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Ruling

Subject: FBT - exempt benefits: in-house remedial massage, nutritionist consultations, or stretching and yoga classes.

Issue 1

Question 1

Is the cost of in-house therapeutic massage provided by an employer for all of its employees an exempt fringe benefit pursuant to subparagraph 58M(1)(b)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer: No.

Question 2

Is the cost of in-house nutritionist consultation provided by an employer for all of its employees an exempt fringe benefit pursuant to subparagraph 58M(1)(b)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer: No.

Question 3

Is the cost of in-house stretching and yoga classes provided by an employer for all of its employees an exempt fringe benefit pursuant to subparagraph 58M(1)(b)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer: No.

Issue 2

Question 1

Are the costs incurred by the employer for therapeutic massage tax deductible under subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer: Yes - under section 8-1 of Income Tax assessment Act 1997 (ITAA 1997).

The ruling applies for the following period:

April 1 2011 to 31 March 2012

The scheme commenced on:

Under serious contemplation for 2011

Relevant facts and circumstances:

The applicant is currently planning to launch a business offering workplace health and wellbeing programs to businesses. The programs will be paid for by employers on behalf of their employees.

You will be offering businesses within a particular state, health and wellbeing programs to address some current health issues and potential health hazards for employees in the workplace. You will be the third party service provider and not a part of the purchasers business and not an employee of that business.

The three services that you will be offering within programs include:

· in-house remedial massage

· in-house nutritionist consultations

· in-house stretching and yoga classes

These programs will be conducted on-site at the businesses premises and during normal operating hours. The programs will be paid for in full by the employers on behalf of the employees.

The services may not necessarily be always provided in a clinic setting or at a first-aid post (due to an unavailability of room), but in any available space set aside for employee activities.

All the services will be provided with the aim of primarily improving the health and well-being of the employee at work and addressing current health problems related to work. Secondary benefits will include an improvement in staff productivity, a reduction in the incidence of chronic illness and injury and a reduction in time away from work.

Programs will be conducted one-on-one or in a group setting with employees, conducted by fully trained and accredited health professionals.

The health professionals will include nutritionists, remedial massage therapists and yoga teachers.

The programs will provide both preventative health treatments and also address existing health problems in individuals.

The Preventative Health Component:

· nutritional advice for individuals to reduce the incidence of developing a chronic disease such as diabetes or obesity;

· massage to reduce tightness in muscles and an incidence of sprain or strain and to educate individuals on how to avoid problems with these in the future;

· massage to minimise stress or the development of any stress related disorders, such as anxiety or depression;

· yoga and stretching classes to prevent muscular sprain or strain, and reduce incidence of postural related disorders.

The Treatment of Existing Disorders Component:

· treatment of existing muscular strains and sprains and stress reduction with remedial massage;

· treatment of poor nutritional health and education of good dietary practices with nutrition consultations;

· treatment of existing muscular strains and sprains and stress reduction with yoga and stretching classes;

All services will be conducted directly with the employees.

On the definition of exempt benefits (in-house health care facilities), section 58K states that:

The exemption applies to any form of care or test relating to a person's health… (including) health counselling,…in a clinic or other medical facility operated wholly or principally to provide health care relating to work-related injuries of employees…such a clinic must be on your premises

You have interpreted this as stating that allied health modalities such as remedial massage, nutritional consultations and yoga classes would be covered under this section, so long as they are provided primarily for the benefit of the employee's health and at their place of work.

"While the clinic or facility must be operated principally for treating employees' work-related injuries, incidental treatment provided in the clinic for illness or injuries not related to work…also qualifies for exemption"

As remedial massage, nutrition therapy and yoga address work related issues, they also address non-work related health problems with individuals. This strengthens your belief that this section covers workplace health and wellbeing programs as qualifying as exempt from FBT.

On exempt benefits (Occupational health and migrant language training: work related counselling), section 58K states that:

This is individual or group counselling (for example, a seminar) related to matters such as safe work practices, health, fitness, stress management, drug or alcohol abuse, rehabilitation or retirement problem. You must provide the benefit in order to improve or maintain the efficiency of employees.

You interpret 'work related counselling' to be the provision of allied health services and health education. Nutritional therapy and yoga therapy as most certainly a form of health counselling and remedial massage would qualify for a stress management program and health counselling as it includes education about how to prevent muscular strains and sprains.

Other supporting evidence why you believe the above mentioned type of workplace health and wellbeing programs should be exempt from FBT are:

· workplace health and wellbeing is currently a major issue for many Victorian State businesses, many are suffering from a loss of revenue resulting from costs associated with poor employee health. Some recent facts reveal a strong correlation between poor employee health and the cost to the economy.

· The health of employees has a direct relationship with productivity. Each year absenteeism due to Illness and injury costs Victoria more than $440 million. (Work Health Victoria 2010).

· Physical inactivity can lead to a higher risk of musculoskeletal disorders and slowed injury recovery. This translates to a higher incidence of workplace injury and time away from work.

· Nutritional inadequacies and a poor diet can lead to an array of health problems including Diabetes, Obesity and Cardiovascular (heart) disease. Cardiovascular disease and diabetes cost the Victorian health system $600 million per year, and Work Health has estimated that over one million Victorian employees are at risk of developing a chronic disease. (Work Health Victoria 2010).

· Preventable job stress is said to be draining $730 million per year from the Australian economy every year. Approximately 1.5 million Australians have been diagnosed with depression from excessive job stress, costing businesses more than $8,000 per person every year (Victorian Health 2010).

Remedial massage, nutritional education and yoga classes are all widely accepted as being important in addressing the above health problems in individuals.

Relevant Legislative Provisions

Income Tax assessment Act 1997 Section 8-1

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58K(b)

Fringe Benefits Tax Assessment Act 1986 subparagraph 58M(1)(b)(iii)

Reasons for Decision

Issue 1:

Question 1, 2 & 3:

Summary

The provision of in-house remedial massage, nutritionist consultations or stretching and yoga classes are not exempt fringe benefits pursuant to subparagraph 58M(1)(b)(iii) of the ITAA 1997.

Detailed reasoning

Several categories of work-related health and counselling benefits are exempt benefits under the Fringe Benefits Tax system. Work related preventative health care, specifically exempt under subparagraph 58M(1)(b)(iii) of the FBTAA includes any form of care provided by or on behalf of a medical practitioner, nurse, dentist or optometrist for the purpose of preventing an employee from suffering from an injury or illness relating to the employee's employment. It is a condition of exemption that the care is generally provided to all employees with similar work-related risks.

To qualify for exemption under this provision the proposed therapeutic massage service must fall within the requirements of 'work related preventative health care' as defined in subsection 136(1) of the FBTAA. This definition specifies that:

work-related preventative health care, in relation to an employee of an employer, means any form of care provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist wholly or principally in order to prevent the employee suffering from work-related trauma, but does not include a form of care that is not made available generally to all employees of the employer:

(a) who are likely to be at risk of suffering from similar work-related trauma;

(b) who perform the duties of their employment at or near the place where the employee performs the duties of their employment; and

(c) whose duties of employment are similar to those of the employee.

Work related trauma is also defined under s136(1) FBTAA in this context as:

…(d) coming into existence, aggravation, acceleration or recurrence of any other physiological or psychological condition in relation to the employee that is or may be harmful or disadvantageous to, or result in harm or disadvantage to the employee, related to any employment of the employee.

The proposed arrangement at your place of work suggests the 'form of care' the employer will make available is the provision of therapeutic massage sessions to employees, which will be administered by a registered massage therapist. Although it is stated that this service will be available to all of the employees at your office premises, the arrangement does not meet the requirements of subparagraph 58M(1) (b)(iii) of the FBTAA, as it is not provided by a professional of the categories required by the subsection.

The employer's intended outcome in providing therapeutic massage sessions may be to assist in the prevention of possible conditions and diseases that may result from the sedentary nature of the employees' work.

In your arrangement, the therapeutic massage sessions will not be provided 'by' or 'on behalf of' a legally qualified medical practitioner or nurse. In order to satisfy the definition in subsection 136(1) of the FBTAA the therapeutic massages must be provided 'on or on behalf of' such a qualified person. As the arrangement proposed does not satisfy this requirement, the benefits provided to your staff will not qualify for the FBT exemption under subparagraph 58M(1)(b)(iii) of the FBTAA. S136(1) of the FBTAA also specifies that the medical practitioner should be administering the services in order to prevent the employees suffering from 'work-related trauma'.

The Boards of Review have taken the view that 'the general concept of 'therapeutic treatment' seems to be the positive one of healing or curing….rather than the negative one of prevention of the need for therapy. (Case S2 85 ATC 102; (1985) 28 CTBR (NS) Case 8) Therefore, it is evident that your proposal to provide the therapeutic massage services would not fulfil the requirements of subsection 136(1) of the FBTAA which requires the 'prevention of work-related trauma', rather than therapeutic massages which are applied for healing or curative purposes, as decided in Case T67 86 ATC 1005; (1986) 18 TRBD 346 (Case T67).

You have also not indicated any kind of 'work related trauma' specific to your employees which has been brought about as a result of conditions in the work place which you were seeking to alleviate or prevent them from suffering. You have not described or provided any evidence of; nor is there a distinct relation to a kind of trauma that can result from the type of workplace conditions presented in the proposed arrangement.

The legislation specifically permits exemption only for the purpose of preventing suffering from and injury or illness which has arisen as a result of a work environment. It is also a condition of exemption that the care is provided to all employees with similar work-related risks.

Although subsection 136(1) of the FBTAA specifies the treatment must be administered by -or on behalf of- or at the direction of a legally qualified medical practitioner, the treatment need not be administered by such a practitioner themself. Physiotherapy, massage, chiropractic treatment and osteopathy are common examples of therapeutic treatment.

It was decided in CaseT67, that 'therapeutic treatment' is a concept concerned with healing or curing, rather than preventing the need for therapy. The Administrative Appeals Tribunal found in Case R95 84 ATC 633; 27 CTBR (NS) Case 148, that "therapeutic treatment" necessitated the exercise of professional skill in the medical field, in a way which normally involves the person administering the treatment using drugs or physical and mental processes which are directed towards the purpose of curing or managing the disease or ailment.

It was also held in Case A53 69 ATC 313; 15 CTBR (NS) Case 30 that the mere suggestion or recommendation by a medical practitioner that a patient undergoes therapeutic treatment is not sufficient for the payment to qualify as a 'medical expense'. The patient would have to be referred by a medical practitioner to a particular therapist.

In your proposed plan the qualified massage therapist you engage would not be administering the service at the instruction of a legally qualified medical practitioner, therefore the service would not be eligible within the definition given in subsection 136(1) of the FBTAA.

Due to all the reasons given above, the cost of providing the therapeutic massage service at your place of work will not be exempt from FBT under subparagraph 58M(1)(b)(iii) of the FBTAA.

Issue 2

Question 1:

Summary

The costs incurred by the employer for therapeutic massage, nutritionist consultations and stretching and yoga classes are tax deductible under subsection 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Detailed reasoning

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income.

The taxpayer will incur expenses in providing an in house massage facility to its employees. The therapeutic massages will provide a benefit in order to improve or maintain the efficiency of employees or prepare them for retirement. The expenses have the essential character of expenses incurred in the production of assessable income to the company as it is for the benefit of its employees. The expenses are incidental and relevant to the income producing activity and as such are deductible under section 8-1 of the ITAA 1997.

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