• FBT exemption for hospital employees

    Issue

    Can the FBT exempt cap for a hospital employee apply twice when the employee moves from one hospital network to another hospital network in the same jurisdiction in the same FBT year?

    Background

    A number of hospital networks have been created under the new national health initiative.

    Each hospital network is registered separately for an ABN, but is currently consolidated with the Department of Health for FBT purposes. However, it is intended that each network will be disaggregated for FBT purposes from 1 April 2013. As a result of this nomination, each of the hospital networks will be a separate employer.

    It is envisaged that employees of one hospital network may transfer to another hospital network during the FBT year.

    Industries view/suggested treatment

    Under the disaggregation rules a nominated State or Territory body will be treated as a separate employer for FBT purposes.

    It has previously been established at STIP meetings that a hospital worker moving from one jurisdiction to another jurisdiction in the same FBT year will be entitled to an exempt cap of $17,000 grossed-up taxable value at each jurisdiction.

    The same principle should apply when a hospital employee moves from one hospital network to another hospital network in the same jurisdiction where the hospital networks are treated as separate employers for FBT purposes.

    Technical references

    Fringe Benefits Tax Assessment Act 1986

    • Section 5B
    • Section 57A
    • Part XIC

    ATO Response

    In general terms, a benefit provided to an employee will be an exempt benefit under subsection 57A(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) if the employer is a public hospital.

    Alternatively, if the employer is a government body that is not a public hospital, the benefit will be an exempt benefit under subsection 57A (2) of the FBTAA if the duties of employment of the employee are exclusively performed in, or in connection with a public hospital.

    The exemptions provided by subsections 57A (2) and (3) are limited to a grossed up value of $17,000 for each employee by sections 5B (1D) to 5B(1L). If the grossed-up value of the benefits provided to the employee is more than $17,000, the excess amount forms part of the employer's aggregate non-exempt amount and is included in the calculation of the employer's fringe benefits taxable amount.

    In calculating the non-exempt amount, (the amount over $17,000), an employer is required to calculate:

    • the amount that would be the employee's individual fringe benefits amount (the employee's share of the taxable value of the fringe benefits relating to the employer) if the exemptions in 57A(2) or 57A(3) did not apply; and
    • the employee's share of all but three types of the excluded fringe benefits (the fringe benefits that are excluded from the calculation of the employee's individual fringe benefits amount) that relate to the employer.

    These two amounts are grossed-up and added together to calculate the employee's individual grossed-up non-exempt amount.

    Where an employee is employed by two separate employers, each employer will separately calculate their fringe benefits taxable amount. In calculating this amount, both employers (if either 57A (2) or 57A (3) apply) will be able to apply the $17,000 concession.

    The fact that the two employers are associates will not affect the application of the concession by both employers.

    However, for both employers to apply the $17,000 concession, it is necessary for both to be an employer of the employee and for both to satisfy the requirements of either subsection 57A (2) and 57A (3). In this regard, the ATO noted the agenda item is based on a presumption that each hospital network will be a 'public hospital'. In view of the Taxation Determination that is being drafted in relation to Local Hospital Networks (discussed at agenda item 3.2.2), the ATO advised it was unable to comment on this presumption and that it is possible (depending upon the facts of the employee's situation and the conclusion reached in the Taxation Determination) that the benefits provided to an employee of a hospital network may not come within either subsection 57A(2) or 57A(3).

      Last modified: 20 May 2013QC 34349