Private ruling: Employee in-house benefits and salary packaging program
Date of advice: 28 June 2017
Published: October 2017
Ruling period: FBT year ending 31 March 2018 | FBT year ending 31 March 2019 | FBT year ending 31 March 2020 | FBT year ending 31 March 2021
Date scheme commenced: 1 April 2017

Ruling: Q1: Does a discount provided to the applicants’ employees off the retail selling price, on the purchase of in-house goods, give rise to a fringe benefit under subsection 136(1) of the FBTAA? | A1: Yes | Q2: If the answer to Question 1 is yes, what is the type of fringe benefit? | A2: An in-house property fringe benefit is being provided. | Q3: If the answer to Question 1 is yes, what is the taxable value of the fringe benefits? | A3: The taxable value will be 75% of the lowest selling price to the public where the items are manufactured, produced or processed by the employer less any recipient’s contributions. The taxable value will be the arm’s length price in respect of the acquisition of the property by the employer where the items are acquired by the employer but not manufactured, produced or processed, less any recipients contributions. | Q4: Are recipients contributions towards the purchase of in-house goods, in excess of the taxable value, excess recipients contributions that can be applied to reduce the taxable value of subsequent similar fringe benefits (packaging purchases)? | A4: Yes, recipients contributions towards the purchase of in-house goods, in excess of the taxable value, are excess recipients contributions that can be applied to reduce the taxable value of subsequent similar fringe benefits.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The employer intends to implement one of two alternate programs, consisting of the following components: ● Employees of the employer are entitled to an immediate discount, off the retail selling price, on the purchase of all in-house goods. ● Under each alternate program, when the employee purchases the goods, the consideration for the goods is the amount equal to the taxable value of FBT purposes. This is documented by way of a signed agreement between the applicant and the employee prior to the purchases occurring. ● The difference between the actual amount paid, from after-tax salary dollars, by the employee and the taxable value of the goods is not considered as consideration for those immediate goods, but rather is recorded and accumulated as “excess recipients contributions” to constitute consideration for subsequent goods, per the agreement between the employer and the employee. ● The employer tracks this employee in-house expenditure over the specified period of the FBT year. ● Excess recipients contributions, as a result of in-house purchases by the applicants’ employees, are accumulated over the “qualifying period”. ● An effective salary sacrifice agreement for the purposes of TR 2001/10 is entered into between the employer and its employee for the employer’s products, capped at the value of the excess recipients contributions on the purchase of in-house goods over the qualifying period. ● Employees can then purchase in-house goods, consistent with and authorised by the effective salary sacrifice arrangement, up to the value of the accumulated excess recipients contributions, during the “packaging period”. ● If “Program 1” is implemented, employees will salary sacrifice up to the value of the accumulated excess recipients contributions, then the applicant will provide them with loaded access cards to purchase the in-house goods. ● If “Program 2” is implemented, employees will purchase goods up to the value of the accumulated excess recipients contributions, the applicant will reimburse and concurrently process the salary sacrifice deduction. ● Under Program 1, the card has no value other than being the means by which an employee can obtain goods and the card cannot be exchanged for cash or transferred or used by any other person. ● The employee can only use the card for goods that are sold by the employer to the public. ● A secondary card, also in the employee’s name, may be issued to an employee’s spouse or immediate family member. ● The non-transferability is enforced by the employee or their secondary card holder being required to display his or her separate plastic x% discount card which identifies the purchaser as the employer’s employee at the point of sale. ● Failure to comply with or abuse of the access card may result in the loss of access to the Program and disciplinary action up to and including termination of employment. ● If the employee leaves employment, or does not utilise the excess recipients contributions on packaging purchases in the packaging period, the excess recipients contributions are forfeited. Depending on circumstances, the applicants may extend the packaging period. ● Discounted goods exclude intangible items. ● The applicants will limit all purchases under the program to that of a private and domestic purpose. The employer tracks employee expenditure on in-house property over the specified period of the FBT year. Each employee is given a card that has the employee’s name printed on the card together with a unique barcode. The employee presents the card at the point of sale and the card (barcode) is scanned together with the employee’s purchases. Based on the information stored, the employer is able to then determine the excess recipients contribution relating to each transaction. Assumptions The proposed salary sacrifice arrangement is an effective salary sacrifice arrangement in accordance with TR2001/10 Income Tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 136(1), | Fringe Benefits Tax Assessment Act 1986 42(1)(aa) and | Fringe Benefits Tax Assessment Act 1986 22A.

Reasons for decision: Summary: Yes, a discount provided to employees off the retail selling price, on the purchase of in-house goods, gives rise to a fringe benefit under subsection 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: A 'fringe benefit’ is defined in subsection 136(1) of the FBTAA, which holds that the following conditions must be satisfied: 1. A benefit is provided at any time during the year of tax. 2. The benefit is provided to an employee or an associate of the employee. 3. The benefit is provided by: a. their employer; or b. an associate of the employer; or c. a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or d. a third party other than the employer or an associate of the employer, if the employer or an associate of the employer: i. participates in, or facilitates the provision or receipt of the benefit; or ii. participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought to reasonably to know, that the employer or associate is doing so; 4. The benefit is provided in respect of the employment of the employee. 5. The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1) of the FBTAA. In order to determine whether the provision of a discount off the retail selling price of goods is a 'fringe benefit’ as defined in subsection 136(1) of the FBTAA, a discussion is provided below in respect of whether each element or condition of the definition of fringe benefit is satisfied. | Detailed Reasoning - A benefit provided: Subsection 136(1) of the FBTAA provides a broad definition of a 'benefit’ as including: 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 in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; … The provision of discounted goods to employees is a privilege and meets the definition of benefit for FBT purposes. | Detailed Reasoning - The benefit is provided to an employee or an associate of the employee: An 'employee’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employee. Based on the facts provided, only employees of the applicants or their spouse or immediate family member are eligible to receive the discounted goods. In FC of T v Indooroopilly Children Services (QLD) Pty Ltd [2007] FCAFC 16, it was held that references to the 'the employee’ throughout the definition of a 'fringe benefit’ in subsection 136(1) of the FBTAA were to a particular employee, the identify of whom is known with sufficient particularity at the time a benefit is provided to that employee. This principle was also held in Essenbourne Pty Ltd v FC of T 2002 ATC 5201 (Essenbourne). As the benefit (the receipt of goods at a discount) is provided to certain (identifiable) employees, the second condition is satisfied. | Detailed Reasoning - The benefit is provided by an employer, an associate of the employer or a third party: 'Employer’ is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer. The definition of associate adopts the meaning of that term given by the Income Tax Assessment Act 1936 (ITAA 1936). The list of the associates of a company (the 'Primary Entity’) is contained in subsection 318(2) of the ITAA 1936. Associates of the Primary Entity include the following: ● Another entity which has 'sufficient influence’ over the primary entity, either in its own right or in conjunction with other entities. ● Another entity which holds a majority voting interest in the Primary Entity, either in its own right or in conjunction with other entities which would be treated as its associates under any of the other tests described in subsections 318(1), (2) or (3) of the ITAA 1936. ● A company which is sufficiently influenced by (a) the Primary Entity; (b) another company, partnership, trustee or other person classed as an associate of the Primary Entity by virtue of subparagraph 318(2)(e)(i)(B) of the ITAA 1936; or (c) a company which is itself classed as an associate of the Primary Entity by reason of the application of the rules in paragraphs 318(2)(a), (b), (c) or (d) of the ITAA 1936; or (d) two or more of the above entities. ● A company where a majority voting interest is held by: (a) the Primary Entity; (b) entities which are classed as associates of the primary Entity under any of the other rules in subsection 318(2) of the ITAA 1936; or (c) the Primary Entity and entities which are classed as associates of the Primary Entity under any of the other rules in subsection 318(2) of the ITAA 1936. A company is 'sufficiently influenced’ by others if, according to paragraph 318(6)(b) of the ITAA 1936, the company or its directors are accustomed to act in accordance with the directions, instructions or wishes of those others, or are under an obligation (formal or informal) to do so, or might reasonably be expected to do so. This element of the definition of a 'fringe benefit’ in subsection 136(1) of the FBTAA would also be satisfied if, as per paragraph (e) of the definition, the relevant benefit is provided by a person (the 'arranger’) other than the employer or an associate of the employer under an arrangement between the employer (or an associate of the employer) and the arranger. For the purposes of paragraph (e) of the definition of a 'fringe benefit’ in subsection 136(1) of the FBTAA, an 'arrangement’ – as defined in paragraph (a) of the definition of an ’arrangement’ in subsection 136(1) of the FBTAA is: any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings.. As the benefit is provided by the employer or an associate of the employer, this condition is satisfied. | Detailed Reasoning - The benefit is provided in respect of the employment of the employee: As per subsection 136(1) of the FBTAA, 'in respect of’ in relation to the employment of an employee includes by reason of, by virtue of, or in relation directly or indirectly to, that employment.’ The dominant reason the employees are provided with the discount on the in-house goods is because of their employment relationship. Therefore, this condition is met. | Detailed Reasoning - The benefit is not specifically excluded from the definition of a fringe benefit: It is assumed for the purposes of this Private Ruling that the product(s) or benefit(s) provided to an employee of the applicant is not a benefit that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1) of the FBTAA. As such, this condition is met and the definition of a 'fringe benefit’ in subsection 136(1) of the FBTAA is satisfied. | Summary: An in-house property fringe benefit is being provided. | Detailed Reasoning - Detailed reasoning: The relevant benefit types that could arise are an expense payment fringe benefit, a property fringe benefit, or a residual fringe benefit. | Detailed Reasoning - Expense payment fringe benefit: An expense payment fringe benefit arises under section 20 and subsection 136(1) of the FBTAA where an employer reimburses an employee for expenses they incur or where an employer pays a third party in satisfaction of expenses an employee incurred. In this case, neither of these conditions arise because the employee is purchasing the goods from their post-tax money and the employee is not being reimbursed by their employer for this expenditure. The benefit is therefore not an expense payment benefit. | Detailed Reasoning - Property fringe benefit: Section 40 of the FBTAA defines when a property benefit arises: 'Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.’ Subsection 136(1) of the FBTAA provides the following: ● provider , in relation to a benefit, means the person who provides the benefit. ● recipient , in relation to a benefit, means the person to whom the benefit is provided. ● property fringe benefit means a fringe benefit that is a property benefit ● property benefit means a benefit referred to in section 40, but does not include a benefit that is benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III. ● property means: (a) intangible property; and (b) tangible property. ● tangible property means goods and includes: (a) animals, including fish; and (b) gas and electricity. The term 'goods’ is not defined in the FBTAA and therefore takes on its ordinary meaning. 'Goods’ is defined in the Macquarie Dictionary online as: 1. possessions, especially movable effects or personal belongings. 2. articles of trade; wares; merchandise, especially that which is transported by land. … In this case, the provider is providing goods (tangible property) at a discount to the employees (the recipient). Therefore the requirements of a property fringe benefit are met. | Detailed Reasoning - Residual fringe benefit: Under section 45 of the FBTAA, a residual fringe benefit only arises where a benefit is being provided that does not fall within one of the other benefit types. The benefit being provided meets the definition of a property fringe benefit and is therefore not a residual benefit. | Detailed Reasoning - In-house property fringe benefit: An in-house property fringe benefit is defined in subsection 136(1) of the FBTAA as follows: in-house property fringe benefit , in relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property: (a) where both of the following conditions are satisfied: (i) the provider is the employer or an associate of the employer; and (ii) at or about the provision time, the provider carried on a business that consisted of or included the provision of identical or similar property principally to outsiders; or (b) where all of the following conditions are satisfied: (i) the provider is not the employer or an associate of the employer; (ii) the property was acquired by the provider from the employer or an associate of the employer (which employer or associate in this definition is called the seller); and (iii) at or about the provision time, both the provider and the seller carried on a business that consisted of or included the provision of identical or similar property principally to outsiders. . In this case, the provider of the benefit is the employer or an associate of the employer and the provider carries on a business that consists of the provision of identical property to outsiders. Therefore, the benefit is an in-house property fringe benefit as per paragraph (a) of the definition of in-house property fringe benefit. | Summary: The taxable value will be 75% of the lowest selling price to the public where the items are manufactured, produced or processed by the employer less any recipients’ contributions. The taxable value will be the arm’s length price in respect of the acquisition of the property by the employer where the items are acquired by the employer but not manufactured, produced or processed, less any recipients’ contributions. | Detailed Reasoning - Detailed reasoning: The taxable value of the property fringe benefit depends upon whether the benefit is an in-house property fringe benefit or an external property fringe benefit. As discussed at question 2 above, the benefit is an in-house property fringe benefit. The taxable value of an in-house property fringe benefit is calculated under section 42 of the FBTAA. Section 42 provides that: 42(1) [Calculation of taxable value] Subject to this Part, the taxable value of an in-house property fringe benefit in relation to an employer in relation to a year of tax, is: (aa) if the recipient’s property was provided to the recipient under a salary packaging arrangement – an amount equal to the notional value of the recipient’s property at the provision time; or (ab) if paragraph (aa) does not apply and the benefit is an airline transport fringe benefit – an amount equal to 75% of the stand-by airline travel value of the benefit at the time the transport starts; or (a) if neither paragraph (aa) nor (ab) applies and the recipient’s property was manufactured, produced, processed or treated by the provider: (i) if identical property that was manufactured, produced, processed or treated, as the case may be, by the provider was, at or about the provision time, sold by the provider in the ordinary course of business to purchasers being manufacturers, wholesalers or retailers – an amount equal to: (A) if any of that identical property was, at or about the provision time, sold by the provider under an arm’s length transaction or arm’s length transactions – the lowest price at which it was sold under such a transaction; or (B) if sub-sub paragraph (A) does not apply – the lowest price at which any of that identical property could reasonably be expected to have been sold by the provider at or about the provision time under an arm’s length transaction; or (ii) if subparagraph (i) does not apply but identical property that was manufactured , produced, processed or treated, as the case may be, by the provider was, at or about the provision time, sold by the provider: (A) in the ordinary course of business to members of the public under an arm’s length transaction or arm’s length transactions; and (B) in similar circumstances and subject to identical terms and conditions (other than as to price) as those that applied in relation to the provision of the recipient’s property to the recipient; an amount equal to 75% of the lowest price at which that property was so sold to a member of the public; or (iii) in any other case – an amount equal to 75% of the notional value of the recipient’s property at the provision time; or (b) if none of the above paragraphs applies and the property was acquired by the provider – an amount equal to the lesser of: (i) the arm’s length price in respect of the acquisition of the recipient’s property by the provider; or (ii) the notional value of the recipient’s property at the provision time; or (c) in any other case – an amount equal to 75% of the notional value of the recipient’s property at the provision time; reduced by the amount of the recipient’s contribution. In this case paragraphs (aa) and (ab) do not apply as the goods are not provided under a salary packaging arrangement nor are they airline transport benefits. Some of the goods, have been manufactured, produced, processed or treated by the employer and as such, the taxable value will be calculated under 42(1)(a)(ii). That is, the taxable value of these goods will be 75% of the lowest price that the goods were sold to the public, less any recipients contribution. Where the goods were not manufactured, produced, processed or treated by the employer, the taxable value is calculated as per paragraph 42(1)(b). Subsection 136(1) defines notional value as: notional value , in relation to the provision of property or another benefit to a person, means the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm’s length transaction. You have advised that the notional value will not apply for these goods as it will lead to a higher value. The taxable value will therefore be the arm’s length price in respect of the acquisition of the goods by the employer, less any recipients contribution. | Summary: Yes, they are excess recipients contributions that can be applied to reduce the taxable value of subsequent similar fringe benefits. | Detailed Reasoning - Detailed reasoning: Recipients contribution is defined in subsection 136(1) of the FBTAA as: (a) in relation to a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit, being a fringe benefit provided in respect of the employment of an employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration. In this case, the employee pays an amount when they purchase the goods which meets the definition of recipients contribution. However, the amount that they pay is in excess of the agreed purchase price of the goods, which is equal to the taxable value for FBT purposes, so there are recipients contributions that are in excess of the taxable value. ATO Interpretative Decision 2005/210 Fringe Benefits Tax Employee Contributions: excess contributions used in a later FBT year provides that where there is a remuneration agreement in place between the employer and employee to make recipient’s payments to the extent of the taxable value of the fringe benefit, excess amounts are not recipient’s payments in this year, and can be either refunded to the employee, or dealt with as agreed between the employer and employee, including being set aside for a later FBT year. The ATOID also notes that while it is in relation to car benefits and recipients payments, the principles that apply in the ATOID can apply to those fringe benefits where the gross taxable value is reduced by the amount of any employee contribution. In this case, the applicant and the employee enter into an agreement to limit the consideration towards qualifying purchases to the taxable value for FBT purposes, and carry forward the excess recipients contributions to be offset against future in-house benefits. Therefore, the excess recipients contributions can be applied to reduce the taxable value of subsequent similar fringe benefits. | Summary: Yes, a fringe benefit arises under subsection 136(1) of the FBTAA where the employer allows employees to salary sacrifice company goods, capped at the value of excess recipients contributions accumulated over a specified period of time within the FBT year. | Detailed Reasoning - Detailed reasoning: The definition of benefit and fringe benefit were discussed at Issue 1, Question 1. Enabling an employee to salary package for the purchase of goods meets the definition of benefit under subsection 136(1) of the FBTAA. Paragraph 77 of Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements states: 77. However, if an employee enters into an effective SSA, he or she foregoes an expected entitlement to an amount of salary or wages, before that entitlement has been earned, in return for benefits of a similar value. We accept that, when personal services have been performed by an employee in that situation, he or she becomes entitled to the agreed value of benefits. The benefits, when provided, as ordinary or statutory income provided by way of 'fringe benefits’ within the meaning of subsection 136(1) of the FBTAA. The benefits, therefore, are not assessable income under section 6-5 or 6-10 of the ITAA 1997. Allowing an employee to salary package the purchase of goods further meets the definition of fringe benefit under subsection 136(1) of the FBTAA for similar reasons as discussed at Issue 1, Question 1 - a benefit is provided by the employer to the employee in respect of their employment and none of the exclusions in paragraphs (f) to (s) apply. | Summary: A property fringe benefit is being provided. | Detailed Reasoning - Detailed reasoning: The provision of the employee access card and the later use of that card to obtain goods involve two distinct actions. The issue of the card does not constitute a fringe benefit for the purposes of the FBTAA at the time of issue but is an administrative aid in facilitating the later provision of merchandise to the employee. The 'benefit’ under subsection 136(1) therefore is the provision of the merchandise by the employer. The employer 'provides’ the benefit when the employee uses the card to purchase the merchandise. Support for this view is found in Taxation Ruling TR 1999/10 – Income tax and fringe benefits tax: Members of Parliament – allowances, reimbursements, donations and benefits, deductions and recoupments . TR 1999/10 provides the following guidance in respect of 'Life Gold Passes’ and 'Severance Passes’ given to members of Federal Parliament on their 'retirement’: 22. On 'retirement’ from Federal Parliament, Members may be issued with either a Life Gold Pass or a Severance Pass which may entitle the holder of the pass and his or her spouse to travel benefits. Similar travel entitlements are available for Members of State and Territory Parliaments. 23. We consider that the issuing of a Life Gold Pass or Severance Pass has no income taxation implications. The value of travel benefits received through the use of these passes does not form part of either a Member’s or a Member’s spouse’s assessable income. However, travel benefits received from the use of a Life Gold Pass or Severance Pass are residual fringe benefits and the provider of the pass may be subject to fringe benefits tax when the passes are used for travel (paragraphs 84 to 88). … 86. We do not consider that the issuing of passes under the Life Gold Pass and Severance Pass Schemes attracts any income tax implications. However, travel benefits received in relation to each use of a Gold Pass or Severance Pass by a Member will be taxed as a residual benefit, within the meaning of section 45 of Division 12 of the FBTAA, to the provider of the pass. As stated above, the provision of merchandise is a 'good’ and the benefit provided is a property benefit. Further, as the property benefit was provided in recognition of employment it is a 'property fringe benefit’ as defined in subsection 136(1). A property fringe benefit is an 'in-house property fringe benefit’ where certain conditions are satisfied. The term 'in-house property fringe benefit’ was discussed at Issue 1, Question 2. In this case, the benefit is an in-house property fringe benefit, as it is a property fringe benefit, it is provided by the employer, and at or about the provision time, the employer carried on a business that consisted of or included the provision of identical or similar property principally to outsiders. Accordingly, where the applicant has provided an employee with an access card loaded with a value equal to the excess recipients payments which the employee can use to purchase merchandise from the employer at a discount, the employer provides the employee with an 'in-house property fringe benefit’ as defined in subsection 136(1) when the employee uses the access card to purchase the merchandise, not when the access card is issued. | Summary: Subsection 42(1) of the FBTAA sets out the taxable value of an in-house property fringe benefit. Where the in-house property fringe benefit is provided under a salary packaging arrangement, the taxable value is calculated in accordance with paragraph 42(1)(aa) as an amount equal to the notional value of the recipients property at the provision time, reduced by the amount of the recipient’s contribution. | Detailed Reasoning - Detailed reasoning: Salary packaging arrangement is defined in subsection 136(1) as follows: salary packaging arrangement means an arrangement under which a benefit is provided to an employee if: (a) the benefit is provided in return for the employee agreeing to a reduction in the employee’s salary or wages that would not have happened apart from the arrangement; or (b) the arrangement is part of the employee’s remuneration package, and the benefit is provided in circumstances where it is reasonable to conclude that the employee’s salary or wages would be greater if the benefit were not provided. Notional value is defined in subsection 136(1) of the FBTAA as: notional value , in relation to the provision of property or another benefit to a person, means the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm’s length transaction. Arm’s length transaction is defined subsection 136(1) of the FBTAA as … a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction. The notional value would therefore be the price at which the goods are sold to the public. That is, the discount is not taken into account when determining the notional value. The taxable value is therefore the retail selling price of the goods, less any recipients contributions. FBT: A guide for employers provides some important points to note about employee contributions (recipients payments) at 1.6 of the Guide. One such point is that employee contributions can only be paid from after-tax income. Therefore, the only recipients contribution that could potentially be used will be the amount carried forward from the qualifying purchases (to the extent available). The corresponding pre-tax deduction that’s made equal to the value loaded onto the employee access card is not a recipient’s payment. | Summary: Yes, the excess recipients contributions mentioned in Issue 1, Question 4 above can be applied to reduce the taxable value. | Detailed Reasoning - Detailed reasoning: As discussed at Issue 1, Question 4, recipients contribution is defined in subsection 136(1) of the FBTAA as: (a) in relation to a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit, being a fringe benefit provided in respect of the employment of an employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration. In this case, there are two benefits – the benefits provided as part of the qualifying purchases and then the benefit that rises from the packaging purchases. As discussed above in Issue 1, Question 4; excess recipients contributions accrue during the qualifying purchases phase and ATOID 2005/210 provides that excess recipient’s contributions can be carried forward to a later FBT year. The employer can apply the excess recipients contributions from qualifying purchases to packaging purchases, as the policy and salary packaging agreement directly authorises this. | Summary: Yes, a fringe benefit arises under subsection 136(1) of the FBTAA where the employer allows employees to salary sacrifice for the reimbursement of company goods, capped at the value of excess recipients contributions accumulated over a specified period of time within the FBT year. | Detailed Reasoning - Detailed reasoning: The definition of benefit and fringe benefit were discussed at Issue 1, Question 1. Enabling an employee to salary package for the reimbursement of goods purchased meets the definition of benefit under subsection 136(1) of the FBTAA. Paragraph 77 of Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements states: 77. However, if an employee enters into an effective SSA, he or she foregoes an expected entitlement to an amount of salary or wages, before that entitlement has been earned, in return for benefits of a similar value. We accept that, when personal services have been performed by an employee in that situation, he or she becomes entitled to the agreed value of benefits. The benefits, when provided, as ordinary or statutory income provided by way of 'fringe benefits’ within the meaning of subsection 136(1) of the FBTAA. The benefits, therefore, are not assessable income under section 6-5 or 6-10 of the ITAA 1997. Allowing an employee to salary package the reimbursement of goods purchased further meets the definition of fringe benefit under subsection 136(1) of the FBTAA for similar reasons as discussed at Issue 1, Question 1 - a benefit is provided by the employer to the employee in respect of their employment and none of the exclusions in paragraphs (f) to (s) apply. | Summary: The benefit is an in-house property expense payment fringe benefit. | Detailed Reasoning - Detailed reasoning: As mentioned above, the employee is provided with a property fringe benefit. Similar to the qualifying purchases, employees will buy in-house products and receive a discount. However, the reimbursement of these 'packaging purchases’ are eligible to be salary sacrificed up to the value of excess recipients contributions. The packaging purchases will be in-house fringe benefits per the explanation given at Issue 1, question 2. We need to determine what sub-type the benefits are. Subsection 136(1) of the FBTAA defines an 'in-house fringe benefit’ to mean: (a) an in-house expense payment fringe benefit; (b) an in-house property fringe benefit; or (c) an in-house residual fringe benefit. An in-house expense payment fringe benefit is defined in subsection 136(1) of the FBTAA to mean: (a) an in-house property expense payment fringe benefit (b) an in-house residual expense payment fringe benefit. An in-house property expense payment fringe benefit is defined in subsection 136(1) of the FBTAA as: in-house property expense payment fringe benefit , in relation to an employer, means an expense payment fringe benefit in relation to the employer where: (a) the recipients expenditure was incurred in respect of the provision of tangible property by a person (in this definition called the property provider); (b) the provision of the property is a property benefit; (c ) if the property provider is the employer or an associate of the employer – at or about the provision time, the property provider carried on a business that consisted of or included the provision of identical or similar property principally to outsiders; (d) if the property provider is not the employer or an associate of the employer: (i) the property was acquired by the property provider from the employer or an associate of the employer (which employer or associate is in this definition called the seller); and (ii) at or about the provision time, both the property provider and the seller carried on a business that consisted of or included the provision of identical or similar property principally to outsiders; and (e) documentary evidence of the recipients expenditure is obtained by the recipient and that documentary evidence, or a copy, is given to the employer before the declaration date. The employer reimburses the employee in respect of the in-house property benefit provided to and paid for by the employee, and the use of the employee discount card enables the transaction data to be passed to the employer. Therefore the definition of in-house property expense payment fringe benefit is met. | Summary: The taxable value of the benefit is calculated in accordance with subsection 22A(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Subsection 22A(1) provides that : Subject to this Part, the taxable value in relation to a year of tax of an in-house property expense payment fringe benefit (in this subsection called the actual fringe benefit) provided during the year of tax is the amount that, if: (a) the provision of property to which the actual fringe benefit relates were an in-house property fringe benefit (in this subsection called the notional fringe benefit); and (b) the recipients contribution in relation to the notional fringe benefits were equal to the recipients expenditure reduced by whichever of the following amounts is applicable; (i) the amount of the payment referred to in paragraph 20(a) reduced by the amount of the recipients contribution in relation to the actual fringe benefit; (ii) the amount of the reimbursement referred to in paragraph 20(b); would have been calculated under section 42 as the taxable value, but for section 44 and Division 14, of the notional fringe benefit in relation to the year of tax. As discussed at Issue 2, Question 3 above, where the in-house property fringe benefit is provided under a salary packaging arrangement, the taxable value is calculated in accordance with paragraph 42(1)(aa) as an amount equal to the notional value of the recipients property at the provision time, reduced by the amount of the recipient’s contribution. As explained at Issue 2, Question 3 above; the benefit is being provided under a salary packaging arrangement. Notional value is defined in subsection 136(1) of the FBTAA as: notional value , in relation to the provision of property or another benefit to a person, means the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm’s length transaction. Arm’s length transaction is defined subsection 136(1) of the FBTAA as … a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction. The notional value would therefore be the price at which the goods are sold to the public. That is, the discount is not taken into account when determining the notional value. Recipients contribution is defined in subsection 136(1) of the FBTAA as: (a) in relation to a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit being a fringe benefit provided in respect of the employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration.. Recipients expenditure is defined in subsection 136(1) of the FBTAA as: recipients expenditure, in relation to an expense payment benefit, means the expenditure incurred by the recipient as mentioned in paragraph 20(a) or 20(b), as the case requires. Section 20 of the FBTAA states: 20 Where a person (in this section referred to as the provider): (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or (b) reimburses another person (in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. | Summary: Yes, the excess recipients contributions mentioned in Issue 1, Question 4 above can be applied to reduce the taxable value. | Detailed Reasoning - Detailed reasoning: As discussed at Issue 1, Question 4, recipients contribution is defined in subsection 136(1) of the FBTAA as: (a) in relation to a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit, being a fringe benefit provided in respect of the employment of an employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration. In this case, there are two benefits – the benefits provided as part of the qualifying purchases and then the benefit that rises from the packaging purchases. As discussed above in Issue 1, Question 4; excess recipients contributions accrue during the qualifying purchases phase and ATOID 2005/210 provides that excess recipient’s contributions can be carried forward to a later FBT year. The employer can apply the excess recipients contributions, as the policy and salary packaging agreement directly authorises this.

Does a fringe benefit arise under subsection 136(1) of the FBTAA where the employer allows employees to salary sacrifice company goods, capped at the value of excess recipients contributions accumulated over a specified period of time within the FBT year? | The benefit is an in-house property fringe benefit in accordance with subsection 136(1) of the FBTAA. | If the answer to Question 1 is yes, can the excess recipients contributions mentioned in Issue 1, Question 4 above be applied to reduce the taxable value? | Yes, the excess recipients contributions referred to in Issue 1, Question 4 above can be applied to reduce the taxable value. | The type of fringe benefit is an in-house property expense payment fringe benefit. | The taxable value of the fringe benefit is calculated under section 22A of the FBTAA as the notional value less the recipients contributions.