Edited version of private ruling

Authorisation Number: 1011912973128

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Ruling

Subject: Fringe Benefits Tax - exempt benefits - hospital and ambulance employees

Question 1

Will a benefit provided to an employee be an exempt benefit under subsection 57A(2) of the Fringe benefits Tax Assessment Act 1986 (FBTAA) where the duties are either exclusively carried out in a public hospital, or are exclusively in connection with a public hospital?

Answer

Yes

Question 2

Will a benefit provided to an employee be an exempt benefit under section 57A(3) of the FBTAA where the duties are predominantly in connection with the provision of the public ambulance service?

Answer

Yes

Question 3

Will a benefit provided to an employee whose duties are predominately for a public hospital be an exempt benefit under subsection 57A(2) of the FBTAA if all of the duties are exclusively performed in a public hospital?

Answer

Yes

Question 4

Will a benefit provided to an employee whose duties are predominately for a public hospital be an exempt benefit under subsection 57A(2) of the FBTAA if the duties are not exclusively performed in a public hospital?

Answer

No

Question 5

Will a benefit provided to an employee whose duties are predominately for a public hospital be an exempt benefit under subsection 57A(3) of the FBTAA if the balance of the duties are in connection with the provision of the ambulance service?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commenced on

1 April 2011

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 are a nominated State or Territory body as defined in subsection 135S(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

You are restructuring your operations to improve the administrative services that you provide to public hospitals and the ambulance service.

The restructure which includes the centralisation of functions involves the transfer of hospital or ambulance administrative staff.

To enable you to identify the employees who are eligible for the subsection 57A(2) and 57A(3) concessions you have established a number of separate payroll divisions. For example, you have created a separate payroll division for each of the public hospitals for which you provide employees. These payroll divisions are separate to the payroll divisions created for departmental employees that are not eligible for the concession.

Following the restructure you will establish a separate division for the hospital or ambulance administrative staff who will continue to come within either subsection 57A(2) or subsection 57A(3) of the FBTAA.

Following the restructure some of the hospital or ambulance administrative staff will continue to be physically located within a public hospital. However, most will be relocated to a central office that is not physically located within a public hospital.

Some of the employees relocated to the central office may continue to perform duties exclusively in connection with a public hospital. However other employees will undertake a mix of duties for both public hospitals and the ambulance service.

The percentage of duties performed for the ambulance service by these employees may vary. For some, the duties performed for the ambulance service will be more than 50% of the duties performed. However, others will perform less than 50% of their services for the ambulance service. In some instances the ambulance service duties may only be 10% of their duties.

Relevant legislative provisions

Fringe benefits Tax Assessment Act 1986 Subsection 57A(2)

Fringe benefits Tax Assessment Act 1986 Subsection 57A(3)

Fringe benefits Tax Assessment Act 1986 Subsection 135S(6)

Fringe benefits Tax Assessment Act 1986 Paragraph 135U(5)(c)

Reasons for decision

Will a benefit provided to an employee who is part of the hospital or ambulance administrative staff be an exempt benefit under either subsection 57A(2) or subsection 57A(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Currently the benefits provided to the hospital or ambulance administrative staff are exempt benefits under either subsection 57A(2) or subsection 57A(3) of the FBTAA. The issue to be considered in this ruling is whether the exemptions will continue to apply after the restructure occurs.

The application of subsection 57A(2)

Subsection 57A(2) of the FBTAA states where:

· the employer of an employee is a government body; and

· the duties of the employment of the employee are exclusively performed in, or in connection with:

· a public hospital; or

· a benefit provided in respect of the employment of the employee is an exempt benefit

For this exemption to apply the following conditions must be met:

· the employer must be a government body

· the duties of employment of the employee must be exclusively performed in, or in connection with a public hospital.

(a) Is the "employer" a "government body"?

You are a nominated State or Territory body.

Under paragraph 135U(5)(c) a nominated State or Territory body is taken to be a government body. Therefore, as you are a nominated State or Territory body this condition will be met in relation to all of your employees.

However, only some of your employees satisfy the condition in paragraph (b).

(b) Are the duties of the employment exclusively performed in, or in connection with a public hospital?

The second condition is for the duties of employment of the employee to be exclusively performed:

· in; or

· in connection

· with a public hospital.

The meaning of exclusively

The word 'exclusively' requires an approach not admitting anything other than what is provided for in the tests.

In Lloyd v. Federal Commissioner of Taxation (1955) 93 CLR 645 at p671, Kitto J in considering whether a gift was made 'exclusively' or 'only' for the purpose of public education stated:

…for then no gift could attract the exemption if any part of the corpus or income of the property given could be applied, consistently with the gift, for any purpose, however minor in importance, which was collateral or independent as distinguished from being a purpose of or incidental to public education.

The first test

The first test requires the duties to be exclusively performed in a hospital.

The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 defines the meaning of 'in' as:

inclusion within space or limits, a whole, material or immaterial surroundings, etc.: in the city, in the army, dressed in white; in politics.

It is considered that the meaning of the word 'in' in the phrase 'exclusively performed in', in the context of this provision, means the duties must be performed in the physical location of a hospital which would be within the land and buildings occupied by a hospital.

Accordingly, the first test in paragraph 57A(2)(b) requires that the duties of the employment of the employee of a government body must be exclusively performed in the physical location of a hospital.

There may be occasions where land and buildings are utilised for separate and identifiable purposes and where one of those purposes includes the conducting of a hospital. In these cases it is necessary to identify that part of the land and buildings where a hospital is being conducted as being a place in a hospital where an employee's duties must be performed.

Where some but not all of the duties of employment of an employee are performed in the physical location of a hospital the first test will not be satisfied. In such situations, it is necessary to consider the second test to determine whether the employee's duties satisfy paragraph 57A(2)(b).

The second test

The second test in paragraph 57A(2)(b) is satisfied where the duties are exclusively performed 'in connection with' a hospital.

In the Federal Court decision of Hatfield v. Health Insurance Commission, Davies J in considering the meaning of the expression 'in connection with' stated;

Expressions such as "relating to", "in relation to", "in connection with" and "in respect of" are commonly found in legislation but invariably raise problems of statutory interpretation. They are terms which fluctuate in operation from statute to statute. As was said by Blackburn, Gallop & Neaves JJ in Butler v. Johnston (1984) 55 ALR 265 at 268:-

"It is clear that the words 'in respect of' can convey a meaning of wide import, but their exact width will depend upon the context in which they appear. Reference to individual cases on different statutes is of little assistance in determining their particular meaning. The court has to construe the meaning of the words with reference to the purpose or object underlying the legislation in which they appear (s 15AA of the Acts Interpretation Act 1901(Cth))."

The terms may have a very wide operation but they do not usually carry the widest possible ambit for they are subject to the context in which they are used, to the words with which they are associated and to the object or purpose of the statutory provision in which they appear.

In the context of this provision the term 'exclusively performed in connection with' takes a narrower, rather than a wider meaning.

Accordingly, the second test in paragraph 57A(2)(b) requires that the duties of the employment of an employee of a government body are such that the employee is exclusively engaged in activities that enable a hospital to carry out its functions.

The application of subsection 57A(3)

Subsection 57A(3) of the FBTAA states:

A benefit provided in respect of the employment of an employee is an exempt benefit if:

· the employer provides public ambulance services or services that support those services and the employee is predominantly involved in connection with the provision of those services.

The relevant paragraph is paragraph (b) which requires:

· the employer to provide public ambulance services or services that support those services; and

· the employee to be predominantly involved in connection with the provision of those services.

Does the employer provide ambulance services or services that support those services?

The application of subsection 57A(3) to your employees who perform duties in the ambulance service was previously considered in a private ruling that issued to you.

That ruling referred to the dictionary definition of the word 'provide' before concluding that the ambulance services are provided by a separately incorporated entity.

However, this did not prevent subsection 57A(3) applying to some of your employees as it was accepted that you provide services that support the ambulance service. In so doing, reference was made to the following extract from the Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 2) Bill 2004:

8.12 An employer would provide 'services that support those services' in circumstances such as where the employer operates a call centre which answers emergency telephone calls made to public ambulance services. This would be the case even in circumstances where the call centre operated calls for other emergency services.

8.13 An employer would not be providing 'services that support those services' in circumstances where the service being provided has only an indirect connection with the provision of public ambulance services, or is merely similar to the provision of public ambulance services. For example, a commercial provider of transportation to hospitals would not be providing services that support public ambulance services.

Which employees will be predominantly involved in connection with the provision of public ambulance services?

Guidance for determining which employees will satisfy this condition was provided in paragraph 8.14 of the Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 2) Bill 2004 which stated:

8.14 An employee would be 'predominantly' involved if for at least half of their employment with the employer over the course of the relevant FBT year, they were involved in connection with the provision of those services. An employee would be 'involved in connection with the provision of those services' if they were working as a public ambulance officer. An employee would also be 'involved in connection with the provision of those services' if they were providing secretarial services for an employer who provides public ambulance services or services that support those services.

Following the restructure the hospital or ambulance administrative staff will come within one of the following categories:

· employees physically located within a public hospital;

· employees not physically located within a public hospital whose duties are exclusively in connection with a public hospital;

· employees not physically located within a public hospital whose duties are predominantly for the ambulance service; and

· employees not physically located within a public hospital whose duties are not predominantly for the ambulance service.

The application of the above discussion to each of these categories leads to the following conclusions:

(a) Employees physically located within a public hospital

Benefits provided to these employees will be exempt under subsection 57A(2) as the duties of employment are exclusively performed in a public hospital.

Employees not physically located within a public hospital whose duties are exclusively in connection with a public hospital;

Benefits provided to these employees will be exempt under subsection 57A(2) as the duties of employment are exclusively performed in connection with a public hospital.

Employees not physically located within a public hospital whose duties are predominantly for the ambulance service

Benefits provided to these employees will be exempt under subsection 57A(3) as the employee is predominantly involved in connection with services that support the ambulance service.

Employees not physically located within a public hospital whose duties are not predominantly for the ambulance service.

Benefits provided to these employees will be not be exempt under either subsection 57A(2) or subsection 57A(3) as:

· the duties are not exclusively performed in a public hospital;

· the duties are not exclusively performed in connection with a public hospital; and

· the duties are not predominantly for the ambulance service.