ATO ID 2010/135: Property fringe benefits: gift cards
Date of decision: 16 June 2010
Year of income: Year ended 31 March 2011
Business line: Superannuation and Employer Obligations

Issue
Where a retail store employer provides an employee with a gift card, has the employer provided the employee with an 'in-house property fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
No. As the gift card provided to the employee is not 'tangible property' as defined in the FBTAA, the gift card does not satisfy the definition of 'in-house property fringe benefit' in subsection 136(1) of the FBTAA.

Facts
The employer operates retail stores. As part of the employer's business, gift cards are available for purchase by the public with a loaded value ranging from a minimum of $20 to a maximum of $500. The employer recognises the efforts of employees who have worked diligently over a period of time or who have met particularly tight work project deadlines. In recognition of an employee's work, the employer provides the employee with a gift card. The value that is loaded on the gift card, up to the maximum of $500, is solely at the employer's discretion. The decision as to the stored value of the gift card was made prior to the gift card being provided to the employee. The gift card can be redeemed at participating stores operated by the employer. The gift card can be redeemed for goods or services up to the stored value on the gift card within 12 months of its issue date. Any remaining stored value on the gift card at the expiry date will be forfeited. Once the stored value of the gift card is redeemed, the gift card cannot be re-activated. That is, the gift card is not re-loadable. The gift card cannot be refunded or exchanged for cash. The gift card can be used by any person (bearer) who holds it. If the gift card is lost or stolen, it cannot be replaced and may still be used by whoever holds it.

Reasons for decision
Summary: Section 40 of the FBTAA deals with 'property benefits' and states the following: 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 provides the following definitions relevant to property benefits: 'property' means: (a) intangible property; and (b) tangible property. The term 'benefit' is defined in subsection 136(1) of the FBTAA as including: any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility. A gift card in the circumstances described confers rights on the bearer, being the merchant's promise to provide goods or services up to the stored value on the gift card. When the employer gives a gift card to the employee, the rights conferred are 'benefits' under subsection 136(1) of the FBTAA. Subsection 136(1) of the FBTAA defines 'provide', in relation to property, to mean dispose of (whether by sale, gift, declaration of trust or otherwise) the beneficial interest in property or the legal ownership of property. The rights that exist as a bearer of a stored value gift card, which allows the bearer to receive goods or services up to the stored value, are property. The benefit is a property benefit. The employer 'provided' the benefit when the gift card was given to the employee. As the property benefit was provided as a reward for services performed it is a 'property fringe benefit' as defined in subsection 136(1) of the FBTAA. The concessional valuation for 'in-house property fringe benefits', as defined in subsection 136(1) of the FBTAA, is limited to benefits in respect of 'tangible property'. That is: 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.... (emphasis added) As stated above, 'property' means 'intangible property' and 'tangible property'. Tangible property means goods, animals, gas and electricity. 'Goods' is not a defined term in the FBTAA and therefore it takes on its ordinary meaning. The Macquarie Dictionary [Online], viewed 17 October 2017, www.macquariedictionary.com.au defines the term 'goods' relevantly as: 1. possessions, especially movable effects or personal chattels. 2. articles of trade; wares; merchandise, especially that which is transported by land. The benefit the gift card represents, being the employer's promise to provide goods or services up to the stored value where redemption occurs before the 12 month expiry date, does not constitute possessions, articles of trade or merchandise and is not 'goods' for the purposes of the FBTAA. The benefit is property but is not goods or any other form of 'tangible property' as defined in the FBTAA. The benefit is accordingly 'intangible property' as defined in subsection 136(1) of the FBTAA. As the gift card provided to the employee is not 'tangible property' as defined in the FBTAA, the gift card does not satisfy the definition of 'in-house property fringe benefit' in subsection 136(1) of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act (1986) section 40 subsection 136(1)
Subject references: Fringe benefits tax Fringe benefits Property fringe benefits FBT intangible property FBT tangible property In-house property fringe benefits