Edited version of your written advice

Authorisation Number: 1051179773280

Date of advice: 13 January 2017

Ruling

Subject: Fringe benefits tax: exempt benefits: section 58

Question 1

Is the provision of accommodation, utilities and telephone to the house manager of The Property exempt benefits pursuant to section 58 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following period(s)

1 April 2016 to 31 March 2017

1 April 2017 to 31 March 2018

1 April 2018 to 31 March 2019

1 April 2019 to 31 March 2020

1 April 2020 to 31 March 2021

The scheme commences on

1 April 2016

Relevant facts and circumstances

You are a charitable organisation registered with the Australian Charity and Not-for-Profit Commission (ACNC) for purposes beneficial to the community.

You own a property known as The Property. You provide accommodation in The Property to relatives and carers of rural, interstate or international patients who have been admitted to local City hospitals.

You rely upon referrals from doctors and social workers based upon your admission policy. The key selection criterion is based on financial need and priority is given as follows:

a) PRIORITY ONE - individuals who have no capacity to immediately pay normal commercial rates for accommodation because of either acute financial stress associated with the hospitalisation event or chronic financial hardship;

b) PRIORITY TWO - individuals whose financial situation is such that paying normal accommodation rates would represent a serious burden to their financial stability; and

c) PRIORITY THREE - individuals from communities that are known to be financially disadvantaged, such as aboriginal communities and recent immigrants.

You consider that relying on doctors and social workers is essential in determining which individuals are most in need of the services provided by The Property. You suggest that the doctors and social workers are considered to be in the best situation to make an effective and efficient assessment of the financial needs of the individuals. The doctors and social workers provide a statement to The Property setting out the circumstances of the individual, together with a rating of their priority level. These statements are retained by The Property House.

Guests who stay at The Property may be eligible to receive government-subsidised travel and accommodation allowances for carers of patients. This allowance is not means tested. Guests who are not eligible for government subsidies are usually immediate family (children, spouse) of the designated carer staying in The Property House. For these guests, the accommodation charge is equivalent to the subsidy rate paid.

Guests can arrive at any hours of the day or night. Accordingly, you employ a house manager who lives at The Property.

The house manager provides the following services for guests:

a) access to professional assistance;

b) a contact for hospitals where the guest cannot be contacted directly;

c) in circumstances where the inpatient passes away, support to the guest of The Property until other family or friends arrive, including assisting with making funeral arrangements;

d) directions or information or how to get to and from hospitals;

e) advice regarding documentation to support a claim for government assistance;

f) hospitality;

g) ensuring compliance with health and safety regulations and other relevant statutory regulations;

h) cleaning; and

i) provide a secure environment.

The Property and its employees provide guests with a safe, clean, comfortable and secure residence. Assistance is provided by the house manager 24 hours a day, 7 days a week.

The house manager is remunerated for their role. The house manager does not pay for their accommodation, residential fuel (i.e. electricity), or telephone at The Property.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Section 58

Subsection 58(1)

Paragraph 58(1)(a)

Subparagraph 58(1)(a)(iii)

Paragraph 58(1)(b)

Paragraph 58(1)(c)

Paragraph 58(1)(d)

Subsection 58(2)

Subsection 136(1)

Reasons for decision

Subsection 58(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides:

Where, during a period:

(a) the employer of an employee is:

                     (i) a government body; or

                   (ii)  a registered religious institution; or

(iii)  a company that is registered under the Australian Charities and Not-for-profits Commission Act 2012 and does not meet the description of the subtype of entity in column 2 of item 4 of the table in subsection 25-5(5) of that Act; or

                     (iv) a non-profit company that is not an ACNC type of entity;

whose activities consist of, or include, caring for elderly persons or disadvantaged persons; and

(b)  the duties of the employment of the employee consist of, or consist principally of:

(i) caring for elderly persons and any children of those elderly persons who reside with those elderly persons; or

(ii)  caring for disadvantaged persons and any children of those disadvantaged persons who reside with those disadvantaged persons; and

(c)  in the performance of those duties, the employee lives, together with elderly persons or disadvantaged persons, in residential premises of the employer; and

(d)  the fact that the person lives in those premises is directly related to the provision, in the course of the performance of the duties of the employment of the employee, of care to the elderly persons or disadvantaged persons living in those premises;

any benefit arising from the provision, during that period, of:

(e)  that accommodation to the employee or to the employee and a spouse or child of the employee who resides in those premises with the employee; or

(f)  residential fuel in connection with that accommodation for use by the employee or by the employee and a spouse or child of the employee; or

(g)  meals provided on those premises to the employee or to a spouse or child of the employee who resides in those premises with the employee; or

(h)  food or drink (other than meals) for consumption during that period by the employee or by a spouse or child of the employee who resides in those premises with the employee;

is an exempt benefit.

Paragraph 58(1)(a)

For benefits to be exempt, the employer must be an entity that falls within one of categories of employers listed in paragraph 58(1)(a) of the FBTAA. The Property is a charitable organisation registered with the Australian Charities and Not for Profit Commission.

The Property is not registered as an entity whose purpose is the advancement of religion. Accordingly, The Property is an employer that is referred to in subparagraph 58(1)(a)(iii) of the FBTAA.

Paragraph 58(1)(b)

A further requirement is that the duties of the employee must consist principally of caring for either elderly persons or disadvantaged persons.

A guest of The Property can be a person of any age, provided they are a relative, friend or an approved carer of a person who has been admitted as an inpatient to a local City hospital. Therefore, subparagraph 58(1)(b)(i) of the FBTAA is not applicable to the circumstances.

Therefore, it is necessary to consider if the clients of The Property are disadvantaged persons. The term 'disadvantaged person' is defined in subsection 136(1) of the FBTAA as:

(a) a person who is intellectually, psychiatrically or physical handicapped; or

(b) a person who is in necessitous circumstances.

A guest of The Property is not limited to people who are intellectually, psychiatrically or physically handicapped. Therefore, paragraph 136(1)(a) of the FBTAA is not applicable to the circumstances.

On this basis, it is necessary to consider if the clients of The Property are in 'necessitous circumstances.'

Necessitous circumstances

The term 'necessitous circumstances' is not defined in the FBTAA. However, the Commissioner's views on the meaning of 'necessitous circumstances' are set out in Taxation Ruling TR 2000/9 Income tax: necessitous circumstances funds which deals with public funds established and maintained for the relief of persons who are in necessitous circumstances.

Paragraph 29 of TR 2000/9 lists some of the principles that have emerged from case law on the meaning of necessitous circumstances. These include:

● necessitous circumstance concern financial necessity

● it involves some degree of poverty, though it may be less than abject poverty or destitution

● it is relative to a modest standard of living'

● it is a relative term, which has no fixed quantitative measure and it may be relative to particular circumstances; and

● it is distinguished from the inability to afford merely desirable advantages

The Commissioner considers that 'necessitous circumstances' refers to financial necessity and does not extend to more general needs. This view was taken by Kitto J in Ballarat Trustees Executors and Agency Co Ltd v FC of T (1950) 80 CLR 350 at 353:

It was contended ... that the expression "necessitous circumstances" ... includes any circumstances of need, such as the need for hospital attention, and is not confined to circumstances of financial necessity. In my opinion so wide a construction of the expression should not be adopted, having regard to ordinary usage, the context in which the words appear and the history of the sub-section [8(5) of the Estate Duty Assessment Act 1914 - 1942]. I construe the expression as referring to circumstances characterized by some degree of financial necessity.

While necessitous circumstances involve financial necessity, the necessity need not be to the extent of abject poverty or destitution. In Ballarat Trustees, Kitto J said at 80 CLR 355:

The expression "necessitous circumstances" is not defined by the Act, nor has it been judicially interpreted in its present or a comparable context. It does not admit of definition in terms so precise as to provide a yardstick for the determination of every case which may arise. Yet it is an expression which is familiar in common speech, not as limited to cases of abject penury, but as conveying the notion which the Oxford Dictionary endeavours to express as "having little or nothing to support oneself by; poor, needy; hard up". None of these words or phrases can be selected as by itself precisely defining the expression. "There are degrees of poverty less acute than abject poverty or destitution, but poverty nevertheless": Lemm v. Federal Commissioner of Taxation (1942) 66 CLR 399, at 410 per Williams J; and "necessitous circumstances" refers in my opinion to some degree of poverty.

You rely upon referrals from doctors and social workers based upon your admission policy. The key selection criterion is based on financial need and priority is given as follows:

a) PRIORITY ONE - individuals who have no capacity to immediately pay normal commercial rates for accommodation because of either acute financial stress associated with the hospitalisation event or chronic financial hardship;

b) PRIORITY TWO - individuals whose financial situation is such that paying normal accommodation rates would represent a serious burden to their financial stability; and

c) PRIORITY THREE - individuals from communities that are known to be financially disadvantaged, such as aboriginal communities and recent immigrants.

You consider that relying on doctors and social workers is essential in determining which individuals are most in need of the services provided by The Property. They are considered to be in the best situation to make an effective and efficient assessment of the financial needs of the individuals. In accordance with the policy, the doctors and social workers assess the financial circumstances of the individual and assign a priority level and that priority level determines assistance by you. In these circumstances, the Commissioner accepts that the duties of the house manager consist principally of caring for disadvantaged persons.

Paragraph 58(1)(c)

A further requirement is that the employee must live with the elderly or disadvantaged persons in the residential premises of the employer.

The term 'residential premises' is defined at subsection 58(2) of the FBTAA as follows:

In this section:

"residential premises " means a house or hostel used exclusively for the provision of residential accommodation to:

(a)  elderly persons or disadvantaged persons and children of elderly persons or disadvantaged persons;

(b)  persons the duties of whose employment consist of, or consist principally of, caring for persons referred to in paragraph (a); and

     (c)  spouses and children of persons referred to in paragraph (b).

The use of the word exclusively in this definition requires the residential premises to only be used to house elderly or disadvantaged persons and their children, and the employees who care for them, together with their spouse and children. As discussed above, this requires an assessment as to whether each person who is provided with residential accommodation at The Property is in necessitous circumstances, or is the child of somebody in necessitous circumstances. Essentially, this requires the admission policy to be strictly enforced. You confirm that the assessment is conducted by the doctors and social workers, with a statement provided to The Property setting out the circumstances of the individual, together with a rating of their priority level. The Property will then offer accommodation based on their priority level.

In these circumstances, the Commissioner accepts that The Property is residential premises for the purposes of paragraph 58(1)(c) of the FBTAA.

Paragraph 58(1)(d)

A further requirement is that the employee only lives in the residential premises due to their requirement to care for elderly or disadvantaged persons.

Guests can arrive at any hour of the day or night which requires somebody to be on-site at all times. The house manager is employed to fill this role, with assistance being provided 24 hours a day, 7 days a week. The house manager resides on premises to provide for the care of the residents.

In these circumstances, the Commissioner accepts that the employee is required to live at The Property due to their requirements to care for disadvantaged persons.

Accordingly, fringe benefits such as accommodation, residential fuel, meals, and food and drink (other than meals) will be exempt under section 58 of the FBTAA.