House of Representatives

Taxation Laws Amendment Bill (No. 5) 2003

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 2 Fringe benefits tax - certain exemptions for public hospitals

Outline of chapter

2.1 Schedule 5 to this bill amends subsection 5B(1E) and section 57A of the FBTAA 1986 to ensure that fringe benefits provided to employees whose duties are performed in, or in connection with, a public hospital will continue to be subject to the $17,000 capped FBT exemption, whether or not the hospital is a PBI.

2.2 This Schedule also amends section 140 of the FBTAA 1986 so that for the purposes of the remote area housing FBT exemption, a remote area for a public hospital will be one that is at least 100 kilometres from a population centre of 130,000 or more, whether or not the hospital is a PBI.

Context of amendments

2.3 Certain public hospitals are currently provided with an FBT exemption of up to $17,000 of grossed-up taxable value per employee. As part of the Government's response to the Report of the Inquiry into the Definition of Charities and Related Organisations, the FBTAA 1986 will be amended so that fringe benefits provided to employees whose duties are performed in, or in connection with, a public hospital will continue to be subject to the $17,000 capped FBT exemption, whether or not the hospital is a PBI.

2.4 Currently, public hospitals of the Commonwealth, a State or a Territory must be a PBI in order for the exemption to apply. This amendment will ensure that a change in the structure of these hospitals that results in their no longer meeting the PBI requirements does not cause them to lose access to the $17,000 capped FBT exemption.

2.5 Housing fringe benefits are FBT exempt where they are provided in a remote area. For public hospitals, a remote area is one that is at least 100 kilometres from a population centre of 130,000 or more. However, public hospitals of the Commonwealth, a State or a Territory must be a PBI for this treatment to be available to them.

2.6 The proposed amendment will ensure that for public hospitals, a remote area will continue to be one that is at least 100 kilometres from a population centre of 130,000 or more, whether or not the hospital is a PBI.

2.7 As these amendments are designed to ensure that public hospitals continue to be entitled to these concessions, they will not alter the current taxation treatment of public hospitals.

2.8 This measure will not affect the entitlement to these concessions of any other taxpayers.

Summary of new law

2.9 The amendments in this Schedule ensure that, whether or not a public hospital is a PBI:

·
public hospitals of the Commonwealth, a State or Territory will continue to have access to the $17,000 capped FBT exemption; and
·
for the purposes of the remote area housing FBT exemption, a remote area for a public hospital will be one that is at least 100 kilometres from a population centre of 130,000 or more.

2.10 As these amendments will allow all public hospitals to access these concessions, the provisions that specifically allow public hospitals that are not hospitals of the Commonwealth, a State or a Territory to receive these concessions are no longer required.

Comparison of key features of new law and current law

New law Current law

From 1 April 2003, fringe benefits provided to an employee are FBT exempt (subject to the $17,000 cap) where the employee works in a public hospital, and is employed by:

·
the public hospital; or
·
a government body.

Fringe benefits provided to an employee are FBT exempt (subject to the $17,000 cap) where the employee works in a public hospital that:

·
is a PBI; or
·
is not a hospital of the Commonwealth, a State or a Territory; and

is employed by:

·
the public hospital; or
·
a government body.

From 1 April 2003, a remote area (in relation to public hospitals for the purposes of the remote area housing FBT exemption) will be one that is at least 100 kilometres from a population centre of 130,000 or more, where the employee works in a public hospital, and is employed by:

·
the public hospital; or
·
a government body.

A remote area (in relation to public hospitals for the purposes of the remote area housing FBT exemption) is one that is at least 100 kilometres from a population centre of 130,000 or more, where the employee works in a public hospital that:

·
is a PBI; or
·
is not a hospital of the Commonwealth, a State or a Territory; and

is employed by:

·
the public hospital; or
·
a government body.

Detailed explanation of new law

$17,000 capped FBT exemption

2.11 Currently, public hospitals that are PBIs and public hospitals that are not a hospital of the Commonwealth, a State or a Territory receive an FBT exemption of up to $17,000 of grossed-up taxable value per employee. This means that public hospitals of the Commonwealth, a State or a Territory must qualify as a PBI in order for the capped FBT exemption to apply.

2.12 The amendments will provide an FBT exemption of up to $17,000 of grossed-up taxable value per employee where the employee works in a public hospital, and is employed by:

·
the public hospital; or
·
a government body.

[Schedule 5, items 1, 2, 4 and 5]

2.13 The amendments remove the requirement that public hospitals of the Commonwealth, a State or a Territory must also be a PBI in order to qualify for the exemption. [Schedule 5, items 1, 2, 4 and 5]

2.14 As this measure will allow all public hospitals to access this concession, the provision that specifically allows public hospitals that are not hospitals of the Commonwealth, a State or a Territory to receive this concession is no longer required. [Schedule 5, items 2, 4 and 5]

Exemption for remote area housing fringe benefits

2.15 Housing fringe benefits are FBT exempt where provided in a remote area. In relation to public hospitals, a remote area is one that is at least 100 kilometres from a population centre of 130,000 or more. However, public hospitals of the Commonwealth, a State or a Territory must be a PBI for this treatment to apply. Other employers receive an exemption where the fringe benefit is provided at least 40 kilometres from a population centre of 14,000 or more and at least 100 kilometres from a centre of 130,000 or more.

2.16 The amendments provide that in relation to public hospitals, a remote area will be one that is at least 100 kilometres from a population centre of 130,000 or more, where the employee works in a public hospital, and is employed by:

·
the public hospital; or
·
a government body.

[Schedule 5, items 6 and 7]

2.17 The amendments remove the requirement that public hospitals of the Commonwealth, a State or a Territory must also be a PBI in order for this treatment to be available. [Schedule 5, items 6 and 7]

2.18 As this measure will allow all public hospitals to receive this treatment, the provision that specifically allows public hospitals that are not hospitals of the Commonwealth, a State or a Territory to receive this treatment is no longer required. [Schedule 5, items 6 and 7]

Application provisions

2.19 These amendments apply in relation to benefits provided on or after 1 April 2003. [Schedule 5, item 8]

2.20 These amendments are designed to preserve the current treatment for public hospitals under these exemption provisions. As such, there will be no disadvantage to taxpayers by applying these amendments retrospectively.


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