ATO ID 2007/141: Exempt Benefits: work related medical examinations
Date of decision: 10 May 2007
Year of income: Year ended 31 March 2008
Business line: Superannuation and Employer Obligations

Issue
When an employee undergoes a medical examination prior to the commencement of a new employment contract with the same employer will the benefit be accepted as a 'work-related medical examination' that is an exempt benefit under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
Yes. The medical examination prior to commencement of a new contract will be an exempt benefit under section 58M of the FBTAA.

Facts
The employee is employed under a contract of employment for a fixed 5 year term. Prior to the expiration of that first contract the employer and employee meet to determine if a new contract can be agreed. In the event that an agreement is reached the employee shall enter into a new contract on completion of the former contract. The continued service of the employee will be recognised under the new contract so as to avoid any break of service, and any accrued or pro-rata entitlements will be carried forward into the new contract. The employer requires, prior to the employee entering into a new contract for the same position, that the employee undergo and satisfactorily pass a medical examination by a qualified medical practitioner selected by the employer at the employer's expense. The medical examination is carried out by or on behalf of a legally qualified medical practitioner wholly or principally in order to ascertain the physiological or psychological condition of the employee for the purpose of the employee entering into the new employment contract.

Reasons for decision
Summary: Under section 58M of the FBTAA where an employer provides an expense payment benefit, property benefit or a residual benefit in respect of a work-related medical examination of an employee, the benefit will be an exempt benefit. The term 'work-related medical examination' is defined in subsection 136(1) of the FBTAA to mean: in relation to a benefit provided in respect of the employment of an employee, means an examination or test carried out by, or on behalf of, an audiometrist or a legally qualified medical practitioner, nurse, dentist or optometrist wholly or principally in order to ascertain the physiological or psychological condition of the employee for any or all of the following purposes: (a) the commencement of the employment of the employee; (b) the confirmation of probationary employment of the employee; (c) a change in the duties or location of the employment of the employee; (d) the employee becoming a member of a superannuation fund. As the employee's job will be effectively completed at the end of the contract term, it is considered that the new contract will satisfy 'the commencement of employment of the employee' requirement. Therefore, as the employer provided a work-related medical examination for the employee prior to the commencement of a new contract of employment, the benefit will be exempt under section 58M of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 58M subsection 136(1)
Subject references: FBT work-related counselling FBT work-related medical examination Fringe benefits Fringe benefits tax Exempt benefits