Edited version of private ruling

Authorisation Number: 1011817047154

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Subject: Definition of a hospital

Will a benefit provided to an employee be an exempt benefit under subsection 57A(4) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You have been endorsed as a charitable institution.

You provided a copy of your Memorandum and Articles of Association.

You also provided details of your activities.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 57A(4)

Fringe Benefits Tax Assessment Act 1986 paragraph 65J(5)

Will a benefit provided to an employee be an exempt benefit under subsection 57A(4) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Section 57A of the FBTAA provides that the benefits provided by certain employers will be exempt benefits.

Subsection 57A(4) of the FBTAA states:

A benefit provided in respect of the employment of an employee is an exempt benefit if the employer of the employee is a hospital carried on by:

(a) a society that is a non-profit society for the purposes of section 65J; or

(b) an association that is a non-profit association for the purposes of section

65J.

Note: Subsection 65J(5) explains:

(a) which societies are non-profit societies for the purposes of section 65J; and

(b) which associations are non-profit associations for the purposes of section 65J.

For a benefit that is provided to an employee to be an exempt benefit under subsection 57A(4) the following conditions must be satisfied:

· the employer of the employee must be a hospital; and

· the hospital is carried on by a non-profit society or non-profit association.

1. Are you a hospital?

The term 'hospital' is not defined in the FBTAA.

In the decision of Australian Hospital Care (Latrobe) Pty Ltd v Commissioner of Taxation (2000) 105 FCR 20; [2000] FCA 1509 (Australian Hospital Care case) the issue concerned the meaning of the term 'public hospital' for the purposes of the Sales Tax (Exemptions and Classifications) Act 1992 was considered, and Merkel J stated at paragraph 41:

… If, as a matter of law, a court concludes that the term is to have a special meaning, that is a meaning other than its ordinary meaning, then it is to be given that special meaning. If not, then the term is to be given its ordinary and natural meaning, which is the commonly understood meaning that is appropriate in the circumstances.

And further, in the Australian Hospital Care case, at paragraph 51:

The question of whether a particular institution is a public hospital according to common understanding is a question of fact to be resolves upon a consideration of all the circumstances…

In the absence of a legislative reference, it is therefore necessary to refer to the contemporary common understanding or ordinary meaning of the term 'hospital' as a question of fact, taking all circumstances into account.

The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, defines 'hospital' as:

'an institution providing medical and surgical treatment and nursing care for ill or injured people'.

The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 defines a 'hospital' as:

An institution in which sick or injured persons are given medical or surgical treatment'.

In Padbury: Home of Peace for the Dying and Incurable v. Solicitor-General (1908) 7 CLR 680 (Padbury case),Griffith CJ stated:

In Australia it [the term "hospital"] is commonly used to denote an institution for the medical or surgical treatment of persons suffering from bodily ailment or injury.

Barton J stated in the Padbury case that:

The sense in which the word [hospital] is generally understood is, I think, that of an institution for those who, being sick or injured in body, are in need of medical or surgical aid.

The term 'hospital' was also considered in the case Public Trustee v. Hospitals Commissioner of New South Wales (1939) 56 Weekly Notes 198 at 199, 200 (Public Trustee case). The judgement states:

I think that it is an essential characteristic of a hospital that medical or surgical services should be rendered … A hospital connotes an institution within whose walls medical or surgical attention is given to the sick or injured.

Based on the ordinary meaning of the term and precedent, an essential function of a hospital is the provision of medical or surgical treatment for sickness, disease or injury. In addition, the reason for the institution receiving the patient must be for the provision of medical care and treatment of that patient.

The provision of accommodation is also essential to an institution being a hospital. In Re Alfred Ford [1945] 1 All ER 288 it was stated:

… but it [the word "hospital"] seems to me, prima facie, to indicate a place in which patients are received for continuous treatment and to exclude places to which patients merely resort for the purpose of occasional medical or surgery aid such as is normally obtained at the out-patients' department of hospitals.

In Salmar Holdings Pty Ltd v. Hornsby Shire Council [1971] 1 NSWLR 192 at 199 (Salmar case) where the definition of 'hospital' was considered, Jacobs JA stated:

There are many different features of hospitals, but the feature which they all have in common is that they provide residential care for the sick.

The Salmar case supports the view that accommodation is an important part of a hospital's function.

Additional guidelines on what constitutes a hospital is provided in GiftPack - Guide for deductible gift recipients and donors which states:

A hospital is an institution in which patients are received for continuous medical care and treatment for sickness, disease or injury. Providing accommodation is integral to a hospital's care and treatment. Clinics that mainly treat ambulatory patients who return to their homes after each visit are not hospitals. However, day surgeries that provide beds for patients to recover after surgery may be hospitals. Homes providing nursing care in respect of feeding, cleanliness and the like are not hospitals. However, nursing homes for people suffering from illness are accepted as hospitals. Hospices for the terminally ill will generally be hospitals. Minor outpatient and nursing care will not prevent an institution from being a hospital.

In applying these extracts, it can be concluded that, to be a hospital, an institution must provide:

· continuous medical care and treatment for sickness, disease or injury; and

· accommodation that is integral to the medical treatment and care.

In considering your situation your principle objective is to educate the public about population growth and control. Although you also have objectives that include the provision of medical advice and assistance to persons who are suffering from physical or mental illness or distress as a result of involuntary sterility or of difficulties connected with the marriage relationship or sexual problems for which medical advice or treatment is appropriate and you conduct screening programs to detect early stages of treatable and preventable disease, the information provided does not indicate that you are an institution that is predominantly for the provision of medical care and treatment where accommodation is integral to the care and treatment.

In analysing the services that you provide:

· most do not involve treatment for sickness, disease or injury; and

· none require the provision of accommodation.

Your situation is similar to the dental hospital considered in the Public Trustee case where Long Innes CJ at 200, stated:

The United Dental Hospital provides dental treatment and dentures to members of the public who are unable to pay for same. It is also a school for teaching dentistry in connection with the Sydney University. It provides no beds. Cases which require the administration of a general anaesthetic are sent for treatment to a hospital which has beds.

In my opinion this is an institution which although public, is not a hospital within the meaning of the will.

Although you may have recovery beds, they are only used for a short period of time by some of your clients. Similarly, although some of your services may detect a sickness or disease, the patient may need to be referred elsewhere for treatment and many of your services do not involve the treatment of a sickness, disease or injury.

To be a hospital an institution must be predominantly for the provision of medical care and treatment where accommodation is integral to the care and treatment. On the basis of the above analysis, it is not possible to conclude that you satisfy this predominant requirement.

Therefore, you are not considered to be a hospital for the purposes of subsection 57A(4) of the FBTAA and the benefits provided to your employees will not be exempt benefits.

2. Are you are a non-profit society or association for the purposes of section 65J of the FBTAA?

The note to subsection 57A(4) refers to subsection 65J(5) of the FBTAA which states:

For the purposes of this section, a society, association or club is a non-profit society, non-profit association or non-profit club, as the case may be, if, and only if:

(a) the society, association or club is carried on otherwise than for the purposes of

profit or gain to its individual members; and

(b) the society, association or club is neither:

(i) an incorporated company where all the stock or shares in the capital of the

company is or are beneficially owned by:

(A) the Commonwealth, a State or a Territory; or

(B) an authority or institution of the Commonwealth, a State or a

Territory; nor

(ii) an incorporated company where the company is limited by guarantee and

the interests and rights of the members in or in relation to the company are beneficially owned by:

(A) the Commonwealth, a State or a Territory; or

(B) an authority or institution of the Commonwealth, a State or a

Territory.

As you have been endorsed as a charitable institution it is accepted that paragraph (a) of this definition would be satisfied.

Further, it is also accepted that you are a company limited by guarantee where the interests and rights of the members are not beneficially owned by the Government or a Government authority or institution.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).