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FBT "on premises" exemption

2010 amendment clarifies the scope of the exemption from FBT for benefits that are provided on the premises of the employer.

Section CX 23 of the Income Tax Act 2007

The amendment clarifies the scope of the exemption from fringe benefit tax (FBT) for benefits that are provided on the premises of the employer, contained in section CX 23 of the Income Tax Act 2007.


The wording used in the rewritten Income Tax Acts 2004 and 2007 for the FBT "on premises" exemption has been interpreted by some taxpayers as being broader than the wording used in the Income Tax Act 1994. There was no intention to widen the exemption beyond its original scope, as set out in the 1994 Act, which provided that benefits were exempt when they were "enjoyed" on an employer's premises.

The ambiguity arose through the use of the words "received or used" in the rewritten Acts. A 2006 amendment, unrelated to those particular words, meant that the wording of the exemption was no longer covered by the savings provision of the 2004 and 2007 Income Tax Acts (which effectively requires the rewritten Acts to be interpreted in the same way as the previous Act unless a deliberate policy shift has been indicated). Some taxpayers had used the enactment of this subsequent amendment to argue that the scope of the exemption had been deliberately widened.

The new amendment corrects any ambiguity by substituting the words "used or consumed" for "received or used" in section CX 23. It is considered that "used or consumed" more closely reflects the concept of "enjoyment" in the original exemption.

Key features

Under the new rules, fringe benefits (other than free, discounted or subsidised travel, accommodation or clothing) provided by an employer or company in the same group as the employer will not be subject to FBT if the benefit is "used or consumed" by the employee on the premises of the employer or relevant group company. This replaces the previous test which required the benefit to be "received or used" on the premises.

Application date

The change applies from 5 August 2010, being the date that the Taxation (GST and Remedial Matters) Bill was introduced to Parliament. This application date allows existing disputes with taxpayers to continue, but prevents other taxpayers taking advantage of any ambiguity for the period between the date of introduction of the bill and its enactment on 20 December 2010.