Private ruling: Goods and services tax (GST) and fringe benefits
Date of advice: 4 February 2016
Published: March 2016

Ruling: Q1: Do you have a GST liability on the employee contribution towards the cost of a private health insurance policy? | A1: No. | Q2: Do you have a GST liability on the employee contribution towards the cost of a Division 100 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) voucher? | A2: No.

Relevant facts and circumstances: You are registered for GST. You provide fringe benefits to employees. These benefits are private health insurance and vouchers of the type falling within Division 100 of the GST Act. You purchase the health insurance and vouchers and the employees make contributions to you towards the cost of the fringe benefits using after tax salary.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 9-75 | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-55(1) | A New Tax System (Goods and Services Tax) Act 1999 Division 100

Reasons for decision: Summary: GST is payable on any taxable supply. You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are registered or required to be registered. However, the supply is not a *taxable supply to the extent that it is*GST-free or *input taxed. (*Denotes a term defined in section 195-1 of the GST Act) The indirect tax zone is Australia. Goods and Services Tax Ruling GSTR 2001/3 provides guidance on the GST implications of fringe benefits. Paragraph 13 of GSTR 2001/3 states: 17. The provision of a fringe benefit can be a supply. The supply of a fringe benefit may be made by you as an employer, your associate or another party (subject to an arrangement with you). The recipient of the supply may be either an employee or an associate of the employee . Paragraph 20 of GSTR 2001/3 states: 20. Consideration for the supply of a fringe benefit may also take the form of a payment or contribution made by the recipient of the benefit. It is only this consideration that is taken into account in working out the amount of GST on the supply of a fringe benefit. Where an employer provides a fringe benefit to an employee and the fringe benefit is a supply and the employee makes a contribution to the employer towards the cost of the fringe benefit from after tax salary, the employee contribution is consideration for the supply of the fringe benefit. Subsection 38-55(1) of the GST Act provides that a supply of private health insurance is GST-free. Where a GST-free supply of private health insurance is made to an employer and the employer provides-the health insurance to an employee as a fringe benefit, the supply of the health insurance to the employee is GST-free. Therefore, the employee contribution to the employer towards the cost of the insurance policy using after tax salary is consideration for a GST-free supply. Hence, GST is not payable on the employee contribution. In accordance with subsection 100-5(1) of the GST Act, a sale of a Division 100 voucher is not a taxable supply (even if the requirements of section 9-5 of the GST Act are met). Therefore, where an employer purchases a Division 100 voucher and then gives it to an employee as a fringe benefit and the employee makes a contribution to the employer towards the cost of the voucher using after tax salary, this contribution is treated as being consideration for a non-taxable supply. Hence, GST is not payable on the contribution by the employee.