FBT: Minor benefits – TR2007/12

This Ruling sets out the Commissioner’s views on the application of the minor benefits exemption in S.58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

The Ruling makes it clear that, to be exempt, a minor benefit must both satisfy the ‘less than $300’ threshold criterion (previously a $100 threshold) as well as other criteria before it can be concluded that the minor benefit is an exempt benefit.

Ruling
A minor benefit is generally an exempt benefit under S.58P where:

• The notional taxable value of the minor benefit is less than $300; and
• It would be concluded that it would be unreasonable, having regard to the specified criteria in S.58P(1)(f), to treat the minor benefit as a fringe benefit.

Basically, those criteria (which also include associated identical or similar benefits) are:

• The frequency and irregularity in providing benefits;
• The total values of the benefits;
• The sum of the notional taxable values of any benefits;
• The practical difficulty in determining the notional taxable values of the benefits; and
• The circumstances surrounding the provision of the minor benefit.

The Ruling states that it will be necessary to look to the nature of the benefit provided and give due weight to each of the criteria.

The following are some important points stated in the Ruling:

• The $300 threshold test applies to each benefit provided to an individual employee (even if two or more benefits are provided at the same time), and/or each benefit provided to an associate of an employee;
• It is not an upper limit on the total value of minor benefits that any individual employee may receive;
• In applying the ‘infrequency and irregularity’ criterion, it is not appropriate to stipulate the maximum number of times associated benefits that are identical or similar to a minor benefit, or benefits in connection with the minor benefit, can be provided before the criterion would be met.

However, the more often and regularly those benefits are provided, the less likely it is that this criterion would be met.

• The minor benefits exemption can apply to car benefits provided the requisite conditions are satisfied (for the purpose of the threshold test, the value of the benefit mist be calculated by assuming the car benefit is a residual benefit).

Exclusions

Even if a benefit satisfies the other criteria of S.58P, benefits may be specifically excluded from being exempt benefits if they are, or involve providing:

• Airline transport benefits;
• Expense payment, residual benefits and property benefits where they would be in-house fringe benefits;
• Tax-exempt body entertainment (although this may otherwise be exempt anyway);
• Non-deductible exempt entertainment provided to an employee or an associate;
• Meal entertainment using the 50-50 split method; and
• Any benefits under a salary sacrifice agreement.

Example: Ad hoc road tolls

An employer allows an employee to use a car to travel to and from work, and an electronic toll tag which is attached to the car (the account is held in the employer’s name) records all road toll expenditure for that car.

The employee takes the car home every overnight 10 times during the FBT year (which is 20 tolls).

The cost of each toll is well below the minor benefits threshold, but it is also necessary to determine if it would be unreasonable to treat the minor benefits as fringe benefits.

The road tolls are provided infrequently and irregularly, and the sum of the value of all the road tolls, being identical or similar benefits, in this year and all other years is not considered to be substantial.

The use of the car is provided in connection with the road tolls. But the sum of the value of the associated benefits is not considered to be substantial.

On balance, having regard to the carious criteria in S.58P(1)(f), it would be concluded that it is unreasonable to treat the benefits as a fringe benefit, and so the benefits are exempt benefits.

Example: Gym membership

An employer decides to provide each of its employees with a three month membership at the local gym (the cost of each membership is less than $300 per employee).

As the value of each membership is below the minor benefits threshold, it is necessary to consider the other criteria to determine of it would be unreasonable to treat the minor benefit as a fringe benefit.

The employer has not provided a gym membership to the employee in the past, and does not intend to provide these memberships on an ongoing basis; therefore it is considered that they are provided on an infrequent and irregular basis.

Even though the total value of the memberships provided to all of the employees might be substantial, this is not a relevant criterion; the sum of the value of the benefit to each employee is not substantial (being a one-off benefit).
There would be no difficulties in determining the value of the gym membership. On the facts, it is difficult to determine if the benefit is wholly or principally a reward for services.

On balance, it would be concluded that it would be unreasonable to treat the benefit as a fringe benefit.

Example: Babysitting expenses

An employer unexpectedly requests one of its staff to work overtime, but reimburses the employee for the babysitting expense incurred by the employee (which is less than $300).

The employer only pays for the employee’s babysitting expenses a few times in any year, and so this benefit and identical associated benefits (other babysitting expenses) are provided infrequently and irregularly.

The sum of the value of all babysitting expenses is not considered to be substantial and there are no other benefits provided in association with the babysitting expenses.

There would be no practical difficulties in determining the value of these benefits. However, the benefit was provided to assist the employee because of an unexpected event (the request to work overtime on that same day). On the facts, it is not wholly or principally a reward for services.

On balance, it would be concluded that it would be unreasonable to treat the minor benefit as a fringe benefit.