ATO ID 2001/253: Fringe benefits tax: waiver of a levy payable by a unit owner/employee
Date of decision: 22 May 2001
Business line: Superannuation and Employer Obligations

Issue
Whether the waiver of a levy payable by the owner of a unit in a strata titled complex is a fringe benefit in a situation where the owner is employed as a caretaker by the owners corporation.

Decision
Yes. The waiving of the levy will be either a debt waiver fringe benefit under section 14 or a residual fringe benefit under section 45 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Facts
The owner of one of the units in a strata titled complex of residential units has been employed by the owners corporation as its part-time caretaker. The caretaker is paid a wage by the owners corporation. The operating expenses of the owners corporation are met by periodic levies collected from unit owners. The owners corporation has decided not to collect these levies from the owner who is the part-time caretaker. The minutes of a meeting of the owners corporation record that as an employee of the owners corporation, the caretaker enjoyed privileges that were not given to other unit owners. Specific mention was made to the waiving of levies applicable to the duration of employment of the caretaker.

Reasons for decision
Summary: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA as a benefit provided to an employee (or their associate) by the employer (or their associate) in respect of the employment of the employee, but does not include certain benefits (such as salary or wage payments, specifically exempted benefits, and payments to complying superannuation funds). The meaning of 'in respect of employment' was considered by the Full Federal Court in J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 45 ATR 1101. The Full Federal Court held that it is not sufficient for the purposes of the FBTAA to conclude that there was a causal connection between the benefit and the employment. It must be established that there was a sufficient and material connection or relationship between the benefit and the employment. The agreement between the caretaker and the owners corporation shows sufficient and material connection between the non-payment of the levies and the employment duties of the caretaker. The caretaker would not have received the benefit had he not been an employee and the Minutes confirmed that the levies were only waived because the caretaker was an employee of the owners corporation. The levies were only waived during the period of the caretaker's employment. The waiving of the unit owners levy by the owners corporation is a benefit provided in respect of the employment of the unit owner in the role of caretaker and satisfies the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. The levy waiver is either a debt waiver fringe benefit under section 14 or a residual fringe benefit under section 45 of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 14 section 45 section 136(1)
Case references: J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22
Subject references: Fringe Benefits Debt Waiver Fringe Benefits Residual Fringe Benefits