Edited version of private advice

Authorisation Number: 1051771653634

Date of advice: 25 November 2020

Ruling

Subject: Exempt benefits - career transition assistance

Question

Do the following services provided to outgoing employees under a career transition program constitute exempt benefits pursuant to section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

A.    Outplacement Services

B.    Financial Advice Services, and

C.   Career Transition Training.

Answer

A.    Yes.

B.    Yes.

C.   No.

This ruling applies for the following periods:

1 April 2020 to 31 March 2024.

The scheme commences on:

1 April 2020.

Relevant facts and circumstances

Employees of the Employer are entitled to career transition assistance under the Employer's career transition program. The purpose of the Employer's career transition program is to provide phased benefits, tools and services to assist employees with career transition when their employment with the Employer is terminated.

The benefits provided under the Employer's career transition program are:

A.    Outplacement Services (e.g. curriculum vitae (CV) skills; job search skills; and interview skills)

B.    Financial Advice from a Professional, and

C.   Career Transition Training (e.g. education and training provided by external training facilities, including (but not limited to recognised Australian Qualifications Framework courses; recognised or accredited employer and industry courses; the training component of an apprenticeship etc).

The Outplacement Services are commonly provided through seminars or face-to-face sessions.

These services can be delivered either:

•         in person by the Employer's staff

•         by a professional engaged externally by the Employer

•         by direct payment to a supplier, or

•         by reimbursement to the particular employee (in lieu of direct payment to supplier).

The services are not being provided either by way of salary sacrifice or as a reward for services performed by the employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 24

Fringe Benefits Tax Assessment Act 1986 Section 45

Fringe Benefits Tax Assessment Act 1986 Section 52

Fringe Benefits Tax Assessment Act 1986 Section 58M

Fringe Benefits Tax Assessment Act 1986 Section 58P

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1997 Section 8-1

Reasons for Decision

Question

Do the following services provided to outgoing employees under a career transition program constitute exempt benefits pursuant to section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

A.    Outplacement Services

B.    Financial Advice Services, and

C.   Career Transition Training.

Summary

Outplacement Services and Financial Advice Services provided to employees under the Employer's career transition program are considered 'work-related counselling' as per the definition of that term in subsection 136(1) of the FBTAA and therefore constitute exempt benefits pursuant to section 58M of the FBTAA.

However, Career Transition Training provided to employees under the Employer's career transition program is not considered to be 'work-related counselling' as per the definition of that term in subsection 136(1) of the FBTAA and therefore does constitute an exempt benefit under section 58M of the FBTAA. This component would be taxable as either an expense payment fringe benefit or a residual fringe benefit (as applicable) under section 20 or section 45 of the FBTAA respectively.

Detailed reasoning

Relevant law

Section 58M of the FBTAA exempts from fringe benefits tax (FBT) various benefits including, among other things, work-related counselling. The benefits provided must consist of work-related counselling of the employee or associate of the employee, or the benefit must be associated with such work-related counselling.

With respect to expense payment benefits and residual benefits, subparagraphs 58M(1)(a)(iv) and 58M(1)(c)(iv) of the FBTAA respectively state:

Where any of the following benefits is provided in respect of the employment of an employee:

(a) An expense payment benefit where the recipients expenditure is in respect of:

...

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

...

(c) A residual benefit where the recipients benefit consists of the provision of:

...

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

the benefit is an exempt benefit.

Therefore, for a benefit provided under the Employer's career transition program to be exempt under section 58M of the FBTAA, the following requirements must be met:

1.    The benefit is an expense payment benefit, or a residual benefit, being provided to the entity's employees.

2.    The benefit consists of the provision of work-related counselling.

Paragraph 20(b) of the FBTAA provides that an expense payment benefit arises where a person (the 'provider' of the benefit) reimburses another person (the 'recipient' of the benefit), in whole or in part in respect of an amount of expenditure incurred by the recipient.

Section 45 of the FBTAA provides that a benefit is a residual benefit for the purposes of the FBTAA if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). Where benefits provided under the Employer's career transition program are not expense payment benefits, they are generally provided as residual benefits.

The term 'employee' is defined at subsection 136(1) of the FBTAA to mean a current, future or former employee. Hence, an expense payment benefit or a residual benefit will be provided to an employee even if the particular benefit is provided after the employee has been terminated.

'Work-related counselling' is defined in subsection 136(1) of the FBTAA as follows:

Work-related counselling:

(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) Prepares 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; or

(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.

With particular regard to paragraph (d) of the definition of 'work-related counselling', the phrase 'relates to' is not defined in the FBTAA. The meaning of these words has, however, been discussed at common law. It was common ground in Tooheys Ltd v. Commissioner of Stamp Duties (NSW) (1960) 105 CLR 602 at 620 per Taylor J; Joye v. Beach Petroleum NL & Anor (1996) 14 ACLC 1174 at 1181-1182; (1996) 67 FCR 275 at 285 per Beaumont and Lehane JJ; Australian Competition and Consumer Commission v. Maritime Union of Australia (2002) ATPR 41-849 at 44,514; (2001) 114 FCR 472 at 487 per Hill J; North Sydney Council v. Ligon 302 Pty Ltd (1996) 185 CLR 470; Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355 at 387; O'Grady v. Northern Queensland Co Ltd (1990) 169 CLR 356 at 374 per Toohey and Gaudron JJ; and HP Mercantile Pty Limited v. FC of T 2005 ATC 4571 at 35; that the term 'relates to' was extremely wide requiring the existence of an association or connection between two subject matters. That connection or association may be direct or indirect, substantial or real, depending on the context in which the words are used. However, the connection or association must be relevant and a remote relationship would generally not suffice.

The benefits provided to an employee under the Employer's career transition program will be considered 'work-related counselling' where the relevant conditions as set out in the definition of that term in subsection 136(1) of the FBTAA are met. These conditions are summarised as follows:

1.    Are the benefits provided under the Employer's career transition program considered to be 'counselling' attended by the employee?

2.    Does the attendance of the employee at the counselling give effect to an objective, purpose, plan or policy devised, adopted or required to be followed by the employer to either improve or maintain the quality of the performance of employee's duties or prepare employees for retirement?

3.    Do the costs of the counselling provided under the Employer's career transition program relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA?

4.    Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee?

The ordinary meaning of 'counselling' is provided in the Macquarie Dictionary Online as 'the provision of help and advice, especially to someone experiencing difficulty, by a person trained to do so'. The definition of 'counselling' provided in subsection 136(1) of the FBTAA states that counselling 'includes the giving of advice or information in a seminar'.

'Seminar', while not defined in the FBTAA, takes its ordinary meaning which the Macquarie Dictionary Online defines as:

1.    a small group of students, as in a university, engaged in advanced study and original research under a professor or the like.

2.    the gathering place of such a group.

3.    a course or subject of study for advanced graduate students.

4.    a meeting of students, usually at an advanced level, for discussion of and instruction in a specified topic, usually chaired by a teacher.

5.    a meeting organised to discuss a specific topic.

In ATO Interpretative Decision 2015/1 Fringe Benefits Tax: Exempt benefits: work-related counselling - training courses or activities for employees being made redundant (ATO ID 2015/1), it was determined that training courses or activities are 'counselling' as defined in subsection 136(1) of the FBTAA. However, ATO ID 2015/1 also stated that:

It is considered that the [worker retraining program for employees being made redundant] does not relate to any of the specific matters listed in subparagraphs (i) to (ix) of paragraph (d) because the connection or association is too remote. The training course or activity enables the employee to acquire new skills, qualifications, and accreditations to enhance their future employment prospects. It is not apparent from an examination of the type of counselling that it relates to one of the matters listed.

Paragraphs 1 to 4 of Taxation Determination 93/153 Fringe Benefits Tax: are outplacement services provided to current and former employees in the nature of work-related counselling and thus exempt from fringe benefits tax under section 58M of the Fringe Benefits Tax Assessment Act 1986 ('the Act')? (TD 93/153) state:

1.    Section 58M exempts from fringe benefits tax various benefits including work-related counselling. The benefit provided must consist of work-related counselling of the employee or associate of the employee, or the benefit must be associated with such work-related counselling.

2.    Subsection 136(1) of the Act defines "work-related counselling" and means amongst other things counselling provided to an employee by an employer which improves or maintains the quality of the performance of employees' duties. The counselling does not have to maintain or improve the quality of the performance of a particular employee, as long as it improves or maintains the quality of the performance of any of the organisation's employees.

3.    Outplacement services are quite commonly provided by employers to employees before and after they are made redundant to assist them to organise their skills and experience in order to obtain satisfactory new employment. Such services, as they are normally provided, are considered to fall within the meaning of counselling as defined in paragraph (d) of the definition of "work-related counselling" in subsection 136(1).

4.    It is considered that as the provision of outplacement services to employees made redundant improve or maintain the quality of the performance of the remaining employees, these services fall within the definition of "work-related counselling" and as such are exempt benefits under section 58M.

Section 24 of the FBTAA allows for the taxable value of an expense payment fringe benefit which is provided to an employee to be reduced to the extent to which the employee would have been entitled to a 'once-only' income tax deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the expenditure concerned had it not been paid or reimbursed by the benefit provider. This is known as the 'otherwise deductible rule'. A 'once-only' deduction is one that is wholly or partly allowable in one year for the expenditure, and not in any other year. Section 8-1 of the ITAA 1997 sets of the general rules for income tax deductibility.

The 'otherwise deductible rule' may also apply in respect of a residual fringe benefit provided to an employee, pursuant to section 52 of the FBTAA.

In considering the applicability of the 'otherwise deductible rule' to the provision of Career Transition Training to the Employer's employees, paragraph 15 of Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business states:

15.  The fact that the study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment) is not a sufficient basis in itself for self-education expenses to be deductible. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Application of the law to the Employer's circumstances

A.   Outplacement Services

The provision of Outplacement Services to an employee will be exempt where:

1.    the benefit is an expense payment benefit or a residual benefit being provided to the entity's employees, and

2.    the benefit consists of the provision of work-related counselling.

Do the Outplacement Services constitute an expense payment benefit or a residual benefit being provided to employees?

As provided in the facts, the Outplacement Services provided under the Employer's career transition program can be delivered either in person by employees of the Employer; by a professional engaged externally by the Employer; by direct payment to a supplier; or by reimbursement to the employee (in lieu of direct payment to supplier). A reimbursement to an employee for the cost of Outplacement Services that the employee received constitutes an expense payment benefit pursuant to paragraph 20(b) of the FBTAA. Outplacement Services provided to an employee under any of the other delivery methods (that is not an expense payment benefit) would constitute a residual benefit under section 45 of the FBTAA.

The employees who are provided with the Outplacement Services under the Employer's career transition program are 'employees' (as per the definition of that term in subsection 136(1) of the FBTAA) regardless of whether they are provided with the benefits before or after they are terminated.

Do the Outplacement Services consist of the provision of work-related counselling?

The benefits provided to an employee under the Employer's career transition program will be considered 'work-related counselling' where the relevant conditions below - as set out in the definition of that term in subsection 136(1) of the FBTAA - are met.

Are the Outplacement Services provided under the Employer's career transition program considered to be 'counselling' attended by the employee?

As per the facts, the Outplacement Services are commonly provided through seminars or face-to-face sessions, which is considered to satisfy the definition of 'counselling' as provided in both subsection 136(1) of the FBTAA and the Macquarie Dictionary Online.

Does the attendance of the employee at the counselling give effect to an objective, purpose, plan or policy devised, adopted or required to be followed by the employer to either improve or maintain the quality of the performance of employee's duties or prepare employees for retirement?

The Employer has created a policy - delivered in the form of its career transition program - to support employees exiting the organisation, as well as to:

•         maintain the performance of the remaining employees through the improvement of morale and reduction of disruptions to the workforce, and

•         ensure that remaining employees understand that support will be available to them when/if they leave, and that their colleagues who are leaving are being supported.

Under the Employer's career transition program, employees are able to access various services provided by the Employer, such as career guidance, skills recognition and training, and financial advice. The intention in providing such counselling was to meet the goal of assisting the affected employees to transition to a new career and a secure future. This is consistent with the principles embedded in TD 93/153.

Therefore, it is accepted that the attendance of an employee at counselling in respect of Outplacement Services will give effect to the Employer's career transition program to maintain the quality of the performance of its employees' duties.

Do the costs of the counselling provided under the Employer's career transition program relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA?

Pursuant to paragraphs 3 and 4 of TD 93/153, Outplacement Services provided under the Employer's career transition program is a support to employees to assist them to organise their skills and experience in order to obtain satisfactory new employment, which are considered to fall within the meaning of 'counselling' as defined in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA.

Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee?

As per the facts, the Outplacement Services are not being provided either by way of salary sacrifice or as a reward for services performed by the employee.

Conclusion for Outplacement Services

Outplacement Services provided to employees under the Employer's career transition program constitute exempt benefits pursuant to section 58M of the FBTAA.

B.  Financial Advice Services

The provision of Financial Advice Services to an employee will be exempt where:

1.    the benefit is an expense payment benefit or a residual benefit being provided to the entity's employees, and

2.    the benefit consists of the provision of work-related counselling.

Do the Financial Advice Services constitute an expense payment benefit or a residual benefit being provided to employees?

The Financial Advice Services provided to employees constitute either an expense payment benefit or a residual benefit on the same basis as per the response to this question for 'Outplacement Services'.

Do the Financial Advice Services consist of the provision of work-related counselling?

The benefits provided to an employee under the Employer's career transition program will be considered 'work-related counselling' where the relevant conditions below - as set out in the definition of that term in subsection 136(1) of the FBTAA - are met.

Are the Financial Advice Services provided under the Employer's career transition program considered to be 'counselling' attended by the employee?

The Employer's career transition program provides that an employee may receive 'professional' financial advice services. As the financial advice must be 'professional' in nature, it must be provided by a person trained in the relevant field. As such, Financial Advice Services provided to an employee are considered to satisfy the definition of 'counselling' as that term is defined in subsection 136(1) of the FBTAA.

Does the attendance of the employee at the counselling give effect to an objective, purpose, plan or policy devised, adopted or required to be followed by the employer to either improve or maintain the quality of the performance of employee's duties or prepare employees for retirement?

On the same basis as per the response to this question for 'Outplacement Services', it is accepted that the attendance of an employee at counselling in respect of Financial Advice Services will give effect to the Employer's career transition program to maintain the quality of the performance of its employees' duties.

Do the costs of the counselling provided under the Employer's career transition program relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA?

For the purposes of this ruling, the Financial Advice Services provided under the Employer's career transition program is to assist employees with arranging their financial affairs when their employment with the Employer is terminated.

Consistent with the principles embedded within TD 93/153, it is considered that the costs of the Financial Advice Services involve the provision of 'outplacement services' which fall within the meaning of 'counselling' as defined in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA.

Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee?

As per the facts, the Financial Advice Services are not being provided either by way of salary sacrifice or as a reward for services performed by the employee.

Conclusion for Financial Advice Services

Financial Advice Services provided to employees under the Employer's career transition program constitute exempt benefits pursuant to section 58M of the FBTAA.

C.  Career Transition Training

The provision of Career Transition Training to an employee will be exempt where:

1.    the benefit is an expense payment benefit or a residual benefit being provided to the entity's employees, and

2.    the benefit consists of the provision of work-related counselling.

Does the Career Transition Training constitute an expense payment benefit or a residual benefit being provided to employees?

The Career Transition Training provided to employees constitute either an expense payment benefit or a residual benefit on the same basis as per the response to this question for 'Outplacement Services'.

Does the Career Transition Training consist of the provision of work-related counselling?

The benefits provided to an employee under the Employer's career transition program will be considered 'work-related counselling' where the relevant conditions below - as set out in the definition of that term in subsection 136(1) of the FBTAA - are met.

Is the Career Transition Training provided under the Employer's career transition program considered to be 'counselling' attended by the employee?

The types of benefits provided under the Career Transition Training entitlement are varied. The benefits are considered to be counselling attended by the employee only to the extent that costs relate to 'the provision of help and advice', including 'the giving of advice or information in a seminar' per the definition of 'counselling' in subsection 136(1) of the FBTAA.

The following Career Transition Training courses are considered to constitute 'counselling' attended by the employee as they relate to the provision of help and advice by a person trained to do so. This view is supported by ATO ID 2015/1 which provides that training courses or activities are 'counselling' (as that term is defined in subsection 136(1) of the FBTAA).

•        Recognised Australian Qualifications Framework courses

•        Recognised or accredited employer and industry courses

•        Training component of an apprenticeship

Does the attendance of the employee at the counselling give effect to an objective, purpose, plan or policy devised, adopted or required to be followed by the employer to either improve or maintain the quality of the performance of employee's duties or prepare employees for retirement?

On the same basis as per the response to this question for 'Outplacement Services', it is accepted that the attendance of an employee at counselling in respect of Career Transition Training will give effect to the Employer's career transition program to maintain the quality of the performance of its employees' duties.

Do the costs of the counselling provided under the Employer's career transition program relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA?

It was provided in ATO ID 2015/1 that a training course or activity was not related to any of the specific matters listed in subparagraphs (i) to (ix) of paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA because the connection or association is too remote. Having regard in the present circumstances to Career Transition Training courses accepted as constituting 'counselling', these courses enable the employee to acquire new skills, qualifications, and accreditations to enhance their future employment prospects. It is not apparent from an examination of this type of counselling that these training courses relate to one of the matters listed in subparagraphs (i) to (ix) of paragraph (d).

It is further considered that these training courses do not relate to 'any similar matter'. The Macquarie Dictionary Online defines 'similar' to mean having likeness or resemblance, especially in a general way. In this context, for an unlisted matter to be similar, that matter would have to resemble or have likeness to one of the listed matters. It is not considered in the circumstances described that the matter of redundancy resembles or has a likeness to any specific matter listed.

Therefore, the Career Transition Training courses (that are considered to meet the definition of 'counselling') are not related to any matter listed in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA.

Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee?

As per the facts, the Career Transition Training is not being provided either by way of salary sacrifice or as a reward for services performed by the employee.

Conclusion for Career Transition Training

Career Transition Training provided to employees under the Employer's career transition program does not constitute exempt benefits pursuant to section 58M of the FBTAA. Such benefits would be taxable as either an expense payment fringe benefit or a residual fringe benefit (as applicable) under section 20 or section 45 of the FBTAA respectively.