Edited version of private advice

Authorisation Number: 1052167510561

Date of advice:6 October 2023

Ruling

Subject: FBT - redemption of value pre-loaded onto benefits card for in-house goods

Question 1

Does the provision of general merchandise and apparel to an employee or a relative of the employee, under Benefits Program A or B, give rise to a fringe benefit?

Answer

Yes

Question 2

What is the type of fringe benefit?

Answer

The fringe benefit provided will be an in-house property fringe benefit.

Question 3

What is the taxable value of the fringe benefit?

Answer

The taxable value of the fringe benefit will be calculated under subparagraph 42(1)(a)(ii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) or paragraph 42(1)(b) of the FBTAA reduced by Subsection 62(1) of the FBTAA.

This ruling applies for the following periods:

1 April 20XX to 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

The Employer operates stores which offer customers a wide range of goods.

The group runs two benefit reward programs:

•                     Benefits Program A - An annual incentive programme to reward and recognise certain employees on achieving sales targets. Subject to management signoff, employees may receive benefit cards for the purchase of goods sold in stores to the value of the percentage increase in sales above budget. The benefits cards are distributed proportionally based on the number of hours worked by the employee, The percentage of sales allocated to an employee is calculated and awarded on a quarterly basis, up to an annual aggregated value of $1,000.

•                     Benefits Program B - An annual incentive programme to reward and recognise certain employees, on achieving sales targets. Subject to management signoff, employees may receive benefits cards for the purchase of goods sold in stores to the value of the percentage increase in either sale above budget. These benefits cards are distributed proportionately based on the number of hours worked by each employee. The percentage of sales allocated to an employee is calculated and awarded on a half yearly basis, up to an annual aggregated value of $1,000.

Employees receive a Member Benefit Card (Benefit Card) which come preloaded with a dollar value. These cards cannot be transferred between stores within the group. That is the benefit cards must be used at eligible stores. These cards can be exchanged for general merchandise or apparel that are sold to the general public. They cannot be exchanged for concessional goods

The Employer provides its employees with a member card which entitles staff to a x% staff discount on purchases. This discount is separate from the member's card.

The Terms and Conditions are summarised as follows:

•                     The Benefits Card is provided to current full time, part time and casual employees only. It will not be available to retired employees or former employees.

•                     Employees receive a paper-based card ("the Benefits Card") once an employee's reward and recognition has been determined. The Benefits Card would be loaded with the value offered as part of the Benefits Program.

•                     The Benefits Card has no value other than being the means by which an employee can obtain goods and the card cannot be exchanged for cash or transferred or used by any other person. The only exception is that the employee may also allow an immediate family member (a relative) to use the Benefits card to redeem goods that are sold by the employer to the general public.

•                     The non-transferability is enforced by the employee or immediate family member being required to display their valid identification card at the point of sale. Such an identification card is issued to each of the Employer's employees, with a second card issued in the employee's name to an immediate family member of the employee. Failure to comply with or abuse of the benefits card may result in the loss of access to the rewards and incentives programs and possible disciplinary action up to and including termination of employment. Non-compliance or abuse at the point of sale will result in the cancellation of the benefits card.

•                     The employee can only redeem the Benefits Card for goods that are sold by the employer to the general public within eligible stores. The redemption of benefits occurs at the current point of sale selling price of the item.

These benefits will not be provided under a salary packaging arrangement.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 41

Fringe Benefits Tax Assessment Act 1986 subparagraph 42(1)(a)(ii)

Fringe Benefits Tax Assessment Act 1986 paragraph 42(1)(b)

Fringe Benefits Tax Assessment Act 1986 section 58P

Fringe Benefits Tax Assessment Act 1986 section 62

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Summary

The provision of general merchandise and apparel to an employee, under Benefits Program A or the Benefits Program B, will give rise to a property fringe benefit.

Detailed reasoning

A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which holds that the following conditions must be satisfied:

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

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

3.            The benefit is provided by:

(i)            their employer; or

(ii)           an associate of the employer; or

(iii)         a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or

(iv)         a third party other than the employer or an associate of the employer, if the employer or an associate of the employer:

                                             i.                participates in or facilitates the provision or receipt of the benefit; or

                                            ii.                participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

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

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

In order to determine whether the provision of general merchandise and apparel to employees under the Benefits Program A or B constitutes a 'fringe benefit' as defined in subsection 136(1) of the FBTAA, a discussion is provided below in respect of whether each element of the definition of a fringe benefit is satisfied.

A benefit is provided

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

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

(a) an arrangement for or in relation to:

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

'Provide' in relation to a benefit is defined in subsection 136(1) of the FBTAA as allow, confer, give, grant or perform.

The provision by the employers of general merchandise and apparel to an employee (and/or their immediate family member) upon redemption of the available balance on the employee's Benefits Card constitutes a privilege, and therefore meets the definition of a 'benefit' for the purposes of the FBTAA.

As such, the first condition (i.e. the provision of a 'benefit') of the definition of a 'fringe benefit' - as defined in subsection 136(1) of the FBTAA - is satisfied.

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

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

An 'associate' is defined in subsection 136(1) of the FBTAA to have the meaning given by section 318 of the Income Tax Assessment Act 1936 (ITAA 1936).

Subsection 318(1) of the ITAA 1936 states that an associate of a natural person includes a relative of that person.

Based on the facts provided, only certain employees (and/or an immediate family member) are entitled to receive general merchandise and apparel upon redemption of the relevant employee's benefit card and presentation of the identification card.

Therefore, as the benefit will be provided to certain (identifiable) employees and their associate, the second condition (i.e. a benefit is provided to an employee and/or associate) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied.

The benefit is provided by an employer, an associate of the employer or a third party

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

As per the facts, the benefit is provided by the employer, the third condition of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied.

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

As per subsection 136(1) of the FBTAA, 'in respect of' in relation to the employment of an employee includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee:

•                     whether or not the benefit also relates to some other matter or thing

•                     whether the employment is past, present or future

•                     whether or not the benefit is surplus to the recipient's requirements

•                     whether or not the benefit is also provided to another person

•                     whether or not the benefit is offset by any inconvenience or disadvantage

•                     whether or not the benefit is provided or used, or required to be provided or used, in connection with any employment

•                     whether or not the provision of the benefit is in the nature of income, and

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

Given the current circumstances, the connection between the benefits that would be received by an employee (and/or their associate) and their employment would indicate that the benefit is provided in respect of their employment. The benefits will be provided to employees (and/or their associates) as part of the Employee Benefits Programs. If it were not for an employee's employment with the employer, the employee (and/or their associate) would not be entitled to access any benefit (being general merchandise and apparel received through redemption of part or all of the pre-loaded value on the employee's Benefits Card).

On the basis of the above, a benefit provided to an employee (and/or their associate) would be considered to be 'in respect of the employee's employment'.

As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied.

Is the benefit an exempt benefit as per paragraph 136(1)(g)?

A fringe benefit is defined as excluding exempt fringe benefits per subsection 136(1) of the FBTAA. The two relevant benefit categories to consider are:

•                     Section 41 of the FBTAA - exempt property benefits

•                     Section 58P of the FBTAA - minor benefits

The property benefit provided to the employee will not be consumed by the employee on business premises of the employer or a company that is related to them. Accordingly, the requirements of section 41 are not satisfied, hence the benefit is not an exempt property benefit.

Section 58P does not apply because the goods provided by the employer are likely to have a taxable value of $300 or more.

The benefit is not excluded from the definition of a fringe benefit

A benefit which comes within paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is excluded from being a fringe benefit.

It is assumed for the purposes of this Private Ruling that the benefit(s) provided to an employee (and/or an associate of the employee) is not a benefit that is specifically excluded as per paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA (paragraph (g) is explained above).

As such, the fifth condition of the definition of a 'fringe benefit' (i.e. the benefit provided is not excluded from the definition of a 'fringe benefit') as defined in subsection 136(1) of the FBTAA is satisfied.

Therefore, as all the conditions required of the definition of a "fringe benefit" defined under the subsection 136(1) have been met, a fringe benefit has been provided.

Question 2

Summary

The provision of general merchandise and apparel by the employer to an employee (and/or an associate) upon redemption of part or all of the value loaded onto the employee's Benefits Card under Benefits Program A or B is an 'in-house property fringe benefit' as defined in subsection 136(1) of the FBTAA.

Detailed Reasoning

Property Fringe Benefit

Section 40 of the FBTAA defines a property fringe benefit as

"Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time."

Subsection 136(1) of the FBTAA defines 'provider' as 'the person who provides the benefit' and defines 'recipient' in relation to a benefit to mean the person to whom the benefit is provided.

'Property' is defined in subsection 136(1) of the FBTAA to mean intangible property and tangible property. 'Tangible property' is defined in subsection 136(1) of the FBTAA to mean goods.

The term 'goods' is not defined in the FBTAA and therefore takes on its ordinary meaning. 'Goods' is defined in the Macquarie Dictionary (online) as:

1.            possessions, especially movable effects or personal belongings.

2.            articles of trade; wares; merchandise, especially that which is transported by land.

The Benefits Cards versus a Gift Card/Voucher

Whilst the Benefits Card issued the employer to its employees has characteristics similar to that of a 'gift card' or 'gift voucher' that is sold to the general public, Benefits Cards can be distinguished in that they cannot be transferred to any person. Benefits Cards can only be used by the employee or an associate to obtain goods which are also sold by the employer to the general public (with exceptions stated in the facts).

Two distinct actions but one integrated arrangement

In ATO Interpretative Decision (ID) ATO ID 2014/17 'Property fringe benefits: redemption of voucher/coupon by a retail store employee for merchandise retailed by their employer' (ATO ID 2014/17), the provision of a voucher/coupon and the later redemption of that voucher/coupon to obtain merchandise were considered to involve two distinct actions.

The issue of the voucher/coupon was an administrative aid in facilitating the later provision of merchandise to the employee. The 'benefit' as defined in subsection 136(1) of the FBTAA was therefore the provision of the merchandise by the employer. The employer provides the benefit when the employee redeems the voucher/coupon for the merchandise. The same principle was applied in Class Ruling (CR) CR 2014/56 'Fringe benefits tax: Corporate clients of Dell Australia Pty Ltd (Dell Australia) who participate in the Dell Australia employee purchase program' (CR 2014/56).

Similarly, in the current circumstances, the provision of the Benefits Card to certain employees and the later use of these cards to obtain goods involve two distinct separate actions. However, the following facts indicate that the provision of a Benefits Card and the consequent provision of general merchandise and apparel upon redemption of the value/available balance on the Benefits Card should be considered to be part of the one seamlessly integrated arrangement to provide the merchandise and apparel to the relevant employee:

1.            The available balance of the benefit card can only be redeemed by the employee or their associate upon valid presentation of an employee card.

2.            The Benefit Card is non-transferable

3.            The value loaded on the cards can only be earned by the recognition program.

4.            The value loaded onto the employee's Benefit Card can only be redeemed at the point of sale at the relevant branches

5.            Fraudulent use of the benefit card may result in loss of access to the Employee recognition programs.

The provision of the benefit card should be viewed as a convenient way to facilitate the provision of general merchandise or apparel from employer to their employee. Thus, the supplying of the general merchandise and apparel at the time of redemption of the available balance on the employee's benefit card (not the provision of the card itself) that should be treated as the sole relevant benefit in the current circumstances for the purposes of the FBTAA.

On the basis of the above definition and the principles encapsulate in ATO ID 2014/17 and CR 20014/56, the provision of general merchandise and apparel by the employer (the "provider") to an employee or an associate (the "recipient") upon redemption of the benefit card under the benefit programs constitute the provision of "property benefits" of the purposes of section 40 of the FBTAA.

In House Property Fringe Benefits

Under the FBTAA, property fringe benefits can be 'in-house' or 'external'.

An 'in-house property fringe benefit' is defined in subsection 136(1) of the FBTAA as follows:

in-house property fringe benefit, in relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property;

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

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

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

(b)          where all of the following conditions are satisfied:

(i)            the provider is not the employer or an associate of the employer;

(ii)           the property was acquired by the provider from the employer or an associate of the employer (which employer or associate is in this definition called the seller); and

(iii)         at or about the provision time, both the provider and the seller carried on a business that consisted of or included the provision of identical or similar property principally to outsiders.

An 'external property fringe benefit' is defined in subsection 136(1) of the FBTAA to mean, in relation to an employer, a property fringe benefit other than an in-house property fringe benefit.

As established above, the provision of (tangible) general merchandise and apparel (or 'property') by the employer to an employee or an immediate family member of the employee upon redemption of the value/available balance on the employee's Benefits Card constitutes the provision of a property fringe benefit. Furthermore, the provider of the property fringe benefit is the employer, and the provider carries on a business that consists of the provision of identical or similar property (general merchandise and apparel) principally to outsiders.

As such, the benefit provided is an in-house property fringe benefit under paragraph (a) of the definition of "in-house property fringe benefit" in subsection 136(1) of the FBTAA.

Question 3

Summary

The taxable value of the in-house property fringe benefit will be calculated under:

1.            subparagraph 42(1)(a)(ii) of the FBTAA where the benefit pertains to general merchandise and apparel manufactured, produced, or processed by the employer, and/or

2.            paragraph 42(1)(b) of the FBTAA where the benefit pertains to general merchandise and apparel acquired by the employer and not manufactured, produced or processed by the employer.

The taxable value will then be reduced by the reduction amount as specified in section 62 of the FBTAA.

Detailed Reasoning

The taxable value of the property fringe benefit depends upon whether the benefit is an in-house property fringe benefit or an external property fringe benefit.

As discussed in the response to Question 2 above, the benefit (being the provision of general merchandise and apparel by the employer to an employee and/or an associate of the employee upon redemption of the value/available balance on the employee's Benefits Card) is an in-house property fringe benefit. The taxable value of an in-house property fringe benefit is calculated under section 42 of the FBTAA. Subsection 42(1) of the FBTAA provides that:

42(1) Subject to this Part, the taxable value of an in-house property fringe benefit in relation to an employer in relation to a year of tax, is:

(aa) if the recipient's property was provided to the recipient under a salary packaging arrangement - an amount equal to the notional value of the recipient's property at the provision 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 time the transport starts; or

(a) if neither paragraph (aa) nor (ab) applies and the recipient's property was manufactured, produced, processed or treated by the provider:

(i) if identical property that was manufactured, produced, processed or treated, as the case may be, by the provider was, at or about the provision time, sold by the provider in the ordinary course of business to purchasers being manufacturers, wholesalers or retailers - an amount equal to:

(A) if any of that identical property was, at or about the provision time, sold by the provider under an arm's length transaction or arm's length transactions - the lowest price at which it was sold under such a transaction; or

(B) if sub-subparagraph (A) does not apply - the lowest price at which any of that identical property could reasonably be expected to have been sold by the provider at or about the provision time under an arm's length transaction; or

(ii) if subparagraph (i) does not apply but identical property that was manufactured, produced, processed or treated, as the case may be, by the provider was, at or about the provision time, sold by the provider:

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

(B) 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 recipient's property to the recipient;

an amount equal to 75% of the lowest price at which that property was so sold to a member of the public; or

(iii) in any other case - an amount equal to 75% of the notional value of the recipient's property at the provision time; or

(b) if none of the above paragraphs applies and the property was acquired by the provider - an amount equal to the lesser of:

(i) the arm's length price in respect of the acquisition of the recipient's property by the provider; or

(ii) the notional value of the recipient's property at the provision time; or

(c) in any other case - an amount equal to 75% of the notional value of the recipient's property at the provision time;

reduced by the amount of the recipient's contribution.

The FBTAA does not define the meaning of 'acquired'. Its ordinary meaning must therefore be considered. The Macquarie Dictionary (online) defines 'acquire' as:

1. to come into possession of; get as one's own.

Subsection 136(1) defines 'notional value' as:

notional value, in relation to the provision of property or another benefit to a person, means the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm's length transaction.

Guidance for determining this amount is provided by Taxation Determination TD 93/231 Fringe benefits tax: what is an acceptable method for determining the 'notional value' of a property fringe benefit for the purposes of sections 42 and 43 of the Fringe Benefits Tax Assessment Act 1986? (TD 93/231).

Paragraphs two to five of TD 93/231 state:

2. To ascertain the 'notional value' of a property fringe benefit the employer must determine the amount the employee would have to pay for a comparable (on the basis of age, type and condition) benefit under an arm's length transaction.

3. This Office will accept a number of ways of obtaining the notional value including:

•                    the price of comparable goods advertised in local newspapers and/or relevant magazines or similar publications,

•                    the price paid for comparable goods at a public auction,

•                    the price of comparable goods at a second-hand store, or

•                    the market value of the goods determined by a qualified valuer.

4. The lowest value obtained using any of these methods will be acceptable.

5. Valuation methods which are not acceptable to this Office include the lease residual value, the tax written value or the 'best offer' made by an employee.

In Walstern v. Federal Commissioner of Taxation [2003] FCA 1428; (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423, Hill J in discussing notional value stated at ATC 5092:

As already noted, the valuation formula depends upon the 'notional value' in relation to the provision whether of property or of a benefit to each of the Medichs. From the definition it follows that the question to be asked is what is the amount that each of the Medichs could reasonably be expected to have been required to pay to obtain the benefit from the provider under an arm's length transaction. The provider in the present case is Walstern. Hence the question in relation to Mr Ronald Medich, is how much he could reasonably be expected to have been required (i.e., by Walstern) to pay to Walstern to obtain the interest obtained by him in the fund, assuming the transaction between Walstern and him to be at arm's length.

'Recipient's contribution' is defined in subsection 136(1) of the FBTAA as:

(a)          in relation to a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit, being a fringe benefit provided in respect of the employment of an employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration; and...

In the current circumstances, paragraphs (aa) and (ab) of subsection 42(1) of the FBTAA do not apply, as the benefits are not provided under a salary packaging arrangement nor are they airline transport fringe benefit.

As per the facts, the majority of the employer's goods are acquired by the employer and are not manufactured, produced, processed or treated. However, the employer does manufacture, produce, process or treat some goods, including clothing, bedding, kitchenware and other employer branded item.

The taxable value of general merchandise and apparel that have been manufactured, produced, processed or treated by the employer will therefore be calculated under subparagraph 42(1)(a)(ii) of the FBTAA. That being an amount equal to 75% of the lowest price the property was so sold to a member of the public, less any recipient contribution.

Where the general merchandise and apparel that have been acquired by the employer, the taxable value is calculated as per subsection 42(1)(b). That is the taxable value will be the lessor of the arm's length price in respect of employer's acquisition of the general merchandise and apparel that was provided to their employees (or their associates) under the two Employee In-house Benefits Programs, or the notional value of those goods.

As per the facts, the notional value will not apply in respect of the goods provided to employees (and/or their associates) under the two Employee In-house Benefits Programs, as it will be a higher value than the arm's length price in respect of the acquisition of the employee's (and/or their associate's) property by the employer. The taxable value will thus be the arm's length price in respect of the acquisition of the goods by the employer, less any recipient's contribution.

Where an employer provides one or more in-house fringe benefits to a particular employee, the aggregate taxable value of those in-house fringe benefits may be reduced under section 62 of the FBTAA. Section 62 states:

62(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.

62(2) Subsection (1) does not apply to an in-house fringe benefit provided under a salary packaging arrangement.

As per the responses to Questions 1 and 2 above, the applicable benefit - being the (tangible) general merchandise and apparel that the employer provides to its employees (and/or their associates) under the two Employee In-house Benefits Programs upon redemption of the value that has been pre-loaded onto a Benefits Card - is an 'in-house property fringe benefit'. As such, subsection 62(1) of the FBTAA will apply so that the aggregate taxable value of the in-house property fringe benefits for each employee (and their associate) is reduced by up to $1,000.

Subsection 62(1) of the FBTAA is applicable only in relation to 'a particular employee'. In terms of whether benefits provided to an associate of an employee (as will be the case under Benefits Program A or B) will also be eligible for the reduction in taxable value under subsection 62(1), paragraph 5 of Miscellaneous Taxation Ruling MT 2044 Fringe benefits tax: reduction of aggregate taxable value of fringe benefits - application to associates (MT 2044) states:

Section 62 applies to benefits which "relate to a particular employee". The word "relate" is not specifically defined in the Act and therefore has its ordinary meaning. The Concise Oxford Dictionary defines "relate" to mean "...establish relation between; connected; allied". The Macquarie Dictionary, in so far as is relevant, defines "relate" to mean "to bring into or establish association, connection, or relation". It is therefore considered that a benefit will "relate" to an employee if the provision of that benefit is connected to or associated with the employee. As a benefit provided to an associate of an employee must be in respect of the employment of the employee, the provision of the benefit is therefore connected to or associated with the employee. In other words it relates to the employee.

MT 2044 makes it clear that benefits provided to an associate of the employee fall within the requirements of subsection 62(1) of the FBTAA that the employee and their associate is grouped with the relevant employee for accessing the employee's $1,000 reduction amount.

As the benefit programs provided by the employer are not a salary packaging arrangement, subsection 62(2) of the FBTAA does not have an application.

Accordingly, section 62 of the FBTAA will apply to reduce the taxable value of all in-house property benefits for each employee and their associate (calculated under sub-subparagraph 42(1)(a)(ii) and/or paragraph 42(1)(b) of the FBTAA) up to an amount of $1,000.

Therefore, for each employee (and/or their associate) who receives one or more in-house property fringe benefit under the Member Benefits Program A or B, the taxable value will be calculated as follows:

1. Calculate the taxable value of each individual in-house property fringe benefit provided to that employee (and/or their associate):

•                    for an in-house property benefit provided to an employee (and/or their associate) that has been manufactured, produced, processed or treated by the employer, the taxable value will be 75% of the lowest price that the goods were sold to the public, less any recipient's contribution, pursuant to sub-subparagraph 42(1)(a)(ii) of the FBTAA.

•                    for an in-house property benefit provided to an employee (and/or their associate) that was acquired (and not manufactured, produced, processed or treated) by the employer, the taxable value will be the arm's length price in respect of the acquisition of those goods, less any recipient's contribution, pursuant to paragraph 42(1)(b) of the FBTAA.

2. The taxable value, or the sum of the taxable values where the employee has received more than one in-house property benefit, is then reduced by the amount specified in subsection 62(1) of the FBTAA.