Private ruling: Fringe benefits tax
Date of advice: 23 February 2023
Published: 11 April 2023
Ruling period: Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: XX November 20XX

Ruling: Q1: Will the provision of a boat by the Company to its shareholder result in a fringe benefit as defined in subsection 136(1) the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)? | A1: No

Relevant facts and circumstances: The Company is considering purchasing an asset. The shareholder of the Company is the Trust. The Company will make the asset available to the shareholder (the Trust). The asset will be used by A and B, who are primary beneficiaries of the Trust. A and B are trustees of the Trust. A and B are directors of the Company. A and B are not employees of the Company. The Trust is not an employee of the Company. The Company does not pay director fees. A and B's use of the asset will result from the Trust being the shareholder of Company and not from them being directors of the Company. The asset will be purchased by the Company for asset protection reasons. All funding and operating costs will be paid for by A and B personally, including loan repayments and all operating and maintenance costs. The Company will not claim for any expenses relating to the asset. The Company and any other related entity will not claim GST or income tax deductions on the purchase or any future operating costs of the asset.

Relevant legislative provisions: Section 136 of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision: Summary: To be subject to Fringe Benefits Tax, a benefit must be a fringe benefit as defined in the FBTAA 1986. Subsection 136(1) of the FBTAA 1986 provides the following meaning of fringe benefit: fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: (a) provided at any time during the year of tax, or (b) provided in respect of the year of tax, being a benefit provided to the employee or to an associate of the employee by: (c) the employer, or (d) an associate of the employer, or (e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement... between: (i) the employer or an associate of the employer, and (ii) the arranger or another person, or (ea) a person 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 associates knows, or ought reasonably to know, that the employee or associate is doing so, in respect of the employment of the employee... Subsection 136(1) of the FBTAA states that 'employment, in relation to a person, means the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that result, will result or has resulted in the person being treated as an employee'. An employee includes a current employee, future employee and former employee (subsection 136(1) of the FBTAA 1986). A current employee is a 'person who receives, or is entitled to receive, salary or wages', a former employee is a 'person who has been a current employee', and a future employee is a 'person who will become a current employee' (subsection 136(1) of the FBTAA 1986). A director may be considered as an employee for FBT purposes if they receive director fees (subsection 136(1) of the FBTAA 1986 meaning of salary or wages). The Company propose to buy an asset that it will make available to its shareholder, the Trust, for use by its beneficiaries (A and B). A and B are also directors of the Company but do not receive director's fees, and are not otherwise employed by the Company. Based on the facts, no fringe benefit has been provided to an employee as there is no employment relationship between the Company and the Trust, or A and B. As such, no amount will be a fringe benefit on these facts.