ATO Interpretative Decision

ATO ID 2007/204

Fringe Benefits Tax

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Issue

Can the payment of 'money' constitute the provision of a 'property fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision

Yes. The payment of money can constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA.

Facts

The employer makes a payment of money to an associate of a particular identified employee in respect of the employment of the employee.

The payment represents a 'benefit' as defined at subsection 136(1) of the FBTAA.

This payment does not constitute 'salary or wages' for the purposes of section 12-35 of the Taxation Administration Act 1953 and therefore is not 'salary or wages' of the employee as defined in subsection 136(1) of the FBTAA.

Reasons for Decision

Section 40 of the FBTAA provides that where a person (the 'provider') provides property to another person (the recipient), the provision of property 'shall be taken to constitute a benefit provided by the provider to the recipient'.

'Property' is defined in subsection 136(1) of the FBTAA as 'intangible property' and 'tangible property'. Tangible property is in turn defined as 'goods and includes animals, including fish; and gas and electricity'.

Intangible property' is defined as:

(a)

real property;

(b)

a chose in action; and

(c)

any other kind of property other than tangible property,

but does not include:

(d)

a right under a contract of insurance; or

(e)

a lease or licence in respect of real property or tangible property.

Money is or may be a form of exchange, but even when regarded as currency; money is still a form of property. The courts have always recognised that when money is exchanged or provided by one person to another, property passes from one to the other. For example, in Higgs v. Holiday (1599) Cro Eliz 746; 78 ER 978, the court held that, in respect of money 'where the owner of property lost the possession of it, he had lost the property in it'. Similarly, in Wookey v. Pole (1820) 4 B & Ald 1; 106 ER 839, the court held that, in the case of money, the property passes with delivery. In describing the nature of money, Best J said that 'by the use of money the interchange of all other property is most readily accomplished'.

To constitute a 'property fringe benefit' a property benefit needs to be a 'fringe benefit'.

The definition of 'fringe benefit' in subsection 136(1) of the FBTAA is as follows:

"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

(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,

...in respect of the employment of the employee....

The FBTAA contemplates that money is property and capable of constituting a fringe benefit. This is evident from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA which specifically excludes:

(hb)

a benefit constituted by the acquisition by a trust of money or other property where the sole activities of the trust are obtaining shares.... [emphasis added]

Further, paragraphs 136(1)(j) to 136(1)(p) of the FBTAA, which exclude certain payments of money from the definition of fringe benefit, demonstrates a plain intention that payments of money can constitute a fringe benefit, otherwise such exclusions would be superfluous.

The principle that money can constitute property for the purposes of the FBTAA has the support of the Federal Court decision of Caelli Constructions (VIC) Pty Ltd v. Commissioner of Taxation (2005) 147 FCR 449; 2005 ATC 4938; 60 ATR 542. Here at FCR 465; ATC 4952; ATR 557, Kenny J accepted the Commissioner's submission that money constitutes property whilst formally rejecting the applicant's argument that the FBTAA does not contemplate that the payment of money can constitute a property fringe benefit.

For these reasons, the payment of money can constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA.

Year of income:  31 March 2008

Legislative References:
Fringe Benefits Tax Assessment Act 1986
   section 40
   section 43
   section 136

Case References:
Caelli Constructions (VIC) Pty Ltd v. Commissioner of Taxation
   (2005) 147 FCR 449
   2005 ATC 4938
   60 ATR 542

Keywords
Fringe benefits tax
Fringe benefits
Property fringe benefits

Siebel/TDMS Reference Number:  5810762; 1-6DE0IMV

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  15 November 2007
Date reviewed:  14 July 2015

ISSN: 1445-2782