Employer social club contributions

A recently released interpretive decision by the ATO deals with an organisation’s social club funded by an annual payment from the employer, as well as by contributions from employees, that is, members of the club. The social club is run by employees through a committee managing the funds of the social club on behalf of members. The issue was whether the employer’s contribution constituted a property fringe benefit thereby being subject to FBT.

To constitute a “fringe benefit”, it is necessary to specifically identify the employees who will benefit from the payment. The critical moment for determining whether a fringe benefit arises is when the benefit is provided by the employer to the social club committee, as an associate of the employee. It should not matter if the social club committee later provides benefits to the employees because, at that point in time, the employer or their associate is no longer providing a benefit to an employee or their associate.

It is irrelevant that the social club is solely for the benefit of employees, because those benefits cannot be sufficiently connected with any particular employee. Consequently, the employer contributions to an employee social club are not considered property fringe benefits.

This has important consequences for employers contributing to employee social clubs or in other situations where a group of employees can collectively share in the benefits of an employer contribution.

Published : 22 February 2008