Private ruling: Fringe Benefits Tax
Published: July 2014
Ruling period: FBT Year ended 31 March 2014
Date scheme commenced: 1 April 2013

Ruling: Q1: Is the payment of an immigration vendors fee a fringe benefit? | A1: Yes | Q2: Is the payment of a business nomination fee a fringe benefit? | A2: Yes


Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 - Subsection 136(1) | Fringe Benefits Tax Assessment Act 1986 - Subsection 148(1) | Fringe Benefits Tax Assessment Act 1986 - Subsection 142A(1) | Fringe Benefits Tax Assessment Act 1986 - Section 58F | Fringe Benefits Tax Assessment Act 1986 - Section 143A

Reasons for decision: Detailed Reasoning - Fringe Benefits: Fringe Benefits Tax is a tax payable by employers on the value of certain benefits that have been provided to their employees or to associates of those employees in respect of their employment. Fringe benefit is defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). It arises where the following circumstances exist: • A benefit is provided to an employee, an associate of an employee, or some other person at the direction of an employee or an associate of an employee. • The benefit is provided by the employee's employer, by an associate of the employer, or by a third party under an arrangement with the employer or with an associate of the employer • The benefit is provided in respect of the employment of the employee. A benefit is defined in subsection 136(1) of the FBTAA: 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 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. An employee is defined in subsection 136(1) as: (a) a current employee (b) a future employee (c) a former employee This means that past and prospective employees are treated as employees, so that benefits provided to such people or to their associates are subject to fringe benefits tax if those benefits meet the other criteria. | Detailed Reasoning - Nexus with an employees' employment: The phrase "in respect of" is defined in subsection 136(1) 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. Also, subsection 148(1) makes it clear that a benefit will be provided in respect of the employment of an employee: (a) Even though it relates to some other thing or matter (b) Whether the employment is past, present or future (c) Even where the benefit is surplus to the recipient's requirements (d) Even where it is also provided to another person (e) Despite any offsetting inconvenience or disadvantage (f) Whether or not it is provided or used, or required to be provided or used, in connection with any employment (g) Whether or not it is in the nature of income (h) Whether or not it is provided as a reward for services rendered, or to be rendered, by the employee. In Case 13/98 98 ATC 190, BJ McMahon commented that: [a]side form the broad statutory definition, the phrase 'in respect of' has been held to have 'the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer' (per Mann CJ in Trustees, Executors and Agency Co Ltd v Reilly [1941] 110 at 111). A majority of the High Court thought that this was 'going somewhat too far' and added that the phrase 'gathers meaning from the context in which it appears' ( Workers Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 653). The context in which the words appear in…[s 136(1)] indicates that they are intended to bring to tax advantages received by an employee at the cost of an employer. Payment of an employee's income tax is, in my view, a payment in respect of his employment." In Federal Commissioner of Taxation v Scully , (2000) 201 CLR 148; 2000 ATC 4111; (2000) 43 ATR 718, consideration of the words 'in respect of' highlighted the importance of the context in which the phrase appears and resulted in the requirement that there be some 'discernable rational link' between the two subject matters. The case J & G Knowles & Associates Pty Ltd v FC of T (2000) ATC 4151, involved advances of money by a company to its directors and their families. In that case, Heerey, Merkel and Findlestein JJ stated: The words "in respect of" have no fixed meaning. They are capable of having a very wide discernible meaning denoting a relationship or connection between two things or subject matters. However, the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found… …it must be remembered that what must be established is that there is a sufficient or material connection rather than a, casual connection or relationship… Furthermore, a benefit must also be in respect of the employment of "an" employee of the employer. This means that the identification of a particular employee(s) is a requisite element in the application of the definition of 'fringe benefit' ( Essenbourne Pty Ltd v and FC of T 2002 ATC 5201; Indooroopilly Children Services (QLD) Pty Ltd v FC of T 2007 ATC 4236; Spotlight Stores Pty Ltd & Anor v FC of T 2004 ATC 4674). In your case, there is an identifiable employer and employee relationship (employer sponsored visa). Hence, the payments associated with the renewal of a Visa application will meet the definition of a fringe benefit unless it is an FBT exempt benefit. | Detailed Reasoning - Visa renewal application cost: Section 58F of the FBTAA exempts from fringe benefits tax, benefits 'in respect of relocation transport'. Section 143A of the FBTAA specifies the circumstances in which a benefit will be treated as a benefit 'in respect of relocation transport. Subparagraph 143A(ii) of the FBTAA stipulates that relocation costs include an expense payment benefit where the recipients expenditure is in respect of the provision of transport or meals or accommodation in connection with transport. By virtue of subsection 142A(1) of the FBTAA expenditure by an employee on accident insurance, airport or departure tax, a passport, a visa, a vaccination, or any similar matter 'in connection with transport' is taken to be 'in respect of the provision of, or to consist of, transport'. Therefore, the words 'in connection with' in subsection 142A(1) of the FBTAA should be read such that Visa Application costs that are incurred for the purpose of an employee taking up residence in the locality of the new work place will be 'in connection with transport'. Where an employee applies for a Visa to remain in Australia and, at the time, the employee is already living in Australia (i.e. renewal of the Visa as opposed to the initial costs of the Visa), the Visa application costs are not incurred for the purpose of the employee taking up residence in the locality of the new work place. The costs are therefore not 'in connection with transport' for the purposes of subparagraph 143A(a)(ii) of the FBTAA, and are not an exempt benefit under section 58F of the FBTAA. | Detailed Reasoning - Immigration Vendors fee: A residual fringe benefit includes any right, privilege, service or facility provided in respect of employment. The only criteria necessary is that there must be something that can be identified as a benefit, and the necessary employment relationship exists to make the benefit a fringe benefit. The immigration vendors' fees are costs that the employer has incurred in hiring an immigration agent to assist in getting the visa application through the system. The benefit provided to the employee in this case is the service provided by the migration consulting firm in finalising all matters pertaining to the application of a 457 Visa. This work has been done by the migration consulting firm on behalf of, or for a particular employee, and has been paid for by the employer. The link between the benefit provided and the employment of the employee is more than a mere casual connection or relationship. The only reason the benefit has been provided is because the employer requires the services of the employee to continue. It is therefore considered that there is a sufficient or material connection for the benefit to be a fringe benefit. In summary, a benefit is being provided to an identified employee by their employer, under a specific arrangement, and in respect of the employment of the employee. The benefit provided is not an excluded benefit, nor does it fall under any of the exemption categories specified under the FBTAA. Furthermore, it is considered that the 'otherwise deductible rule' does not apply as the expenditure allows the taxpayer to remain legally in Australia, and is therefore considered to be private in nature (ATOID 2002/208). Consequently, the payment of the immigration vendors' fee by the employer is a residual fringe benefit that is subject to fringe benefits tax. | Detailed Reasoning - Business Nomination fee: Similar to the Immigration Vendors fee, the Business Nomination fee is a cost that an employer incurs in order to hire a skilled overseas worker. Furthermore, the cost cannot be passed on to, or incurred by the employee. The benefit provided in this case is a service (Business Nomination) that has resulted in an employee being able to remain in Australia and continue working for the employer. The Business Nomination process also requires that a particular employee that will benefit under the arrangement is identified. Similar to the Immigration Vendors fee, the link between the benefit provided and the employment of the employee is more than a mere casual connection or relationship. The reason the benefit has been provided is because the employer requires the services of the employee to continue and this can only occur if the employee is allowed to remain in Australia. It is therefore considered that there is a sufficient or material connection for the benefit to be a fringe benefit. In summary, a benefit has been provided to an identified employee by their employer, under a specific arrangement, and in respect of the employment of the employee. The benefit provided is not an excluded benefit, nor does it fall under any of the exemption categories specified under the FBTAA. The 'otherwise deductible rule' does not apply as the cost cannot be passed on to an employee. Consequently, there is no notional income tax deduction that the employee would be entitled to. Consequently, the payment of the Business Nomination fee by the employer is a residual fringe benefit that is subject to fringe benefits tax.

Relevant facts: You have incurred the following costs in processing the renewal of a 457 visa for one of your employees: | The immigration vendors fee are the costs associated with hiring an immigration consultant to assist you in submitting your employees Visa application. | The Business Nomination fees are costs that the employer is required to pay on submission of the Visa application. | The costs incurred that are the subject to this ruling request relate to the renewal of a Visa, not the initial costs of obtaining one.