Private ruling: Exempt residual fringe benefit
Date of advice: 4 April 2025
Published: 10 June 2025
Date scheme commenced: 1 April 20XX

Ruling: Q1: Will the benefits provided under a salary sacrifice arrangement with Employees of the Employer for the childcare fees where children attend 'Long Day Care' 'Mobile Childcare' 'Family Day care and 'After Kinder Care' on the employer's premises an exempt fringe benefit under subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: Does the provision of inhouse recreation, pool and gym services by the Employer to the Employees constitute an exempt residual benefit under subsection 47(2) of the FBTAA? | A2: Yes This private ruling applies for the following periods: Year ending 31 March 20XX Year ending 31 March 20XX Year ending 31 March 20XX Year ending 31 March 20XX The scheme commenced on: 1 April 20XX

Relevant facts and circumstances: The Employer provides inhouse childcare in the form of Long Day Care, Mobile Childcare, Family Day Care and After Kindergarten care from the employer owned premises. The Employer is in the business of providing childcare services that are available to both employees and to the public on a user fee basis. Employees and the public pay equivalent fees for similar services. The Employees will be charged the same fees as levied to the general public for equivalent childcare services and recreation, pool, and gym facilities. The Employer provides childcare services, for children up to 6 years of age, in the form of Long Day Care, Mobile Care, Family Day Care, and After Kinder Care. The employer provides the following inhouse childcare services: Long Day Care • The childcare provided from the Employer owned premises with the service operated by the Employees. • The Employer controls and sets the fees payable by service users. Mobile Childcare • The childcare provided from the Employer's premises with the service operated by the Employees. • The Mobile Childcare is operated for shorter hours from the Employer's facility that is not purpose built for childcare. • The facility, such as the Employer owned and operated halls, are adapted on scheduled workdays to provide childcare services to the community. • The Employer controls and sets the fees payable by service users. Family Day Care • The childcare provided from the Employer's premises with the service operated by the independent carers (third party providers). The employer controls and sets the fees payable by service users. After Kinder Care • The childcare provided from the Employer's premises and operated by the Employees. • The Employer controls and sets the fees payable by service users. • After Kinder Care are fee paying the employer programs that operate outside of state funded Kindergarten hours (for example 1.45pm to 6.00 pm). Recreation, pool and gym facilities The Employer provides inhouse recreation, pool and gym facilities from the Employer owned premises. The facilities are owned and controlled by the Employer but operated by a third-party organisation pursuant to a contract of management. Salary packaging The Employer proposes to offer employees to salary sacrifice their fees/membership payments for both 'inhouse childcare' and 'inhouse recreation, pool and gym facilities'.

Relevant legislative provisions: Fringe Benefit Tax Assessment Act 1986(FBTAA)section 20 | Fringe Benefit Tax Assessment Act 1986(FBTAA)section 38 | Fringe Benefit Tax Assessment Act 1986(FBTAA)section 45 | Fringe Benefit Tax Assessment Act 1986(FBTAA)subsection 47(2) | Fringe Benefit Tax Assessment Act 1986(FBTAA)subsection 136(1) | Income Tax Assessment Act 1997 (ITAA 1997)section 8-1 | Income Tax Assessment Act 1997 (ITAA 1997)section 32-5 | Income Tax Assessment Act 1997 (ITAA 1997)section 32-10

Reasons for decision: Detailed Reasoning - Question 1: Are benefits provided under a salary sacrifice arrangement with Employees of the Employer for the childcare fees where children attend 'Long Day Care' 'Mobile Childcare' 'Family Day care and 'After Kinder Care' on the employer's premises an exempt fringe benefit under subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | Summary: Yes, the provision of 'Long Day Care', 'Mobile Childcare', 'Family Day Care' and 'After Kinder Care provided by the Employer to the Employee on the Employer's premises are exempt benefits under subsection 47(2) of the FBTAA. | Detailed Reasoning - Detailed reasoning: If an employer provides an employee with benefits in respect of the employment of the employee, the employer is liable to pay fringe benefits tax on the benefits unless the benefits are excluded from the definition of fringe benefit in subsection 136(1) of the FBTAA. Exempt benefits are specifically excluded from the definition of fringe benefit in subsection 136(1) of the FBTAA. Subsection 136(1) of the FBTAA defines a benefit to include any right, privilege, service or facility. The childcare provided to the Employees of the Employer will be benefits provided in respect of their employment. Therefore, the benefits will be fringe benefits unless they are exempt benefits. Subsection 47(2) of the FBTAA states where: (a) a residual benefit provided to a current employee in respect of his or her employment consists of: (i) the provision, or use, of a recreational facility; or (ii) the care of children of the employee in a childcare facility; and (b) the recreational facility or childcare facility, as the case may be, is located on business premises of: (i) the employer, or (ii) if the employer is a company, of the employer or of a company that is related to the employer, the benefit is an exempt benefit. Therefore, the provision of childcare will be an exempt benefit under subsection 47(2) of the FBTAA if the following conditions are satisfied: 1. the benefit is a residual benefit 2. the benefit is provided to a current employee 3. the benefit consists of the care of the children of the employee 4. the care of the children is in a childcare facility 5. the childcare facility is located on the business premises of the employer | Detailed Reasoning - Is the benefit a residual benefit?: A benefit is a residual benefit under section 45 of the FBTAA if the benefit does not fit into any of the specific categories of benefits under a provision of Subdivision A of Divisions 2 to 11 of the FBTAA. The Employer will provide childcare services to the Employees as part of a salary sacrifice arrangement. As the benefit does not fit into any other category of benefits under provision of Subdivision A of Divisions 2 to 11 of the FBTAA, the benefit will be a residual benefit. | Detailed Reasoning - Is the benefit provided to a current employee?: A current employee is defined in subsection 136(1) of the FBTAA as 'a person who receives, or is entitled to receive, salary or wages'. The Employer will provide the childcare benefits to the Employees under salary sacrifice arrangements. As these arrangements require the individual to be entitled to receive salary or wages, the benefit will be provided to current employees. | Detailed Reasoning - Does the benefit consist of the care of children in a childcare facility?: Subsection 136(1) of the FBTAA 1986 defines childcare facility as: a facility at which a person receives, or is ready to receive, 2 or more children under the age of 6, not being associates of the person, for the purpose of minding, caring for or educating them for a day or part of a day without provision for residential care but does not include a facility at the place of residence of any of those children. As the childcare facility is, at a minimum, ready to provide care to two or more children under six years of age, and exists to mind, care and/or educate the children for a day or part of the day, it meets this definition. | Detailed Reasoning - Is the childcare facility located on the business premises of the employer?: The term 'business premises' is defined in subsection 136(1) of the FBTAA as being: "...premises, or part of premises, of the person used, in whole or in part, for the purposes of business operations of the person..." The childcare services are provided on the Employer's premises. As such, the childcare facility is located on the business premises of the employer. | Detailed Reasoning - Conclusion: It is considered that the childcare fee provided to the employees where children attend the childcare services on the employer's premises will be exempt benefits and excluded from the definition of a fringe benefit. | Detailed Reasoning - Question 2: Does the provision of inhouse recreation, pool and gym services by the Employer to the Employees constitute an exempt residual benefit under subsection 47(2) of the FBTAA? | Summary: The inhouse recreation, pool, gym services are exempt residual benefits where they are provided on the business premises of the employer. | Detailed Reasoning - Detailed reasoning: As discussed in question one, exempt benefits are specifically excluded from the definition of fringe benefit in subsection 136(1) of the FBTAA. Subsection 136(1) of the FBTAA defines a benefit to include any right, privilege, service or facility. Providing employees with access to inhouse recreation, pool and gym services in respect of their employment is a benefit. Under subsection 47(2) of the FBTAA, where a residual benefit provided to a current employee in respect of their employment consists of the provision, or use, of a recreational facility and the facility is located on business premises of the employer, the benefit is an exempt benefit. | Detailed Reasoning - Is the benefit a residual benefit?: The benefit provided must be a residual benefit which according to section 45 of the FBTAA ' is a benefit that is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive)...'. Essentially, residual benefits are benefits that remain or are left over because they are not one of the more specific categories of benefit. The Employees will not be incurring any expenses in relation to recreational facilities entry so there is no possibility of an expense payment benefit under section 20 of the FBTAA. Employees will be using the inhouse recreation, gymnasium and pools. Under subsection 136(1) of the FBTAA recreation includes: (a) amusement; (b) sport or similar leisure-time pursuits; and... Recreation is included within the definition of entertainment for the purposes of the FBTAA which takes its definition from section 32-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Because the Employer is an income tax exempt body and the use of the inhouse recreation, gymnasium and pools can be considered entertainment, it is necessary to consider whether the benefits are tax-exempt body entertainment benefits under section 38 of the FBTAA. Section 38 of the FBTAA states: Where, at a particular time, a person (in this section referred to as the "provider") incurs non-deductible exempt entertainment expenditure that is wholly or partly in respect of the provision, in respect of the employment of an employee, of entertainment to a person (in this section referred to as the "recipient") being the employee or an associate of the employee, the incurring of the expenditure shall be taken to constitute a benefit provided by the provider to the recipient at that time in respect of that employment. In order to determine if the Employer will be providing benefits under this section it is necessary to determine if the Employer will be incurring non-deductible exempt entertainment expenditure in providing the Employees with use of the recreational facilities. Non-deductible exempt entertainment expenditure means 'non-deductible entertainment expenditure to the extent to which it is not incurred in producing assessable income'. Under subsection 136(1) of the FBTAA 'non-deductible entertainment expenditure' means a loss or outgoing to the extent to which: (a) section 32-5 of the Income Tax Assessment Act 1997 applies to it, or would if it were incurred in producing assessable income; and (b) apart from that section, it would be deductible under section 8-1 of that Act, or would be if it were incurred in producing assessable income; The costs that the Employer will incur in providing the benefits will be the same costs incurred in providing the gymnasium and pools to any person using them. There are no specific costs incurred in in respect of the provision of the benefit to the Employee by the Employer in respect of that employment. As the employer will not be incurring 'non-deductible entertainment expenditure' in providing the benefits to its Employees, paragraph 136(1)(a) of the FBTAA is not satisfied. Therefore, the benefits will not be tax-exempt body entertainment benefits under section 38 of the FBTAA Since the benefits will not be benefits by virtue of another provision of Subdivision A of Divisions 2 to 11 (inclusive) of the FBTAA, the benefits will be residual benefits under section 45 of the FBTAA. | Detailed Reasoning - Does the benefit consist of the provision or use of a recreational facility?: As discussed above the Employees will be provided with the use of the gymnasium and pools, which are recreational facilities. | Detailed Reasoning - Is the recreational facility located at the business premises of the employer?: According to subsection 136(1) of the FBTAA, 'business premises': in relation to a person, means premises or part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include: (a) premises, or part of premises, used as a place of residence of an employee of the person or an employee of an associate of the person; or (b) a corporate box; or (c) boats or planes used primarily for the purpose of providing entertainment unless the boat or plane is used in the person's business of providing entertainment; or (d) other premises used primarily for the purpose of providing entertainment unless the premises are used in the person's business of providing entertainment. Paragraph 12 of Taxation Ruling TR 2000/4 provides guidance concerning the two requirements that must be satisfied for premises to be classified as business premises of the employer. These requirements are: (a) the control the employer has over the premises, and (b) the consistency of an employer's actions and activities on the premises with those of normal business practices. Paragraph 7 of TR 2000/4 addresses the first requirement that the premises or part of the premises are under a person's control. A person's control is satisfied if that person owns the premises or has exclusive occupancy rights as lessee of the premises. The second requirement is that the premises or part of premises must be used by the person, in whole or part, for the purposes of their business operations. Under subsection 136(1) of the FBTAA 'business operations' in relation to a government body or non-profit company, includes any operations or activities carried out by that body or company. As noted in the explanation above the operation of the inhouse recreation, gymnasium and pool is considered to be a business that the employer carries on. Consequently: • the inhouse recreation, gymnasium and pools are not excluded by paragraph (d) of the definition of business premises in subsection 136(1) of the FBTAA as the premises are used in the Employer's business of providing entertainment, and • The Employer's actions and activities on the premises are consistent with its normal business practice of providing recreation. The inhouse recreation, gymnasium and pool is therefore located on the Employer's business premises and all of the conditions in subsection 47(2) of the FBTAA are satisfied. Since all the conditions are satisfied the benefits that will be provided the Employees of the Employer will be exempt benefits and excluded from the definition of a fringe benefit. | Detailed Reasoning - Conclusion: It is considered that the benefits that the Employer provides to their Employees will be exempt benefits and excluded from the definition of a fringe benefit.