to assist you in determining whether a benefit is a minor benefit can be found in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12).

Conclusion

The financial planning reimbursement will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. No specific exemptions apply and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.

Issue 2

Question 2

Summary

The rental reimbursement will be an expense payment benefit. The minor benefits exemption contained in section 58P of the FBTAA is unlikely to apply. If the minor benefits exemption does not apply no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning contained in Issue 2 Question 1 above.

The same reasoning can be applied to conclude that the rental reimbursement is an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

Section 21 of the FBTAA exempts from fringe benefits tax, expense payment benefits that relate to accommodation expenses that are provided to current employees of an employer whose duties of employment require them to live away from their normal place of residence. Additional requirements that need to be met in order to access this exemption are contained in section 21 of the FBTAA.

Any employee that leaves your employment to take up new employment and is entitled to rental assistance will no longer be your employee at their new place of employment. That is, if they relocate away from their normal place of employment and are entitled to a rental assistance reimbursement they will not be your current employee. You will be providing them with the benefit of rental reimbursement but they will not be your current employee and the duties of their employment with you will not require the employee to live away from their usual place of residence. Therefore the exemption contained in section 21 of the FBTAA will not apply.

As discussed in Issue 2 Question 1 above, the minor benefits exemption contained in section 58P is unlikely to apply in these circumstances however this is something you can assess on a case by case basis when you make the decision to provide one of the benefits set out in the scheme.

Conclusion

The rental reimbursement will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. Section 21 of the FBTAA will not apply, no other specific exemptions apply and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.

Issue 2

Question 3

Summary

The home purchase payment will be an expense payment benefit. If the minor benefits exemption contained in section 58P of the FBTAA does not apply, no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning contained in Issue 2 Questions 1 above.

The same reasoning can be applied to conclude that the home purchase payment is an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

Section 58C exempts from fringe benefits tax benefits that relate to incidental costs incurred in the sale or purchase of a home by an employee who is required to change their usual place of residence in order to perform the duties of their employment. The conditions for the exemption to apply in relation to costs incidental to the purchase of a home are set out in subsections 58C(1) and 58C(3) of the FBTAA.

The exemption specifically exempts expense payment benefits where the recipients expenditure is incidental to the acquisition of a property as described in paragraph 58C(3)(a) of the FBTAA.

The home purchase payment is a reimbursement in relation to the purchase price of a home where an employee obtains new employment and moves closer to the new work location. The expenditure reimbursed by this payment is not incidental to the acquisition of a property but is a reimbursement of the actual purchase price of the property. Section 141A of the FBTAA sets out the type of costs which are considered to be incidental to the acquisition of a property and consideration of this section confirms that the expenditure reimbursed by the home purchase payment is not a cost that is incidental to the purchase of a property and therefore the home purchase payment will not be exempt under section 58C of the FBTAA regardless of whether the other conditions required for the exemption to apply are met.

No other specific exemptions will apply. As explained above, the minor benefits exemption contained in section 58P is unlikely to apply in these circumstances however this is something you can assess on a case by case basis when you make the decision to provide one of the benefits set out in the scheme.

Conclusion

The home purchase payment will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. Section 58C of the FBTAA will not apply, no other specific exemptions apply and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.

Issue 2

Question 4

Summary

The incidental home improvement reimbursement will be an expense payment benefit. If the minor benefits exemption contained in section 58P of the FBTAA does not apply, no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning contained in Issue 2 Question 1 above.

The same reasoning can be applied to conclude that the incidental home improvement reimbursement is an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

You have advised that the sort of expenses commonly reimbursed as incidental home improvement expenses are new locks, safety switches, glob replacement, hot water replacement or plumbing jobs to fix leaks.

Refer to the discussion about the section 58C exemption contained at Issue 2 Question 3 above. For the same reasons contained in question 3 the section 58C exemption will not apply to the incidental home improvement reimbursement. The conditions for the exemption to apply in relation to costs incidental to the sale of a home are set out in subsections 58C(1) and 58C(2) of the FBTAA. Section 141A of the FBTAA sets out the type of costs which are considered to be incidental to the sale of a property and the type of costs that are reimbursed by the incidental home improvement reimbursement are not costs that are listed in section 141A (such as legal services, agents services, discharge of a mortgage and advertising) or costs of a similar matter. The types of costs reimbursed under the incidental home improvement reimbursement relate to improvements and maintenance on a house and are not incidental to the process of selling a property. The incidental home improvement reimbursement will not be exempt under section 58C of the FBTAA regardless of whether the other conditions required for the exemption to apply are met.

No other specific exemptions will apply. Although you may reimburse an employee for an amount of $300 or less, as explained above, the minor benefits exemption contained in section 58P is unlikely to apply in these circumstances given the other benefits likely provided in conjunction with the incidental home improvement reimbursement. However this is something you can assess on a case by case basis when you make the decision to provide one of the benefits set out in the scheme.

Conclusion

The incidental home improvement reimbursement will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. Section 58C of the FBTAA will not apply, no other specific exemptions apply and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.

Issue 2

Question 5

Summary

The school reimbursement will be an expense payment benefit. If the minor benefits exemption contained in section 58P of the FBTAA does not apply, no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning contained in Issue 2 Question 1 above.

The same reasoning can be applied to conclude that the school reimbursement is an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

There are no specific exemptions that will apply to exempt the school reimbursement from being classified as a fringe benefit. As discussed in relation to the other Issue 2 questions, the minor benefits exemption contained in section 58P is unlikely to apply, however this is something you can assess on a case by case basis when you make the decision to provide one of the benefits set out in the scheme.

Conclusion

The school reimbursement will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. No specific exemptions are applicable and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.

Issue 2

Question 6

Summary

The child care reimbursement will be an expense payment benefit. If the minor benefits exemption contained in section 58P of the FBTAA does not apply, no other exemptions will apply and the benefit will be a fringe benefit.

Detailed reasoning

Refer to the reasoning in Issue 2 Question 5 above. The same reasoning as applied in relation to the school reimbursement can be applied to the child care reimbursement to conclude that the child care reimbursement is an expense payment benefit in accordance with subsection 20(b) of the FBTAA.

There are no specific exemptions that will apply to exempt the child care reimbursement from being classified as a fringe benefit. As discussed in relation to the other Issue 2 questions, the minor benefits exemption contained in section 58P is unlikely to apply, however this is something you can assess on a case by case basis when you make the decision to provide one of the benefits set out in the scheme

Conclusion

The child care reimbursement will be an expense payment benefit in accordance with subsection 20(b) of the FBTAA. No specific exemptions are applicable and the minor benefits exemption is unlikely to apply. Therefore the benefit will be an expense payment fringe benefit and the taxable value will be calculated in accordance with section 23 of the FBTAA. As the expense would not have been deductible to the employee had they paid for the expense themselves and not been reimbursed by the employer, the otherwise deductible rule in section 24 of the FBTAA will not operate to reduce the taxable value of the benefit.