FBT Q&A – Gifts made to your employees by third parties
Our employees sometimes receive gifts from third party organisations such as suppliers, contractors and cultural/arts/sports/professional association bodies. Gifts received can be tickets to theatre performance/sport event/professional forum, lunches, a box of chocolates, a bottle of wine etc.
These gifts are recorded in a gift register with estimated values and signed by divisional managers. However, we do not have any arrangement with the third parties for gifts to be provided to our employees. What would be the FBT implication of these gifts?
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For the gifts to be a fringe benefit the definition of fringe benefit in subsection 136(1) of the FBTAA requires the benefit to be provided by one of the following:
- the employer;
- an associate of the employer;
- a person other than the employer, or associate of the employer under an arrangement covered by paragraph (a) of the definition of ‘arrangement’ between (i) the employer, or an associate of the employer and (ii) the arranger or another person; or
- a person other than the employer or an associate of the employer if the employer or associate (i) participates in or facilitates the provision or receipt of the benefit, or (ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit and, in either case, the employer, or associate knows or ought reasonably to know that the employer or associate is doing so.
Paragraph (a) of the definition of ’arrangement’ in subsection 136(1) of the FBT Act states the term means:
‘any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings’.
Accordingly, a fringe benefit will not arise unless there is an agreement of some kind between the employer and a third party. The gifts in your scenario do not appear to meet this condition and so FBT liability should not arise.
Alternatively, in order for FBT liability to arise, it must be the case that you, as the employer:
- participate in or facilitate the provision or receipt of the gift; or
- participate in, facilitate or promote the scheme involving the provision of the gift:
and, in either case:
- know or ought reasonably to know that you are so participating, facilitating or promoting the benefit.
Once again, this does not appear to be the case based on the background facts you have provided.
Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.