Question
We are a local Council and we allow employees to use the Council owned and operated gym facilities and allow them to salary sacrifice the annual gym membership fee.
Employee’s currently pay for a family member’s gym membership via a payroll deduction, presently it is treated as a post-tax contribution from their salary such that no FBT arises.
Can we allow the employee to salary sacrifice the family member’s membership fee from pre-tax salary?
Answer
The FBT Act has a specific exemption for residual benefits constituting the provision or use by a current employee of a recreational facility located on their employer’s business premises. This generally allows employees to salary sacrifice the cost of Council gym facilities with no FBT applying.
However, the exemption only covers current employees of the employer and does not extend to family members. Your current treatment in relation to family member memberships results in no FBT applying as the taxable value of the family members gym membership is offset by the after-tax employee contribution.
If you were to allow the employee to salary sacrifice the family members’ membership, then FBT would be payable at the FBT rate which is likely to be higher than the employees personal income tax rate.
As such, it is recommended the current treatment for family memberships not change.