Private ruling: FBT exemption for public hospitals
Date of advice: 24 June 2020
Published: August 2020
Ruling period: FBT year 1 April 2020 to 31 March 2021 | FBT year 1 April 2021 to 31 March 2022 | FBT year 1 April 2022 to 31 March 2023 | FBT year 1 April 2023 to 31 March 2024 | FBT year 1 April 2024 to 31 March 2025
Date scheme commenced: 1 April 2020

Ruling: Q1: Will the employees of three agencies within a state or territory health department (Agency A, Agency B and Agency C) who will be relocating to new premises be exclusively performing their duties in a public hospital for the purposes of providing exempt benefits under subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No | Q2: Will the benefits provided to the employees of Agency A who exclusively perform their duties in connection with a public hospital be exempt benefits pursuant to subsection 57A(2) of the FBTAA? | A2: Yes | Q3: Will the benefits provided to the employees of Agency B who exclusively perform their duties in connection with a public hospital be exempt benefits pursuant to subsection 57A(2) of the FBTAA? | A3: Yes | Q4: Will the benefits provided to the employees of Agency C who exclusively perform their duties in connection with a public hospital be exempt benefits pursuant to subsection 57A(2) of the FBTAA? | A4: Yes

Relevant facts and circumstances: Relocation to new premises Beginning in the second half of 2020, employees of three agencies within a state/territory health department will relocate to a new purpose-built property adjacent to a public hospital in the state or territory capital city. Agency A Agency A employees engage with front-line clinical and support staff at public hospitals and across various networks including surgery and anaesthesia, interventional medicine, trauma, pain and rehabilitation, intensive and urgent care at public hospitals to deliver improved models of patient care within the State or Territory's public hospitals. The majority of Agency A's employees undertake their duties at the agency's head office premises and travel to public hospitals to perform their duties. Agency B The purpose of Agency B is to promote and support improvement in clinical quality and safety in public health services. Employees undertake their duties primarily on the entity's head office premises in the state or territory capital city. The employees also work part-time with each public hospital in the State or territory. Agency C The purpose of Agency C is to deliver high-quality, accessible education, training and support that has a positive impact on the safety and quality of health service delivery within the state or territory. Agency C's employees undertake their duties from its head office located in a building on the grounds of a public hospital in the state or territory capital city. Some of its employees also work at public hospitals across the state or territory. Policy Directive In keeping with the overall objective of the relevant health department to provide better patient outcomes across the state or territory, a health Policy Directive provides that it is a requirement that public health organisations are responsible for identifying patient safety risks and to undertake activity to address the standards mandated by the health department. The Policy Directive further sets out the following National Safety and Quality Health Service (NSQHS) Standards with which public hospitals must comply when delivering Patient Safety and Clinical Quality Programs: · Standard 1: Health services have systems in place to monitor and review patient safety. · Standard 2: Health Services have developed and implemented policies and procedures to ensure patient safety and effective clinical governance. · Standard 3: An incident management system is in place to effectively manage incidents that occur within health facilities and risk mitigation strategies are implemented to prevent their reoccurrence. · Standard 4: Complaints management systems are in place and complaint information is used to improve patient care. · Standard 5: Systems are in place to periodically audit a quantum of medical records to assess core adverse events rates. · Standard 6: Performance review processes have been established to assist clinicians maintain best practice and improve patient care. · Standard 7: Audits of clinical practice are carried out and, where necessary, strategies for improving practice are implemented.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 57A | Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision: Summary: The employees of Agency A, Agency B and Agency C who are relocating to new premises are not considered to be exclusively performing their duties in a public hospital for the purposes of the exemption in subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). | Detailed Reasoning - 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; (ii) ... A benefit provided in respect of the employment of an employee is an exempt benefit". | Detailed Reasoning - Is Agency A, Agency B and Agency C each considered 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." Agency A is a statutory health corporation established under state or territory health legislation and as such meets the definition of a government body. Agency B is a statutory health corporation established under state or territory health legislation and as such meets the definition of a government body. Agency C is a statutory health corporation established under state or territory health legislation and as such meets the definition of a government body. | Detailed Reasoning - Is Agency A, Agency B and Agency C considered to be a public hospital?: As the term "hospital" is not defined within the FBTAA, it is necessary to consider its ordinary meaning. The ATO definition of public 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 Agency A, Agency B and Agency C do not provide medical care and treatment for sickness, disease or injury which are an integral part of a public hospital, these agencies are not considered to be a public hospital. | Detailed Reasoning - The "in" test: The first test in paragraph 57A(2)(b) of the FBTAA requires that the duties be performed exclusively 'in' a public hospital. Paragraphs 44 and 45 of Taxation Determination TD 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: 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. 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 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 TD 2015/12 further provides that hospitals' 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. | Detailed Reasoning - Relocation to new premises: In the second half of 2020, employees of Agency A, Agency B and Agency C will relocate to a new purpose-built property adjacent to a public hospital in the state or territory capital city. Although the building will be in the vicinity of a public hospital, as the building will not be fitted out or used to treat and provide medical care to patients, this building would not be considered a public hospital. Further, as this building is not a hospital facility where activities of the hospital are being conducted, the employees of Agency A, Agency B and Agency C who are moving to new premises are not considered to be performing duties in a public hospital. As such, employees of Agency A, Agency B and Agency C who are moving to work in these new premises will not be exclusively performing services "in" a public hospital in subsection 57A(2)(b) of the FBTAA by virtue of them working in the new premises. | Summary: The benefits provided to Agency A employees who exclusively perform their duties in connection with a public hospital are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Agency A employees (as well as employees of Agency B and Agency C) who are relocating to the new premises are not located on public hospital grounds and do not satisfy the requirement under the first test in paragraph 57A(2)(b) of the FBTAA. As such, we must consider whether the duties undertaken by employees of Agency A (as well as the employees of Agency B and Agency C) are exclusively performed "in connection with" a public hospital. | Detailed Reasoning - The "in connection with" test: The second test in paragraph 57A(2)(b) of the FBTAA requires that the duties be exclusively performed 'in connection with' a public hospital. Paragraphs 53 to 56 of TD 2015/12 provide: "53. 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'. 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 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 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'. 55. 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. 56. 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". Therefore, the "in connection with" test is broad enough to include employees who work as members of the relevant hospital's staff in addition to governmental employees who work in a departmental role with hospital related duties but not as a member of the hospital staff. Under this test, the exemption will be satisfied when the duties of the employee are duties that allow the hospital to carry out its functions. | Detailed Reasoning - Hospital functions: Agency A employees engage with front-line clinical and support staff at public hospitals and across various networks including surgery and anaesthesia, interventional medicine, trauma, pain and rehabilitation, intensive and urgent care at public hospitals to deliver improved models of patient care within the State or Territory's public hospitals. Agency A employees' duties are so involved with the activities of public hospitals that the employees support the operation of the hospitals and conversely the employees are dependent on the hospitals to undertake their duties. The employees are engaged in duties that allow the public hospitals to carry out their functions on the following basis: · Assists public hospitals in complying with the NSQHS Standards as specified in the Health department Policy Directive; · Agency A employees work with clinicians, front-line staff such as doctors and nurses to promote better healthcare and deliver improved models of patient care within public hospitals; · Duties performed by the employees are therefore focused on improving patient experience in public hospitals; · Accordingly, the work performed by the employees within Agency A assists the public hospitals to carry out its function by providing effective health care services that promote, protect and maintain the health of the community, and provide care and treatment to sick and injured people, taking into account the particular needs of their diverse communities. We therefore accept that the services provided by Agency A employees are within the scope of Public Hospital functions. As such, we further accept that the benefits provided to those Agency A employees who exclusively perform duties 'in connection with' public hospitals are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA. | Summary: The benefits provided to Agency B employees who exclusively perform their duties in connection with a public hospital are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA. | Detailed Reasoning - Detailed reasoning: The primary purpose of Agency B is to promote and support improvement in clinical quality and safety in public health services. Agency B employees' duties are so involved with the activities of public hospitals that the employees support the operation of the hospitals and conversely the employees are dependent on the hospitals to undertake their duties. The employees are engaged in duties that allow the public hospitals to carry out their functions on the following basis: · Assist public hospitals to comply with the NSQHS Standards as specified in the health department Policy Directive; · Support public hospitals identify patient safety risks and to undertake activity to address the standards mandated by the health department. With patient care such an overarching priority in public hospitals, programs and training that educate and ensure that frontline caregivers are continually working on improving the quality and safety of care provided to patients is an integral function of the public hospitals; · Ensuring that the hospital has a system in place to effectively manage incidents that occur within health facilities for risk mitigation strategies to be implemented to prevent their reoccurrence · Support the public hospitals to carry out their functions in relation to continually assessing their performance and identifying issues and trends in patient safety that need to be addressed. The tools and initiatives developed by Agency B employees assist the public hospital to provide safer care for patients and to develop a reliable safety culture; We therefore accept that the services provided by Agency B employees are within the scope of Public Hospital functions. As such, we further accept that the benefits provided to those Agency B employees who exclusively perform duties 'in connection with' public hospitals are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA. | Summary: The benefits provided to Agency C employees who exclusively perform their duties in connection with a public hospital are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA. | Detailed Reasoning - Detailed reasoning: The purpose of Agency C is to deliver high-quality, accessible education, training and support that has a positive impact on the safety and quality of health service delivery within the state or territory. Agency C plays a critical role in the training and education of the medical workforce across the public health system in the state or territory through a range of initiatives. Agency C employees' duties are so involved with the activities of NSW public hospitals that the employees support the operation of the hospitals and conversely the employees are dependent on the hospitals to undertake their duties. The employees are engaged in duties that allow the public hospitals to carry out their functions on the following basis: · Assist public hospitals to comply with the NSQHS Standards as specified in the health department policy directive; · Ensure that clinicians, and medical specialists are suitably qualified for the role in which they are employed and that they complete the relevant training relating to safety and quality in health care and that they attend continuing education and skill enhancement programs. · In addition, Agency C employees manage and support training networks within the state or territory and provides a forum for a range of specialist professionals to learn and engage. We therefore accept that the services provided by Agency C employees are within the scope of Public Hospital functions. As such, we further accept that the benefits provided to those Agency C employees who exclusively perform duties 'in connection with' public hospitals are exempt benefits pursuant to paragraph 57A(2)(b) of the FBTAA.