Private ruling: Fringe benefits
Date of advice: 24 September 2025
Published: 10 November 2025
Ruling period: Fringe Benefits Tax (FBT) Year Ending 31 March 20XX | FBT Year Ending 31 March 20XX | FBT Year Ending 31 March 20XX | FBT Year Ending 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Does the provision of flights by the Employer to the Employee constitute a 'residual fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes. | Q2: If the answer to Question 1 is 'Yes,' can the taxable value be reduced in accordance with the 'otherwise deductible rule' under section 52 of the FBTAA? | A2: No. Issue 2 - Reimbursement of Car Travel Expenses | Q3: Does the reimbursement by the Employer of car travel expenses to the Employee constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA? | A3: No.

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. Find out more about when you can rely on your private ruling at ato.gov.au/relyonprivateruling. The Employee lives in their primary place of residence at Location A but works at the Employer's office at Location B on most workdays, returning home via flights on commercial airlines or via their own car. The Employee's remuneration is paid for by the Employer and includes entitlements which provides up to XX business class return airfares per year for reunion travel between place of work and primary residence during each XX-month service period. If travelling by plane on a commercial airline, the Employer books and pays for the Employee's business class flights. If travelling via the Employee's own car, the Employee requests reimbursement for costs incurred on a cents per kilometre basis. The Employee maintains a logbook recording distance travelled to calculate the total cost per trip using the cents per kilometre method. The total benefits - in respect of the Employee's travel via plane and car - are capped at the equivalent cost of XX business class return airfares, as determined at the start of the year.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 20 | Fringe Benefits Tax Assessment Act 1986 section 22 | Fringe Benefits Tax Assessment Act 1986 section 23 | Fringe Benefits Tax Assessment Act 1986 section 45 | Fringe Benefits Tax Assessment Act 1986 section 51 | Fringe Benefits Tax Assessment Act 1986 section 52 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Fringe Benefits Tax Assessment Act 1986 section 148(1) | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 28-13 | Income Tax Assessment Act 1997 section 28-165

Reasons for decision: Detailed Reasoning - Question 1: Does the provision of flights by the Employer to the Employee constitute a 'residual fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | Summary: Yes, the provision of flights by the Employer to the Employee constitutes a residual fringe benefit as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Residual Benefit: Subsection 136(1) of the FBTAA defines a 'residual fringe benefit' as a fringe benefit that is a residual benefit. The terms 'residual benefit' and 'fringe benefit' are considered individually below. | Detailed Reasoning - '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. In this case, the Employer books and pays for the Employee's business class flights. As the Employer is the entity who incurs the cost of the flights, and not the Employee, the benefit does not meet the definition of an 'expense payment benefit' in section 20 (Subdivision A of Division 5) of the FBTAA. The benefit provided by the Employer does not fit into any other category of benefits under a provision of Subdivision A of Divisions 2 to 11 of the FBTAA. As such, the benefit will be a residual benefit. | Detailed Reasoning - 'Fringe benefit': The definition of a 'fringe benefit' in subsection 136(1) of the FBTAA provides that a fringe benefit will arise where the following conditions are all 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 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. A discussion is provided below in respect of whether each element or condition of the definition of a fringe benefit is satisfied. | Detailed Reasoning - A benefit is 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 or in relation to: i. the performance of work (including work of a professional nature), whether with or without the provision of property; ... It is considered that the provision of flights by the Employer to the Employee constitutes a 'benefit'. As such, the first condition (i.e. the provision of a 'benefit') of the definition of a 'fringe benefit' - as defined in subsection 136(1) of the FBTAA - is satisfied. | 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. The definition of a 'current employee' in subsection 136(1) of the FBTAA includes a person who receives 'salary or wages'. 'Salary or wages' is defined in subsection 136(1) of the FBTAA to mean: (a) a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income; and.... As the Employee receives salary and wages from which an amount must be withheld by the Employer, the Employee would therefore be considered a 'current employee'. As the benefit is provided to a current employee, the second condition (i.e. a benefit is provided to an employee or an associate of an employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Meaning of 'employer': An 'employer' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer, but does not include the Commonwealth, or an authority of the Commonwealth that cannot, by law of the Commonwealth, be made liable to taxation by the Commonwealth. Subsection 136(1) of the FBTAA defines a 'current employer' to mean a person who pays, or is liable to pay, salary or wages. The Employer is liable to pay salary or wages to the Employee and meets the definition of an 'employer'. | Detailed Reasoning - Meaning of 'provide': The definition of 'provide' and 'provider' in subsection 136(1) of the FBTAA are as follows: provide: (a) In relation to a benefit - includes allow, confer, give, grant or perform, and (b) ... provider, in relation to a benefit, means the person who provides the benefit. The Employer provided benefits in the form of the provision of flights to the Employee. Therefore, the third condition (i.e. the benefit is provided by an employer) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - The benefit is provided in respect of the employment of the employee: In considering whether a benefit is provided to an employee 'in respect of' their employment, subsection 136(1) of the FBTAA defines 'in respect of', in relation to the employment of an employee, to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee: (a) Whether or not the benefit is also provided in respect of, by reason of, by virtue of, or for or in relation directly or indirectly to, any other matter or thing; (b) Whether the employment will occur, is occurring, or has occurred; (c) Whether or not the benefit is surplus to the needs or wants of the recipient; (d) Whether or not the benefit is also provided to another person; (e) Whether or not the benefit is, to any extent, offset by an inconvenience or disadvantage; (f) Whether or not the benefit is provided or used, or required to be provided or used, in connection with that employment; (g) Whether or not the provision of the benefit is, or is in the nature of, income; and (h) Whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee. In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 ( Knowles ), the full Federal Court - in examining the meaning of 'in respect of' an employee's employment - held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment', though noted that 'what must be established is whether there is a sufficient or material, rather than a causal connection or relationship between the benefit and the employment'. Based on the facts, the provision of the benefits - being the provision of flights to the Employee - are sufficiently and materially connected to the Employee's employment, and as such, the benefits are considered to have been provided 'in respect of their employment'. As such, the fourth condition (i.e. a benefit is provided in respect of the employment of the employee) of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - The benefit is not specifically excluded from the definition of a fringe benefit: A benefit which comes within paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is excluded from being a fringe benefit. It is considered that the benefit provided by the Employer in the current circumstances 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. As such, this condition is satisfied. | Detailed Reasoning - Conclusion regarding definition of a 'fringe benefit': Each of the relevant conditions of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA are satisfied in the current circumstances, such that the provision of flights to the Employee constitutes a 'fringe benefit'. | Detailed Reasoning - Conclusion on definition of 'residual fringe benefit': Based on the above discussion, the definitions of a 'fringe benefit' and a 'residual benefit' are satisfied, which in turn satisfies the definition of a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Question 2: If the answer to Question 1 is 'Yes,' can the taxable value be reduced in accordance with the 'otherwise deductible rule' under section 52 of the FBTAA? | Summary: The taxable value cannot be reduced in accordance with the 'otherwise deductible rule' under section 52 of the FBTAA as the flight costs would not be otherwise deductible to the Employee under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Otherwise deductible rule: The 'otherwise deductible rule' in section 52 of the FBTAA operates to reduce the taxable value of a residual fringe benefit where the recipient of the benefit is an employee, and the employee would have been entitled to a once-only deduction under either the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997 for the expense had they personally incurred it. The relevant ATO view on whether an employee would be able to claim a once-only deduction if they had incurred the unreimbursed transport expenses themselves is contained in Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? (TR 2021/1). | Detailed Reasoning - Section 8-1 of the ITAA 1997: Where an employee incurs unreimbursed expenses, they may be entitled to a deduction under section 8-1 of the ITAA 1997. Paragraph 7 of Taxation Ruling TR 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 (TR 2020/1) states: An employee can only deduct an expense under section 8-1 to the extent that: - it is incurred in gaining or producing assessable income (positive test) and also meets the 'negative tests' that: - the expense is not a loss or outgoing of capital - the expense is not private or domestic in nature - the expense is not incurred in relation to gaining or producing exempt or non-assessable non-exempt income, and - another provision of the tax law does not prevent deduction of the expense. | Detailed Reasoning - Application of the 'otherwise deductible rule': As concluded in the response to Question 1, the provision of flights to the Employee is a residual fringe benefit under subsection 136(1) and section 45 of the FBTAA. The taxable value of these benefits is calculated in accordance with section 51 of the FBTAA because they are external period residual fringe benefits. This taxable value is reduced where the 'otherwise deductible rule' in subsection 52(1) of the FBTAA applies. The relevant conditions in subsection 52(1) of the FBTAA are considered below, all of which must be satisfied (if applicable) in order for the 'otherwise deductible rule' to apply. | Detailed Reasoning - Paragraph 52(1)(a) of the FBTAA: For the 'otherwise deductible rule' to apply, the recipient of the residual fringe benefit must be an employee of the employer. This condition is satisfied because, as per the response to Question 1, the Employee received the residual fringe benefit from the Employer. | Detailed Reasoning - Paragraph 52(1)(b) of the FBTAA: For the 'otherwise deductible rule' to apply, a once-only deduction must have been allowable to the employee under either the ITAA 1936 or ITAA 1997. | Detailed Reasoning - Application of section 8-1 of the ITAA 1997: Paragraph 7 of TR 2021/1 states that an employee can only deduct a transport expense under section 8-1 of the ITAA 1997 to the extent that: • they incur the expense in gaining or producing their assessable income • the expense is not of a capital, private or domestic nature • the expense is not incurred in gaining or producing exempt income or non-assessable non-exempt income, and • a provision of the Act [the ITAA 1936 or ITAA 1997] does not prevent it from being deducted. Determining whether a particular transport expense is incurred in gaining or producing assessable income will involve consideration of the proper scope of a particular employee's work activities to determine if the circumstances of the transport expense have a sufficiently close connection to earning the employment income (paragraph 15 of TR 2021/1). It is important to have regard not just to the duties in the contract of employment, but to the nature of the work as a matter of substance. While transport expenses will only be deductible if they satisfy the requirements of section 8-1 of the ITAA 1997, the following factors (based on relevant case law) support a characterisation of transport expenses as being incurred in gaining or producing assessable income (paragraph 16 of TR 2021/1): • the travel fits within the duties of employment, that is, the obligation to incur transport expenses arises out of the employment itself and not the employee's personal circumstances • the travel is relevant to the practical demands of carrying out the employee's work duties or role, that is, the transport expenses are a necessary consequence of the employee's income-producing activity. In addition to these factors, paragraph 17 of TR 2021/1 states that the following factors (based on relevant case law) may also be relevant in determining whether a transport expense is incurred in gaining or producing assessable income: • the employer asks for the travel to be undertaken • the travel occurs on work time • the travel occurs when the employee is under the direction and control of the employer. The factors identified in paragraphs 16 and 17 of TR 2021/1 need to be considered in the context of both the form and substance of the specific employment arrangement. No single factor on its own will necessarily support a conclusion that an expense is deductible. For instance, the mere fact that an employer asks an employee to attend their regular place of work on a particular day does not change the conclusion that such travel is a prerequisite to the employment, rather than being incurred in gaining or producing assessable income. Reaching a conclusion as to the deductibility of a transport expense requires a holistic assessment of the relationship between the employment and the expense. Paragraph 28 of TR 2021/1 provides that the usual position that the cost of travel between home and an employee's regular place of work is not deductible does not change merely because the employee's home is very distant (for example, requiring a flight) from their regular place of work. For example, an employee takes a job based wholly in Sydney but chooses to continue to live in Brisbane with their family and flies to their work in Sydney each week (as per Example 5 of TR 2021/1, which is provided below). The mere fact that an employee lives a significant distance from their regular place of work does not make their transport expenses deductible, for example, if they are required to fly to attend work. In such instances, the transport expenses are incurred because the employee lives at a distance from their regular place of work, rather than the employment itself being the occasion for the expenses. The expenses are explained by where the employee chooses to live in relation to where their regular place of work is located and as such, they are not incurred in gaining or producing the employee's assessable income (paragraph 48 of TR 2021/1). The transport expenses are also private expenses. Example 5 in TR 2021/1 relevantly states: Isabelle is a specialist technician who lives in Brisbane. She works as an employee for a company based in Sydney on a part-time basis. On the days she is required to work (Wednesdays and Thursdays), she drives from her home in Brisbane to the airport, catches a flight to Sydney and then a taxi to her company's office. She stays overnight in Sydney on Wednesday night and returns home on Thursday evening. Isabelle's transport expenses (travel between her home and Brisbane airport, return flights from Brisbane to Sydney and taxis between Sydney airport and her office) are not deductible. Isabelle's travel is undertaken to put her in the position to commence her duties and the expenses are not incurred in gaining or producing her assessable income. The expenses are incurred as a necessary consequence of Isabelle choosing to live in Brisbane and work in Sydney and are a prerequisite to gaining or producing her assessable income. Isabelle's travel between her home and her regular workplace is also private in nature. In the current circumstances, similar to Example 5 in TR 2021/1 above, the Employee's return airfares between Location A and Location B would be incurred because of their personal circumstances. This is because the Employee chose to live and have their home in Location A, such that their principal place of residence locality was different to their office locality (in Location B). Therefore, the occasion of the outgoings (the cost of the return airfares) is not explained by the Employee's employment - it is explained by the Employee's personal circumstances of living in Location A whilst maintaining a working office in Location B. As such, the flight expenses would not be an incident of the Employee's employment, would not be incurred in the course of gaining or producing their assessable income and would be private or domestic in nature. On this basis, the condition in paragraph 52(1)(b) of the FBTAA is not satisfied. As all the conditions in section 52 need to be satisfied (if they are applicable) in order for the 'otherwise deductible rule' to apply, it is not necessary to consider the other conditions in section 52. | Detailed Reasoning - Conclusion: The provision of flights by the Employer to the Employee are not 'otherwise deductible' under section 52 of the FBTAA as these airfare expenses would not be deductible to the Employee under section 8-1 of the ITAA 1997. | Detailed Reasoning - Question 3: Does the reimbursement by the Employer of car travel expenses to the Employee constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: The reimbursement by the Employer of car travel expenses to the Employee does not constitute an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA (and the 'otherwise deductible rule' in section 24 of the FBTAA would not be applicable). This is because such a benefit would be exempt from FBT pursuant to section 22 of the FBTAA. | Detailed Reasoning - Expense payment fringe benefit: Subsection 136(1) of the FBTAA defines, an 'expense payment fringe benefit' is a fringe benefit that is an expense payment benefit. The terms 'expense payment benefit' and 'fringe benefit' are considered individually below. | Detailed Reasoning - 'Expense payment benefit': Section 20 of the FBTAA sets out the circumstances in which a payment or reimbursement will be an 'expense payment benefit'. Paragraphs 20(a) and 20(b) state: 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. In the current circumstances, the Employer reimburses the Employee for car travel expenses incurred by the Employee, which constitutes an 'expense payment benefit' pursuant to paragraph 20(b) of the FBTAA. | Detailed Reasoning - 'Fringe benefit': The definition of a 'fringe benefit' in subsection 136(1) of the FBTAA was outlined in the response to Question 1. Regarding the car travel expenses: • It is considered that the reimbursement of car travel expenses by the Department to the Employee constitutes a 'benefit'; • The benefit is provided to an employee or an associate of an employee; • The benefit is provided by an employer; and • The benefit is provided in respect of the employment of the employee. | Detailed Reasoning - The benefit is not specifically excluded from the definition of a fringe benefit: A benefit which comes within paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is excluded from being a fringe benefit. Paragraph (g) of the definition of 'fringe benefit' excludes 'a benefit that is an exempt benefit'. Section 22 of the FBTAA sets out when car expense payment benefits are exempt payment benefits, as follows: Where: (a) an expense payment benefit provided to an employee of an employer in respect of his or her employment is constituted by the reimbursement of the employee, in whole or in part, in respect of an amount of a Division 28 car expense incurred by the employee in relation to a car owned by, or leased to, the employee; (b) in a case where the car is leased to the employee - the recipients expenditure is not attributable to a period when the lessor is the provider of a car benefit in relation to the car in relation to the employee; (c) the benefit is not in respect of relocation transport; (ca) the benefit is not in respect of an employment interview or selection test; (cb) the benefit is not associated with: (i.) a work-related medical examination of the employee; (ii.) (ii) work-related medical screening of the employee; (iii.) (iii) work-related preventative health care of the employee; (iv.) (iv) work-related counselling of the employee or of an associate of the employee; or (v.) (v) migrant language training of the employee or of an associate of the employee; (cc) neither of the following subparagraphs applies in relation to the transport to which the benefit relates: (i.) the transport was provided wholly or partly to enable the employee, or an associate of the employee, to have a holiday; (ii.) (ii) the transport was provided at a time when the employee had ceased to perform the duties of that employment; and (d) the reimbursement is calculated by reference to the distance travelled by the car; the expense payment benefit is an exempt benefit. A 'car expense payment benefit' is defined in subsection 136(1) of the FBTAA to mean an expense payment fringe benefit where the recipient's expenditure is a Division 28 car expense. Subsection 136(1) of the FBTAA defines a 'Division 28 car expense' to mean a car expense as defined in section 28-13 of the ITAA 1997 but does not include a car expense covered by section 28-165 of the ITAA 1997 (regarding certain cars taken on hire). Section 28-13 of the ITAA 1997 defines a 'car expense' as a loss or outgoing to do with a car (including a loss or outgoing to do with operating a car, and the decline in value of a car). The costs incurred by the Employee in travelling by car (which the Employee owns) is considered to constitute a 'car expenses' under section 28-13 of the ITAA 1997, and in turn, meets the definition of a 'Division 28 car expenses' as defined in subsection 136(1) of the FBTAA. Having regard to each of the conditions in section 22 of the FBTAA, the Commissioner considers that paragraph 22(a) is satisfied. This is on the basis that, as concluded above, the reimbursement by the Employer of the Employee's car travel expenses (which are considered to be a 'Division 28 car expense') constitutes an 'expense payment benefit' provided to the Employee under paragraph 20(b) of the FBTAA. In addition, you have advised the car expense is in relation to a car owned by the employee. As the Employer reimburses the Employee's car expenses on a cents per kilometre basis, paragraph 22(d) is also satisfied. Paragraph 22(b) of the FBTAA is not considered to be applicable, and the benefit is not provided in respect of any of the purposes listed in paragraphs 22(c), 22(ca), 22(cb) or 22(cc). Given each of the conditions in section 22 of the FBTAA are considered to be satisfied, then the expense payment benefit (being the reimbursement by the Employer of car travel expenses incurred by the Employee) is an exempt benefit. Therefore, as section 22 of the FBTAA applies, paragraph (g) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA specifically excludes the benefit (the reimbursement by the Employer of car travel expenses incurred by the Employee) from the definition of a 'fringe benefit'. As such, the definition of a 'fringe benefit' in these circumstances is not satisfied. | Detailed Reasoning - Conclusion on definition of 'expense payment fringe benefit': Based on the above discussion, the reimbursement of car travel expenses by the Employer to the Employee does not meet the definition of a 'fringe benefit' (as the benefit is an exempt benefit under section 22 of the FBTAA). Therefore, the definition of an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA is not satisfied

Reasons for decision: These reasons for decision accompany the Notice of private ruling for the Employer. | This is to explain how we reached our decision. This is not part of the private ruling.