Property benefit overview
A property benefit arises when an employer provides property to an employee at no cost or at a discounted price. Property can be provided by way of sale, gift, declaration of trust, or otherwise. Property refers to goods, including animals; real property such as land or buildings; and intangible property such as shares or bonds.
Property fringe benefits can be in-house or external.
- In-house benefit: You provide an employee with goods normally provided as part of your business. An expense payment fringe benefit is considered to be in-house when the expense the employer pays for was incurred by the employee in purchasing goods and services that the employer provides to the public in the ordinary course of business.
If you provide your employee with any benefit that doesn't fall into one of the specific types of fringe benefits, a residual fringe benefit may arise. Residual benefits may also be in-house or external.
- External benefit: You provide the employee with property you don't sell in the ordinary course of your business, or something that is not a good, such real estate or a financial investment.
Different valuation methods apply when determining the taxable value of the benefit according to the nature of the benefit provided.
In-house Property Expense Payment
For fringe benefits tax (FBT) purposes, property includes:
- Goods, such as items of clothing or a television.
- Real property, such as land and buildings.
- Financial assets, such as shares, bonds or crypto assets.
This does not include any property that is specifically included within another fringe benefit type, such as cars, or food provided for entertainment purposes.
Combined Benefits
Where both property benefits and residual benefits are provided together to form one benefit, the property benefit is treated as part of the residual benefit. This would be applicable, for example, to an auto repair business, where the mechanic fixes his wife's car with his labour and the shop's parts.
An exception occurs when the property provided is food and drink. In this case, the two benefits, property and residual, must be treated separately. For there to be a property benefit, the property must be provided in respect of the employee's employment, although not necessarily by the employer or to the employee. The FBT liability arises at the time the property is provided to the employee or associate.
Latest Information
See the ATO website for additional details and the most up to date information:
Entertainment
Where entertainment is provided to employees or associates of employees in respect of their employment, the employer is liable to FBT and the entertainment expenses incurred will be deductible to the employer. The expression provision of entertainment is broadly defined as entertainment including food, drink or, recreation or accommodation or travel in connection with, or for the purpose of facilitating, such entertainment.
In cases when a benefit is provided concurrently to employees or associates (subject to fringe benefits tax and deductible) and non-employees (not subject to fringe benefits tax and non-deductible) the employer may elect on an annual basis to use either of two methods to determine the amount subject to fringe benefits tax:
- Split the expense 50/50
- Use a twelve- week register method
Once a method is used, that method must be applied to all meal entertainment fringe benefits for the year. When such an election is made, the benefit is no longer considered a property fringe benefit but is a meal entertainment fringe benefit. Accordingly, any exemptions qualify as property fringe benefits and may have no application to meal entertainment fringe benefits.