The Australian Taxation Office (ATO) recently released two new interpretative decisions relating to Fringe Benefits Tax (FBT). They concern the payment of money to an employee’s associate (e.g. a spouse) and to an organisations social club and whether those payments attract FBT.
A ‘fringe benefit’ is a benefit provided by an employer to an employee or their associate in respect of the employment of the employee. Certain types of benefits are specifically excluded from being fringe benefits including ‘salary or wages’.
Payment to an associate
The ATO considered whether a payment to an employee’s associate is a property fringe benefit, that is where one person provides ‘property’ to another. On the basis that money can be defined as ‘property’ and that it also constitutes a ‘benefit’, the ATO concluded that payment of money to an employee’s associate could form a ‘property fringe benefit’ thereby attracting FBT.
This is not to say that under all circumstances this sort of payment will attract FBT however, employers should be aware that it could attract FBT.
Employer social club contributions
This decision dealt with an organisation’s social club funded by an annual payment from the employer, as well as by contributions from employees, that is, members of the club. The social club is run by employees through a committee managing the funds of the social club on behalf of members. The issue was whether the employer’s contribution constituted a property fringe benefit thereby being subject to FBT.
To constitute a ‘fringe benefit’, it is necessary to specifically identify the employees who will benefit from the payment. The critical moment for determining whether a fringe benefit arises is when the benefit is provided by the employer to the social club committee, as an associate of the employee. It should not matter if the social club committee later provides benefits to the employees because, at that point in time, the employer or their associate is no longer providing a benefit to an employee or their associate.
It is irrelevant that the social club is solely for the benefit of employees, because those benefits cannot be sufficiently connected with any particular employee. Consequently, the employer contributions to an employee social club are not considered property fringe benefits.
This has important consequences for employers contributing to employee social clubs or in other situations where a group of employees can collectively share in the benefits of an employer contribution.