Private ruling: FBT Childcare on business premises
Published: April 2013
Ruling period: Year ended 31 March 2014 | Year ended 31 March 2015 | Year ended 31 March 2016
Date scheme commenced: 1 April 2013

Ruling: Q1: Will a fringe benefit arise from the benefit provided to your employees under the salary sacrifice arrangement? | A1: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If you 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 intend to provide child care to your employees through a salary sacrifice arrangement. You are one of a group of subsidiaries of a holding company. Another subsidiary in your group has received a private ruling stating that the child care facility is located on their business premises. You will obtain the required child care places from this subsidiary, which you will then provide to your employee through an effective salary sacrifice arrangement.

Relevant legislative provisions: 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)

Reasons for decision: Detailed Reasoning - Detailed reasoning: You will offer your employees child care services through a salary sacrifice agreement. The child care services will be located on the business premises of another subsidiary within your group. Subsection 47(2) of the FBTAA provides that this will be an exempt benefit: Where: (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) the care of children of the employee in a child car facility; and (b) the recreational facility or child care facility, as the case may be, is located on 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 is an exempt benefit. Therefore, the provision of child care will be an exempt benefit under section 47(2) if the following conditions are satisfied: 1. the benefit is a residual benefit 2. the benefit is provided to a current employee 3. the benefit consists of the care of the children of the employee 4. the care of the children is in a child care facility 5. the child care facility is located on the business premises of the employer (or a related company if the employer is a company). | Detailed Reasoning - 1. Is the benefit a residual benefit?: Section 45 of the FBTAA defines a residual benefit as: A benefit is a residual benefit for the purpose of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Division 2 to 11 (inclusive). Under the terms of the salary sacrifice agreement you will agree to provide childcare. As the benefit being provided is the care of children rather than the paying or reimbursement of child care costs by the employee, the benefit will be a residual benefit. | Detailed Reasoning - 2. Will the benefit be provided to a current employee?: As the child care is being provided under the terms of a salary sacrifice agreement the benefit will be provided to a current employee. | Detailed Reasoning - 3. Will the benefit consist of the care of children?: As discussed above, the benefit consists of the care of the children of the employee. | Detailed Reasoning - 4. Will the children be cared for in a child care facility: The children will be cared for in the childcare facility of another subsidiary within your group. | Detailed Reasoning - 5. Will the childcare facility be located on the business premises of the employer (or a related company if the employer is a company)?: The childcare facility is located on the business premises of the other subsidiary within your group. | Detailed Reasoning - Is the other subsidiary within your group a related company?: Subsection 158(1) of the FBTAA provides: [Where companies related ] For the purposes of this Act, a company shall be taken to be related to another company if: (a) one of the companies is a subsidiary of the other company; or (b) each of the companies is a subsidiary of the other company. You and the other subsidiary are subsidiaries of the same holding company. Under paragraph 158(1)(b) above you and the other subsidiary are related. Therefore the childcare facility is located on the business premises of a related company. As all the conditions listed above are met a fringe benefit will not arise from the benefit provided to your employees under the salary sacrifice arrangement.