ATO Interpretative Decision

ATO ID 2015/1

Fringe Benefits Tax

Issue

Does the payment for or reimbursement of a training course or activity provided under a worker retraining program by an employer to an employee being made redundant relate to any matter specified in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision

No. The payment for or reimbursement of a training course or activity does not meet the definition of 'work-related counselling' in subsection 136(1) of the FBTAA as it does not relate to a matter specified in paragraph (d) of the definition.

Facts

The employer has committed to closing its operations.

A current employee is considered excess and will be made redundant when the operations cease at a specified time in the future.

The employer has created a vocational training and development (worker retraining) program under which employees being made redundant or redeployed may have their fees for eligible training courses or activities provided by external educational institutions or training organisations paid for or reimbursed by the employer. The amount paid or reimbursed is subject to a specified limit and is available until the cessation of the employment of the employee.

The worker retraining program allows an employee to retrain, up-skill, and acquire new skills, qualifications, accreditations and competencies to enhance their prospects for future employment elsewhere. It excludes activities that relate to hobbies or personal interests.

The terms and conditions of the worker retraining program must be satisfied for the excess employee to be eligible for the payment or reimbursement. This includes that the employee attend and successfully complete the training course or activity.

The benefit is an expense payment benefit under section 20 of the FBTAA regardless of whether the amount is reimbursed to the employee or paid directly to the provider of the training course or activity.

The payment or reimbursement is a fringe benefit within the meaning of that term in subsection 136(1) of the FBTAA as it is provided by the employer to a particular employee in respect of their employment.

The employee has not entered a salary sacrifice arrangement. The employee only performs normal duties to qualify for the benefit.

The payment for or reimbursement received by the employee under the worker retraining program in this case is not in consequence of the termination of employment. It is therefore not an eligible termination payment and is not excluded from the definition of 'fringe benefit' at paragraphs (la) to (le) of subsection 136(1) of the FBTAA.

Reasons for Decision

The FBTAA specifies that certain benefits will be exempt benefits. Paragraph 58M(1)(a)(iv) of the FBTAA provides that an expense payment benefit is an exempt benefit where the recipients expenditure is in respect of 'work-related counselling' of an employee or their associate.

'Work-related counselling', as is relevant to the circumstances, is defined in subsection 136(1) of the FBTAA to mean:

(a)

... counselling attended by the employee; ...

where all of the following conditions are satisfied:

(c)

the attendance of ... the employee ... 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 performance of employee's 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; or

(x)

any similar matter;

(e)

there is no benefit that: ...

(iii)

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

Paragraphs (a), (c) and (e) of the definition of 'work-related counselling' are satisfied. The training course or activity is 'counselling' as defined in subsection 136(1) of the FBTAA, which 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 edition 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: a public seminar on uranium mining.

An employee attending a training course or activity pursuant to the worker retraining program at least maintains the quality of the performance of employees' duties until the cessation of the employers operations.

The benefit is not wholly or principally a reward for services as the employee has not entered a salary sacrifice arrangement and is not required to do anything other than their normal duties for which they are paid in order to qualify for the benefit.

However, paragraph (d) of the definition of 'work-related counselling' requires that the counselling 'relates to' certain specified matters.

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.

It is considered that the training course or activity 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.

It is further considered that the training course or activity does not relate to any similar matter. The Macquarie Dictionary Online edition 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.

Accordingly, the training courses or activities therefore are not related to any matter listed in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA.

Note - The payment for or reimbursement of the training course or activity may be an exempt benefit if the conditions of a minor benefit under section 58P of the FBTAA are satisfied. Alternatively, if the employee would otherwise have been eligible to a deduction for the expenses incurred for the training course or activity, the taxable value of the benefit may be reduced under the 'otherwise deductible rule' in section 24 of the FBTAA (see Taxation Ruling TR 98/9 about the deductibility of self-education expenses incurred by an employee).

Year of income:  Year ended 31 March 2014

Legislative References:
Fringe Benefits Tax Assessment Act 1986
   section 20
   section 24
   section 58M
   subparagraph 58M(1)(a)(iv)
   section 58P
   subsection 136(1)

Case References:
Australian Competition and Consumer Commission v. Maritime Union of Australia
   (2002) ATPR 41-849
   (2001) 114 FCR 472

Related Public Rulings (including Determinations)
Taxation Ruling TR 98/9

Other References:
The Macquarie Dictionary Online edition

Keywords
Fringe Benefits Tax
Exempt benefits
FBT work-related counselling
Expense payment benefit
Expense payment fringe benefits

Siebel/TDMS Reference Number:  1-5BYA5XR; 1-CR7OS47

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  23 January 2015
Date reviewed:  16 January 2018

ISSN: 1445-2782