Private ruling: Fringe benefits tax
Date of advice: 26 February 2016
Published: April 2016
Ruling period: FBT year ending 31 March 2017 | FBT year ending 31 March 2018 | FBT year ending 31 March 2019
Date scheme commenced: The scheme has commenced

Ruling: Q1: Will employees who enter into salary sacrifice arrangements (SSA) for the provision of child care receive a fringe benefit from the Employer pursuant to subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. The benefit provided by the Employer to its employees under the child care SSA will be an exempt residual benefit under subsection 47(2) of the FBTAA. A fringe benefit does not include a benefit that is an exempt residual benefit pursuant to paragraph 136(1)(g) of the FBTAA. | Q2: Is the Employer exempt under the FBTAA from paying fringe benefits tax (FBT) on the benefit provided to its employees under the child care SSA? | A2: Yes.

Relevant facts and circumstances: The Employer and several subsidiaries will provide child care to its employees through a salary sacrifice arrangement. One of the Employer's subsidiaries has received a private ruling stating that the child care facility is located on their business premises. The Employer is the holding company of several subsidiaries. The Employer and those subsidiaries will obtain the required child care places from its subsidiary, which they will then provide to its employees (including employees of subsidiaries) through an effective salary sacrifice arrangement.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 subsection 47(2). | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Fringe Benefits Tax Assessment Act 1986 subsection 158

Reasons for decision: Summary: The Employer and several subsidiaries will offer its employees child care services through a salary sacrifice agreement. The child care services will be located on the business premises of the Employer's subsidiary. Subsection 47(2) of the FBTAA provides an exemption from fringe benefits tax for the provision of child care when certain conditions are satisfied. It 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 child care facility; and (b) the recreational facility or child care 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 child care 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 child care facility 5. the child care facility is located on the business premises of the employer (or a related company if the employer is a company). | Detailed Reasoning - 1. Is the benefit a residual benefit?: Section 45 of the FBTAA defines a residual benefit as: A benefit is a residual benefit for the purpose of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Division 2 to 11 (inclusive). Under the terms of the salary sacrifice agreement the Employer and its subsidiaries will agree to provide child care. As the benefit being provided is the care of children rather than the paying or reimbursement of child care costs by the Employer, and is not a benefit by virtue of a provision of Subdivision A of Division 2 to 11 of the FBTAA, the benefit will be a residual benefit. | Detailed Reasoning - 2. Will the benefit be provided to a current employee?: As the child care is being provided under the terms of a salary sacrifice agreement the benefit will be provided to a current employee. | Detailed Reasoning - 3. Will the benefit consist of the care of children?: As discussed above, the benefit consists of the care of the children of the employees. | Detailed Reasoning - 4. Will the children be cared for in a child care facility: The children will be cared for in the Employer's subsidiary's child care facility | Detailed Reasoning - 5. Will the child care facility be located on the business premises of the employer (or a related company if the employer is a company)?: The child care facility is located on the business premises of the Employer's subsidiary. | Detailed Reasoning - Is your subsidiary a related company?: Subsection 158(1) of the FBTAA provides: For the purposes of this Act, a company shall be taken to be related to another company if: (a) one of the companies is a subsidiary of the other company; or (b) each of the companies is a subsidiary of the other company. The Employer is the holding company of a subsidiary at which a child care facility is located and several other subsidiaries which will provide child care to their employees. Therefore, under paragraph 158(1)(a) of the FBTAA above, the Employer and its subsidiaries are related. Consequently, the child care facility is located on the business premises of a related company. In conclusion, the benefit provided by the Employer and several subsidiaries to their employees under the child care SSA will be an exempt residual benefit under subsection 47(2) of the FBTAA. A fringe benefit does not include a benefit that is an exempt residual benefit pursuant to paragraph 136(1)(g) of the FBTAA. Accordingly, no fringe benefit will arise from the provision of child care by the Employer and its subsidiaries to the children of their employees as all the above conditions are met.