Ordinary Income
ORDINARY INCOME Classified into three broad categories: Income from personal services/ exer5on Salary, wages, services
Ordinary Income
Income from business Sale of goods, provision of service, manufacturing etc
Income from property “passive” income e.g. rent, interest, royalWes
Ordinary Income Chapter 6 – Income from personal services and employment -‐
Under S 6-‐5 of the Income Tax Assessment Act 1997 (ITAA) assessable income includes income according to ordinary concepts, which is called ordinary income
Prerequisite to ordinary income In order for an amount to be ordinary income it must satisfy 2 prerequisites. The amount must be cash or convertible to cash: FCT v Cooke & Sherden; and is a real gain to the taxpayer: Hochstrasser v Mayes. Two step approach used to determine whether an amount in ordinary income from personal exertion: 1) Identify the activity undertaken; and 2) Determine whether the receipt is a reward for performing that particular activity: Brown v FCT (2002) -‐
Receipts earned for personal services and employment (aka personal exertion) includes income from both employment and services may be assessable as both ordinary and statutory income.
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Amounts earned directly or indirectly by virtue of a taxpayer’s personal exertion will constitute ordinary income: Moorhouse v Dooland (1955). A nexus between the amount received and the work performed is essential for determining whether the receipt is ordinary income under s 6-‐5. A receipt is not an ordinary income if it is not a product of employment or reward for services: Scott v FCT (1966); Hayes v FCT (1956).
Once the nexus is established it does not matter whether the payment is made before, during or after the completion of the task: Hochstrasser v Mayes (1960). Its also irrelevant whether the benefit is provided by the entity for which the task was performed or by unrelated third party: Kelly v FCT (1956) Wages, salaries, commissions, bonuses, fees for services and other payments that are incidental to employment or are a reward for services are ordinary income. The characterisation of these amounts as ordinary income is based on the nexus between the activity and benefit and is not affected by whether the amount is received regularly or as a lump sum payment. Similarly, it is irrelevant whether the payments are from an ongoing regular employment contract or one off receipt contractually required to be paid for the performance of a given task: Brant v FCT (1971). Unexpected or voluntary payments recovered as a reward for service are ordinary income as the benefit is an incident of employment: Laidler v Perry (1965). Ordinary income may be based on the nature of the income rather than on a nexus. Receipts that are used as a replacement for income are assessable as ordinary income: (FCT v Dixon (1952). Tips Tips are an example of a third party gift and are voluntary payments, since they are made because of the level of service provided this establishes a nexus between with the service provided making it ordinary income: Penn v Speirs & Pond Ltd (1908); Calvert v Wainwright (1947). Personal gifts and voluntary payments A gift given for personal qualities is not regarded as ordinary income and would not normally be assessable to the recipient: Hayes v FCT (1947). When distinguishing between a non assessable personal gift and assessable voluntary payments for service, the courts have given more weight to the nature of the receipt in the hands of the recipient rather than the motive of the giver: Scott v FCT. Viewing the receipt from the point of view of the recipient emphasises the importance of looking for any connection the receipt may or may not have with any service provided or other income earning activity. An solicited gift does not become ordinary income only it was because prompted by gratitude for some service, as other factor must also be considered: Scott v FCT (1966).
Factors relevant when distinguishing between ordinary income and personal/ voluntary gifts are: -‐ -‐ -‐ -‐ -‐
whether the gift was expected, as expected gifts are more likely to be ordinary income: Scott v FCT whether the gift consists of a lump sum or regular payment. If it consists of regular payments, then it is more likely to be ordinary income: FCT v Blake (1984) the motive of the donor. If the donor intends the gift to be a reward for services the gift is more likely to be ordinary income: Scot v FCT; whether the recipient has already been remunerated for his or her services. If so, this makes the voluntary payment less likely to be ordinary income: Scott v FCT; Hayes v FCT (1956) whether there was personal relationship between the donor and the recipient. The existent of a pre existing personal relationship will make the voluntary payment less likely to be ordinary income: Scott v FCT; Hayes v FCT.
Gifts received are not ordinary income but a capital receipt. Prizes and chance winnings Windfall gains in the form of chance winnings or prizes, which primarily depend on luck, are therefore not ordinary income, although they may in some cases be income from business. For example, winnings from gambling will be a windfall gain unless the gambler is in the business of gambling: Babka v FCT (1989). For prizes to be classified as ordinary income they would have to be earned as a result of business activity or the degree of personal exertion and skill would have to outweigh the element of chance. It is a question of degree, as to whether the level of personal exertion is sufficient to turn a prize into ordinary income and, as with all question of degree, the difficulty is to determine the level of personal exertion that is necessary to change the character of the receipt: Kelly v FCT (1985). The distinction between a non-‐assessable prize and a prize that is related to personal exertion is more difficult when the activity is not associated with the employment of professional activities. Some of the factors used to make this distinction are: -‐ -‐ -‐ -‐
the degree of professionalism; whether the reward is for services rather than for personal qualities; whether the reward is paid before or after service; and whether the reward is related to the tax payer contract.
Non-‐cash benefits Receipts that are not convertible to cash are not ordinary income: Tennant v Smith (1892); Payne v FCT (1996). Customer loyalty programs typically accumulate points that can be redeemed as free travel, free accommodation, discounts and purchases and other similar rewards.
Two issues arise in relation to taxation from these loyalty programs: first, whether the rewards are cash or convertible to cash; and, secondly, whether the benefit is connected with the personal exertion. Benefits that are not cash or cash convertible cannot be ordinary income and are not assessable under s 6-‐5 of ITAA 1997 but they may be assessable under s 15-‐2 or subject to FBT. However, if the benefit is convertible to money through sale or via some other means, then the question of the benefits assessable as ordinary income will rest with whether the benefit shows a nexus with personal exertion. Capital receipts or personal exertion The distinction between a receipt that is a reward for services is therefore ordinary income, and the receipt that is capital in nature is primarily concerned with whether the tax payer has given up a valuable right. It follows that where the payment is for giving up a capital right, then the payment is most likely capital in nature and not ordinary income. Conversely, if nothing substantial of a capital nature is given up then it, is necessary to consider whether the payment shows a nexus with any service, in which case it will be ordinary income: Brent v FCT (1971). Changes to entitlements Payments for changes to entitlements under employment and service contracts may give rise to capital receipts for the giving up of valuable capital right and therefore not fall into the category of ordinary income: Bennett v FCT (1947). This follows the principle that compensation takes the form of what it replaces in that compensation for the loss of capital rights will be a capital receipt. If no capital right is given up, as in FCT v Brent 1971, then the receipt is more likely to be ordinary income unless it is a personal gift. Receipts for entering a restrictive covenant A restrictive covenant or restraint of trade may be formed at the time of entering a contract, during the contract’s operation or after the completion of the service. Characterizing receipts from entering a restrictive covenant is capital or ordinary income will depend on whether the payment is connected with the current employment agreement or whether it is a separate agreement to give up valuable rights. However, where the restrictive covenant is commonly used as a part of normal employment contracts it will be ordinary income as it is generally viewed as a payment for future services: Higgs v Olivier (1952) Payments made at the termination of the service agreements that restrict the activities of the taxpayer are seen as capital as they do not arise out of the employment or service contract and do not show a nexus with the earning activity: Higgs v Olivier [1952], Hepples v FCT (1991) Capital receipts may also arise out of restrictive covenants agreed to at the time of entering a contract, an the characterisation of these receipts again be based on
whether the payment is for giving up a valuable right or services provided: FCT v Woite (1982), Reuter v FCT (1993). Sign-‐on fees The view expressed by Commissioner in Ruling TR 1999/17 is that where a sign-‐on fee is a normal part of the practices of attracting sports people and employees into a new contract, the payment is less likely to be a capital and more likely to be an ordinary income as a one off payment for the future services: Pickford v FCT (1998). STATUTORY INCOME FROM SERVICES AND EMPLOYMENT S 15-‐2 of ITTAA 1997 deems certain gains arising from employment and services to be assessable as statutory income. The current s15-‐2 does have a contrary intention in s 15-‐2, which means that if a gain is ordinary income, it will not be covered by s 15-‐2. Specifically, s 15-‐2 covers gains from employment and services if they are not ordinary income or a fringe benefit and if they fulfill all three of the requirements. First requirement The first requirement for a gain to be assessable under s15-‐2 is that there is an allowance, gratuity, compensation, benefit, bonus or premium. This includes receipts that are cash, cash convertible or non-‐cash convertibles. Some examples, of receipts that meet the first requirement are: -‐ -‐
a cash payment for services, which is a ‘benefit’ and so would fulfill this requirement an employer giving an employee a free television or giving the employee use of a car for personal purposes.
Note also that this first requirement: -‐ -‐
is not confined to receipts that the tax payer is entitled to receive, but can also include (gratuities) that have been received by the tax payer; and will also be satisfied when the tax payer receives something from an entity to which he or she has not directly provided a service. For instance, free hotel accommodation received by an employee of an accounting firm from one of the firms client’s that would satisfy this first requirement.
An example of an item that satisfies the first requirement is an “allowance”. An allowance is a predetermined amount given to a taxpayer for a specific purpose where the taxpayer does not have to return any of the unspent amount. Reimbursement, are also not usually ordinary income but they may be subject to FBT. Although allowances will generally fulfill the three requirements of s 15-‐2, they also will usually constitute ordinary income in which case they will be assessable as
ordinary income under s6-‐5 rather s 15-‐2. This is because of the contra intention contained in s 15-‐2 which removes the application of s 15-‐2 if the amount is also ordinary income. Second requirement This second requirement for a gain to be assessable under s15-‐2 is that the allowance, benefit, etc. is “provided to you” (i.e. the taxpayer). Third requirement The third requirement for a gain to be assessable under s 15-‐2 is that what has been received by the taxpayer is in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by the taxpayer. This requirement will be satisfied when there is a sufficient nexus between the receipt and services provided. Can compensation receipts be assessable under s 15-‐2? Compensation paid to an employee takes on the form of what the employee is being compensated for. This means that compensation for loss of salary is ordinary income and compensation paid for the loss of the actual job or some of the rights related to that job is generally capital. FRINGE BENEFITS TAX Chapter 7 FBT is imposed on the employer, not the employee s 66 (1) FBTAA. As such tax is imposed on the provision of fringe benefits, not on the receipt of them. Definition of fringe benefits The term fringe benefits is defined in s 136 (1) FBTAA. A fringe benefit exists: -‐ -‐ -‐ -‐ -‐
a benefit provided during the year of tax by an employer, associate or third party arranger to an employee or an associate in respect of the employment of the employee
Benefit The benefit is defined s 136 (1) and includes and right, privilege, service or facility provided under an arrangement in relation to the performance of work. Provided during the year of tax The term provided is defined in s136 (1). In relation to benefits it includes allow, confer, give, grant or perform and, in relation to property the disposal of a beneficial interest in or illegal ownership of the property. A benefit may also be deemed to be provided where the benefit it prohibited but the prohibition is not consistently enforced: s148 (3). S 148 (4) further specifies that a benefit that is received or obtained by an employee of respect of employment is deemed to be provided. This ensures that fringe benefits that are supplied to an employee by a party other than the employer are nonetheless provided by the employer. Employee, associate or third party arranger S137 ensures that the FBT legislation applies in situations where there is a clear employment relationship but the employee is remunerated with non cash benefits instead of salary or wages. Fringe benefits can also be provided by an employer to an employee indirectly through third party arrangements. Although the benefit is provided to the employee by a third party, it qualifies as a fringe benefit form the employer to the employee where the third party does so under an arrangement with the employer. Note that the employer must participate in or facilitate the provision or receipt of the benefit for the benefit to qualify as a fringe benefit. Employee or associate A fringe benefit can also arise where the benefit is not provided to an employee directly, but to an associate of an employee. Note that in order to constitute a fringe benefit, the benefit provided must relate to a particular employee: Essenboourne Pty Ltd v FCT (2002); FCT v Indooroopily Children’s Services (2007). In respect of the employment of the employee Their Honours proceeded to suggest that, for the benefit to constitute a fringe benefit, there must be a sufficient and material relationship between the employment and the provision of the benefit. The scope of the requirement that the benefit be provided in respect of the employment of the employee is potentially widened by s148 (1) FBTAA which states that a benefit is provided in respect of the employment of the employee regardless or whether the benefit; -‐ -‐
is also provided in respect of another matter or thing relates to past, current or future employment
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is surplus to the needs or wants of the recipient is also provided to another person is offset by any inconvenience or disadvantage is provided or used in connection with the employment is in the nature of income; and is a reward for services rendered or to be rendered by the employee
Exclusions The definition of fringe benefits in s136 (1) of FBTAA specifically excludes certain items from being a fringe benefit, including: -‐ -‐ -‐ -‐ -‐
salary or wages superannuation contributions payments from superannuation funds benefits under an employee share scheme; and payments on termination of employment
Allowances are classified as salary and wages and are excluded from the definition of fringe benefits. Reimbursements are not excluded from the definition of fringe benefit.
Ordinary Income
Income from business Sale of goods, provision of service, manufacturing etc
Income from property “passive” income e.g. rent, interest, royalWes
Ordinary Income Chapter 6 – Income from personal services and employment -‐
Under S 6-‐5 of the Income Tax Assessment Act 1997 (ITAA) assessable income includes income according to ordinary concepts, which is called ordinary income
Prerequisite to ordinary income In order for an amount to be ordinary income it must satisfy 2 prerequisites. The amount must be cash or convertible to cash: FCT v Cooke & Sherden; and is a real gain to the taxpayer: Hochstrasser v Mayes. Two step approach used to determine whether an amount in ordinary income from personal exertion: 1) Identify the activity undertaken; and 2) Determine whether the receipt is a reward for performing that particular activity: Brown v FCT (2002) -‐
Receipts earned for personal services and employment (aka personal exertion) includes income from both employment and services may be assessable as both ordinary and statutory income.
-‐
-‐
Amounts earned directly or indirectly by virtue of a taxpayer’s personal exertion will constitute ordinary income: Moorhouse v Dooland (1955). A nexus between the amount received and the work performed is essential for determining whether the receipt is ordinary income under s 6-‐5. A receipt is not an ordinary income if it is not a product of employment or reward for services: Scott v FCT (1966); Hayes v FCT (1956).
Once the nexus is established it does not matter whether the payment is made before, during or after the completion of the task: Hochstrasser v Mayes (1960). Its also irrelevant whether the benefit is provided by the entity for which the task was performed or by unrelated third party: Kelly v FCT (1956) Wages, salaries, commissions, bonuses, fees for services and other payments that are incidental to employment or are a reward for services are ordinary income. The characterisation of these amounts as ordinary income is based on the nexus between the activity and benefit and is not affected by whether the amount is received regularly or as a lump sum payment. Similarly, it is irrelevant whether the payments are from an ongoing regular employment contract or one off receipt contractually required to be paid for the performance of a given task: Brant v FCT (1971). Unexpected or voluntary payments recovered as a reward for service are ordinary income as the benefit is an incident of employment: Laidler v Perry (1965). Ordinary income may be based on the nature of the income rather than on a nexus. Receipts that are used as a replacement for income are assessable as ordinary income: (FCT v Dixon (1952). Tips Tips are an example of a third party gift and are voluntary payments, since they are made because of the level of service provided this establishes a nexus between with the service provided making it ordinary income: Penn v Speirs & Pond Ltd (1908); Calvert v Wainwright (1947). Personal gifts and voluntary payments A gift given for personal qualities is not regarded as ordinary income and would not normally be assessable to the recipient: Hayes v FCT (1947). When distinguishing between a non assessable personal gift and assessable voluntary payments for service, the courts have given more weight to the nature of the receipt in the hands of the recipient rather than the motive of the giver: Scott v FCT. Viewing the receipt from the point of view of the recipient emphasises the importance of looking for any connection the receipt may or may not have with any service provided or other income earning activity. An solicited gift does not become ordinary income only it was because prompted by gratitude for some service, as other factor must also be considered: Scott v FCT (1966).
Factors relevant when distinguishing between ordinary income and personal/ voluntary gifts are: -‐ -‐ -‐ -‐ -‐
whether the gift was expected, as expected gifts are more likely to be ordinary income: Scott v FCT whether the gift consists of a lump sum or regular payment. If it consists of regular payments, then it is more likely to be ordinary income: FCT v Blake (1984) the motive of the donor. If the donor intends the gift to be a reward for services the gift is more likely to be ordinary income: Scot v FCT; whether the recipient has already been remunerated for his or her services. If so, this makes the voluntary payment less likely to be ordinary income: Scott v FCT; Hayes v FCT (1956) whether there was personal relationship between the donor and the recipient. The existent of a pre existing personal relationship will make the voluntary payment less likely to be ordinary income: Scott v FCT; Hayes v FCT.
Gifts received are not ordinary income but a capital receipt. Prizes and chance winnings Windfall gains in the form of chance winnings or prizes, which primarily depend on luck, are therefore not ordinary income, although they may in some cases be income from business. For example, winnings from gambling will be a windfall gain unless the gambler is in the business of gambling: Babka v FCT (1989). For prizes to be classified as ordinary income they would have to be earned as a result of business activity or the degree of personal exertion and skill would have to outweigh the element of chance. It is a question of degree, as to whether the level of personal exertion is sufficient to turn a prize into ordinary income and, as with all question of degree, the difficulty is to determine the level of personal exertion that is necessary to change the character of the receipt: Kelly v FCT (1985). The distinction between a non-‐assessable prize and a prize that is related to personal exertion is more difficult when the activity is not associated with the employment of professional activities. Some of the factors used to make this distinction are: -‐ -‐ -‐ -‐
the degree of professionalism; whether the reward is for services rather than for personal qualities; whether the reward is paid before or after service; and whether the reward is related to the tax payer contract.
Non-‐cash benefits Receipts that are not convertible to cash are not ordinary income: Tennant v Smith (1892); Payne v FCT (1996). Customer loyalty programs typically accumulate points that can be redeemed as free travel, free accommodation, discounts and purchases and other similar rewards.
Two issues arise in relation to taxation from these loyalty programs: first, whether the rewards are cash or convertible to cash; and, secondly, whether the benefit is connected with the personal exertion. Benefits that are not cash or cash convertible cannot be ordinary income and are not assessable under s 6-‐5 of ITAA 1997 but they may be assessable under s 15-‐2 or subject to FBT. However, if the benefit is convertible to money through sale or via some other means, then the question of the benefits assessable as ordinary income will rest with whether the benefit shows a nexus with personal exertion. Capital receipts or personal exertion The distinction between a receipt that is a reward for services is therefore ordinary income, and the receipt that is capital in nature is primarily concerned with whether the tax payer has given up a valuable right. It follows that where the payment is for giving up a capital right, then the payment is most likely capital in nature and not ordinary income. Conversely, if nothing substantial of a capital nature is given up then it, is necessary to consider whether the payment shows a nexus with any service, in which case it will be ordinary income: Brent v FCT (1971). Changes to entitlements Payments for changes to entitlements under employment and service contracts may give rise to capital receipts for the giving up of valuable capital right and therefore not fall into the category of ordinary income: Bennett v FCT (1947). This follows the principle that compensation takes the form of what it replaces in that compensation for the loss of capital rights will be a capital receipt. If no capital right is given up, as in FCT v Brent 1971, then the receipt is more likely to be ordinary income unless it is a personal gift. Receipts for entering a restrictive covenant A restrictive covenant or restraint of trade may be formed at the time of entering a contract, during the contract’s operation or after the completion of the service. Characterizing receipts from entering a restrictive covenant is capital or ordinary income will depend on whether the payment is connected with the current employment agreement or whether it is a separate agreement to give up valuable rights. However, where the restrictive covenant is commonly used as a part of normal employment contracts it will be ordinary income as it is generally viewed as a payment for future services: Higgs v Olivier (1952) Payments made at the termination of the service agreements that restrict the activities of the taxpayer are seen as capital as they do not arise out of the employment or service contract and do not show a nexus with the earning activity: Higgs v Olivier [1952], Hepples v FCT (1991) Capital receipts may also arise out of restrictive covenants agreed to at the time of entering a contract, an the characterisation of these receipts again be based on
whether the payment is for giving up a valuable right or services provided: FCT v Woite (1982), Reuter v FCT (1993). Sign-‐on fees The view expressed by Commissioner in Ruling TR 1999/17 is that where a sign-‐on fee is a normal part of the practices of attracting sports people and employees into a new contract, the payment is less likely to be a capital and more likely to be an ordinary income as a one off payment for the future services: Pickford v FCT (1998). STATUTORY INCOME FROM SERVICES AND EMPLOYMENT S 15-‐2 of ITTAA 1997 deems certain gains arising from employment and services to be assessable as statutory income. The current s15-‐2 does have a contrary intention in s 15-‐2, which means that if a gain is ordinary income, it will not be covered by s 15-‐2. Specifically, s 15-‐2 covers gains from employment and services if they are not ordinary income or a fringe benefit and if they fulfill all three of the requirements. First requirement The first requirement for a gain to be assessable under s15-‐2 is that there is an allowance, gratuity, compensation, benefit, bonus or premium. This includes receipts that are cash, cash convertible or non-‐cash convertibles. Some examples, of receipts that meet the first requirement are: -‐ -‐
a cash payment for services, which is a ‘benefit’ and so would fulfill this requirement an employer giving an employee a free television or giving the employee use of a car for personal purposes.
Note also that this first requirement: -‐ -‐
is not confined to receipts that the tax payer is entitled to receive, but can also include (gratuities) that have been received by the tax payer; and will also be satisfied when the tax payer receives something from an entity to which he or she has not directly provided a service. For instance, free hotel accommodation received by an employee of an accounting firm from one of the firms client’s that would satisfy this first requirement.
An example of an item that satisfies the first requirement is an “allowance”. An allowance is a predetermined amount given to a taxpayer for a specific purpose where the taxpayer does not have to return any of the unspent amount. Reimbursement, are also not usually ordinary income but they may be subject to FBT. Although allowances will generally fulfill the three requirements of s 15-‐2, they also will usually constitute ordinary income in which case they will be assessable as
ordinary income under s6-‐5 rather s 15-‐2. This is because of the contra intention contained in s 15-‐2 which removes the application of s 15-‐2 if the amount is also ordinary income. Second requirement This second requirement for a gain to be assessable under s15-‐2 is that the allowance, benefit, etc. is “provided to you” (i.e. the taxpayer). Third requirement The third requirement for a gain to be assessable under s 15-‐2 is that what has been received by the taxpayer is in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by the taxpayer. This requirement will be satisfied when there is a sufficient nexus between the receipt and services provided. Can compensation receipts be assessable under s 15-‐2? Compensation paid to an employee takes on the form of what the employee is being compensated for. This means that compensation for loss of salary is ordinary income and compensation paid for the loss of the actual job or some of the rights related to that job is generally capital. FRINGE BENEFITS TAX Chapter 7 FBT is imposed on the employer, not the employee s 66 (1) FBTAA. As such tax is imposed on the provision of fringe benefits, not on the receipt of them. Definition of fringe benefits The term fringe benefits is defined in s 136 (1) FBTAA. A fringe benefit exists: -‐ -‐ -‐ -‐ -‐
a benefit provided during the year of tax by an employer, associate or third party arranger to an employee or an associate in respect of the employment of the employee
Benefit The benefit is defined s 136 (1) and includes and right, privilege, service or facility provided under an arrangement in relation to the performance of work. Provided during the year of tax The term provided is defined in s136 (1). In relation to benefits it includes allow, confer, give, grant or perform and, in relation to property the disposal of a beneficial interest in or illegal ownership of the property. A benefit may also be deemed to be provided where the benefit it prohibited but the prohibition is not consistently enforced: s148 (3). S 148 (4) further specifies that a benefit that is received or obtained by an employee of respect of employment is deemed to be provided. This ensures that fringe benefits that are supplied to an employee by a party other than the employer are nonetheless provided by the employer. Employee, associate or third party arranger S137 ensures that the FBT legislation applies in situations where there is a clear employment relationship but the employee is remunerated with non cash benefits instead of salary or wages. Fringe benefits can also be provided by an employer to an employee indirectly through third party arrangements. Although the benefit is provided to the employee by a third party, it qualifies as a fringe benefit form the employer to the employee where the third party does so under an arrangement with the employer. Note that the employer must participate in or facilitate the provision or receipt of the benefit for the benefit to qualify as a fringe benefit. Employee or associate A fringe benefit can also arise where the benefit is not provided to an employee directly, but to an associate of an employee. Note that in order to constitute a fringe benefit, the benefit provided must relate to a particular employee: Essenboourne Pty Ltd v FCT (2002); FCT v Indooroopily Children’s Services (2007). In respect of the employment of the employee Their Honours proceeded to suggest that, for the benefit to constitute a fringe benefit, there must be a sufficient and material relationship between the employment and the provision of the benefit. The scope of the requirement that the benefit be provided in respect of the employment of the employee is potentially widened by s148 (1) FBTAA which states that a benefit is provided in respect of the employment of the employee regardless or whether the benefit; -‐ -‐
is also provided in respect of another matter or thing relates to past, current or future employment
-‐ -‐ -‐ -‐ -‐ -‐
is surplus to the needs or wants of the recipient is also provided to another person is offset by any inconvenience or disadvantage is provided or used in connection with the employment is in the nature of income; and is a reward for services rendered or to be rendered by the employee
Exclusions The definition of fringe benefits in s136 (1) of FBTAA specifically excludes certain items from being a fringe benefit, including: -‐ -‐ -‐ -‐ -‐
salary or wages superannuation contributions payments from superannuation funds benefits under an employee share scheme; and payments on termination of employment
Allowances are classified as salary and wages and are excluded from the definition of fringe benefits. Reimbursements are not excluded from the definition of fringe benefit.
