ATO ID 2007/208: Property Fringe Benefit: employer contribution to its employees' social club
Date of decision: 12 November 2007
Year of income: Year ended 31 March 2008
Business line: Superannuation and Employer Obligations

Issue
Where an employer has made a contribution to its employees' social club, will this contribution be a property fringe benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
No. The contribution will not be a property fringe benefit as defined in subsection 136(1) of the FBTAA as at the time no particular employee has been identified who will benefit from that contribution to the social club.

Facts
Employees of an employer have formed a social club. The employer provides the social club with an annual donation which in turn is supplemented by personal contributions made by employee members during the year and through fundraising events. The social club operates on the basis of a committee of officers being drawn from the employees. The committee is a body of persons and therefore a person for the purposes of paragraph (d) of this definition at subsection 136(1) of the FBTAA. The committee operates in a fiduciary capacity in terms of the funds that are kept in a bank account and for which it shall appoint the signatories thereto. The social club is a trustee under the definition of trustee at subparagraph 136(1)(f)(ii) of the FBTAA. The payment of money to the social club is a property benefit under section 40 of the FBTAA.

Reasons for decision
Summary: The definition of a fringe benefit contained in subsection 136(1) of the FBTAA requires, amongst other things, that in order for a benefit to be a fringe benefit the benefit must be provided to the employee or an associate of the employee and that the benefit be provided in respect of the employment of the employee. In determining whether a fringe benefit has been provided in these circumstances the Full Federal Court decision in Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 369 is authority for the requirement that a particular employee must be identified. Edmonds J, at paragraph 37, found that whilst a benefit provided to a trustee of a trust estate can be a fringe benefit, this occurs when ...the identity of each employee who will take a share of the benefit is known with sufficient particularity, at the time the benefit is provided to enable it to be said that the benefit is provided in respect of the employment of each of those employees. His Honour further found that the shares provided to the trustee were not provided in respect of the employment of any particular employee, nor all of the employees capable of benefiting who would in fact receive a benefit - only some employees may later benefit and their identity was not known (paragraph 38). With respect to the facts relating to the social club, at the time the benefit is provided by the employer to the social club, the identity of employees is not known with 'sufficient particularity', despite the fact that the social club has been established solely for the benefit of employees of the employer. It cannot be ascertained at that point in time that there has been a benefit provided in respect of any particular individual employee. Accordingly, a property fringe benefit as defined in subsection 136(1) of the FBTAA has not been provided by the employer because no particular employee has been identified who will benefit from that contribution to the social club.

Legislative references: Fringe Benefits Tax Assessment Act 1986 subsection 136(1)
Case references: Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16 2007 ATC 4236 65 ATR 369
Subject references: Fringe benefits tax Fringe benefits Property fringe benefits