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Is the benefit provided by an employer to its employee's same sex partner a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Yes. The same sex partner is deemed to be an associate of the employee under subsection 148(2) of the FBTAA.

The employer is a company and has employees.

One of the employees of the company has a partner who is of the same sex as the employee. They live together. The employee's partner (the partner) is not an employee of the company.

The company provides the partner with the use of a car. The car is owned and maintained by the company.

By reason of the employment relationship between the company and the employee, the partner has the use of the company car.

The employee and the company have an agreement which recognises that the partner has the use of the company car.

A 'fringe benefit' is defined in subsection 136(1) of the FBTAA. A 'fringe benefit' is a benefit that is provided by an employer or associate of the employer, to an employee or an associate of the employee, in respect of the employment of the employee.

The benefit is the use of the car by the partner. The partner is not an employee of the employer. The provider of the benefit is the employer. The benefit is provided in respect of the employment of the employee.

Because the other requirements of the definition of 'fringe benefit' are satisfied, provided that the partner is an associate of the employee, the car benefit will be a 'fringe benefit'.

Subsection 136(1) of the FBTAA provides a definition of 'associate'. 'Associate' has the same meaning in relation to a person as that expression has in relation to a person in section 26AAB of the Income Tax Assessment Act 1936 (ITAA 1936).

Section 26AAB of the ITAA 1936 provides that a 'relative' of a person will be an 'associate' of that person.

'Relative', in relation to a person, is defined in subsection 6(1) of the ITAA 1936 and includes the spouse of that person.

'Spouse', in relation to a person, is defined in subsection 6(1) of the ITAA 1936. 'Spouse', in relation to a person, would not include his or her same sex partner (Refer also to ATO Interpretative Decision 2002/649 which contains further analysis of why in relation to a person, a same sex partner could not be that person's spouse).

The partner is not an 'associate' of the employee because he or she is not the 'spouse' of the employee. As the partner does not fall within any other class of 'associate' contained within section 26AAB of the ITAA (for example by certain business relationships), then the partner is not an 'associate' of the employee as defined in subsection 136(1) of the FBTAA.

Subsection 148(2) of the FBTAA provides an additional class or category of 'associate' for the purposes of the FBTAA. Subsection 148(2) of the FBTAA contains a deeming provision which would need to be considered if a benefit was not provided to an employee or 'associate' of the employee. That is 'associate' as defined in subsection 136(1) of the FBTAA. In the present case, subsection 148(2) of the FBTAA would need to be considered.

Subsection 148(2) of the FBTAA deems a third party to be an 'associate' of an employee where the third party receives a benefit provided under an 'arrangement' between the employer and the employee.

An 'arrangement' is defined in subsection 136(1) of the FBTAA and includes agreements, arrangements and promises. An 'arrangement' is discussed at paragraphs 24 to 26 of Taxation Ruling TR 1999/5.

As the employee and the company have an agreement which recognises that the partner has the use of the company car there is an 'arrangement' in place between the employer and the employee to provide the benefit to the partner.

As a consequence, the partner is deemed to be an 'associate' of the employee under subsection 148(2) of the FBTAA. The car benefit provided by the employer to the partner is therefore a benefit provided to an 'associate' of the employee.

Accordingly, the car benefit is a 'fringe benefit' in accordance with subsection 136(1) of the FBTAA.