Edited version of your written advice

Authorisation Number: 1012775099151

Date of advice: 29 September 2015

Ruling

Subject: Exempt fringe benefits

Question 1

Will a fringe benefits tax liability arise from the provision of the use of the on-site Wellness Centre (Centre) by employees via a salary sacrifice arrangement?

Answer

The answer to this question depends upon the factual circumstances of the arrangement under which the use is provided. As your application and subsequent letters indicated there may be more than one arrangement with different factual circumstances, we are not able to provide a ruling to this question.

However, we have provided a table at the end of the reasons for decision which summarises the possible outcomes for each of the arrangements.

Question 2

Will a fringe benefits tax liability arise from the employee's attendance at a fitness class held in the open space area?

Answer

A fringe benefits tax liability will not arise from the attendance at the fitness class where it is part of the employee's membership of the Centre. However, if the membership is provided under a salary sacrifice arrangement, a fringe benefits tax liability may arise from the provision of the membership.

If the attendance at the fitness class is not part of the employee's membership of the Centre, a fringe benefits tax liability will arise from the attendance at a fitness class unless it comes within the definition of work-related preventative health care in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Question 3

Will a fringe benefits tax liability arise from the employee's attendance at an off-site fitness class that is provided in conjunction with the Centre?

Answer

A fringe benefits tax liability will not arise from the attendance at the off-site fitness class where it is part of the employee's membership of the Centre. However, if the membership is provided under a salary sacrifice arrangement, a fringe benefits tax liability may arise from the provision of the membership.

If the attendance at the off-site fitness class is not part of the employee's membership of the Centre, a fringe benefits tax liability will arise from the attendance at the fitness class unless it comes within the definition of work-related preventative health care in subsection 136(1) of the FBTAA.

Question 4

Will a fringe benefits tax liability arise from the use of onsite bathrooms, lockers and a towel service?

Answer

No

Question 5

Do the First Aid/consulting rooms come within the definition of 'in-house health care facility' in subsection 136(1) of the FBTAA?

Answer

The First Aid/consulting rooms will come within the definition of 'in-house health care facility' if they are operated wholly or principally for providing health care relating to work-related injuries of employees.

Question 6

Will a fringe benefits tax liability arise from the medical and pampering services provided to an employee in the First Aid/consulting rooms?

Answer

A fringe benefits tax liability will not arise from a medical or pampering service provided to an employee in the First Aid/consulting rooms where it is part of the employee's membership of the Centre. However, if the membership is provided under a salary sacrifice arrangement, a fringe benefits tax liability may arise from the provision of the membership.

If the service is not provided as part of the employee's membership of the Centre, a fringe benefit will arise from a medical or pampering service provided to an employee in the First Aid/consulting rooms unless:

• the First Aid/consulting room is an 'in-house health care facility' and the service is provided by a medical practitioner, dentist, nurse, optometrist, physiotherapist, first-aid attendant, speech therapist; or

• the service comes within the definitions of 'work-related counselling', 'work-related medical examination', 'work-related medical screening' or 'work-related preventative health care' in subsection 136(1) of the FBTAA.

This ruling applies for the following periods:

1 April 2015 to 31 March 2019

The scheme commences on:

1 April 2015

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 considering the establishment of an on-site Wellness Centre (Centre) and plan to engage an unrelated third party to operate the Centre. This will include the provision of an on-site manager and/or other person who will coordinate the operation of the Centre.

The Centre will be located on premises that you lease, which will not be sub-let to the third party operator.

The Centre will be located on two levels of your building:

• Level one will consist of the on-site manager's office, gymnasium equipment, open space that will be used for fitness classes such as pilates, yoga, circuit and boxing, a faith/prayer room, a mothers room and two First Aid/consulting rooms.

• Level two will consist of the ladies' and men's bathrooms, locker, towel and shower facilities with the balance of the floor being office floor space.

It also will be a meeting place for outdoor fitness classes such as boot camp and running clubs.

The First Aid/consulting rooms will be used to provide a range of services including massage, physiotherapy, chiropractic, flu shots, eye checks, dietician and beautician services.

You will own all the fundamental equipment and fixtures in the Centre, including the gymnasium equipment, massage beds and furnishings. However, certain practitioners may bring in their own equipment for their particular service. For example, a nurse administering flu vaccinations will use their needles.

Only current employees who enter into a salary sacrifice arrangement that includes the use of the Centre will be eligible to utilise the Centre.

The salary sacrifice may be for an annual membership, or it may be on a user pays basis for a particular activity or service.

Employees who elect an annual membership will have their monthly salary reduced by one twelfth of their yearly membership fee.

Employees who elect a user pays basis will apply to pre-purchase points and the value of those points will be deducted from their salary in advance.

On-site services such as physiotherapy will be charged at the provider's standard rate, less any health fund rebate that is available.

Employees with an annual membership may receive a number of on-site services as part of their membership. Employees who elect the user pays service, will salary sacrifice for the estimated cost of the on-site services upfront.

You will pay the third party for their services on a monthly basis in one of three ways, or a combination of the following:

• fixed fee

• total annual membership amount paid up front with respect to those members who have committed to an annual membership, or

• total pre-purchased entries with respect to those members who have elected a user pays basis.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 41

Fringe Benefits Tax Assessment Act 1986 subsection 47(2)

Fringe Benefits Tax Assessment Act 1986 subsection 47(3)

Fringe Benefits Tax Assessment Act 1986 section 58K

Fringe Benefits Tax Assessment Act 1986 subsection 58M(1)(b)

Fringe Benefits Tax Assessment Act 1986 subsection 58M(1)(c)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

These reasons for decision accompany the Notice of private ruling for the Trust.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Will a fringe benefits tax liability arise from the provision of the use of the on-site Wellness Centre by employees via a salary sacrifice arrangement?

In general terms, a fringe benefit will arise when an employer pays for an employee's membership, or participation in a fitness class conducted at, or by a gymnasium.

However, a fringe benefit will not arise when:

• an employee uses a recreational facility located on the employer's business premises;

• an employee uses property (other than a motor vehicle) that is ordinarily located on the business premises of the employer and is used wholly or principally in connection with business operations of the employer;

• an employee receives health care in an in-house health care facility; or

• the employer provides an employee with work-related counselling, a work-related medical examination, a work-related medical screening or work-related preventative health care.

Under the arrangement an employee may receive one or more of the following as part of a salary sacrifice arrangement:

• an annual membership of the Centre;

• use of the gymnasium equipment located in the Centre;

• attendance at a fitness class conducted either in the Centre, or outdoors;

• a range of services in the First aid/consulting rooms;

• use of the bathroom, locker, towel and shower facilities.

In general terms, the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that a fringe benefit will arise if:

• a benefit is provided;

• to an employee, or an associate of an employee;

• by an employer, an associate of the employer or another person under an arrangement involving the employer or an associate;

• the benefit is provided in respect of the employment of the employee; and

• it is not excluded from being a fringe benefit by paragraphs (f) to (s) of the fringe benefit definition. For the purposes of this ruling the relevant paragraph is paragraph (g) which provides that an exempt benefit will not be a fringe benefit.

Each of these requirements is considered below:

Will a benefit be provided?

The term 'benefit' is defined in subsection 136(1) to include:

any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

(a) an arrangement for or in relation to:

(i) the performance of work (including work of a professional nature), whether with or without the provision of property ...

In addition to this general definition, Divisions 2 to 11 of Part III of the FBTAA define specific situations in which a benefit is taken to arise. For the purpose of this ruling the relevant divisions to consider are:

• Division 5 which applies to expense payment benefits;

• Division 11 which applies to property benefits; and

• Division 12 which applies to residual benefits.

Will the arrangement involve the provision of an expense payment benefit?

Section 20 of the FBTAA describes the circumstances in which a benefit will be an expense payment benefit. Section 20 states:

Where a person (in this section referred to as the provider):

(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b) reimburses another person (in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient;

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

For the purpose of this ruling the relevant paragraph to consider is paragraph 20(a) which will apply if you make a payment to a third person (the Centre operator) in respect of expenditure incurred by the employee that discharges all or part of an obligation of the employee.

The information provided indicates this section will not apply as there is no indication of the employee incurring expenditure.

Will the arrangement involve the provision of a property benefit?

Subsection 136(1) defines 'property benefit' to mean a benefit referred to in section 40 that is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive).

Section 40 of the FBTAA states:

Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.

Subsection 136(1) of the FBTAA defines property to mean:

(a) intangible property; and

(b) tangible property.

Both intangible property and tangible property are defined in subsection 136(1) of the FBTAA. Intangible property is defined to mean:

(a) real property;

(b) a chose in action; and

(c) any other kind of property other than tangible property;

but does not include:

(d) a right arising under a contract of insurance; or

(e) a lease or licence in respect of real property or tangible property.

Tangible property is defined to mean:

goods and includes:

(a) animals, including fish; and

(b) gas and electricity.

In considering the list of the things that may be received by an employee, the only one that may be a property benefit is the provision of a membership.

Will a property benefit arise from the provision of a membership?

Guidance for considering whether a property benefit will arise from the provision of a membership is provided by ATO interpretative Decisions ATO ID 2010/135 and ATO ID 2014/17. These ATO IDs consider the circumstances in which a property benefit will arise from the provision of a gift card/voucher/coupon to an employee.

ATO ID 2010/135 concerned the provision of a gift card to an employee in recognition of the employee's work. The gift card:

• was available for purchase by the public with a loaded value ranging from a minimum of $20 to a maximum of $500;

• can be redeemed at participating stores operated by the employer within 12 months of its issue date; and

• can be used by any person (bearer) who holds it

In the circumstances considered, ATO ID 2010/135 concluded the gift card conferred rights on the bearer, being the merchant's promise to provide goods or services up to the stored value on the gift card. It stated:

When the employer gives a gift card to the employee, the rights conferred are 'benefits' under subsection 136(1) of the FBTAA.

Subsection 136(1) of the FBTAA defines 'provide', in relation to property, to mean dispose of (whether by sale, gift, declaration of trust or otherwise) the beneficial interest in property or the legal ownership of property.

The rights that exist as a bearer of a stored value gift card, which allows the bearer to receive goods or services up to the stored value, are property. The benefit is a property benefit. The employer 'provided' the benefit when the gift card was given to the employee.

Therefore, the relevant benefit was the provision of the gift card, rather than the products purchased using the gift card.

By contrast, ATO ID 2014/17 concluded that the relevant benefit was the provision of the products, rather than the voucher/coupon. The relevant facts were:

• no monetary value was specified, nor loaded on the voucher/coupon;

• the voucher can be redeemed at participating stores operated by the employer for a specified number of items within a specified time of its issue date;

• each voucher/coupon is individually numbered and the number is recorded as being provided to that particular employee;

• the identity of the employee must be reconciled against the voucher/coupon before the merchandise can be obtained; and

• the merchandise can only be obtained in person by the employee.

In considering these facts, ATO ID 2014/17 stated:

• The provision of the voucher/coupon and the later redemption of that voucher/coupon to obtain merchandise involves two distinct actions.

• The issue of the voucher/coupon does not constitute a fringe benefit for the purposes of the FBTAA at the time of issue but is an administrative aid in facilitating the later provision of merchandise to the employee.

• The 'benefit' under subsection 136(1) therefore is the provision of the merchandise by the employer. The employer 'provides' the benefit when the employee redeems the voucher/coupon for the merchandise.

Support for this view is found in Taxation Ruling TR 1999/10 which provides the following guidance in respect of 'Life Gold Passes' and 'Severance Passes' given to members of Federal Parliament on their 'retirement':

 22. On 'retirement' from Federal Parliament, Members may be issued with either a Life Gold Pass or a Severance Pass which may entitle the holder of the pass and his or her spouse to travel benefits. Similar travel entitlements are available for Members of State and Territory Parliaments.

23. We consider that the issuing of a Life Gold Pass or Severance Pass has no income taxation implications. The value of travel benefits received through the use of these passes does not form part of either a Member's or a Member's spouse's assessable income. However, travel benefits received from the use of a Life Gold Pass or Severance Pass are residual fringe benefits and the provider of the pass may be subject to fringe benefits tax when the passes are used for travel (paragraphs 84 to 88).

   ...

86. We do not consider that the issuing of passes under the Life Gold Pass and Severance Pass Schemes attracts any income tax implications. However, travel benefits received in relation to each use of a Gold Pass or Severance Pass by a Member will be taxed as a residual benefit, within the meaning of section 45 of Division 12 of the FBTAA, to the provider of the pass

From the information provided, it is not possible to determine whether the granting of a membership will confer a right to use the Centre and the associated services, or whether it is merely an administrative aid in facilitating the use of the Centre and the associated services. The relevant factors that would need to be considered in making a decision on this matter include:

• whether there is a reconciliation of use of the with the amount salary sacrificed at the end of the year with the employee receiving a credit for any balance that has not been used, or being required to make an additional sacrifice if the number of visits exceeds the budgeted amount; and

• whether the employee receives a refund of the balance of the sacrificed amount which has not been used at the time he or she ceases employment.

If a reconciliation of the use does not occur, it is more likely that the salary sacrifice was made to obtain the rights provided by the membership, rather than the use of the Centre and its associated services. In such a situation, the granting of the rights will be a property benefit.

Will the arrangement involve the provision of a residual benefit?

Section 45 of the FBTAA provides that a benefit will be a residual benefit if it is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). This will apply to:

• the use of the gymnasium equipment located in the Centre;

• the attendance at a fitness class conducted either in the Centre, or outdoors;

• the services provided in the First aid/consulting rooms; and

• the use of the bathroom, locker, towel and shower facilities.

Is the benefit provided to an employee, or an associate of an employee?

The benefits are provided to current employees.

Is the benefit provided by an employer, an associate of the employer or another person under an arrangement involving the employer or an associate?

The benefits are provided by the employer.

Is the benefit provided in respect of the employment of the employee?

Subsection 136(1) of the FBTAA defines 'in respect of' as including:

… by reason of, by virtue of, or for or in relation directly or indirectly to, that employment.

The benefits that are provided by reason of the employment are those that have the necessary connection with the salary sacrifice.

For employees who have elected to use an annual membership this will be:

• the provision of the membership (if it is a property benefit); or

• the residual benefits (if the membership is not a property benefit).

For employees who elect to salary sacrifice on a user pays basis, this will be the residual benefits.

Is the benefit an exempt benefit?

In your application and subsequent letters, you identified the exempt benefits contained in the following sections:

• section 41 which applies to property benefits;

• subsection 47(2) which applies to residual benefits;

• subsection 47(3) which applies to residual benefits;

• section 58K which applies to the provision of 'health care' in an 'in-house health care facility'; and

• section 58M which applies to 'work-related counselling', 'work-related medical examination', 'work-related medical screening' or 'work-related preventative health care'.

If a property benefit arises from the provision of a membership is it an exempt benefit under section 41?

Subsection 41(1) of the FBTAA states:

Where:

(a) a property benefit is provided to a current employee of an employer in respect of his or her employment; and

(b) the property is provided to, and consumed by, the employee on a working day and on business premises of:

(i) the employer; or

(ii) if the employer is a company, of the employer or of a company that is related to the employer;

the benefit is an exempt benefit.

The application of this exemption to the provision of a voucher used to obtain a massage on the employer's business premises was considered in ATO Interpretative Decision ATO ID 2005/109. In explaining why section 41 of the FBTAA did not apply to exempt the property benefit, ATO ID 2005/109 stated:

The general effect of section 41 of the FBTAA is to exempt a property benefit where the property is provided to, and consumed by, an employee on a working day on the employer's business premises.

There is no definition of 'consume' in the FBTAA and as such it takes on its ordinary meaning. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. defines 'consume' as:

1. to destroy or expend by use; use up.

2. to eat or drink up; devour.

The explanatory memorandum to the Fringe Benefits Tax Assessment Bill 1986 in relation to section 41 explained that,

Goods supplied on a working day and consumed on the employer's premises, e.g., a daily ration of beer consumed at work by brewery workers, will not attract tax.

Given the context and the policy intent, it is considered that the meaning of 'consumed' in section 41 of the FBTAA is limited to that which can be eaten, drunk or otherwise devoured.

The act of redeeming a voucher does not fall within this definition of consume. Consequently the voucher is not capable of being consumed for the purposes of section 41 of the FBTAA.

Accordingly, section 41 of the FBTAA does not apply to exempt the property benefit as the benefit provided is not consumed by the employee.

In applying this explanation, we do not accept your contention regarding the application of section 41 to a property benefit that arises from the membership. Further, we note that subsection 41(2) (which was inserted in 2008) is in accordance with ATO ID 2005/109 as it specifies that subsection 41(1) does not apply to food or drink provided to and consumed by an employee if the food or drink is provided under a salary packaging arrangement. If subsection 41(1) had the broad application that you contend, subsection 41(2) is unlikely to have specified food or drink.

Does subsection 47(2) apply to the residual benefits?

Subsection 47(2) of the FBTAA states:

Where:

(a) a residual benefit provided to a current employee in respect of his or her employment consists of:

(i) the provision, or use, of a recreational facility; or

(ii) the care of children of the employee in a child care facility; and

(b) the recreational facility or child care facility, as the case may be, is located on business premises of:

(i) the employer; or

(ii) if the employer is a company, of the employer or of a company that is related to the employer;

the benefit is an exempt benefit.

For this subsection to apply it is necessary for the following conditions to be met:

• the benefit must consist of the provision, or use of a recreational facility; and

• the recreational facility must be located on business premises.

For the purposes of this ruling, it is assumed the Centre is located on business premises. Therefore, the residual benefits will be exempt under subsection 47(2) if they consist of the provision or use of a recreational facility.

Subsection 136(1) of the FBTAA defines 'recreational facility' to mean:

• a facility for recreation, but does not include a facility for accommodation or a facility for drinking or dining.

A similar provision is contained in item 1.5 of the table in section 32-30 of Income Tax Assessment Act 1997 (ITAA 1997). Item 1.5 enables an employer to claim an income tax deduction for entertainment expenditure incurred for:

• providing a facility for recreation on property you occupy, if the facility is mainly operated for your employees to use.

• But the exception does not apply if the facility is for accommodation, or dining or drinking (unless it is a food or drink vending machine).

Both provisions contain the phrase 'facility for recreation' and by exclusion indicate this term can include a facility for accommodation, dining, drinking, a food or drink vending machine.

The meaning of the term 'facility' in the context of the definition of 'entertainment facility leasing expenses' is discussed in ATO Interpretative Decision ATO ID 2009/141 Fringe benefits tax Entertainment facility leasing expenses: hire of a marquee.

In summarising the dictionary, income tax and fringe benefit definitions referred to, ATO ID 2009/141 states:

The word facility, as described in each dictionary definition above, and as used in the income tax and fringe benefits tax definitions above is of wide meaning. It is accepted that the term 'facility' as it is used in the definition of 'entertainment facility leasing expenses' also has a wide meaning that includes buildings, part of buildings or other structures used for the purpose of the provision of entertainment.

A similar wide meaning will apply to the term 'facility' as it is used in the definition of 'recreational facility'. It can include buildings, part of buildings, structures or items (for example a food or drink vending machine or pool table).

A facility will be a recreational facility if it is used for recreation and is not a facility for accommodation, drinking or dining. The term 'recreation' is defined in subsection 136(1) of the FBTAA as follows:

Recreation includes:

(a) amusement

(b) sport or similar leisure-time pursuits; and

(c) recreation or amusement provided on, or by means of, a vehicle, ship, vessel or aircraft.

As the definition of the term 'recreation' in subsection 136(1) is inclusive, the ordinary meaning of the term is also relevant. The Macquarie Dictionary Online edition states in relation to the term 'recreation':

recreation

1. refreshment by means of some pastime, agreeable exercise, or the like.

2. a pastime, diversion, exercise, or other resource affording relaxation and enjoyment.

In applying this discussion to the situation being considered:

• the gymnasium equipment; and

• the room in which the gymnasium equipment is located and in which the on-site fitness classes are conducted are recreational facilities.

Therefore, as the gymnasium equipment is located on business premises, the residual benefit that arises from the use of the equipment will be an exempt benefit under subsection 47(2).

In your application, you contend that the exemption in subsection 47(2) will also apply to both the on-site and off-site fitness classes. We do not agree with this contention as although some of the classes may be held in a recreational facility (the room) and particular exercises may involve the use of a recreational facility (gymnasium equipment), the relevant benefit provided to the employee is the participation in the fitness class where various exercises are undertaken at the direction of the fitness instructor. In this regard, it is the fitness instructor who uses the recreational facility for the purposes of conducting the classes.

Accordingly, as the benefit provided to the employee is the participation in a fitness class, rather than the provision, or use, of a recreational facility, the residual benefit that arises from the participation in a fitness class will not be an exempt benefit under subsection 47(2).

In your application you did not raise the possibility of subsection 47(2) applying to the other residual benefits. Consequently, we have not considered the application of subsection 47(2) for these benefits. However, given our conclusion in relation to the fitness classes, it is unlikely that these other residual benefits will consist of the provision, or use, of a recreational facility (even though they may be provided in the Centre).

Does subsection 47(3) apply to the residual benefits?

Subsection 47(3) of the FBTAA provides that the use of property (other than a motor vehicle) that is ordinarily located on business premises of the employer and is used directly in connection with business operations of the employer will be an exempt benefit.

Subsection 47(4) of the FBTAA provides that for the purposes of subsection 47(3) toilets, bathroom facilities, food or drink vending machines, tea or coffee making facilities, water dispensers or other amenities (not being facilities for drinking or dining) for the use of employees shall be taken to be principally used directly in connection with business operations of the employer.

In applying the examples given in subsection 47(4), it is accepted the use of a bathroom, locker and towel located in the Centre will be an exempt benefit under subsection 47(3) as they are ordinarily located on business premises of the employer.

Does section 58K apply to the medical and pampering services?

Section 58K of the FBTAA states:

Where

(a) a benefit consisting of the provision of health care is provided in respect of the employment of an employee of an employer; and

(b) the health care is provided:

(i) in an in-house health care facility of the employer; or

(ii) by a member of the staff of an in-house health care facility of the employer in the performance of his or her duties as such a member;

the benefit is an exempt benefit.

For this section to apply to the medical and pampering services provided to the employee, it is necessary for the following conditions to be met:

(i) the service must consist of the provision of 'health care';

(ii) the First aid/consulting rooms in which the services are provided must be an 'in-house health care facility' of the employer.

(i) Do the medical and pampering services consist of the provision of 'health care'?

Health care is defined in subsection 136(1) to mean:

any examination, test or form of care (whether therapeutic, preventative or rehabilitative) that is related to the physiological or psychological health of a person and, without limiting the generality of the foregoing, includes:

(a) the supply, maintenance or repair of:

(i) an artificial limb or other artificial substitute; or

(ii) a medical, surgical or similar aid or appliance used by a person; and

(b) the supply of drugs or other property in connection with such an examination, test or form of care.

In explaining the benefits that would be considered to consist of the provision of health care the Explanatory Memorandum PART B to the Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 stated:

For these purposes, the term "health care" is being defined by amendments proposed by clause 48 to mean, broadly, any test or form of care related to a person's health. The exemption will thus extend to a wide range of health-related services including -

• the services of medical practitioners, dentists, nurses, optometrists, physiotherapists, first-aid attendants, speech therapists, dieticians, chiropodists, psychologists, etc.;

• the provision of diagnostic services and facilities;

• accommodation and care in the in-house health care facility (e.g., a mini-hospital); and

• counselling and advisory services.

The provision of drugs, first-aid items and other property in connection with the test or care will also be exempt.

The meanings of 'examination or test' and 'care' in the context of section 58M of the FBTAA are discussed in Class Ruling CR 2011/41 Fringe benefits tax: health services provided by BUPA Wellness Pty Ltd.

In discussing 'examination or test', paragraph 85 of CR 2011/41 states:

Neither examination, nor test are defined in the FBTAA. The Macquarie Dictionary ² defines the word 'examination' as:

1 . ... 2 . the state of being examined. ...' and 'test' as ' 1 . that by which the presence, quality, or genuineness of anything is determined; a means of trial. 2 . ... 5 . Psychology a standardised procedure for eliciting responses upon which appraisal of the individual can be based ...

In discussing 'care' paragraphs 104 and 105 of CR 2011/41 state:

104. The word 'care' is not defined within the FBTAA. However, 'health care' is defined in subsection 136(1) to mean 'any examination or test or form of care (whether therapeutic, preventative or rehabilitative) that is related to the physiological or psychological health of a person'. It includes the provision of drugs, vaccines or other medical preparations in connection with the care.

105. The Macquarie Dictionary ⁵ defines the word 'care' as

1 ... 4 . protection; charge: under the care of a doctor .' Care for is defined as ' a ... c to look after; make provision for.

In applying these paragraphs, it is accepted that the massage, physiotherapy, chiropractic and dietician services, the flu shots and the eye checks come within the definition of 'health care'. However, the beautician services will not.

(ii) Is the health care provided in an in-house health care facility?

Subsection 136(1) defines 'in-house health care facility' as:

in relation to an employer, means a clinic, surgery, first-aid station or similar facility that is:

(a) operated wholly or principally for providing health care in respect of compensable work-related trauma suffered:

(i) in any case - by employees of the employer; or

(ii) if the employer is a company - by employees of the employer or by employees of a company that is related to the employer; and

(b) located:

(i) on premises of the employer or, if the employer is a company, of the employer or of a company that is related to the employer; or

(ii) at or adjacent to a place where employees of the employer or, if the employer is a company, of the employer or of a company that is related to the employer (other than members of the staff of the facility) perform the duties of their employment.

In explaining this definition, the Explanatory Memorandum PART B to the Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 stated:

The term "in-house health care facility" is also being defined by amendments proposed by clause 48 and will mean, broadly, a clinic or other medical facility that is operated wholly or principally for providing health care in respect of compensable work-related injuries suffered by employees of the employer (or a related company) and which is located on premises of the employer (or a related company) or at or adjacent to, a site (e.g., a construction site) at which employees of the employer perform duties of their employment.

It is noted that while the facility must be operated principally for the treatment of compensable work-related injuries suffered by employees, the exemption will extend to the incidental use of the facility for the treatment of injuries suffered by the employee that are not related to work or for the treatment of injuries suffered by an associate of the employee.

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

work-related trauma suffered by an employee where:

(a) if there is no Australian workers' compensation law that applies to the employment of the employee - if any Australian workers' compensation law had applied to the employment of the employee, that law would have provided for compensation or other benefits for or in respect of the trauma; or

(b) in all cases - there is a workers' compensation law that:

(i) applies to the employment of the employee; and

(ii) provides for compensation or other benefits for or in respect of the trauma.

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

(a) the injury of the employee (including the aggravation, acceleration or recurrence of an injury of the employee);

(b) the contraction, aggravation, acceleration or recurrence of a disease of the employee;

(c) the loss or destruction of, or damage to:

(i) an artificial limb or other artificial substitute;

(ii) a medical, surgical or similar aid or appliance used by the employee; or

(iii) clothing worn by the employee; or

(d) the coming into existence, the aggravation, acceleration or recurrence of any other physiological or psychological condition in relation to the employee that is or may be harmful or disadvantageous to, or result in harm or disadvantage to, the employee;

that is related to any employment of the employee.

From the information provided, it is accepted that the First Aid/consulting rooms are used to provide health care and that some of the health care is in respect of compensable work-related trauma. However, it appears the rooms are also used for other purposes such as the provision of pampering services. Further, it is possible that some of the health care may be for trauma that is not work-related trauma. Therefore, the First Aid/consulting rooms cannot be said to be wholly for providing health care in respect of compensable work-related trauma suffered.

Although it is not necessary for the facility to be operated wholly for providing health care in respect of compensable work-related trauma, it must be principally operated for this purpose. From the information provided it is not possible to determine whether this requirement is met.

Does section 58M apply to the benefits?

Paragraph 58M(1)(b) provides that a property benefit will be an exempt benefit where the property is required solely for the purposes of:

(i) a work-related medical examination of the employee;

(ii) work-related medical screening of the employee;

(iii) work-related preventative health care of the employee;

(iv) work-related counselling of the employee or of an associate of the employee; or

(v) migrant language training of the employee or of an associate of the employee;

Similarly, paragraph 58M(1)(c) provides that a residual benefit will be an exempt benefit where the recipients benefit consists of the provision of:

(i) a work-related medical examination of the employee;

(ii) work-related medical screening of the employee;

(iii) work-related preventative health care of the employee;

(iv) work-related counselling of the employee or of an associate of the employee; or

(v) migrant language training of the employee or of an associate of the employee;

In your letter dated mid-August 20XX, you referred to the application of paragraphs 58M(b)(iii) and 58M(c)(iii). Paragraph 58M(b)(iii) will apply if the property benefit (the membership) is required solely for 'work-related preventative health care'. Paragraph 58M(c)(iii) will apply where the residual benefit consists of 'work-related preventative health care'.

Work-related preventative health care

Subsection 136(1) of the FBTAA defines 'work-related preventative health care' to mean:

any form of care provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist wholly or principally in order to prevent the employee suffering from work-related trauma, but does not include a form of care that is not made available generally to all employees of the employer:

(a) who are likely to be at risk of suffering from similar work-related trauma;

(b) who perform the duties of their employment at or near the place where the employee performs the duties of his or her employment; and

(c) whose duties of employment are similar to those of the employee.

The application of this definition was discussed in paragraphs 104 to 110 of CR 2011/41. CR2011/41 also provides two flowcharts at paragraphs 86 and 102 which summarises the tests that need to be met for a benefit to be work-related preventative health care. These are:

(i) the benefit must not be an examination or test;

(ii) the benefit must involve the provision of care;

(iii) the care must be provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist;

(iv) the care must be provided to an employee;

(v) the care must be provided wholly or principally in order to prevent the employee suffering from work-related trauma;

(vi) the care must be made available to all employees of the employer who are likely to be at risk of suffering from similar work-related trauma, who perform the duties of their employment at or near the place where the employee performs the duties of his or her employment and whose duties are similar to those of the employee.

In considering these requirements in relation to the services provided in the First Aid/consulting rooms, it is accepted that requirements (i), (ii), (iv) and (vi) are met.

However, from the information provided, it is not possible to determine whether the other requirements are met.

Requirement (iii) is the care provided by, or on behalf of a legally qualified medical practitioner, nurse, dentist or optometrist?

The third requirement requires the care to be provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist.

The meaning of 'legally qualified medical practitioner' is discussed in ATO Interpretative Decision ATO ID 2015/11 which states:

The term 'legally qualified medical practitioners', within the definition of 'disability superannuation benefit' in subsection 995-1(1) of ITAA 1997, is not a defined term in taxation legislation. The Commissioner relies on its ordinary meaning and takes the view that 'legally qualified medical practitioners' are persons who have general or specialist registration with the Medical Board of Australia (MBA).

…

The Commissioner considers that in this context the term 'legally qualified medical practitioners' should be construed as referring to those who are legally qualified under the relevant legislation to practice medicine in Australia: see Re VBI and Federal Commissioner of Taxation (Case 9/2005) [2005] AATA 683; 2005 ATC 193 ; (2005) 52 ATR 1197 at ATC 196.

The relevant law governing who is qualified to practice medicine in Australia is the Health Practitioner Regulation National Law (the National Law) in force in each state and territory of Australia.

Section 5 of the National Law defines the term 'medical practitioner' as follows:

    medical practitioner means a person who is registered under this Law in the medical profession.

The medical profession is but one health profession recognised under the National Law. Other health professions include Chinese medicine, chiropractic, dental, nursing and midwifery, pharmacy and psychology. Section 113 of the National Law states that; a person must not use a title of a health profession unless they are registered in that profession. Only members of the medical profession can use the title of medical practitioner.

The information provided does not indicate who will be providing the services in the First Aid/consulting rooms. However, it is likely that the first aid and the flu shot may be provided by a nurse and that an optometrist is likely to provide the eye check. In such a situation, requirement (iii) will be met for these services.

If the service is not provided by one of the listed providers, requirement (iii) will only be met if the care is provided 'on behalf of' a legally qualified medical practitioner, nurse, dentist or optometrist. The meaning of 'on behalf of' is discussed in paragraphs 93 to 96 of CR 2011/41. Paragraphs 94 to 96 of CR 2011/41 state:

94. The phrase 'on behalf of' is not defined for the purposes of the FBTAA. The Australian Concise Oxford Dictionary ³ defines the term 'behalf' or 'on behalf of' as:

behalf n. on (US in) behalf of (or on a person's behalf ) 1 in the interests of (a person, principle, etc.). 2 as representative of (acting on behalf of my client ).

95. In Cuthbertson & Richards Sawmills v. Thomas (1999) 93 FCR 141 the meaning of the phrase 'on behalf of' was discussed. It was stated that the phrase does not have a strict legal meaning. The court referred to R v. Toohey ; Ex parte Attorney General (N.T.) (1980) 145 CLR 374 at 386 where Stephen, Mason, Murphy and Aickin JJ referred to the phrase in these terms:

...it bears no single and constant significance. Instead it may be used in conjunction with a wide-range of relationships, all however, in some way concerned with the standing of one person as auxiliary to or representative of another person or thing.

...Context will always determine to which of the many possible relationships the phrase 'on behalf of' is in a particular case being applied; 'the context and subject matter' (per Dixon J in R v. Portus ; Ex parte Federated Clerks Union (1949) 79 CLR 428) will be determinative.

'Auxiliary' is defined in the Macquarie Dictionary :⁴

1. giving support, helping, aiding or assisting

96. In the context of the definitions of 'work-related medical examination', as well as 'work-related medical screening' and 'work-related preventative health care', the phrase 'on behalf of' requires a relationship between the two parties such that one party is acting in place of or as representative of the other. That is, if the person carrying out the examination or test (or providing the care) is not a specified medical person, then that person must be giving support or assisting a specified medical person who is providing the benefit.

Although the information provided does not indicate whether this requirement is met, it is noted that the beautician services are unlikely to be provided on behalf of a legally qualified medical practitioner, nurse, dentist or optometrist.

Requirement (v) is the care provided wholly or principally in order to prevent the employee suffering from work-related trauma?

As set out above, work-related trauma is defined in subsection 136(1) of the FBTAA to mean:

(a) the injury of the employee (including the aggravation, acceleration or recurrence of an injury of the employee);

(b) the contraction, aggravation, acceleration or recurrence of a disease of the employee;

(c) the loss or destruction of, or damage to:

(i) an artificial limb or other artificial substitute;

(ii) a medical, surgical or similar aid or appliance used by the employee; or

(iii) clothing worn by the employee; or

(d) the coming into existence, the aggravation, acceleration or recurrence of any other physiological or psychological condition in relation to the employee that is or may be harmful or disadvantageous to, or result in harm or disadvantage to, the employee;

that is related to any employment of the employee.

One of the requirements is for the injury to be related to the employment of the employee. From the information provided, we have not been able to determine whether this requirement is met.

Other possible exemptions in section 58M

Apart from paragraphs 58M(b)(iii) and 58M(c)(iii), you may also like to consider the application of:

• paragraphs 58M(b)(ii) and 58M(c)(ii) which will be applicable if the service is work-related medical screening; and

• paragraphs 58M(b)(iv) and 58M(c)(iv) which will be applicable if the service is work-related counselling.

Work-related medical screening

The definition of work-related medical screening in subsection 136(1) states:

work-related medical screening , in relation to an employee of an employer, means an examination or test carried out by, or on behalf of, an audiometrist or a legally qualified medical practitioner, nurse, dentist or optometrist wholly or principally in order to ascertain whether the employee has suffered, is suffering or is at risk of suffering, from work-related trauma, but does not include an examination or test that is not made available generally to all employees of the employer:

(a) who are likely to have suffered, be suffering or be at risk of suffering, from similar work-related trauma;

(b) who perform the duties of their employment at or near the place where the employee performs the duties of his or her employment; and

(c) whose duties of employment are similar to those of the employee.

This definition is discussed in paragraph 99 of CR2011/41.

Although you have not referred to this exemption, it may be relevant to the eye checks.

It may also be relevant if a legally qualified medical practitioner or nurse conducts an examination or test on an employee which determines the employee is likely to be at risk of suffering from work-related trauma and refers the employee to the service provider who provides the relevant service in the First Aid/consulting rooms. In such a situation, the initial examination may be work-related screening and the subsequent service may be work-related preventative health care.

Work-related counselling

If the nutrition advice is not considered to be work-related preventative health care as a result of the care not being provided by or on behalf of a legally qualified medical practitioner, nurse, dentist or optometrist it may be an exempt benefit under paragraph 58M(1)(c)(iv) if the advice is work-related counselling.

The definition of 'work-related counselling' in subsection 136(1) of the FBTAA states:

(a) in relation to an employee of an employer, means counselling attended by the employee; and

(b) in relation to an associate of an employee of an employer, means counselling attended by the associate where the associate is accompanied by the employee;

where all of the following conditions are satisfied:

(c) the attendance of:

(i) if paragraph (a) applies - the employee; and

(ii) if paragraph (b) applies - both the employee and the associate;

at the counselling gives effect to an objective, purpose, plan or policy devised, adopted or required to be followed, by the employer to:

(iii) improve or maintain the quality of the performance of employees' duties; or

(iv) prepare employees for retirement;

(d) the counselling relates to any of the following matters:

(i) safety;

(ii) health;

(iii) fitness;

(iv) stress management;

(v) personal relationships;

(vi) retirement problems;

(vii) drug or alcohol abuse;

(viii) rehabilitation or prevention of work-related trauma or of other disease or injury;

(ix) first aid;

(x) any similar matter;

(e) there is no benefit that:

(i) is provided in respect of the employment of the employee;

(ii) consists of the provision of, or relates to, the counselling; and

(iii) is provided wholly or principally as a reward for services rendered or to be rendered by the employee.

This definition is discussed in paragraphs 111 to 117 of CR 2011/41.

Conclusion

The treatment of the benefits provided under the arrangement can be summarised as follows:

Another exemption which could apply if the benefits were not provided under a salary sacrifice arrangement is section 58P. In general terms, this exemption will apply where the notional taxable value is less than $300 and it is considered unreasonable on the basis of a consideration of the criterion listed in paragraph 58P(1)(f) to treat the benefit as a fringe benefit.

The application of this section has not been considered as paragraph 16 of Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits states:

The minor benefits exemption in section 58P does not apply to benefits that are provided to an employee under a SSA.