Private ruling: $1,000 reduction in the taxable value of in-house fringe benefits
Published: December 2013
Ruling period: 1 April 2012 to 31 March 2013 | 1 April 2013 to 31 March 2014
Date scheme commenced: 1 April 2012

Ruling: Q1: Is the company able to claim the $1,000 reduction on the taxable value of goods provided to an employee under subsection 62(1) of the FBTAA? | A1: No

Relevant facts and circumstances: · The company operates a business, specialising in providing services to a particular industry. · Over the years, the company has been involved in other income-producing activities relating to a particular industry including re-selling goods. · The company no longer operates its online website to sell the goods and does not advertise · The company still maintains a licence to sell the goods although it has not recently sold any goods. · As part of an employee's remuneration package the employee is entitled to $1,000 worth of goods sold by the company.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 62 | Fringe Benefits Tax Assessment Act 1986 section 136(1)

Reasons for decision: Summary: The taxable value of 'eligible fringe benefits' that relate to a particular employee are subject to an aggregate $1,000 reduction under section 62 of the FBTAA. Under subsection 62(1), where one or more eligible fringe benefits in relation to an employer in relation to a year of tax relate to a particular employee of the employer, the taxable value of the fringe benefit, or the sum of the taxable values of those fringe benefits, as the case may be, in relation to that year shall be reduced by: a) If the taxable value or the sum of the taxable values does not exceed $1,000 - an amount equal to the taxable value or the sum of the taxable values; or b) In any other case - $1,000 An 'eligible fringe benefit' is defined in subsection 62(2) as: a) An in-house fringe benefit; or b) An airline transport fringe benefit. An in-house fringe benefit includes an 'in-house property fringe benefit', which is defined in subsection 136(1) of the FBTAA: In-house property fringe benefit , in relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property: a) Where both of the following conditions are satisfied: i. The provider is the employer or an associate of the employer; and ii. At or about the provision time, the provider carried on a business that consisted of or included the provision of identical or similar property principally to outsiders' or b) Where all of the following conditions are satisfied: iii. The provider is not the employer or an associate of the employer iv. The property was acquired by the provider from the employer or an associate of the employer (which employer or associate is in the is definition called the seller); and v. At or about the provision time, both the provider and the seller carried on a business that consisted of or included the provision of identical or similar property principally to outsiders In this case, for paragraph a) above to be satisfied and the $1,000 reduction in the aggregate taxable value of eligible fringe benefits to be applied, the company must satisfy the following: · Tangible property provided · The provider is the employer · Provider carried on a business consisted of or included the provision of identical or similar property principally to outsiders' Tangible property According to the employment contract between the company and the employee ($1000 worth of goods sold by the company will be provided to the employee. It is considered that tangible property will be provided to the employee. Employer is the provider The company is the employer of the employee and will provide the goods to the employee as part of the employee's remuneration package. Carried on a business The employer must have carried on a business that consists of or includes "the provision of identical or similar property principally to outsiders" at the time it provides the property to its employee. In this case, the company must have carried on a business that involves selling the goods principally to outsiders, if the benefit it provides to its employee is the goods. Whether or not a person is carrying on a business is a question of fact. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production lists the following indicators as relevant in determining if a business is being carried on: · Whether the activity has a significant commercial purpose or character, · Whether the taxpayer has more than an intention to engage business, · Whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity · Whether the there is repetition and regularity of the activity, · Whether the activity is of the same kind that is carried on in a similar manner to that of the ordinary trade in that line of business. · Whether the activity is planned, organised and carried out in a business like manner · The size, scale and permanency of the activity, · Whether the activity is better described as a hobby, a form or recreation or a sporting activity. The company specialises in providing services to a particular industry. In addition to these services, the company has been involved in re-selling goods that relate to the particular industry. However, recently the company has not made any sales, no longer operates its website to sell the goods and no longer advertises its goods. We acknowledge that the company may make the occasional sale and does maintain a licence to sell the goods. However, none of the indicators above have been satisfied and the occasional sale of the goods will not amount to carrying on a business. Further, the website to promote the sale of the goods has since stopped operating and consequently, it does not appear that there is any commercial purpose or intention to engage in a business that sells the goods. Therefore, the goods provided to the employee are not 'in-house property fringe benefits'. The provision of the goods to the employee is not an in-house fringe benefit and therefore, will not be eligible for the $1,000 reduction in the aggregate taxable value of eligible fringe benefits.