Private ruling: Bursary given to employee's child
Published: June 2012
Ruling period: 1 April 2012 | 1 April 2013 | 1 April 2014 | 1 April 2015 | 1 April 2016
Date scheme commenced: On or after 1 January 2007

Ruling: Q1: Whether the bursary that is provided to an employee, which is not provided in respect to the employee's employment, is subject to fringe benefits tax? | A1: No

Relevant facts and circumstances: All fees are billed on a semester basis and any reduction of fees is the sole discretion of the Principal. The entity offers bursaries to a number of students each year. Bursaries are offered, at the Principal's discretion, to families experiencing difficulty in meeting their annual tuition fees. The child of both staff and non staff members are eligible for a bursary and there is no difference in the treatment by the Principal between staff children and the children whose parents are not involved in the administration of the school. The entity's policy provides the following: A bursary is a financial grant (usually a full or partial reduction in tuition fees or boarding fees) for a fixed period of time. Each year it is up to the Principal's discretion as to how many bursaries will be given. Offers made to students due to financial hardship within the family. Such hardships may include divorce, economic downturn, illness and unemployment. These bursary discussions are generally initiated by parents, however remain at the Principal's discretion to award. The Principal considers a range of issues before deciding which child or children receive the bursary. Normal terms of trade apply for any residual balance owing. When considering financial hardship the Principal takes into consideration some of the following: · Unforseen family events impacting on finances: · Parents business dealings · Frozen assets due to marriage breakdown · Unexpected events such as unemployment · Illness · Length of association with the College · History of meeting school fee payments · Number of children at the school · Student behaviour · Access to reasonable alternative education · Current economic environment The bursary is deducted from the annual fees. The services provided to children of non employees and children of employees are the same.

Relevant legislative provisions: Section 45 of the Fringe Benefits Tax Assessment Act 1986 | Section 49 of the Fringe Benefits Tax Assessment Act 1986 | Section 62 of the Fringe Benefits Tax Assessment Act 1986 | Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 | Section 149 of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision: Summary: A fringe benefit is defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as follows: "fringe benefit", in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: provided at any time during the year of tax; or provided in respect of the year of tax; being a benefit provided to the employee or to an associate of the employee by: (c) the employer; or (d) an associate of the employer; or (e) a person (in this paragraph referred to as the "arranger") other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between: the employer or an associate of the employer; and the arranger or another person; or (ea) a person other than the employer or an associate of the employer, of the employer or an associate of the employer: · participates in or facilitates the provision or receipt of the benefit; or · participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; · and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so; · in respect of the employment of the employee, but does not include:… Paragraphs (f) to (r) of the definition contain a number of exclusions from this definition. | Detailed Reasoning - Is a benefit provided?: A benefit is defined in subsection 136(1) of the FBTAA as follows: "benefit" includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; (ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; or (c) an arrangement for or in relation to the lending of money. The bursary provided is a financial grant which is provided by way of a discount. The provision of the bursary fits within the definition of a benefit. Taxation Ruling MT 2016 Fringe benefits tax: benefits not taxable unless provided in respect of employment, at paragraph 8 provides: 'To be subject to fringe benefits tax two essential requirements must be satisfied. First, the benefit must be provided to an employee (or associate) and, second, the benefit must be provided in respect of the employment of the employee.' | Detailed Reasoning - Is a benefit provided to an employee or an associate of an employee?: Bursaries are offered to a number of students each year including child of employees of the entity. The bursary provided in respect to a child of an employee is considered to be a benefit provided to the employee as it a deduction or discount from the amount of annual tuition fee otherwise payable by the employee in respect to his/her child's education. | Detailed Reasoning - Is the benefit provided in respect of employment of the employee?: A benefit must be in respect of employment to satisfy the definition of a fringe benefit contained in subsection 136(1) of the FBTAA. In J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000 ) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22, it was concluded that there must be a sufficient or material, rather than a causal connection or relationship between the benefit and the employment for the benefit to be in respect of employment. In the circumstances described in the MT2016 ruling, the bursaries are offered to families of students experiencing financial difficulties in meeting their tuition fees. The child(ren) of both staff and non staff members are eligible for a bursary. Whether a family member is a staff member is not a factor for consideration in deciding whether to grant a bursary. As the benefit (the bursary) is provided to an employee on the basis of being a parent of a student and not because they are an employee of the school, the benefit is not provided in respect of employment of the employee. Therefore, as the benefit is not provided in respect of the employment of an employee, it is not a fringe benefit in accordance with subsection 136(1) of the FBTAA. Hence the bursary is not subject to fringe benefits tax.

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