FBT Q&A – Benefits to employees that have been stood down

Is a person whom an employer has stood down due COVID-19 an employee for FBT purposes during the period of stand down?

Question

We have had to stand down some employees due to the COVID-19 crisis. If we provide benefits to these employees during the period they have been stood down does FBT arise?

Answer

It is our understanding that under the Fair Work Act an employee that has been stood down due to COVID-19 is still regarded as being employed by the employer. The employee definition for FBT operates differently in that it applies to current, future and former employees.

A current employee is a person who receives, or is entitled to receive, salary or wages. Perhaps an employee who has been stood down falls outside this definition. However, we would consider the former employee definition would apply as this refers to a person that has been a current employee.

The bottom line is that the employee who has been stood down would continue to be considered an employee for FBT purposes in our view.

On this basis, benefits provided during the stand down period will be subject to FBT. However, depending on the benefit, a specific exemption/reduction or the otherwise deductible rule may be available to reduce the taxable value accordingly.

 

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