FBT Q&A – Provision of gifts to long serving employees

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Is a local government organization entitled to claim FBT exemption for long service gifts under s. 58Q of the FBT Act?

Question

Would you please provide guidance in relation to section 58Q of the FBT Assessment Act?

We are a Council and we provide gifts to long serving employees at a long service awards ceremony. As a local government organisation, are we eligible to apply the exemption under section 58Q of the FBTAA for gifts to long serving employees?

Answer

There is nothing specifically preventing a local government organization from accessing the section 58Q exemption.

Long service award benefits typically take the form of a gift which will constitute a property fringe benefit. Section 58Q provides that such a benefit is exempt up to $1,000 for 15 years’ service and $100 for each additional year, if certain conditions are satisfied.

To qualify for the exemption the following conditions must be satisfied:

  1. A long service award benefit must be provided to an employee.
  2. The award is for a recognized long service period.
  3. Notional taxable value of the award must not exceed the threshold.

A ‘long service award benefit’ is a benefit provided to an employee in, or in respect of, a year of tax solely by way of an award to recognize service by the employee to the employer of at least 15 years.

However, a long service award benefit does not include:

  1. a payment of salary or wages or a payment that would be salary or wages if exempt income were included
  2. a benefit provided under a non-arm’s length arrangement, or
  3. a benefit provided under an arrangement entered into for the sole or dominant purpose of enabling the employer to benefit from the exemption.

We also note that the minor benefit exemption is capable of applying to such gifts where the value of the gift provided is less than $300.

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.