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Edited version of your written advice

Authorisation Number: 1051403644412

Date of advice: 23 July 2018

Ruling

Subject: Fringe benefits tax: exempt benefits

Question 1

Will nicotine replacement therapy be an exempt benefit as ‘work-related preventative health care’ of the employee under section 58M of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

Question 2

Will nicotine replacement therapy be an exempt benefit under section 58K of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following periods:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commences on:

In the FBT year ending 31 March 20XX

Relevant facts and circumstances

You plan to offer Nicotine Replacement Therapy (NRT) in the form of patches, gum or sprays to your employees who smoke.

You consider that by providing NRT to your employees who smoke you will improve the health and productivity of staff and promote a healthier workplace.

When providing the NRT, you would keep written evidence that a medical practitioner had prescribed/advised the employee to undergo NRT.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 58K

Fringe Benefits Tax Assessment Act 1986 section 58M

Fringe Benefits Tax Assessment Act 1986 section 58P

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Summary

The NRT will not be provided wholly or principally in order to prevent your employees from suffering ‘work-related trauma’ and therefore the provision of the NRT is not ‘work-related preventative health care’ The provision of the NRT will not be exempt as ‘work-related preventative health care’. As the benefits will be provided in respect of your employee’s employment they will be fringe benefits if they are not exempt.

The minor benefits exemption may apply to exempt the benefits however this will depend on the arrangement and will need to be considered on a case by case basis.

Detailed reasoning

You plan to offer NRT in the form of patches, gum or sprays to your employees who smoke.

When you provide your employees with the NRT you will be providing them with a benefit as defined in subsection 136(1) of the FBTAA.

Subsection 136(1) of the FBTAA provides the following definition of a ‘fringe benefit’:

in respect of the employment of the employee, but does not include:

As you will be providing the NRT to your employees in respect of their employment, the NRT will be a benefit that will be a fringe benefit as long as it is not an exempt benefit.

The FBTAA categorises benefits into 13 categories. Different exemptions can apply to the different categories of benefits and each category has its own valuation rules.

If you purchase and provide the NRT to your employee, you will be providing your employee with a property benefit in accordance with section 40 of the FBTAA.

If your employee purchases the NRT themselves and you then reimburse the whole or part of the purchase amount, the reimbursement would be an expense payment benefit in accordance with section 20 of the FBTAA. Similarly, if your employee was to enter into an arrangement with a provider of NRT, causing the employee to have an obligation to pay the provider for the NRT and you then pay the provider on behalf of your employee, you will be providing your employee with an expense payment benefit.

As discussed above, you would be providing the benefits to your employees in respect of their employment and as such, the benefits will be fringe benefits in accordance with the definition of fringe benefit contained in subsection 136(1) of the FBTAA, if they are not exempt benefits.

Work-related preventative health care exemption

Section 58M of the FBTAA exempts expense payment, property and residual benefits where the benefits consist of or are associated with work-related preventative health care of the employee.

Section 58M states:

58M(2) [Associated benefits] Where:

That is, an expense payment, property or residual benefit will be exempt under section 58M of the FBTAA where the benefit is in respect of, is required solely for the purposes of, or consists of, ‘work-related preventative health care’ of the employee.

‘Work-related preventative health care’

The meaning of ‘work-related preventative health care’ for the purposes of section 58M of the FBTAA is defined in subsection 136(1) of the FBTAA as follows:

ATOID 2002/963 Fringe Benefits Tax Fringe Benefits Tax: Exempt benefits – work-related preventative health care (ATOID 2002/963), provides guidance on the criteria that must be satisfied in order for the work-related preventative health care exemption contained in section 58M of the FBTAA to apply. ATO ID 2002/963 considers abattoir employees, who because of their duties of employment are at risk of contracting Q fever, a disease carried by cattle which is communicable to humans. ATO ID 2002/963 concluded that a benefit relating to the vaccination of an abattoir employee against Q fever is ‘work-related preventative health care’ and is exempt under section 58M of the FBTAA. ATO ID 2002/963 states:

Is the provision of NRT ‘work-related preventative health care’?

According to the subsection 136(1) definition, the provision of the NRT will be ‘work-related preventative health care’ if:

Is the care provided wholly or principally in order to prevent the employee from suffering work-related trauma?

As discussed above, in order for the provision of NRT to be considered to be ‘work-related preventative health care’ the care must be provided wholly or principally in order to prevent the employee from suffering ‘work-related trauma’.

The meaning of the term ‘work-related trauma’ used in the definition of ‘work-related preventative health care’ is defined in subsection 136(1) of the FBTAA which states:

work-related trauma, in relation to an employee, means:

As seen from the definition above, one requirement that must be met for the definition ‘work-related trauma’ to be satisfied is that the trauma described in paragraphs 136(1)(a) to 136(1)(d) of the definition (the injury or contraction, aggravation, acceleration or recurrence of a disease for example), must be related to the employment of the employee.

The minutes of the NTLG FBT Sub-committee meeting of 21 August 2003 discuss whether the provision of nicotine patches, a form of NRT, to employees will be exempt as work-related preventative health care in accordance with section 58M of the FBAA. In advising that the patches will not be work-related preventative health care the ATO concluded that employees who smoke are not suffering from work-related trauma as smoking is a personal decision and generally not caused by the work environment. If the health care provided to the employee is not provided wholly or principally in order to prevent the employee from suffering work-related trauma, the care will not be exempt under section 58M as work-related preventative health care. The NTLG FBT sub-committee minutes summarise:

19 Work-related trauma

…

…

As discussed in the NTLG FBT sub-committee minutes above, the facts provided in your circumstances do not indicate that your employees are suffering from ‘work-related trauma’ in accordance with the definition contained in subsection 136(1) of the FBTAA. Any injury or contraction, aggravation, acceleration or recurrence of a disease of the employee that the NRT would be intended to prevent the employee from suffering is not an injury or disease that is related to the employment of the employee, but is related to the employee’s personal decision to smoke.

As the NRT would not be provided wholly or principally in order to prevent the employee from suffering work-related trauma, the provision of the NRT is not ‘work-related preventative health care’ and the benefits will not be exempt as work-related preventative health care under section 58M of the FBTAA (subparagraphs 58M(1)(a)(iii), 58M(1)(b)(iii), 58M(1)(c)(iii)).

For your information - Minor benefits exemption

Section 58P of the FBTAA provides that a benefit is exempt if it is considered to be a minor benefit. Broadly speaking, the minor benefits exemption exempts benefits if the value of the benefit is less than $300 and it is considered unreasonable to treat the benefit as a fringe benefit according to the factors provided in paragraph 58P(1)(f) of the FBTAA.

The minor benefits exemption does not apply to exempt all benefits with a notional value of less than $300. Airline transport benefits and expense payment, property and residual benefits where, if the benefits were fringe benefits they would be in-house expense payment, in-house property and in-house residual fringe benefits cannot be exempt using the minor benefits exemption. The exemption also does not apply in relation to certain tax-exempt body entertainment benefits, the provision of meal entertainment depending on the valuation method elected or to benefits provided under a salary sacrifice arrangement.

Paragraph 58P(1)(f) of the FBTAA states that regard is to be had to various criteria in concluding if it would unreasonable to treat a minor benefit as an exempt benefit. The criteria which paragraph 58P (1)(f) of the FBTAA requires to be considered are:

Whether the benefit is a minor benefit must be determined on a case by case basis depending on the arrangement.

Guidance to assist you in determining whether a benefit is a minor benefit can be found in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12). TR 2007/12 provides:

Chapter 20 of Fringe benefits tax – a guide for employers (FBT guide for employers) provides some broad examples of the operation of the exemption:

Depending on the facts and the arrangement, it is likely that a once-off benefit consisting of up to $300 worth of NRT provided as a property or expense payment benefit may be exempt as a minor benefit.

However, multiple expense payment or property benefits of NRT provided throughout the year, even where the total notional value of the benefits provided to a particular employee are less than $300 may not be exempt as minor benefits. This is something that would be determined on a case by case basis.

As discussed in paragraphs 195 – 197 of TR 2007/12, the five criteria contained in paragraph 58P(1)(f) of the FBTAA must all be considered when determining whether a benefit is a minor benefit and no single criteria will alone determine whether the exemption will apply. It is necessary to look to the nature of the benefit provided when considering the criteria and the weight given to each criterion will vary depending on the circumstances surrounding the provision of the benefit. Paragraphs 200 to 244 of TR 2007/12 provide guidance on each of the five criteria. Paragraph 245 of TR 2007/12 then provides general examples that would likely be considered minor benefits (subject to consideration of the five criteria):

Question 2

Summary

You would not be providing the NRT as health care in your own ‘in-house health care facility’ or by a member of the staff of your own ‘in-house health care facility’ and therefore the NRT will not be exempt under section 58K of the FBTAA.

Detailed reasoning

As discussed in question 1 above, when you provide your employees with NRT you will be providing them with a benefit as defined in subsection 136(1) of the FBTAA which will most likely be a property or expense payment benefit depending on the arrangement and will be a fringe benefit as long as it is not an exempt benefit.

In-house health care facilities exemption

Section 58K of the FBTAA exempts benefits that consist of the provision of health care that are provided in certain in-house health care facilities. Section 58K states:

That is, in order for a benefit to be exempt under section 58K of the FBTAA:

‘Health care’ is defined in subsection 136(1) of the FBTAA as:

‘In-house health care facility’

As discussed above, in order for a benefit to be exempt under section 58K of the FBTAA the benefit must consist of the provision of health care provided either in an ‘in-house health care facility’ of the employer or by a member of the staff of an ‘in-house health care facility’ of the employer in the performance of their duties as a staff member.

The term ‘in-house health care facility’ is defined in subsection 136(1) as:

That is, a benefit will only be exempt where:

Compensable work related trauma

Based on the information provided, you do not have a clinic, surgery, first-aid station or similar facility located on your premises (or a related company’s premises) or at or adjacent to, a site at which your employees perform the duties of their employment, from which health care can be provided to your employees.

Even if you were to have a clinic, surgery, first-aid station or similar facility that is located your premises (a related company’s premises) or at or adjacent to, a site at which your employees perform the duties of their employment, the definition of ‘in-house health care facility’ requires that the clinic or similar facility must be operated wholly or principally for the purpose of providing health care in respect of ‘compensable work-related trauma’ suffered by employees of the employer (or a related company).

Subsection 136(1) of the FBTAA defines ‘compensable work-related trauma’ to mean:

Work-related trauma’ is also defined in subsection 136(1) of the FBTAA to mean:

As discussed above, you have not provided any information to suggest that you have a clinic, surgery, first-aid station or similar facility located on your premises (a related company’s premises) or at or adjacent to, a site at which your employees perform the duties of their employment. Even if you did however, those premises would need be operated wholly or principally for the purpose of providing health care to your employees (not the general public or a section of the general public) and the health care provided to your employees at such a facility would need to be care in respect of ‘compensable work-related trauma’ where both the definitions of ‘work-related trauma’ and ‘compensable work-related trauma’ would need to be met. As you would not be providing health care in your own ‘in-house health care facility’ or by a member of the staff of your own ‘in-house health care facility’, the NRT will not be exempt under section 58K of the FBTAA.

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