Edited version of private ruling

Authorisation Number: 1011615224522

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Ruling

Subject: FBT : Exempt benefits

Question 1

Would the expenditure on the laser surgery incurred for an employee be considered an exempt benefit for the purposes of section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 2

Would the employer be entitled to a deduction under section 8-1 of the Income tax Assessment Act 1997 for expenditure incurred on laser surgery performed on an employee's eyes to remove their need to wear bi-focal glasses?

Answer

Yes

This ruling applies for the following period:

1 July 2009 to 30 June 2010

The scheme commences on:

1 July 2009

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.

The employer operates an installation and maintenance business.

The employees of the business are required to use ladders, scaffolding and work in confined spaces.

The employee required the use of bi-focal glasses to accurately assess where their feet were to be placed. The employee lost their footing causing the employee to fall and sustain injuries.

The employer paid for the laser surgery performed on the employee's eyes to remove the need to wear bi-focal glasses. The employee is the only one who has had laser surgery performed.

It is the employer's policy that employees are not allowed to undertake their employment duties when a risk is identified until an assessment is carried out and the appropriate corrective measures have been undertaken. The employer has extended the offer for any of the field-workers required to use ladders and perform tasks in confined spaces.

Reasons for decision

Question 1

Summary:

The expenditure on the laser surgery incurred for an employee is not an exempt benefit for the purposes of section 58M of the FBTAA as it does not satisfy the definition of work related preventative health care under subsection 136(1) of the FBTAA.

Detailed reasoning:

For the purpose of determining whether a benefit is exempt from fringe benefits tax, we need to first determine whether there was a benefit provided. The employer paid for the costs of a laser surgery that was performed on an employee's eyes which is an expense payment benefit that the employer provided to an employee.

Section 58M of the FBTAA exempts from FBT the provision of certain benefits provided in respect of the employment of an employee. The exemptions include the provision of benefits that result in the work related preventative health care (WRPHC) of the employee. The definition of WRPHC in subsection 136(1) of the FBTAA requires that the form of care needs to be for the purpose of preventing the employee suffering from work-related trauma.

Work-related trauma is defined in subsection 136(1) of the FBTAA to include the contraction, aggravation, acceleration or recurrence of a disease of an employee that is related to any employment of the employee.

In more specific terms, all the following conditions are required to be satisfied for a benefit to be considered to be in respect of WRPHC and thus be exempt under subparagraph 58M(1)(a)(iii) of the FBTAA. These conditions are:

(a) the care must be provided by a particular person, or on behalf of that person;

(b) the care must be generally available to all employees in the same circumstances, and

(c) the care must be provided principally to prevent an employee suffering a work-related trauma, and is provided because of the employee's employment.

In order for the benefit to be categorised as WRPHC of an employee, the first requirement is that the care must be provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist. In this case, the care provided was the laser eye surgery. As a surgical procedure is involved, it was performed by a legally qualified medical practitioner, thus satisfying the first requirement.

The second requirement is that the benefit will be available to all employees of the employers in the same circumstances. As indicated in the written policy, "appropriate corrective measures" are offered to all the field employees who wear bi-focal glasses and undertake the tasks in the same circumstances as the employee. The "appropriate corrective measure" indicated in the written policy does not specify laser eye surgery for all such employees. Therefore, the employer does not satisfy this requirement.

The third requirement is that the care must be provided principally in order to prevent an employee suffering a work-related trauma. It is accepted that the duties of the employees (that is, using ladders, scaffolding and working in confined spaces) puts them at risk of injuring themselves. However, there is insufficient evidence that the provision of the laser surgery is wholly or principally in order to prevent the work-related trauma.

The employer submits that the expenditure on the laser eye surgery has a purpose of preventing such injury. The benefit is not principally provided for preventing the employees from injuring themselves while using ladders, scaffolding and working in confined spaces. Instead, the principal purpose of the laser surgery was to improve the employee's eye condition, removing the need for the employee to wear bi-focal glasses. In this case, the employer does not satisfy this requirement.

It is required that all three requirements must be satisfied in order for the benefit to be classified as WRPHC and therefore be an exempt benefit. Since the benefit of providing laser eye surgery to the employee does not satisfy the principal purpose requirement, the benefit is not an exempt benefit under section 58M of the FBTAA and the employer are liable to the fringe benefits tax incurred for this benefit.

Question 2

Summary

The employer is entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).for expenditure incurred on laser surgery performed on one of the employee's eyes to remove their need to wear bi-focal glasses.

Detailed reasoning

The operative provision that determines the deductibility of expenses is section 8-1 of the ITAA 1997.

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

Generally, the cost of the laser eye surgery to be performed on an employee is not incurred in the course of gaining or producing your assessable income. The purpose of the expense is to improve the condition of the employee's eyes, removing the need to wear bi-focal glasses and the expense is therefore private in nature.

However, the cost of the laser surgery the employer incurs for the employee is a fringe benefit. The benefit was provided in view of their value as an employee of the business. We acknowledge that it is the employer's policy to not allow employees at risk of injuring themselves from carrying out their employment duties until appropriate corrective measures have been undertaken. The payment for corrective measures is available to all employees who are at risk of suffering a similar work related trauma. Therefore, although the employee and the fellow employees in a similar circumstance will receive a personal benefit form this form of expenditure, the company also stands to benefit. In particular, it is beneficial to the employer:

· in that your employees will be able to continue carrying out their employment duties which enables you to gain your assessable income, and

· by a reduction in the risk of the employee injuring themselves while undertaking their employment duties.

As a result, the outgoing is employment related and necessarily incurred in the carrying on of the business and therefore deductible under section 8-1 of the ITAA 1997.

Furthermore, the employer is liable to fringe benefits tax for these expenses. In accordance with Taxation Ruling TR 95/24, fringe benefits taxes incurred for this fringe benefit are also outgoings necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income and therefore deductible under section 8-1 of the ITAA 1997.

The cost of the laser surgery performed on the employee's eyes and the relevant fringe benefit tax incurred are deductible under section 8-1 of the ITAA 1997 as these are outgoings necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.