Edited version of your private ruling

Authorisation Number: 1012462510110

Ruling

Subject: FBT - whether the employee's duties are performed exclusively in a public hospital?

Question

Are the duties of employment considered to be exclusively performed in, or in connection with a public hospital for the purposes of subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

This ruling applies for the following periods:

31 March 2014

31 March 2015

31 March 2016

The scheme commences on:

1 April 2013

Relevant facts and circumstances

You are a nominated State or Territory body.

Your employee is employed in two ongoing and concurrent positions.

The employee works in both positions on two days a week.

One is in a public company Limited by Guarantee incorporated under the Australian Securities and Investment Commission which is located on premises shared by a hospital.

The other is in a specialised health unit located near a hospital.

Your employee receives a pay slip for both positions. You are his employer on both payslips. At the end of the financial year, you provide your employee with one group certificate that covers both positions.

Your employee does not have a written contract for either position; however on commencement of employment with you, he signed an employment agreement

Relevant legislative provisions

Fringe benefits tax assessment act 57A(2)

Reasons for decision

Are the duties of employment considered to be exclusively performed in, or in connection with a public hospital for the purposes of subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

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

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.

You are a nominated State or Territory body. Paragraph 135U(5)(c) provides that for the purposes of the FBTAA a nominated State or Territory body is taken to be a government body. Therefore, paragraph 57A(2)(a) is satisfied. The issue to be considered is whether paragraph 57A(2)(b) is satisfied.

Requirements of 57A(2)(b)

The duties of an employee will satisfy the requirements of paragraph 57A(2)(b) of the FBTAA when the duties are:

exclusively performed in the physical location of a hospital, or

are such that the employee is exclusively engaged in activities that enable a hospital to carry out its functions.

Both of these tests contain an exclusive requirement. 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 public or non-profit hospital'. (emphasis added)

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 would be 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.

Application to your circumstances

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

On two of the four days the employee works on the premises of a company that is located in a building that is also occupied by a hospital. Although the company is located in the same building as the hospital, this does not make it part of the hospital. It is a separate public company with a separate administration which is not part of the hospital. Given it is a separate independently operated company, the duties can not be considered to be exclusively performed in a hospital, even though a hospital is located on the same premises.

Similarly, the duties performed on the other two days cannot be considered to be in a hospital as the duties are undertaken at a location which is near a hospital.

In this situation it is necessary to consider the second test to determine whether the employee's duties satisfy paragraph 57A(2)(b).

The second test is satisfied where the duties are exclusively performed 'in connection with' a hospital. Although the work undertaken in both positions may assist and benefit a hospital, the work undertaken for the company is primarily undertaken for the benefit of the company. It is not exclusively for the hospital.

Similarly, while some of the work in the second position may assist hospitals, it is primarily for the benefit of the health system in general.

Therefore, it cannot be concluded that the employees are fully engaged in an activity of the hospital.

As neither of the tests in paragraph 57A(2)(b) are satisfied, a benefit provided in respect of the employment will not be an exempt benefit for the purposes of subsection 57A(2) of the FBTAA.

Further, it is noted that even if one of the roles could be said to be exclusively in, or in connection with a public hospital the exemption in subsection 57A(2) requires all of the employee's duties of employment to be performed in, or in connection with a public hospital.

Employment is defined in subsection 136(1) of the FBTAA to mean:

the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee

Although the two positions involve different roles and are undertaken at different premises, all of the duties are duties of employment.

Therefore, for the exclusion in subsection 57A(2) to apply it is necessary for all of the duties to either be performed in a public hospital or in connection with a public hospital. That is, it is necessary for all of the duties undertaken in both roles to be performed in, or in connection with a public hospital. A conclusion that some of the duties do not satisfy one of these tests will prevent the exemption in 57A(2) from applying to the benefits provided in respect of the employment of the employee.