Edited version of private ruling

Authorisation Number: 1011599714172

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Ruling

Subject: Payments subject to Fringe Benefits Tax

Question 1

Are the payments made by the Organisation subject to Fringe Benefits tax under section 57A of the Fringe Benefits Tax Assessment act 1986 (FBTAA)?

Answer

No

This ruling applies for the following period:

1 April 2010 to 31 March 2011

1 April 2011 to 31 March 2012

1 April 2012 to 31 March 2013

The scheme commenced on:

1 April 2010

Relevant facts

The organisation) is a Health Promotion Charity whose purpose is to arrange the training of medical staff. They have no offices interstate.

The aims of the Organisation

To produce well-rounded, competent independent medical practitioners and medical graduates.

To achieve its Mission, the organisation will provide education and training programs in general medical practice.

To ensure quality program provision (QA system)

Support and develop the supervisor network.

Monitor and enhance learning outcomes

Ensure adequate staffing levels, and that staff is supported.

Become a centre of excellence in general practitioner and medical student training.

The training activities of the Organisation are designed to train medical students and practitioners in how to prevent and control.

The Organisation does not undertake any commercial activities.

Situation 1

The Organisation has recently employed a new employee (employee 1)

The employee1 lives permanently in X (where they usually work), and will commute to Y several times per year,

This is a situation where the employee is commencing a new job, not being transferred from one branch to another.

The Organisation (the employer) will incur many of the costs associated with employee 1 commuting to Y and the costs of employee 1 attending a business conference.

Under contractual commitments, the Organisation is obligated to pay all of the costs listed above.

Situation 2

Employee 2 lives in Y for the past 4 years, intends to move permanently to X in the near future. They will perform the majority of their work at X.

The Organisation will pay the travel costs and accommodation in Y on the occasions when he needs to be in Y for work related purposes.

The Organisation (the employer) will incur many of the costs associated with employee 2 transferring to work in X.

Under contractual commitments, the Organisation is obligated to pay all of the costs listed above.

Reasons for decision

A health promotion charitable institution is a non-profit institution whose principal activity is promoting the prevention or control of diseases in human beings.

The relevant legislation for exemption from FBT is contained in subsection 57A(5) FBTAA which states:

A benefit provided in respect of the employment of an employee is an exempt benefit if:

the employer of the employee is a charitable institution.

the institution's principal activity is to promote the prevention or the control of diseases in human beings.

The main requirements for exemption are, therefore, that the body is:

A charitable institution; and

Its principal activity is promoting the prevention or control of diseases in human beings.

It is the view of the Tax Office that such bodies (to the extent that they satisfy the requirements of health promotion) will be considered to be charitable.

The Rulee is regarded as an organisation whose principal activity is the promotion of the prevention or control of diseases in human beings and is endorsed as a Health Promotion Charity, a Deductible Gift Recipient and a Tax Concession Charity.

The Rulee is entitled to exemption under subsection 57A(5) of the FBTAA in respect of benefits provided to employees as it is a charitable institution whose principal activity is the promotion of the prevention or control of diseases in human beings.

Section 57A(5) of FBTAA 1986 provides:

(5) A benefit provided in respect of the employment of an employee is an exempt benefit if:

the employer of the employee is a charitable institution; and

the institutions principal activity is to promote the prevention or the control of diseases in human beings.

Disease is defined in section 136(1) of FBTAA 1986 to include

'any physical of mental ailment, disorder, defect or morbid condition whether of sudden onset or gradual development and whether of genetic or other origin'

Resolving the issue in terms of these sections therefore involves consideration of whether:

the Rulee is a charitable institution; and

the Rulee's principal activity is to promote the prevention or the control of diseases in human beings.

The explanatory memorandum to Taxation Laws Amendment Bill (No 2) 2001, which inserted section 57A(5) into FBTAA 1986, explains at paragraph 5.20 that:

'The charitable institutions to be covered by the amendment are medical or health organisations whose principal focus is preventative in nature, rather than providing direct relief of sickness or suffering. These organisations typically focus on particular types of ailments or health issues, for example, asthma, cancer, acquired immune deficiency syndrome (AIDS), arthritis, heart conditions, brain conditions, paraplegia and kidney conditions.'

As the Rulee is an endorsed charitable institution under item 1.1 of section 50-5 and an approved Research Institute under item 3.1.1 of section 30-40(1) of ITAA 1997, the Commissioner agrees that it meets the requirement to be a charitable institution set out in paragraph (a) of section 57A(5) of FBTAA 1986.

All that remains to be considered is whether the Rulee's principal activity is to promote the prevention or control of diseases in human beings for the purpose of paragraph (b) of section 57A(5) of FBTAA 1986.

Principal activity

The Rulee plays a major role in professional education, at both undergraduate and postgraduate level (provision of undergraduate and post graduate training in research science).

The Rulee is also involved in conducting workshops, conferences and seminars focusing on issues relating to various infectious diseases for health and scientific professionals and the community generally.

To promote the prevention or control of diseases in human beings

The word "promote" has been defined by French J in Brown v. Members of the Classification Review Board of the Office of Film and Literature Classification (1998) 154 ALR 67 at 81, as meaning, ' to promote is to further growth, development, progress or establishment of (anything); to further advance, encourage.' It is noted that this definition equated with that provided by the Shorter Oxford English Dictionary.

Education of postgraduate students and the community undertaken by the Centre also clearly promotes the prevention or control of human diseases.

Conclusion

It is clear that the principal activities of the Rulee are to promote, by research, education and publication, the prevention and control of infectious diseases in humans and related health issues.

Subsection 5B(1D) of the FBTAA states that if any benefits provided in respect of employment are exempt benefits under section 57A of the FBTAA, then the employer's 'fringe benefits taxable amount' is increased by the employer's 'aggregate non-exempt amount' for the year of tax concerned.

Accordingly the benefits provided by the Rulee to its employees in respect of their employment are exempt from fringe benefits tax under section 57A(5) of the FBTAA 1986. However, the operation of Subsection 5B(1E) effectively limits the exemption. This limit is currently $30,000 grossed up taxable value per employee per FBT year.

Subsection 5B(1E) of the FBTAA caps the fringe benefits tax exemption given to employers under section 57A of the FBTAA on a per employee basis. For employers that are a health promotion charity, it sets an exemption threshold of grossed-up taxable value of $30,000 per employee. Any amount in excess of the $30,000 threshold (the aggregate non-exempt amount), is not exempt and is therefore subject to FBT.

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