Edited version of private ruling

Authorisation Number: 1011750924712

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Ruling

Subject: Fringe Benefits Tax - Exempt Property Fringe Benefit

Question

Will the provision of a piece of medical equipment to an employee, constitute an 'exempt property fringe benefit', if the property (the medical equipment) is wholly provided to the employee for health care under section 58N of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

This ruling applies for the following period

Year ended 31 March 2011

Year ended 31 March 2012

The scheme commenced on

1 April 2010

Relevant facts

An employee requires an insulin pump for their Type 1 diabetes condition.

This piece of equipment can be acquired for around $XXX and is urgently required by this member of staff as the condition, without appropriate treatment, is life threatening.

The employer is looking at purchasing the insulin pump on behalf of the employee, with the intention to recognise the provision as an 'exempt property fringe benefit' under section 58N of the FBTAA.

Under this arrangement the employee will repay the employer for the purchase price of the insulin pump.

Relevant legislative provisions

Section 58N of the Fringe Benefits Tax Assessment Act 1986

Section 136(1) of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Summary

The provision of an insulin pump to an employee, although a property fringe benefit, does not meet the criteria for being an exempt property fringe benefit.

Detailed reasoning

Section 58N of the FBTAA provides that a benefit will be an exempt property fringe benefit if a number of conditions are satisfied, namely:

· the benefit is provided in respect of the employment of an employee of the employer;

· the benefit is provided solely by way of a grant of emergency assistance to the recipient;

· the benefit is a property benefit where the recipients property is supplied in connection with the provision of health care; and

· the health care is provided either by an employee of the employer, on the premises of the employer or at, or adjacent to, a place where the employees of the employer perform the duties of their employment.

Benefit provided in respect of the employment of the employee of the employer

The insulin pump will be purchased for the use of an employee of the employer in respect of their employment therefore that condition is satisfied.

Benefit is a property benefit where the recipient's property is supplied in connection with the provision of health care

An insulin pump is a computerised device that delivers small amounts of insulin constantly under the skin through a small plastic tube. This device is used by diabetic in the management of their condition. The pump is property and as it is used in connection with the provision of health care, the condition is satisfied.

Benefit is provided solely by way of a grant of emergency assistance to the recipient

Emergency assistance is defined in section 136(1) of the FBTAA as assistance granted to the person where:

(a) the person is, or is at immediate risk of becoming, the victim of an emergency;

(b) the assistance is granted to the person solely in order to provide immediate relief;

(c) the assistance is in respect of all or any of a number of matters including, first aid or other emergency health care.

It is therefore clear that the exemption under section 58N of the FBTAA would only apply to assistance granted to a victim of an emergency solely in order to provide immediate relief. It is therefore necessary to examine what is meant by immediate relief. In the Explanatory Memorandum that accompanied the FBT legislation, the following is said of the immediate relief test:

This test would not be met by long term benefits such as the provision of a new house or car to replace one destroyed as a result of an emergency

Therefore, it is evident that 'immediate relief' is used in the context of non-enduring character of relief provided rather than in the context of the actual relief itself having to be immediate.

In this case, an insulin pump is a device which is used for the ongoing management of diabetes. The device is necessary for the provision of insulin supply on a regular basis.

Therefore as the provision of the benefit is not considered to be for the immediate relief, this condition is not satisfied.

The place and manner of the provision of the health care

Where emergency assistance takes the form of medical treatment or other kinds of health care, the exemption is limited to treatment provided:

· by an employee of the employer; or

· on premises of the employer or at, or adjacent to, a site at which employees of the employer perform duties of their employment.

Therefore the provision of emergency treatment at the workplace would satisfy the condition. However, as stated in the Explanatory Memorandum, the exemption would not apply if the employer paid for an accident victim's hospital costs.

In this situation, the insulin pump is required to be worn by the diabetic at all times to ensure ease of access to the insulin on a regular basis. Therefore, as the device would be worn away from the workplace as well as within the workplace, the condition would not be satisfied.

Conclusion

The provision of an insulin pump to an employee, although a property fringe benefit, does not meet the criteria for being an exempt property fringe benefit.

Further issues for you to consider

Although not an exempt property fringe benefit, the insulin pump could be provided to the employee as a property fringe benefit, or alternatively, as it is intended that the employee would reimburse the employer for the cost of the pump, the funds required to purchase the pump could be loaned to the employee as a loan fringe benefit.