A conveyancing firm pays a one-year gym membership costing $480 for the director of the company and each of its employees. Paying for employees to have membership of a gym is providing recreational entertainment.

To identify whether the exempt minor benefit applies to the gym membership, you first consider whether the notional taxable value of the benefit is less than $300.

The value of each membership is above the notional taxable value of $300. Consequently, it’s not necessary to consider the 5 criteria to determine whether it would be unreasonable to treat the minor benefit as a fringe benefit.

This means the company will have to pay FBT on the gym memberships provided to the director (who is an employee of the company) and each of the employees. The exempt minor benefit does not apply in this case because the cost of the gym membership is $480 per employee – above the notional taxable value.

The employer can, however, claim an income tax deduction and GST credits for the cost of providing the gym membership to its employees and for the FBT paid.

The employer will have to report and pay FBT for this benefit.