Fringe benefits tax - a guide for employers

This version is no longer current. Please follow this link to view the current version.

• This document has changed over time. View its history.

Chapter 17 - Property fringe benefits

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

17.1 What a property fringe benefit is

A property fringe benefit arises when you (the employer) provide an employee with free or discounted property.

For fringe benefit tax (FBT) purposes, property includes:

• goods (including gas and electricity, unless provided through a reticulation system) and animals
• real property, such as land and buildings
• rights to property, such as shares or bonds.

Benefits specifically covered by earlier chapters of this guide are excluded from being property fringe benefits.

17.2 Taxable value - overview of valuation rules

The taxable value of a property fringe benefit depends on which valuation rule applies. Each valuation rule allows you to reduce the taxable value by the amount of any employee contribution. Each rule recognises different circumstances, such as:

• whether the benefit is an in-house property fringe benefit or an external property fringe benefit
• if the benefit is an in-house property fringe benefit , whether the property
  • was purchased for resale or was manufactured
  • is identical to, or merely similar to, property sold by you (or another provider) in the ordinary course of business at or about the time the benefit is provided
  • is normally sold directly to the public or to customers who sell to the public
• if the benefit is an external property fringe benefit , whether the benefit was provided by you or an associate (rather than a third party) and whether expenditure was incurred in providing the benefit.

The alternative valuation rules are summarised below:

If..	Then..
The benefit is an in-house property fringe benefit provided under a salary packaging arrangement	The taxable value is: the amount that the employee could reasonably be expected to pay to obtain the property under an arm's length transaction less (minus) any employee contribution Note: Transitional rules may apply
The benefit is an in-house property fringe benefit not provided under a salary packaging arrangement	The valuation rule depends on whether the property: was purchased for resale or was manufactured is identical to property sold by the provider in the ordinary course of business is normally sold directly to the public or to retailers who sell the goods to the public
The benefit is an external property fringe benefit	The valuation rule depends on whether you, or an associate (rather than a third party), incurred expenditure in relation to the provision of the property.

17.3 Taxable value - in-house property fringe benefits

An in-house property fringe benefit must satisfy all of the following requirements:

• where you (or an associate) provide the benefit, the property must be identical or similar to property you sell in the ordinary course of business
• where you (or an associate) provide the benefit, the property must be acquired by the provider from you (or an associate) and must be identical or similar to property sold by both you (or an associate) and the provider in the ordinary course of business at or about the time the benefit is provided
• the property must consist of goods . For this purpose, goods include such things as animals and non-reticulated gas and electricity, but not such things as real estate, buildings, or shares.

Property which is 'identical' or 'similar'

Property you provide to your employee is identical to property you sell in the ordinary course of business when the differences between the two items are small.

Property you provide to your employee is similar to property you sell in the ordinary course of business where the two items are alike and generally resemble each other.

Goods provided under a salary sacrifice arrangement

Changes have been made to the FBT law so that from 22 October 2012 onwards, the taxable value of an in-house property fringe benefit provided under a salary packaging arrangement is the amount the employee could reasonably be expected to have been required to pay to purchase the property from the provider under an arm's length transaction (that is, market or fair value). However, transitional rules may apply that affect the commencement date of the changes.

Example : Taxable value of an in-house property fringe benefit Kane works at the Geelong Meat Works abattoir. As part of his annual remuneration negotiations, he agrees to a reduction in his salary in exchange for a meat pack for Christmas which includes hams, steaks and other choice cuts. The meat pack is an in-house property fringe benefit. The taxable value of the benefit would have previously been 75% of the lowest price paid for the meat, which would have been the wholesale price. However, from 22 October 2012 the taxable value of the benefit provided to Kane would be the market value of the meat. As Kane is not a wholesaler, the taxable value would therefore be the retail price of the meat.

Salary packaging arrangements

Salary packaging arrangements (also commonly referred to as salary sacrifice or total remuneration packaging) means arrangements where either:

• You enter into an agreement with your employee to have their salary and wages reduced (or sacrificed) in order to receive a benefit
• A reduction in salary is not negotiated, but you give your employee a benefit as part of their employment contract, and it is reasonable to conclude that the salary and wages they would have received would have been greater if the benefit wasn't provided.

Example : Negotiated salary packaging arrangement Felicity has just started working for a car company. In negotiating her remuneration package she agrees with her new employer to forego $25,000 of her yearly salary in order to receive the use of a car. As she has entered into an agreement to reduce her salary and wages, Felicity would be taken to have entered into a salary packaging arrangement.

Example : Non-negotiated salary packaging arrangement McKenzie has started employment with an IT firm. His job was previously advertised as having a total remuneration package of $100,000 per year. McKenzie only receives $95,000 in salary and wages but is given by his employer, free of charge, gaming and photography software with a retail value of $5,000. In this case, while McKenzie has not entered into a separate agreement to reduce his salary and wages, the salary and wages he would have received would clearly have been greater if the benefit had not been provided. Therefore, McKenzie has entered into a salary packaging arrangement.

Transitional rules

Transitional rules apply where an existing salary packaging arrangement was entered into before the 22 October 2012.

Table : How the transitional rules apply

If...	Then...
The benefit was provided before 22 October 2012	The previous valuation rules apply.
The benefit is provided on or after the 22 October 2012; and The benefit is provided under an existing salary packaging arrangement entered into before 22 October 2012	The previous valuation rules continue to apply up to, and including, the earlier of: 31 March 2014 The date of a material variation to the existing salary packaging arrangement
The benefit is provided under a salary packaging arrangement entered into on or after 22 October 2012	The transitional rules do not apply.

Meaning of 'existing salary packaging arrangement'

An existing salary packaging arrangement means a salary packaging arrangement that was, before the 22 October 2012, both:

• agreed to (that is, you and your employee agree to conditions of the arrangement), and
• entered into (that is, the arrangement was given legal force).

There is no requirement for the actual reduction of salary or wages of the provision of the benefit to occur before 22 October 2012, only that the arrangement to do so was entered into and had legal force before 22 October 2012.

Example : Existing salary packaging arrangement where salary deductions start after 22 October 2012 An employer offers a salary packaging arrangement to employees which must be taken up before 22 October 2012. The benefits will be available to employees during the months of December 2012 and January 2013. However, the pre-tax salary deductions do not commence until the employee has submitted a claim for expenses incurred during the relevant period. An employee accepted the offer before 22 October 2012 and the employee receives the reimbursement for expenses before 1 April 2014. This arrangement would then be covered by the transitional provisions.

Example : Existing salary packaging arrangement where employer offers arrangement and employee takes it up before 22 October 2012 A retail employer provides its employee with the option to salary package certain in-house property fringe benefits. There is no end date for the offer to salary package and no details on the terms or conditions that apply to particular employees. Harold works for the retail employer and has previously used the salary packaging offer to purchase a coffee machine that his employer sells. He is now deciding whether to take up the offer to salary package a kayak which his employer sells. On 18 October 2012, he decides to take up the offer and fills in the requisite forms that lock him into the salary packaging arrangement. As he has entered into the pre-existing offer for salary packaging (in respect to the kayak) and has an agreement that is binding before 22 October 2012, Harold's benefits would be covered by the transitional provisions.

Example : Existing salary packaging arrangements where employer offers arrangements and employee does not take it up before 22 October 2012 As per the example above, with the exception that Harold delays his decision and decides on 24 October 2012 that he wants to take up the salary packaging offer. In this case, while his employer has offered a salary packaging arrangement before 22 October 2012 and despite the fact that he entered into a previous arrangement for the purchase of the coffee machine, Harold does not have a binding agreement in place in respect to the packaging for a kayak. For that reason, Harold's benefits would not be covered by the transitional provisions.

Material variation to an existing salary packaging arrangement

Where an existing salary packaging arrangement is materially altered or varied on or after 22 October 2012, it will no longer be subject to the transitional arrangements.

In determining whether an alteration or variation is material to the existing salary packaging arrangement, regard must be had to the particular wording of the agreement. What is considered material will often depend on the facts and circumstances of the arrangement.

Alterations or variations of an existing salary packaging arrangement that would more than likely be considered material include, but are not limited to:

• change of employer
• alteration of the fixed end date of the arrangement; and
• variation to the types of benefits covered under the arrangement.

Goods manufactured or produced by the provider

These valuation rules apply to an in-house property fringe benefit consisting of goods manufactured, produced, processed or otherwise treated by you (or another provider) as part of your business.

The valuation rules differ depending on whether you normally supply the goods on a retail or non-retail basis and whether the goods are identical or merely similar.

Non-retail goods (identical)

These are goods you normally supply to manufacturers, wholesalers or retailers (that is, not directly to the public).

The goods provided as the fringe benefit must be identical to the goods sold in the ordinary course of business at or about the time you provide the benefit.

The taxable value is the lowest arm's length selling price under which your goods are sold or could reasonably be expected to have been sold:

• at or about the time you provide the benefit
• reduced by any employee contribution.

Where you provide a discount for early payment, the discounted price is used when determining the taxable value of the goods.

Example A manufacturer of electrical goods provides an item of stock to an employee (that is, an item identical to goods sold to wholesalers). The manufacturer usually sells the item for $1,000, including goods and services tax (GST), to wholesalers. Each invoice provided allows for a discount of 5% for early payment, if the invoice is paid within seven days. If the wholesaler pays within seven days, they will pay $950 for the item. However, if the wholesaler does not pay within seven days, they will pay $1,000 for the item. The lowest arm's length selling price is $950.

Retail goods (identical)

These are goods normally supplied to the public. Where you normally sell goods on both a retail and non-retail basis, value the benefit using the non-retail rules above.

The goods provided as the fringe benefit must be identical to the goods sold in the ordinary course of business at or about the time you provide the benefit.

The taxable value is 75% of the lowest selling price you charge the public:

• in the ordinary course of business
• at or about the time you provide the benefit
• reduced by any employee contribution.

Where you provide a discount for early payment, the discounted price is used when determining the taxable value of the goods.

Example : An employer manufactures desks for sale to the public and the lowest selling price of this type of desk to the public is $900, including GST. An employee purchases a desk for $500. The taxable value of the property fringe benefit is (75% x $900) - $500 = $175

Other goods (similar but not identical)

Where goods are similar but not identical to those sold as part of your business at or about the time you provide the benefit (for example, manufacturing seconds), the taxable value is 75% of the notional value of the goods, reduced by any employee contribution.

'Notional value' (or market value) is the amount the employee could reasonably expect to pay in an arm's length transaction.

Example : A sporting goods manufacturer makes squash racquets for sale by wholesale. Sometimes racquets are damaged in the manufacturing process. Instead of bringing the normal arm's length selling price (including GST) of $50, the damaged racquets have a market value of $30 each. An employee purchases a damaged racquet for $5. The taxable value of the property fringe benefit is (75% x $30) - $5 = $17.50.

Goods purchased and sold as part of the employer's business

These valuation rules apply to an in-house property fringe benefit consisting of goods you purchase for resale as part of your business.

The taxable value is the lesser of the following reduced by any employee contribution:

• the arm's length purchase price of the goods to you
• the market value of the goods, where the goods have lost value at the time they are provided to your employee, for example because of obsolescence or deterioration.

Market value is the amount the employee could reasonably expect to pay in an arm's length transaction.

Example : A retailer purchases television receivers for $500 for sale to the public at a retail price of $750. The wholesaler paid sales tax or GST on the sale to the retailer. An employee pays $400 for a receiver under the staff discount purchase scheme. The taxable value of the property fringe benefit is $500 - $400 = $100.

Any other in-house property fringe benefits

This valuation rule applies to any in-house property fringe benefits that do not fall within the preceding categories, that is, goods that are neither accessed under a salary packaging arrangement, purchased for resale nor manufactured or processed.

However, the goods must be of a type that satisfies the in-house property fringe benefit requirements set out at the beginning of section 17.3 .

The taxable value is 75% of the notional or market value of the goods, reduced by any employee contribution. Notional or market value is the amount the employee could reasonably be expected to pay in an arm's length transaction.

17.4 Taxable value - external property fringe benefits

An external property fringe benefit is any property fringe benefit that is not an in-house property fringe benefit.

For example, a property fringe benefit is an external property fringe benefit if the property does not consist of goods that are similar or identical to those you sell in the ordinary course of business.

Benefit provider	Benefit provided	Taxable value
You (or an associate)	Property you purchased under an arm's length transaction at or about the time you provided the benefit	The cost price to you reduced by any employee contribution
You (or an associate) incur expenditure to a provider under an arm's length transaction but you do not provide the benefit	Property	Your expenditure amount reduced by any employee contribution

Where neither of the above rules apply, the taxable value is the amount the employee could reasonably be expected to pay for the property:

• under an arm's length transaction
• reduced by any employee contribution.

Where you receive an early payment discount, the discounted price is used for determining the taxable value.

17.5 Reduction in taxable value where expenditure would have been deductible to the employee

You can reduce the taxable value of a property fringe benefit in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee. Broadly, this means that you may reduce the taxable value by the amount the employee would have been entitled to claim as an income tax deduction if both:

• the property had not been provided as a fringe benefit
• the employee had purchased the property.

For example, if an employee purchased an item of property and used it only to perform employment-related duties, the purchase price would be wholly deductible for income tax purposes. Under the otherwise deductible rule, if you purchased the same item and gave it to the employee to use in performing employment-related duties, the taxable value would be nil, regardless of the amount of the employee contribution you required.

The otherwise deductible rule does not apply to deductions for the decline in value of depreciating assets, except when the cost is less than $301.

There are special rules where the expenditure that would have been deductible to the employee is incurred in relation to a car (refer to section 17.7 ).

Applying the otherwise deductible rule produces different results depending on whether any employee contribution was intended to be for the private element of the property fringe benefit. This is because the employee is:

• entitled to an income tax deduction for expenditure incurred on the portion of the property used to derive assessable income
• not entitled to an income tax deduction for expenditure incurred on the portion used for a private or domestic purpose.

You can apply the otherwise deductible rule using the following steps:

Step	Action
1	Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution.
2	Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?
3	Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the property fringe benefit?
4	Subtract the actual deductible amount (step 3) from the hypothetical deductible amount (step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

Therefore, where the otherwise deductible rule applies, to work out the taxable value of a property fringe benefit, you:

• subtract the amount of any actual employee contribution from the amount that would have been the taxable value if no employee contribution had been made, then
• subtract the amount obtained at step 4 of the otherwise deductible rule.

Example An employee is provided with goods to the value of $500. The employee contribution of $250 is set without regard to how the employee intends to use the property. The employee uses the goods 80% for employment-related (and income tax deductible) purposes and 20% for private purposes. The taxable value of the property fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250). Apply the otherwise deductible rule as follows: Step Action Result 1 Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution. $500 2 Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee? $500 80% = $400 3 Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee. That is, how much of the employee contribution relates to the business use component of the property fringe benefit? $250 80% = $200 4 Subtract the actual deductible amount (step 3) from the hypothetical deductible amount (step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced. $400 - $200 = $200 5 Finally, the taxable value of $250 may be reduced by $200. $250 - $200 = $50

Example : An employee is provided with goods to the value of $500. The employee intends to use the property 50% for employment-related (and income tax deductible) purposes and 50% for private purposes. The employee contribution of $250 is set by the employer after considering how the employee intends to use the goods. That is, the employer knows that under the otherwise deductible rule there will be no FBT liability on that part of the fringe benefit used to produce income. So the employer calculates an employee contribution that is sufficient to avoid incurring FBT on that part of the fringe benefit used for private or domestic purposes. At the end of the FBT year the employee finds that the goods have been used 80% for employment-related (and income tax deductible) purposes and 20% for private purposes. The taxable value of the property fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250). Apply the otherwise deductible rule as follows: Step Action Result 1 Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution. $500 2 Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee? $500 80% = $400 3 Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee. That is, how much of the employee contribution relates to the business use component of the property fringe benefit? If the employer, in setting the amount of the employee contribution, had not allowed for the intended use of the goods, the employee would have: paid a contribution of $500 been entitled to a deduction for business use. $500 x 80% business use = $400 However, the: employer calculated the amount of the employee contribution after taking into account the intended business use the otherwise deductible rule applies. This means the employee's income tax deduction is limited. To calculate the amount: work out the amount that would have been allowed as a deduction to the employee if no allowance had been made for the income-producing purpose for which the property was to be used subtract the amount of the allowance that was made. ($500 x 80%) - ($500 x 50%) = $400 - $250 = $150 4 Subtract the actual deductible amount (step 3) from the hypothetical deductible amount (step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced. $400 - $150 = $250 5 Finally, the taxable value of $250 may be reduced by $250. $250 - $250 = 0

17.5A The otherwise deductible rule and jointly provided property fringe benefits

As described at section 17.5 , the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that property fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rule also applies, it will only apply to the employee's share of any deductible amount and specifically excludes the associate's share of any deductible amount.

If	then
the property fringe benefit was provided or a salary sacrifice arrangement relating to the benefit was entered into before 7.30pm AEST on 13 May 2008	the previous law will continue to apply until 1 April 2009.
the property fringe benefit was provided or the salary sacrifice arrangement relating to the benefit was entered into from 7.30pm (AEST) on 13 May 2008	the amended law applies.

Previous law

An employer could reduce the taxable value of a property fringe benefit provided jointly to an employee and their associate in relation to an income producing asset owned by both the employee and their associate, to the extent that the asset is applied to produce assessable income by both persons (unadjusted notional deduction).

Amended law

You must adjust the taxable value of a fringe benefit determined under the previous law (unadjusted notional deduction) by only allowing the employee's share of the deduction.

That is, the otherwise deductible amount is calculated as:

Unadjusted notional deduction x Employee's percentage of interest

In this calculation:

• the unadjusted notional deduction is the deduction calculated as if the amended law did not apply
• the employee's percentage of interest is the employee's (not the associate's) interest in the asset that is
  • the property
  • applied or used for the purpose of producing assessable income of the employee.

Example: Previous law applies

An employer provides an employee with curtains worth $250 for their rental property. The rental property is:

• owned jointly by the employee and their spouse for the full FBT year
• rented during this time and the curtains are an external property benefit.

There is no employee contribution.

If the curtains were provided on 1 April 2008, the otherwise deductible rule would apply and the taxable value can be reduced to nil.

Example: Amended law applies

If the curtains were provided on 1 June 2008, the otherwise deductible rule would still apply, but the taxable value could only be reduced by the employee's share in the income producing asset, that is $250 x 50% = $125. The taxable value of the property benefit would therefore be $250 - $125 = $125.

17.6 Substantiation requirements

Where you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the property would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return. Where the documentation is a Property benefit declaration by the employee, it must be in a form approved by the Commissioner of Taxation (refer to Declarations ).

Travel diary

A 'travel diary' is a diary or similar document that must be obtained from the employee where the property is provided for either of the following:

• for travel within Australia for more than five consecutive nights, not exclusively for performing employment-related duties. The fact that business travel requires the employee to stay away over a weekend does not, in itself, mean the trip is not undertaken exclusively in the course of their employment
• for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

A travel diary shows the nature of each work or business activity, where and when it took place, the duration of the activity and the date the entry was made.

The requirement to obtain a travel diary is waived where both of the following apply:

• the employee is performing duties of employment as a member of an aircrew travelling outside Australia
• the property provided is food or drink, or is for accommodation, or otherwise incidental to the travel.

Employee declaration

You must obtain a Property benefit declaration in the form approved by the Commissioner of Taxation ( refer to Declarations ), except where any of the following apply:

• the property (other than property used in respect of a car owned or leased by the employee) is used exclusively in the course of performing employment-related duties (for example, protective clothing, tools of trade)
• there is a requirement to keep a travel diary
• the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
• the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

Recurring fringe benefit declaration

The requirement to obtain an employee declaration is waived if the provision of a fringe benefit is covered by a Recurring property benefit declaration (refer to Declarations ).

A fringe benefit is covered by a recurring fringe benefit declaration if:

• it is provided no later than five years after the day on which the declaration was made
• the deductible proportion of the benefit is not significantly less than the deductible proportion of the benefit for which the declaration was first provided (a difference of more than 10% is significant)
• it is 'identical' to the fringe benefit for which the declaration was first made.

Benefits are identical if they are the same in all respects except for any differences that:

• are minimal or insignificant
• relate to the value of the benefits
• relate to the deductible proportion of the benefits.

A recurring fringe benefit declaration is automatically revoked by a later recurring fringe benefit declaration made for an identical benefit. This means that the earlier declaration applies to the first benefit and to any identical benefits provided before the later declaration was made. The later declaration applies to the benefit for which it was provided and to any identical benefits provided subsequently.

The declaration must be in writing in a form approved by the Commissioner of Taxation. The employee must give you the declaration before the due date for lodging your FBT return or, if you are not required to lodge a return, by 21 May.

17.7 Reduction in taxable value where property that would have been deductible to the employee is provided in relation to a car

Special rules apply where you provide a property fringe benefit in relation to a car owned or leased by the employee. You must use these special rules to determine how much (if any) of your expenditure would have been 'otherwise deductible' to the employee.

These special rules are actually three different methods of calculating the amount of the expense that hypothetically would have been income tax deductible to the employee (that is, step 2 in the four-step procedure explained in section 17.5 ). The differences arise from the:

• extent to which the car is used for business or employment-related purposes
• type of evidence available to substantiate that use.

The first method is substantiated by means of log book records and/or odometer records. The second and third methods are substantiated by an employee declaration only. For full details and the appropriate declaration, refer to Employee cars - applying the 'otherwise deductible' rule . The employee declaration shown in section 17.6 is not suitable for an expense incurred in relation to a car.

17.8 Other reductions in taxable value

A number of fringe benefits attract concessional treatment. The concession is a reduction in the taxable value of the fringe benefit that results in a reduced amount of FBT, or even no FBT being payable.

You calculate the taxable value of a property fringe benefit in accordance with the valuation rules explained in sections 17.2 to 17.4 . Where the otherwise deductible rule applies, you then reduce the taxable value as explained in section 17.5 .

If the fringe benefit is of a type that attracts any of the concessions listed below, you may then further reduce the taxable value. In some instances, special conditions must be satisfied before the concession applies, for example, keeping certain records.

The following is a list of reductions that may apply to property fringe benefits:

• remote area residential fuel
• remote area housing assistance
• relocation - meals
• in-house fringe benefits - tax-free threshold
• living away from home - food provided.

For more on the reductions, refer to Reductions in fringe benefit taxable value .

17.9 Exempt property benefits

Payments to worker entitlement funds

Property fringe benefits arising from contributions you make to worker entitlement funds are exempt from FBT, provided the conditions in section 20.6 of Fringe benefits tax exempt benefits are met.

Property provided and consumed on employer's premises

Property you provide to an employee is an exempt benefit if the property is both provided and consumed on your premises on a working day (if you are a company, the premises may be those of a related company). For example, there is no FBT on bread given to bakery employees for consumption at work.

This exemption does not apply to:

• employers that are exempt from income tax where entertainment arises as a result of providing the property benefit (refer to Tax-exempt body entertainment fringe benefits )
• employers who choose to use the meal entertainment provision and calculate the taxable value under the 50:50 split method or the 12-week register method (refer to Fringe benefits tax and entertainment )
• meals provided under a salary sacrifice arrangement.

Remote area - certain meals provided to employees in primary production

Property benefits arising from providing non-entertainment meals to an employee employed in a primary production business located in a remote area are exempt benefits (refer to section 20.7 of Fringe benefits tax exempt benefits ).

More information

For more information, refer to:

• Taxation Determination TD 93/90 - Income tax: does the 'otherwise deductible' rule apply to reduce the taxable value of fringe benefits provided to associates of employees?
• Taxation Ruling TR 2007/12 - Fringe benefits tax: minor benefits.

Changes and updates

The following tables detail any major changes and updates made to this chapter.

November 2013

Section	Changes and updates
17.2 Taxable value - overview of valuation rules	Addition of information summarising the valuation rules
17.3 Taxable value - in-house property fringe benefits	Addition of information regarding the valuation rules for property provided under a salary sacrifice arrangement

Last Modified: December 2013

ATO references:
NO NAT 1054