House of Representatives

Tax Laws Amendment (2004 Measures No. 2) Bill 2004

Explanatory Memorandum

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

Chapter 8 - Public ambulance services

Outline of chapter

8.1 Schedule 8 to this bill amends the Fringe Benefits Tax Assessment Act 1986 to provide public ambulance services with the same fringe benefits tax (FBT) treatment as is provided to public hospitals. Public ambulance services will be able to access an FBT exemption of up to $17,000 of grossed-up taxable value per employee, and will also be able to access the remote area housing FBT exemption under the same criteria as applies to public hospitals. In addition, the Income Tax Assessment Act 1997 (ITAA 1997) will be amended to allow public ambulance services to be endorsed to receive tax deductible gifts.

Context of amendments

8.2 In the past, some public ambulance services had been accessing an FBT exemption for public benevolent institutions. Fringe benefits provided to an employee of a public benevolent institution are exempt from FBT, subject to a $30,000 cap. Public benevolent institutions can also be endorsed to receive tax deductible gifts.

8.3 The Full Federal Court decision of Ambulance Services of New South Wales v Deputy Commissioner of Taxation for the Commonwealth of Australia [2003] FCAFC 161 indicates that public ambulance services controlled by State or Territory governments are not public benevolent institutions. As such, these bodies cannot access the FBT exemption available to public benevolent institutions or be endorsed to receive tax deductible gifts as a public benevolent institution.

8.4 The amendments will allow fringe benefits provided to an employee of a public ambulance service to be exempt from FBT, subject to a $17,000 cap. This is consistent with the FBT treatment of employees of public hospitals. Public ambulance services will also be able to access the remote area housing FBT exemption under the same criteria as currently applies to public hospitals.

8.5 The amendments will also allow public ambulance services to be endorsed to receive tax deductible gifts.

Summary of new law

8.6 From 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,

fringe benefits provided to an employee are exempt from FBT, subject to a cap of $17,000 grossed-up taxable value per employee.

8.7 From 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,

a remote area (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.

8.8 From 1 April 2004, certain gifts made to an endorsed:

·
public ambulance service; or
·
public fund established and maintained for the purpose of providing money for the provision of public ambulance services,

will be tax deductible.

8.9 These amendments will provide employees of public ambulance services with the same FBT treatment as is provided to employees of public hospitals. They will also allow public ambulance services to receive tax deductible gifts.

Comparison of key features of new law and current law

New law Current law
From 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,


fringe benefits provided to an employee are exempt from FBT, subject to a $17,000 cap.
Fringe benefits provided by an employer who provides public ambulance services or services that support those services do not receive any concessional FBT treatment.
However, where the employer is also a public benevolent institution then fringe benefits provided to an employee are exempt from FBT, subject to a $30,000 cap.
From 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,


a remote area (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.
Fringe benefits provided by an employer who provides public ambulance services or services that support those services have to satisfy the same definition of remote area as most other types of organisations, that is, a remote area is one that is:

·
at least 100 kilometres from a population centre of 130,000 or more; and
·
at least 40 kilometres from a population centre of 14,000 or more.


However, if the employer is a charity then a remote area is one that is at least 100 kilometres from a population centre of 130,000 or more.
From 1 April 2004, certain gifts made to an endorsed:

·
public ambulance service; or
·
public fund established and maintained for the purpose of providing money for the provision of public ambulance services,


will be tax deductible.
Gifts made to a public ambulance service, or a public fund established and maintained for the purpose of providing money for the provision of public ambulance services, are not tax deductible.
However, if the public ambulance service is a public benevolent institution then gifts to the service can be tax deductible.

Detailed explanation of new law

$17,000 capped fringe benefits tax exemption

8.10 Section 57A of the Fringe Benefits Tax Assessment Act 1986 allows certain types of employers to access an FBT exemption. Section 5B sets out the method for calculating the fringe benefits taxable amount, including the exempt amount which is capped at $17,000 grossed-up taxable value per employee for public hospitals and $30,000 grossed-up taxable value per employee for public benevolent institutions (that are not public hospitals).

8.11 From 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,

fringe benefits provided to an employee are FBT exempt, subject to a cap of $17,000 grossed-up taxable value per employee. [Schedule 8, items 1 to 5]

8.12 An employer would provide 'services that support those services' in circumstances such as where the employer operates a call centre which answers emergency telephone calls made to public ambulance services. This would be the case even in circumstances where the call centre operated calls for other emergency services.

8.13 An employer would not be providing 'services that support those services' in circumstances where the service being provided has only an indirect connection with the provision of public ambulance services, or is merely similar to the provision of public ambulance services. For example, a commercial provider of transportation to hospitals would not be providing services that support public ambulance services.

8.14 An employee would be 'predominantly' involved if for at least half of their employment with the employer over the course of the relevant FBT year, they were involved in connection with the provision of those services. An employee would be 'involved in connection with the provision of those services' if they were working as a public ambulance officer. An employee would also be 'involved in connection with the provision of those services' if they were providing secretarial services for an employer who provides public ambulance services or services that support those services.

Exemption for remote area housing fringe benefits

8.15 Housing fringe benefits are FBT exempt where provided in a remote area. A remote area (for the purposes of the remote area housing FBT exemption) is generally defined as one that is at least 100 kilometres from a population centre of 130,000 or more and at least 40 kilometres from a population centre of 14,000 or more.

8.16 However, in relation to public hospitals a remote area is defined as one that is at least 100 kilometres from a population centre of 130,000 or more. This definition also applies in certain other circumstances, such as where the employer is a charitable institution.

8.17 The amendments provide that, from 1 April 2004, where:

·
the employer provides public ambulance services or services that support those services; and
·
the employee is predominantly involved in connection with the provision of those services,

a remote area will be one that is at least 100 kilometres from a population centre of 130,000. [Schedule 8, items 6 and 7]

Deductible gift recipient status

8.18 The income tax law allows taxpayers to claim income tax deductions for certain gifts to deductible gift recipients (DGR). To be a DGR, a fund, authority or institution must fall within a category of organisations set out in Division 30 of the ITAA 1997 (or be mentioned by name under that Division). Section 30-17 includes a requirement for a fund, authority or institution to be endorsed by the Commissioner of Taxation in order to obtain DGR status.

8.19 The amendment establishes a new category of fund, authority or institution in Division 30. From 1 April 2004, taxpayers will be able to claim income tax deductions for certain gifts where they are made to an endorsed:

·
public ambulance service; or
·
public fund established and maintained for the purpose of providing money for the provision of public ambulance services.

[Schedule 8, items 9 and 10]

Application provisions

8.20 The amendments to the Fringe Benefits Tax Assessment Act 1986 apply in respect of the FBT year beginning on 1 April 2004 and in respect of all later FBT years. [Schedule 8, item 8]

8.21 The amendments to the ITAA 1997 apply to gifts made on or after 1 April 2004. [Schedule 8, item 11]


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