ATO ID 2006/52: Expense Payment Fringe Benefit: reduction of taxable value - education of children of overseas employees
Date of decision: 17 February 2006
Year of income: Year ended 31 March 2006
Business line: Private Groups and High Wealth Individuals

Issue
Where an employer pays for additional tuition costs of children of overseas employees, will this be considered to be expenditure 'in respect of the full time education of a child' and thus eligible for reduction under section 65A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
Yes. The expenditure in question is in respect of the full time education of the child in terms of section 65A of the FBTAA.

Facts
An employer decides to employ an expatriate employee on a temporary visa in Australia. As part of this arrangement, the employee's family, including a school age child are relocated to Australia for the duration of the appointment. The employee's child is enrolled in a Development & Coaching Centre which specialises in teaching school subjects to support school study needs. The child attends this Centre one afternoon a week after normal school hours. The employer pays the tuition fees. This would be an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.

Reasons for decision
Summary: In accordance with subparagraph 65A(a)(ii) of the FBTAA, in order to qualify for a reduction in the taxable value of the expense payment fringe benefit otherwise provided, the recipient's expenditure must be in respect of the full time education of the child of the employee. Although the attendance of a child at this Coaching Centre is not of itself 'full time education', it needs to be considered whether the additional tuition is 'in respect of the full time education' of a child. As held in the Full Federal Court decision of J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151 (2000) 44 ATR 22, the words 'in respect of' have no fixed meaning. However 'the words must be given a meaning that depends on the context in which the words are found'. It was also held by the Court that there must be a 'sufficient or material connection or relationship' between the benefit and employment. The words 'in respect of the full time education of the child', requires that any expense, whilst not necessarily directly incurred on full time education, must have a sufficient or material connection to the full time education of the child. It is considered that the extra tuition provided to the employee's child at the Development & Coaching Centre, in supporting the study needs of the child in practical areas of their normal education and not being in the area of general interest pursuits, has a sufficient or material connection to the child's full time education. Accordingly, the recipient's expenditure is 'in respect of the full time education' of a child of the employee and thus eligible for reduction under section 65A of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 65A subparagraph 65A(a)(ii)
Case references: J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22
Subject references: FBT employees FBT expense payment fringe benefit Fringe benefits tax Overseas employees Reductions of taxable value