Minor benefits are exempt benefits. A minor benefit is a benefit which is both:
- less than $300 in value (before 1 April 2007 the amount was less than $100), and
- unreasonable to treat as a fringe benefit.
Less than $300 in value
A minor benefit is a benefit which has a ‘notional taxable value’ of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit.
Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night’s accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.
When determining if the notional taxable value of the benefit is less than $300, benefits provided to associates are not included.
If the notional taxable value of a benefit is less than $300, you then need to determine if it would be unreasonable to treat the benefit as a fringe benefit.
Special rules that apply to car benefits
There are different rules for car benefits. The notional taxable value of a car benefit is determined by applying the residual fringe benefit rules – that is, to determine whether a car benefit is less than $300, you may either:
- apportion the operating costs of the vehicle, or
- apply the cents per kilometre method.
Criteria for determining whether it would be unreasonable to treat the minor benefit as a fringe benefit
The following five criteria need to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit:
| 1 | The infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit and benefits given in connection with the minor benefit, are provided. The more frequently and regularly associated benefits are provided, the less likely that the minor benefit will qualify as an exempt benefit. |
| 2 | The total of the notional taxable values of the minor benefit and identical or similar benefits to the minor benefit. The greater the total value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit. |
| 3 | The likely total of the notional taxable values of other associated benefits – that is, those provided in connection with the minor benefit. For example, where a meal, which is a minor benefit, is provided in connection with a night’s accommodation and taxi travel, which themselves may or may not be a minor benefit, the total of their taxable values must be considered. The greater the total value of other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit will qualify as an exempt benefit. |
| 4 | The practical difficulty in determining what would be the notional taxable value of the minor benefit and any associated benefits. This would include consideration of the difficulty for you in keeping the necessary records in relation to the benefits. |
| 5 | The circumstances in which the minor benefit and any associated benefits were provided. This would include consideration as to whether the benefit was provided as a result of an unexpected event, and whether or not it could be considered principally as being in the nature of remuneration. |
If, after considering the five criteria, you conclude that it would be unreasonable to treat the benefit as a fringe benefit, the benefit will be an exempt benefit.
In determining if the minor benefit exemption applies, you need to examine the nature of the benefit provided and consider each of the various criteria – value, frequency and regularity of provision, and recording and valuation difficulties – before concluding whether the exemption should apply to a minor benefit.
