Edited version of private advice

Authorisation Number: 1051998051352

Date of advice: 29 June 2022

Ruling

Subject: Exempt fringe benefits tax

Question 1

Is the reimbursement of financial advice paid to current and former employees impacted by redundancies 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 (FBTAA)?

Answer

Yes.

This ruling applies for the following periods:

End of FBT year 31 March 20XX

End of FBT year 31 March 20XX

End of FBT year 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The Applicant ceased manufacturing activities in Australia.

This decision has led to significant redundancies.

The Applicant was committed to providing outplacement services to affected employees facing redundancy.

A consulting firm was appointed to assist with future career planning and alternatives, resume writing and job interview technique assistance. Additionally, seminars were made available to assist with the mental side of the mass redundancies.

Reimbursement of the cost of financial advice

The Applicant committed to reimbursing the cost of independent financial advice. A maximum amount was set which was able to be claimed as reimbursement for financial adviser fees.

Reimbursement will only be provided for services delivered by a financial adviser holding a valid license and must be claimed using a financial advisor reimbursement form.

In addition to completing the financial adviser reimbursement claim form, the current or former employee must provide to the Applicant

•         An invoice detailing the cost of the financial counselling

•         Confirmation of payment; and

•         The provider's Australian Financial Services License number

Approved claims were to be paid directly to the employee's bank account used for formal payroll processing.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 20

Fringe Benefits Tax Assessment Act 1986 Section 58M

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Question 1

Is the reimbursement of financial advice paid to current and former employees impacted by redundancies 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 (FBTAA)?

Summary

The reimbursement of the cost of financial advice paid to the employee is an exempt benefit under subsection 58M(1)(a)(iv) of the Fringe Benefits Tax Assessment Act 1986 ('FBTAA'), being an expense payment benefit in respect of "work-related counselling".

Detailed reasoning

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.

Subsection 58M(1) of the FBTAA provides that 'work-related counselling' is an exempt benefit as follows:

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

(a)         an expense payment where the recipient's expenditure is in respect 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;

(b) a property benefit where the recipient's 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;

(c) a residual benefit where the recipients benefit consists 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;

the benefit is an exempt benefit.

Therefore, for a benefit provided 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.

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

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

(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.

The benefits provided to an employee 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.    The benefit is an expense payment benefit, a property benefit or a residual benefit.

2.    The benefit consists of the provision of 'counselling' that is attended by the employee, or an associate accompanying the employee.

3. The counselling gives effect to an objective, purpose, plan, or policy devised, adopted, or required to be followed, by the employer to improve or maintain the quality of performance of the employees' duties, or to prepare employees for retirement.
4. The counselling relates to the matters listed in paragraph (d) of the definition.
5. The counselling is not provided wholly or principally as a reward for services rendered by the employee.

1.    Benefit provided

The term 'benefit' is defined in subsection 136(1) of the FBTAA and includes rights, privileges, and services. Benefits are categorised into 13 different types in Divisions 2 to 12 of Part III of the FBTAA.

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.

Under the arrangement the benefit for the cost of financial advice was paid by the employer to its current and former employees.

The benefit was paid by way of reimbursement.

The term 'employee' is defined at subsection 136(1) of the FBTAA to mean a current, future, or former employee. Hence, the benefit will be provided to an employee whether the employee's employment has been terminated.

Therefore, the reimbursement for a financial adviser fee to the employee is a benefit that falls within the meaning of an expense payment benefit pursuant to section 20 of the FBTAA.

2.    Does the benefit consist of the provision of work-related counselling?

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:

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

(ii) 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."

Therefore, the expenditure incurred by the employee in relation to financial advice will be considered "work-related counselling" where the relevant conditions as set out in subsection 136(1) of the FBTAA are met.

Is the financial advice considered to be counselling attended by the employee?

The term "counselling" is defined in subsection 136 of the FBTAA which states:

"counselling includes the giving of advice or information in a seminar."

The financial advice was provided by a licenced financial adviser relating to the employee's financial circumstances surrounding the prospect of terminating employment.

The financial advice is 'counselling' as defined in subsection 136(1) of the FBTAA which includes the giving of advice.

The reimbursement was made where an invoice was produced, and the payment was confirmed by the employee.

Therefore, the seeking of financial advice is considered to be counselling attended by the employee.

3.    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 employees' duties; or prepare employees for retirement?

The counselling must be an initiative of the employer. The counselling must give effect to an objective, purpose, plan, or policy devised, adopted, or required to be followed, by the employer to:

(i)            improve or maintain the quality of the performance of employees' duties, or

(ii)           prepare employees for retirement.

The counselling was initiated by the employer, who paid for the financial counselling to assist and support employees as they faced redundancy and transition into new careers.

4.    Does the financial advice relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling in subsection 136(1) of the FBTAA?

Paragraph (d) of the definition of work-related counselling requires that the counselling 'relates to' certain specified matters. Those matters include health; fitness; stress management; personal relationships; retirement problems and 'any similar matter'.

The Commissioner's view on the application of the exemption under section 58M of the FBTAA to outplacement services is discussed in Taxation Determination TD 93/153 entitled "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? ('TD 93/153').

Paragraph 1 to 4 to TD 93/153 states:

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.

It is considered that the reimbursement of the cost of financial advice involves the provision of outplacement services which are consistent with TD 93/153, and as such fall within the definition in paragraph (d) of the definition of 'work-related counselling in subsection 136(1) of the FBTAA.

5.    Counselling must not be a reward for services

Counselling of employees or associates of employees is not exempt as work-related counselling if it is provided wholly or principally as a reward for services rendered or to be rendered by the employee. The counselling must not be a form of remuneration.

The reimbursement was paid as the employees had been identified as excess. The reimbursement is not being provided by way of salary sacrifice or as a reward for services performed by the employee, therefore, it is accepted that the reimbursement is not provided wholly or principally as a reward for services.

Conclusion

As all the conditions of the term "work-related counselling" have been met, the reimbursement paid to the employee for financial adviser fees constitutes "work-related counselling" as defined in subsection 136(1) of the FBTAA.

The reimbursement of the cost of financial advice paid to the employee is an exempt benefit under subsection 58M(1)(a)(iv) of the FBTAA, being an expense payment benefit in respect of "work-related counselling.