Private ruling: Fringe Benefits Tax
Date of advice: 25 May 2017
Published: September 2017
Ruling period: Year ended 31 March 2018 | Year ended 31 March 2019 | Year ended 31 March 2020 | Year ended 31 March 2021
Date scheme commenced: June 2017

Ruling: Q1: Does the fringe benefit exemption apply if the employee enters into salary sacrifice arrangements on discounted rates for access to the centres? | A1: Yes | Q2: Does the fringe benefits tax exemption apply if the employee pays the fees over the counter or arranges for post-tax deductions for discounted access to the centres? | A2: Yes

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. You plan to offer your employees discounted access to recreational facilities (the centres) which you run and that are open to the public. The centres are located on premises that you own. The scheme will help encourage health and wellbeing initiatives amongst employees and encourage them to participate in a healthy lifestyle. You will provide two options: ● employees enter into a salary sacrifice arrangement to obtain membership of the centres at a discounted rate, or ● employees pay discounted fees for casual use, including a multiple visit pass, either over the counter or by deduction from post-tax income. Under the salary sacrifice arrangement employees will not be billed or invoiced for the cost of membership. The amount of salary deducted under the salary sacrifice arrangement will be transferred to the facility revenue account. Members are issued with non-transferable membership cards with photo identification that appears on the staff computer screens when the card is scanned upon entry. The multiple visit pass also has photo identification of the employee.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986, section 20 | Fringe Benefits Tax Assessment Act 1986, section 38 | 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) | Income Tax Assessment Act 1997 , section 32-10

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated. | Summary: Where an employee enters into salary sacrifice arrangement to receive access to the centres the provision of that benefit will be an exempt benefit. | Detailed Reasoning - Detailed reasoning: A salary sacrifice arrangement is an arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar value. To be an effective salary sacrifice arrangement it should be entered into before the work is performed. You will be entering into salary sacrifice arrangements with your employees whereby your employees will forgo their future entitlements to salary, equivalent to discounted membership fees, in order for you to provide them with membership of the centres that you operate. The provision of the membership is a benefit. A benefit is defined in subsection 136(1) to include 'any right…privilege, service or facility…'. As provided for in subsection 47(2) a benefit will be an exempt benefit where it is: (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) …. (b) the recreational facility…is located at the 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 provided must be a residual benefit which according to section 45 '…is a benefit that … is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive)...'. Residual benefits are benefits that remain or are left over because they are not one of the more specific categories of benefit. The benefit that you will be providing under the salary sacrifice arrangement is to allow your employees to use facilities at the centres. This will be achieved by the employees taking up one of the membership options. Having considered Subdivision A of Divisions 2 to 11 (inclusive), it is concluded that the benefits will be residual benefits under section 45. Since the residual benefits involve the use of the centres by employees as part of your program to increase well-being paragraph 47(2)(a) will be satisfied. To satisfy paragraph 47(2)(b) the centres must be located at your business premises. According to subsection 136(1) business premises: in relation to a person, means premises or part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include: (a) premises, or part of premises, used as a place of residence of an employee of the person or an employee of an associate of the person; or (b) a corporate box; or (c) boats or planes used primarily for the purpose of providing entertainment unless the boat or plane is used in the person's business of providing entertainment; or (d) other premises used primarily for the purpose of providing entertainment unless the premises are used in the person's business of providing entertainment. Paragraph 12 of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises' , provides guidance concerning the two requirements that must be satisfied for premises to be classified as business premises of the employer. These requirements are: ● the control the employer has over the premises and ● the consistency of an employer's actions and activities on the premises with those of normal business practices. The centres are located on premises that you own. The operation of the centres is part of your business operations. Therefore the centres are located at your business premises. As all of the conditions in subsection 47(2) will be satisfied the provision discounted rates for access to the centres that you will be providing to your employees will be an exempt benefit. | Summary: If the employee pays the fees over the counter or arranges for post-tax deductions for discounted access to the centres, the provision of that benefit will be an exempt benefit in accordance with subsection 47(2). | Detailed Reasoning - Detailed reasoning: As explained in the reasons for decision for question one, the use of the centres will be a residual benefit. When an employee pays the discounted fees for casual visits to the centres from his or her post-tax salary, that employee is provided with the use of the centre and that is a residual benefit. The use of the centre at the discounted rate will be provided to the employee as part of the workplace health and wellbeing initiative. Therefore it is provided in respect of the employee's employment. As explained in the reasons for decision to question one, the centres are located at your business premises. Therefore, the provision of the discounted access to the centres will be an exempt benefit in accordance with subsection 47(2).