Edited version of private advice

Authorisation Number: 1052044637192

Date of advice: 2 November 2022

Ruling

Subject: FBT - exempt benefits

Question

Will benefits provided to the staff of the Referral Service (RS), be exempt benefits pursuant to subsection 57A(2) of the FBTAA because the duties they perform are in connection with a public hospital?

Answer

Yes, benefits provided to the staff of the RS will be exempt benefits pursuant to subsection 57A(2) of the FBTAA because the duties are performed exclusively in connection with a public hospital.

This ruling applies for the following periods:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Overview of the RS

The RS manages external referrals for patients requiring a first specialist outpatient appointment within the public health system.

Patient care in public hospitals includes outpatient clinics at which patients consult specialist medical practitioners, have diagnostic or other procedures, or are provided with allied health or specialist nursing care, without being admitted to hospital.

Patients are referred to outpatient services from a range of providers, including General Practitioners (GPs), specialists and clinicians in emergency departments, inpatient units and other areas of the hospital.

The RS provides a single point of entry for external referrals for initial public outpatient appointments across the metropolitan area and manages allocation of referrals to an appropriate hospital site.

Functions of the RS

The RS comprises a function to review and allocate referrals seeking public outpatient services to hospital sites for triaging and appointment allocation.

Prior to the creation of the RS, this function was performed entirely within the HSPs (i.e. via a decentralised model).

The management of outpatient referrals is a core function of the public hospitals offering outpatient services. The hospital has primary responsibility for managing service capacity and activity for its population catchment area.

The RS serves as a 'gatekeeper' and centralised point for receiving referrals for initial specialist (Doctor-led) public outpatient services and allocating them to the most appropriate hospital site and location. The allocation considers patient postcode, clinical urgency and the level of clinical care required, with the goal of improving the patient experience (i.e. delivering equitable, timely care closer to home).

The key benefits of the RS are:

•         improved patient access and reduced patient delays

•         standardised, streamlined referral process with increasing electronic functionality over time

•         allocation of patients to the most appropriate hospital, considering demand measures across the system

•         improved tracking, auditing, and reporting of referrals so that referrers and their patients are better informed about the progress of the referral; and

•         providing an enhanced level of information to referrers at the point of referral.

The provision of an effective referral service is in keeping with the overall objective of the Department to provide better patient outcomes.

The RS process is used by GPs/referrers treating patients who require specialist referral/s and/or outpatient services. GPs/referrers can send referrals to the RS and then receive notifications on the status of their referral that are generated via this process. However, GPs/referrers do not have access to the referral management system itself.

The referral management process sequence is as follows:

a.    GPs/referrers submit a request for their patient to be referred to a particular specialist/s or outpatient service, and this request is reviewed by the RS team (clerical and nursing staff).

b.    Using referral access criteria and considering patient postcode, the level of clinical urgency and clinical care required, the RS will determine the type and level of service (acuity) required, available locations of the specialists for the service within the relevant public hospitals, considering any existing backlogs (i.e. waiting lists) within the hospital or the HSP which the hospital sits within.

c.     The review of outpatient referrals requires a level of clinical triage which occurs at a hospital speciality level, hence the requirement for some of the RS roles to have nursing qualifications. Hospitals are required to notify the RS of any changes in hospital capacity or service offering, which will impact the availability of the type and timeliness of care. In this regard, the hospital and RS work cohesively to deliver timely, quality care with regards to patient referrals.

d.    Once a suitable specialist service is identified, through collaboration with the HSP and hospital site, the RS team will ensure all information contained within the referral is complete and accurate, allocate the referral to the identified hospital site and then send notifications to both the referrer and the patient on the status of their referral.

e.    All referrals are tracked on the RS referral processing system, from referral receipt to acceptance at the hospital site, providing a complete overview of referral status and whether KPIs/targets have been met.

f.      In a small proportion of cases, out-of-scope referrals may be received by RS and forwarded on, where appropriate, to ensure there are no delays to the relevant patient's care. In these out-of-scope instances, RS does not process the referral but merely redirects the referral to a provider outside the public hospital system. This was a function previously completed by HSPs prior to the establishment of RS. The submission of referrals received in error equates to a very small portion of referral handling undertaken by RS staff. It is essentially a courtesy service in the interest of expediting patient care.

The demand management function the RS performs is critical to hospital sites and is a key role within the referral journey and broader WA health system.

On behalf of the hospital sites, the RS provides this centralised referral management function to ensure that patients receive care equitably, within a clinically relevant timeframe, and in the most appropriate place.

Employees of the RS

Employees within the RS are employed and directed by the Department.

Duties of RS employees are divided into JDFs. The JDFs are reflective of the actual duties performed by RS staff, and there is no further documentation or misalignment in employment contracts outlining additional non-qualifying duties.

Except for clerical staff, each of the JDFs include the requirement to hold a nursing qualification which is akin to the qualifications required when referrals were handled by the hospitals / HSPs. Clerical staff report to staff with nursing qualifications (e.g. Nurse Coordinator/Manager, Nurse Specialist). All RS JDFs (nursing and clerical) mirror the roles, duties, responsibilities and qualifications required when the management of referrals was performed by the hospitals (i.e. nursing and clerical roles at hospitals / HSPs).

The current RS roles are as follows:

a.    The Nurse Coordinator/Manager (SRN Level 7) oversees the RS's coordination and management. The main tasks include managing workers, workloads, and day-to-day processes to meet KPIs, as well as implementing strategies to improve the efficiency and effectiveness of referral processing and human resource management.

b.    Nurse Specialists (SRN Level 3) provide specialist screening and patient referral triage and allocation for the designated HSP. Their primary responsibilities include reviewing referrals against access criteria in the electronic referral management system (bespoke SharePoint application, hospital applications [e.g., webPAS], verifying patient demographics, clinical information, and clinical risk/urgency screening, as well as analysing and allocating referrals to suitable specialist services and hospital locations.

c.     Senior Clerical Officers (HSU Level 4) supervise the clerical team. The main responsibilities include managing Clerical Officers and referral allocation, assisting with "Bulk Accepting" referral tasks, assisting with referral processing as needed, and responding to hospital personnel, and troubleshooting referral and patient queries.

d.    Clerical Officers (HSU Level 2) complete referral processing. The main responsibilities include matching patient's unique medical record numbers (UMRNs) and confirming patient demographics, as well as checking and updating patient administrative systems (e.g. webPAS) and performing various administrative tasks (e.g. sending out notifications to patients and referrers on the status of their referral).

Documents included:

RS Policy 2014

RS Hospitals and Services list

Current and proposed RS JDFs.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 57A(2)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Issue

Question

Will benefits provided to the staff of the Referral Service (RS), be exempt benefits pursuant to subsection 57A(2) of the FBTAA because the duties they perform are in connection with a public hospital?

Summary

Yes, benefits provided to the staff of the RS will be exempt benefits pursuant to subsection 57A(2) of the FBTAA because the duties they perform are exclusively performed in connection with a public hospital.

Detailed reasoning

Subsection 57A (2) of the FBTAA states:

(2) Where:

(a) the employer of an employee is a government body; and

(b) the duties of the employment of the employee are exclusively performed in, or in connection with:

(i) a public hospital; or

(ii) a hospital carried on by a society or association that is a rebatable employer

A benefit provided in respect of the employment of an employee is an exempt benefit.

Employer is a government body

Subsection 136(1) of the FBTAA defines a 'government body' as 'the Commonwealth, a State, a Territory or an authority of the Commonwealth or of a State or Territory.'

The employer of the employees is a government body, therefore the first criterion of the exemption in paragraph 57A(2)(a) has been satisfied.

The duties of the employment of the employee are exclusively performed in, or in connection with a public hospital

Taxation Determination 2015/12: Fringe benefits tax: when are the duties of the employment of an employee of an employer who is a government body exclusively performed in, or in connection with, a public hospital or a hospital carried on by a society or association that is a rebatable employer?

Paragraph 2 of TD 2015/12 provides the following 'tests' to help work out whether the duties of an employee of a government body are performed exclusively in connection with a type of hospital specified in paragraph 57A(2)(b) of the FBTAA:

•         the duties are performed 'in' a hospital such that the employee performs their duties at the physical location of the hospital facility where the activities of the hospital are being conducted

•         the duties are performed 'in connection with' a hospital such that the employee performs their duties as a member of the hospital staff under the direction, management and control of the hospital board of management or chief executive officer, or

•         the duties are performed 'in connection with' a hospital such that the employee is engaged in duties that enable the hospital to carry out its functions.

As the RS employees do not perform their duties physically "in" a hospital, an analysis must be conducted to determine whether the duties are performed "in connection with" a public hospital to enable the hospital to carry out its functions.

Definition of public hospital

As the term "hospital" and 'public hospital' is not defined within the FBTAA, it is necessary to consider its ordinary meaning.

The ATO definition of hospital is contained in the "Gift Pack for deductible gift recipients and donors" DGR table Item 1.1.2:

"A hospital is an institution in which patients are received for continuous medical care and treatment for sickness, disease or injury. Providing accommodation is integral to a hospital's care and treatment. Clinics that mainly treat ambulatory patients who return to their homes after each visit are not hospitals. However, day surgeries that provide beds for patients to recover after surgery may be hospitals. Homes providing nursing care in respect of feeding, cleanliness and the like are not hospitals. However, nursing homes for people suffering from illness are accepted as hospitals. Hospices for the terminally ill will generally be hospitals. Minor outpatient and nursing care will not prevent an institution being a hospital".

As stated in Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue, hospitals focus on acute care and medical emergencies, where the purpose is to diagnose, treat and stabilise the condition of a patient.

While it is a feature of hospitals that they enable ongoing treatment by including the provision of accommodation which allows for patients to be admitted as inpatients, clearly outpatient services conducted in and by public hospitals form part of the services of the hospital.

All services within the scope of the RS are conducted by Health Service Providers (HSPs). Each HSP contains a number of public hospitals.

Duties "exclusively in connection with"

It is necessary to consider whether the duties undertaken by employees of the RS have the necessary degree of connection to hospital functions.

The question of whether an employee is engaged exclusively in duties of the requisite nature (in that case, a public benevolent nature) was considered in Ngurratjuta Pmara/Ntjarra Aboriginal Corp v. Commissioner of Taxes (NT)

a.    In that case, it was held an employee's work could not be characterised as benevolent merely because they worked for a public benevolent institution.

b.    However, it was also not necessary that an individual's work be benevolent when considered in isolation. It must be considered in context and the context may be sufficient to give the work its benevolent nature.

c.     The example was provided that a person cleaning rooms in a private hotel will not normally be performing a benevolent activity, but the same person doing the same work in an establishment classified as a public benevolent institution and providing assistance to the sick and needy will be performing a benevolent activity.

d.    This is on the basis that the work is "a necessary part of fulfilling the objectives of the institution"

e.    It was held that a person managing the funds of a public benevolent institution, including its investment funds, is performing work of benevolent nature where those funds are used for the benevolent purposes of the institution. This is extended to maintaining accounting records and management procedures, duties which might otherwise be regarded as financial or administrative, rather than benevolent, in the absence of the overarching aims of the institution.

f.      This was distinguished from the provision of commercial services for reward, which could not be considered essential to the benevolent activities of the institution.

g.    Thus, what is required is that, in the context of the relevant activities (in this instance, those of a public hospital), the employee's work is a necessary part of fulfilling those activities. In the context of subsection 57A(2), the employee's duties must be a necessary part of the hospital fulfilling its objectives i.e. essential to the ordinary activities of the hospital.

In connection with

The definition of 'in connection with' has been defined in Collector of Customs v. Cliffs Robe River Iron Associates per Bowen CJ, Morling and Neaves JJ at paragraph 16: 'The meaning of the word 'connection' is both wide and imprecise. One of its common meanings is 'relation between things one of which is bound up with, or involved, in another'.

In Health and Research Employees Association of Australia v. University of Sydney (Health and Research Employees) her honour Gaudron J examined whether an employee who was employed by the Howard Florey Institute of Experimental Physiology and Medicine was a person employed in or 'in connection with' the University of Melbourne. At CAR 250 her honour said:

'A more appropriate consideration is whether the employment which is claimed to be 'in connection with' universities and/or colleges of advanced education is so bound up or involved with their activities as to be necessarily supportive of or dependent upon such activities.

The phrase 'in connection with' in the context of paragraph 57A(2)(b) has a similar meaning to that referred to in Health and Research Employees. The employee's duties need to be so involved with the hospital activities that the employee supports the operation of the hospital and conversely that the employee is dependent on the hospital to undertake their duties. Essentially the employee is engaged in duties that allow the hospital to carry out its functions. Under this test, it is not necessary that the duties of employment be performed at the physical location of the hospital.

This means in the context of paragraph 57A(2)(b), that the exemption will be satisfied when the duties of the employee are duties that allow the hospital to carry out its functions".

Duties in question enable the hospital to carry out its functions

Example 4 of TD 2015/12 confirms an employee who exclusively provides administrative support to public hospitals is considered engaged in duties that enable a hospital to carry out its functions, even though the duties performed are outside the physical location of the public hospital.

RS employees are engaged in a similar manner and perform services exclusively in managing the provision of health services to the public, in the form of reviewing and processing referral requests, which enable hospitals to then triage the referral and allocate an appointment to the patient.

The management of outpatient referrals is a core function of the public hospitals in question. The hospital holds primary responsibility for managing service capacity and efficient delivery of the required services, which can only occur when specialist referrals are allocated to an appropriate site and specialist.

The introduction of the RS has enabled a significant reduction in administration and coordination duties formerly carried out by key health care professionals located in public hospitals. The referral services previously created a heavy burden on hospital personnel to manage and coordinate the referrals received at each individual hospital site, without full oversight of referrals across the system (i.e. existing and new referrals) or the ability to easily redirect or transfer referrals to other hospitals.

The strain due to the volume of referral requests, lack of staff, and inability to delegate meant wait times for referral review/allocation and access to outpatient services were high, adding to pressure on the public health system overall, as well as the hospital sites themselves. In addition, there was limited visibility of referral demand or the volume and type of referrals that were accepted, rejected, or still awaiting processing at a hospital site.

The introduction of the RS has helped alleviate the pressure on public hospitals due to real-time reporting and referral management across all public hospital outpatient services through a centralised process, which is evidenced via the reduction of administrative and coordination tasks required by hospital-based staff and the time to process referrals.

In addition, the RS performs a gatekeeping function that ensures that only referrals which are complete, accurate and that meet agreed referral access criteria are sent onto hospital sites. This further supports hospital sites by preventing incomplete and inappropriate referrals from being sent to hospital sites. This improves the overall efficiency and effectiveness of referral management across the health system and enables timely care to be provided closer to home.

The fact that these duties were previously carried out within the hospitals is strong support for the position that the duties in question are integral to the HSPs carrying out their functions. The RS relieves strain in the hospital system, creates efficiencies in delivering hospital services and achieves the overall outcome of better patient care. These are functions of the hospital, whether conducted on the premises of the hospital or elsewhere.

Therefore, this criterion is met.

Employees are in positions usually undertaken by hospital staff, under the direction and control of the hospital

There is close cooperation between the hospital and the RS to deliver timely, quality care with regards to managing patient referrals.

The RS undertakes a level of clinical triage when reviewing and allocating referrals, which is important to appropriately managing hospital capacity (i.e. RS' gatekeeping function). Clinical triage requires clinical expertise and hence several of the RS positions require nursing qualifications. Such nursing roles are ordinarily undertaken by hospital staff and were previously completed by hospital staff prior to the introduction of the RS.

In turn, hospitals must notify the RS of changes in their capacity or the services they are able to provide. This collaboration enables the effective delivery of patient care. Thus, the activities of the RS and hospitals are closely connected, with the services performed by the RS being an intrinsic part of hospital operations.

All referrals are tracked on the RS referral processing system, from referral receipt to acceptance at the hospital site, providing a complete overview of referral status and whether KPIs/targets have been met. This is also a function of the hospital, to ensure patients receive timely care. RS is providing these services on behalf of the hospital site and is accountable to the hospitals for their performance

The RS has no role or function apart from supporting and enabling the services of public hospitals. Therefore, in substance, all activities undertaken by the RS are directed by the hospitals.

The Health Services Act 2016 (HS Act) contains the legislative framework under which the RS's services are provided. Under section 51, a service agreement may provide for the Department CEO, through the Department, to perform functions of the HSP that are specified in the agreement.

In effect, the HS Act enables the Department to be delegated certain specified functions including stewardship, guidance and support, strategic leadership, policy, oversight, and improvement in nature. The mandatory RS Policy (2014) acts as the relevant service agreement.

Under the governance of the Department, the RS performs the referral management function on behalf of the HSPs for the benefits of service delivery and system efficiency. There is a reporting line between the RS and HSPs.

From an HSP perspective, RS is an outsourced function (i.e. a function that was previously owned and performed by each hospital, which has since been centralised). The HSPs hold RS (and therefore the Department) to account for the performance of the service.

The Department reports to HSPs on the performance of RS every month (weekly if performance deteriorates). If RS performance deteriorates, this has a negative flow-on effect to HSPs/hospitals as they have less time to triage the referral and allocate an appointment.

Exclusively

The 'exclusively' requirement in paragraph 57A(2)(b) of the FBTAA requires that all of the duties of the employment of the employee must be performed for the required purposes, being 'in, or in connection with' a hospital. The FBT legislation does not provide any guidance on the interpretation of the term 'exclusively'. However, The Macquarie Dictionary online defines 'exclusive' to mean 'limited to the object or objects designated' and 'shutting out all other activities: an exclusive occupation.'[1]

TD 2015/12 clarifies that the word "exclusively" necessitates the performance of all job tasks for the specified purpose. It would not be possible to satisfy the requirement if the majority of the employee's tasks are provided for the relevant purpose. They must exclusively perform permitted duties.

TD 2015/12, paragraph 61, further states:

"A statement of duties which describes the employee's position as being attached to a particular hospital and hospital reporting structure would indicate that the employee is performing their duties as a member of the hospital staff. However, where departmental statements of duties are generic and do not rule in or rule out hospital related duties then reference should be made to the employee's actual duties."

The employee's statement of duties

All RS JDFs indicate the duties are consistent with being exclusively in support of hospital functions and under the direction and control of the hospitals

Several of the JDFs require qualifications in nursing, which demonstrates the strong alignment to hospital services. All RS JDFs (nursing and clerical) mirror the roles, duties, responsibilities and qualifications of equivalent roles performed at hospital sites. This is consistent with the function having previously been undertaken directly by hospital staff.

The individual JDFs are considered further below.

a.      SRN7 - Nurse Coordinator/Manager

                                          i.    The duties include coordination and management of workers and day-to-day processes to meet KPIs.

                                         ii.    These activities are essential to enable the effective processing of referrals and adherence to the standards required by the hospitals.

b.      SRN3 - Nurse Specialist

                                          i.    The duties provide specialist screening and patient referral triage and allocation.

                                         ii.    The clinical expertise required is consistent with a role that is ordinarily provided in and by a hospital.

c.      HSU 4 - Senior Clerical Officer

                                          i.    The duties involve supervision of the clerical team. This includes liaising with hospital personnel, assisting with bulk referral tasks and troubleshooting referral queries.

                                         ii.    These duties are integral to the referral process and enable the hospitals in achieving their functions.

                                        iii.    The expertise required is consistent with a role that is ordinarily provided in and by a hospital.

d.      HSU 2 - Clerical Officer

                                          i.    The duties involve completion of referral processing, updating patient administrative systems and performing various supporting tasks.

                                         ii.    These activities are directly related to the referral process in its entirety. Having administrative and clerical support allows clinically qualified staff to apply their expertise more effectively.

                                        iii.    The expertise required is consistent with a role that is ordinarily provided in and by a hospital.

e.      RN2 - Clinical Nurse (Proposed new JDF)

                                          i.    This additional role would support the Nurse Specialist by completing specialist screening and patient referral triage and allocation.

                                         ii.    Also requiring clinical knowledge, the role is similarly consistent with one ordinarily provided in and by hospital staff.

Duties are exclusively performed in connection with a hospital

Paragraph 6 of TD 2015/12 confirms an employee can carry out their duties in connection with more than one public and/or non-profit hospital and this condition can still be satisfied. Employees of the RS perform services in connection with more than one hospital but there are no duties provided in any other connection.

Whilst RS occasionally handles out-of-scope referrals incorrectly referred by GPs/referrers, these referrals reflect a very small percentage of total referrals and they are not processed by RS, but merely redirected. As this represents a small portion of the actual duties performed by RS and is a function that was previously handled by the hospitals prior to RS's introduction, this should not impact this criterion.

Accordingly, this requirement is satisfied.

Conclusion

Benefits provided to the staff of the Referral Service (RS), will be exempt benefits pursuant to subsection 57A(2) of the FBTAA because the duties are performed in connection with a public hospital.

[1] "Macmillan Publishers Australia, The Macquarie Dictionaryonline, www.macquariedictionary.com.au, accessed 12 October 2022