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Tax Law – Residual fringe benefits

Residual fringe benefits were designed to catch all forms of fringe benefit that do not fall under a specific category, not even property benefits or expense payment benefits. Over the years residual fringe benefits have been subject to a process of accretion, so that many, otherwise unrelated, forms of benefit can fall under the definition.

Examples of residual benefit

A residual fringe benefit is any fringe benefit provided in respect of employment that is not covered by any other category of fringe benefit. This catch­-all category has been used to consider varied forms of benefit, including:

  • cabcharges for transporting employees between work and home;
  • fitness related counselling;
  • free investment related services
  • provision of a cheap hired bus to employees to transport them between work and home and;
  • provison of discounted education

Naturally this category could theoretically extend to an infinite variety of benefits. We will look at the ones listed above.


This incident involved a court decision. A certain bank had employees who worked in shifts. Some of these shifts were at highly inconvenient hours for employees.

The bank provided cabcharges to employees working these shifts, specifically to transport them between work and home. The bank paid the cab fares and a 10% service fee.

The bank argued that the employee could not use the cabcharges for private travel at all, and that the only purpose of the cabcharges was to reduce the inconvenience and possible danger to its employees of travelling at odd hours.

The Court found that the cabcharges were a residual fringe benefit. Taxi transportation was not caught by any other category of fringe benefit, and therefore had to be classified as a residual benefit.

Fitness related counselling

This was the subject of an ATO Class Ruling. A certain company specialised in providing weight loss counselling to clients. They commenced providing their services to employers, instructing the relevant employees in how to stay healthy.

In this case, the ATO ruled that the fitness counselling was not a fringe benefit. It it were, it would be a residual benefit. However, the counselling fell within the FBT exemption for “work related counselling” since fitness counselling qualified as being work related.

Free investment related services

This example comes from an ATO decision. A certain company was in the business of providing investment related services to its customers. It provided some of these services to its own employees, at a discount.

Since this benefit did not fall within any of the specific categories of fringe benefits, the ATO classified it as an in-house residual benefit. Even though the benefit of a type that the employer usually provided as part of its business, the provision to its employees was not under a normal contract of investment insurance.

Hired bus

This example also comes from an ATO decision. A certain mining company had difficulty getting employees from a specific town to find transportation to work. It therefore hired an entire bus, to transport employees from this town to its mine site, and back again.

The employees paid a small amount to the bus driver; the bulk of the cost was paid to the bus company by the employer.

The ATO found that this was a residual benefit, as it did not fall within a specific category. However, the ATO also held that the benefit was FBT exempt (similarly to the fitness counselling) since this was the usage of a commercial motor vehicle for travel to and from work (see our companion article on Commercial motor vehicle exemptions).

Discounted education

Again, this example is from an ATO decision.

A certain school charges a large annual tuition fee for educating its school students. However, it also educates the child of one its employees, for a considerable discount.

The school wished to know if it could calculate the value of this benefit by using the fees payable by a student with a scholarship (ie a much lower fee). In this case the employee’s child had no scholarship.

The ATO classified the benefit as a residual benefit. It decided, however, that the taxable value of the benefit could not be based on the fees payable by a scholarship student, since these would be considerably lower than those of a normal student, and this employee’s child was a normal student.


If you have concerns about residual fringe benefits, call LAC Lawyers and we can provide advice and assistance.