1 Is the Employer considered a government body for the purposes of paragraph 57A(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
1 Yes Question 2 If the answer to Question 1 is yes, would the employees of the Employer be regarded as exclusively performing services 'in' a public hospital or hospital carried on by a rebatable employer for the purposes of paragraph 57A(2)(b) of the FBTAA? Answer 2 No Question 3 If the answer to Question 2 is no, would the following employee cohorts of the Employer be regarded as exclusively performing services 'in connection with' a public hospital or a hospital carried on by a rebatable employer for the purposes of paragraph 57A(2)(b) of the FBTAA: I. Supply Chain/Procurement employees servicing public hospitals and specified healthcare service providers. II. Supply Chain/Procurement employees servicing other healthcare service providers. III. Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety. IV. Specified internal-facing administrative employees who enable the Employer and other employees of the Employer to provide direct services to public hospitals and other healthcare service providers, and
V. Members of the Employer's Board who are remunerated by the Employer. Answer 3 I. Yes. II. No. III. Yes. IV. No. V. Yes. This ruling applies for the following periods Fringe Benefits Tax (FBT) Year ending 31 March 20XX FBT Year ended 31 March 20XX FBT Year ending 31 March 20XX FBT Year ending 31 March 20XX The scheme commenced on: 1 April 20XX
The Employer is a statutory body corporate established by a State or Territory Government. The Employer was established under the relevant State or Territory's health services legislation. The general functions of the Employer are to supply or facilitate access to the supply of goods and services to public hospitals and other health or related services. The employees of the Employer generally perform their duties of employment at the Employer's office or at the Employer's warehouse. The Employer's organisation structure comprises of the following functions: 1. Supply Chain. 2. Procurement. 3. Finance, Risk and Governance. 4. Information Technology. 5. People, Culture and Safety. Supply Chain/Procurement employees (i. and ii. of Question 3 above) In respect of the Supply Chain and Procurement employees, the Employer can practically segregate the roles of each employee between the following two populations: a) employees who deal 'exclusively' with public hospitals and public health services
b) employees who provide the services above and also provide services to other healthcare service providers' Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety (iii. Of Question 3 above) The employees in the Finance, Risk, Governance/Information Technology/People, Culture and Safety functions exclusively provide direct services to public hospitals and public health services. Specified internal-facing administrative employees (iv. of Question 3 above) The administrative services these employees provide are duties which do not have a direct connection with a public hospital or a hospital carried on by a society or association that is a rebatable employer. Rather, the duties of these employees have an indirect connection as a support function to the Employer's other employees who do provide direct services to a public hospital or a hospital carried on by a society or association that is a rebatable employer. As such, in this ruling, these employees have been kept separate from the other cohorts. Members of the Employer's Board who are remunerated by the Employer (v. of Question 3 above)
The Board and Board sub-committees (Board) of the Employer is responsible for the leadership and strategy of the Employer. The Board also provides active assurance in relation to the probity of public hospital procurement practices, encompassing a range of goods and services that are required by public hospitals. In monitoring performance of the various functions and systems of the Employer against their intended purpose, the Board is required to evaluate direct consultation with public hospitals to ensure their needs are being appropriately met. Assumptions For the purposes of paragraph 57A(2)(b) of the FBTAA, each of the entities listed within specified parts of the relevant State or Territory's health services legislation are either a public hospital or a hospital carried on by a society or association that is a rebatable employer.
Fringe Benefits Tax Assessment Act 1986 Section 57A Fringe Benefits Tax Assessment Act 1986 Paragraph 57A(2)(a) Fringe Benefits Tax Assessment Act 1986 Paragraph 57A(2)(b) Fringe Benefits Tax Assessment Act 1986 Subsection 65J(1) Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)
Question 1 Is the Employer considered a government body for the purposes of paragraph 57A(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? Summary The Employer is considered a government body for the purposes of paragraph 57A(2)(a) of the FBTAA. Detailed reasoning Subsection 57A(2) of the FBTAA states: 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. 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 is a statutory body established by a State or Territory Government - it is a body corporate with perpetual succession to enable certain health services and health support services to be provided with goods and services on best value terms within the particular State or Territory.
Therefore, the Commissioner considers that the Employer is a 'government body' for the purposes of paragraph 57A(2)(a) of the FBTAA on the basis that it is either a 'State/Territory', or an 'authority of the State/Territory'. Question 2 If the answer to Question 1 is yes, would the employees of the Employer be regarded as exclusively performing services 'in' a public hospital or hospital carried on by a rebatable employer for the purposes of subsection 57A(2)(b) of the FBTAA? Summary The employees of the Employer would not be regarded as exclusively performing services 'in' a public hospital or a hospital carried on by a rebatable employer for the purposes of paragraph 57A(2)(b) of the FBTAA. Detailed reasoning The first test in paragraph 57A(2)(b) of the FBTAA requires that the duties be performed exclusively 'in' 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
? (TD 2015/12) provides the Commissioner's views in determining whether the duties of an employee of an employer who is a government body are exclusively performed in a relevant type of hospital. Paragraph 2 of TD 2015/12 provides that: The duties of the employment of an employee of an employer who is a government body are 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 for the purposes of paragraph 57A(2)(b) when the duties of the employment of the employee satisfy any of the following tests: • 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. ... Paragraphs 44 and 45 of the TD 2015/12 state: 44. When used as a preposition, the word 'in' can take different meanings. In this context the Macquarie Dictionary defines the word 'in' as including: 1. inclusion within space or limits, a whole, material or immaterial surroundings, etc.; in the city, in the army, dressed in white; in politics. [1]
45. Therefore, the word 'in' can indicate inclusion within a physical space or geographical location. It can also suggest belonging to or being part of an organisation or group (such as 'in the army'). Paragraph 47 of the TD 2015/12 provides that the preferred view of the 'in' test is satisfied when the duties of the employee are performed at the physical location of the hospital facility where the activities of the hospital are being conducted. Paragraph 48 of the TD 2015/12 further provides that a hospital's constituent documents or other informative material such as annual reports, local hospital network reports, or hospital board minutes can be used to identify a location where activities of the hospital are being conducted.
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. A hospital is therefore a place where patients are received for continuous medical care and treatment for sickness, disease or injury, and the provision of accommodation is seen as integral to that continuous care.
In executing their legislative functions of supplying, or facilitating the supply of goods and services and establishing and maintaining a database of supply markets for access by public hospitals under the relevant State or Territory's health services legislation, the existing employee cohorts of the Employer generally perform their duties of employment at the Employer's office or warehouse. As such, the Commissioner considers that an office or warehouse cannot be considered to be a hospital, even where the office or warehouse premises may be regarded as the premises of a public hospital. Therefore, as the employees do not perform their duties exclusively 'in' a public hospital or a hospital carried on by a rebatable employer, the first test under paragraph 57A(2)(b) of the FBTAA is not satisfied. Question 3 If the answer to Question 2 is no, would the following employee cohorts of the Employer be regarded as exclusively performing services 'in connection with' a public hospital or a hospital carried on by a rebatable employer for the purposes of subsection 57A(2)(b) of the FBTAA:
I. Supply Chain/Procurement employees servicing public hospitals and specified healthcare service providers. II. Supply Chain/Procurement employees servicing other healthcare service providers. III. Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety. IV. Specified internal-facing administrative employees who enable the Employer and other employees of the Employer to provide direct services to public hospitals and to other eligible healthcare service providers, and V. Members of the Employer's Board who are remunerated by the Employer. Summary We consider employees in the following job groups exclusively perform services 'in connection with' a public hospital or a hospital carried on by a society or association that is a rebatable employer for the purposes of paragraph 57A(2)(b) of the FBTAA: • (i) - Supply Chain/Procurement employees servicing public hospitals and specified healthcare service providers • (iii) - Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety
• (v) - Members of the Employer's Board who are remunerated by the Employer. However, we do not consider employees in the following job groups exclusively perform services in connection with a type of hospital mentioned in paragraph 57A(2)(b) of the FBTAA: • (ii) - Supply Chain/Procurement employees servicing other healthcare service providers • (iv) - Specified internal-facing administrative employees who enable the employer and other employees of the Employer to provide direct services to public health entities. This is because, in respective order: • for (ii) - the duties of this employee extend to servicing healthcare entities which would not be a type of hospital specified in paragraph 57A(2)(b) of the FBTAA. Therefore, the employee's duties are not 'exclusively' performed in connection with a relevant type of hospital. • for (iv) - the duties of these employees are too far removed to have the connection contemplated by paragraph 57A(2)(b) of the FBTAA, namely, that employees be engaged in duties that enable relevant types of hospital to carry out their functions. Detailed reasoning
The second test in paragraph 57A(2)(b) of the FBTAA requires that the employee's duties be exclusively performed 'in connection with' a public hospital. 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 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. This also demonstrates that the provision is broad enough to include employees who work as a member of a hospital's staff in addition to government employees who work in another departmental role (such as an employee of the Employer) with hospital-related duties but not as a member of the hospital staff. The meaning of 'in connection with'
Paragraph 53 of TD 2015/12 provides that 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'. Similarly, in Burswood Management v. A-G (1990) 23 FCR 144 ( Burswood Management ), the Court stated in a joint decision: the words 'in connection with' are words of wide import; and the meaning to be attributed to them depends on their context and the purpose of the statute in which they appear. Further, paragraph 54 of TD 2015/12 states: 54. 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 CLR 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 Institute, as observed earlier, has a separate legal identity. The evidence does not disclose either that the activities of the Institute necessarily depend upon the activities of the University of Melbourne or alternatively that the University's activities in any way depend upon the Institute'. The Commissioner concludes in paragraph 55 of TD 2015/12 that the phrase 'in connection with' requires that the employee's duties be so involved with the hospital activities that the employee supports the operation of the hospital and conversely that the employee is engaged in duties that allow the hospital to carry out its functions. Under this test, it is therefore not necessary that the duties of employment be performed at the physical location of the hospital. The exemption will therefore be satisfied when the duties of an employee are duties that allow the hospital to carry out its functions.
The meaning of '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 defines 'exclusively' to mean 'limited to the object or objects designated' and 'shutting out all other activities: an exclusive occupation.' Examples TD 2015/12 also provides examples of roles that are considered 'in connection with' a public hospital, and those roles that are not, including: • Administrative support employee (Example 4):
The unit that the employee works for exclusively provides administrative support to a number of metropolitan public hospitals including procurement of hospital goods and services and payment of suppliers. The employee performs their duties at the Department premises which is outside the physical location of a public hospital. The employee is engaged in duties that enable a hospital to carry out its functions, and as such, the employee performs all of her duties 'in connection with' a public hospital. • Shared services manager (Example 5): The shared services group is part of a nominated State Administrative Services Department which is the employee's employer. The employee and his team provide information technology services to all areas of the Department of Health including areas concerned with delivery of public hospital services as well as areas which are not hospital-related such as the government relations area. The employee is not exclusively engaged in duties that enable a hospital to carry out its functions. As such, the employee does not perform all their services 'in connection with' a public hospital. i.
Supply Chain/Procurement employees who deal 'exclusively' with Public Hospitals The Commissioner is of the view that existing employees in the Supply Chain/Procurement functions who deal exclusively with public hospitals are performing duties exclusively 'in connection with' a public hospital under paragraph 57A(2)(b) of the FBTAA. ii. Supply Chain/Procurement employees servicing other health service providers In order for the exemption in section 57A of the FBTAA to apply, paragraph 57A(2)(b) provides that the duties of the employees must be exclusively performed either 'in, or in connection with': (i) a public hospital, or (ii) a hospital carried on by a society or an association that is a rebatable employer.
On the basis that these employees have provided services to both public hospitals and other healthcare services (which are generally not public hospitals), it cannot be concluded that the duties of the employees have been 'exclusively' performed in connection with a public hospital, as their duties have not been 'limited to the object or objects designated' by the definition, and therefore do not satisfy the first limb of paragraph 57A(2)(b) of the FBTAA. In terms of the second limb of paragraph 57A(2)(b) of the FBTAA, a 'rebatable employer' is defined in subsection 65J(1) of the FBTAA, which provides that an employer will be considered a 'rebatable employer' if the employer: (i) is exempt from income tax under specific provisions of the ITAA 1997, and (ii) satisfies special conditions as outlined in Items 1 to 12 of subsection 65J(1) of the FBTAA.
The Commissioner considers that at least some of the other healthcare service entities will neither be a public hospital, nor a hospital carried on by a society or association that is a 'rebatable employer' for the purposes of subparagraph 57A(2)(b)(ii) of the FBTAA. As such, the second limb of paragraph 57A(2)(b) of the FBTAA is not satisfied. On that basis, we do not consider the duties of these employees are exclusively performed in connection with a relevant type of hospital specified in subsection 57A(2) of the FBTAA. iii. Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety employees who oversee or support the performance of duties by Procurement and Value Delivery/Customer Engagement The Commissioner is of the view that existing employees in the Finance, Risk, Governance/Data and Information Technology/People, Culture and Safety functions are performing duties exclusively 'in connection with' a public hospital under paragraph 57A(2)(b) of the FBTAA. iv. Specified internal-facing administrative employees who enable the Employer and other employees of the Employer to provide direct services to public hospitals
In order for the exemption in section 57A of the FBTAA to apply to these employees, the second test in paragraph 57A(2)(b) of the FBTAA requires that the employees' duties be performed exclusively 'in connection with'a public hospital. The Commissioner considers that the administrative staff roles mentioned in the facts would not be performing duties 'in connection with' a public hospital. This is because these employees are considered to be too far removed to have the connection contemplated by paragraph 57A(2)(b) of the FBTAA that employees be engaged in duties that enable hospitals to carry out their functions. Whilst the Employer needs the internal-facing administrative staff to carry out the Employer 's functions, this does not mean the duties of each of those employees necessarily enable a hospital to carry out its functions.
The meaning of 'in connection with' is wide but its scope is not without limit. There still needs to be an evident connection between the duties of each respective administrative staff member and that those duties that enable a hospital to carry out its functions. Even though the administrative services provided by these employees may have a connection with or enable other employees of the employer to provide direct services to public hospitals, we do not consider that this necessitates a conclusion that the internal-facing administrative employees in themselves enable a hospital to carry out its functions. As the requirements under paragraph 57A(2)(b) has not been met, the exemption under section 57A of the FBTAA will not apply. v. Board Members who are remunerated by the Employer The Commissioner concludes in paragraph 55 of TD 2015/12 that the phrase 'in connection with' requires that the employee's duties be so involved with the hospital activities that the employee supports the operation of the hospital and conversely that the employee is engaged in duties that allow the hospital to carry out its functions.
The services provided by the members of the Board (as outlined in the facts to this ruling) are considered to not only support the operation of the hospitals, but - in line with the principles in TD 2015/12 - also allow these hospitals to carry out their functions. In particular, the key duties of the Board members, being leadership and strategy, directly support the operation of public hospitals. Therefore, the Commissioner is of the view that the Board members who are remunerated by the Employer are performing duties 'exclusively' 'in connection with' a public hospital under paragraph 57A(2)(b) of the FBTAA. > [1] The Macquarie Dictionary, 2009 , rev 5th Edn, The Macquarie Library Pty Ltd, NSW