The Tax Office has provided clarity on benefits paid to employees through the company social club however it only goes part of the way to providing guidance on how fringe benefits tax should be treated.

According to Frank Klasic, a Tax Partner in Deloitte’s Global Employer Services Group, this addresses only part of the issue relating to social clubs and FBT.

“We still don’t know if FBT is triggered once it is known which employees have actually received a benefit,” Mr Klasic said.

“The decision confirms that a contribution by an employer to an employee social club will not give rise to fringe benefits tax when it is paid into the social club due to the fact that at the time the employer makes a contribution it is not yet known which employees will receive a benefit.

“As such, an FBT liability does not arise.

“Employers need to be careful as there is still considerable uncertainty surrounding the correct FBT treatment of benefits provided by social clubs to employee members.

“No guidance has been issued by the ATO relating to an FBT liability when the money is spent by the social club for the benefit of employees.

“Most organisations have social clubs set up for the benefit of employees and will receive contributions from the employer which may, for example, go towards the end of year Christmas celebrations,” Mr Klasic said.

“It is common for employee social clubs to provide considerable benefits to their members.

“These benefits include things such as gifts and prizes, end of month drinks and Christmas parties.

“Funding for such benefits is generally received from a combination of employee contributions, employer contributions and/or fundraising activities.”

The ATO has based this Interpretive Decision on a 2007 Full Federal Court case (Indooroopilly) in which it was held that unless a particular employee can be identified at the time a benefit is provided, no FBT applies.