Private ruling: FBT exempt benefits provided to employees who work in or in connection with a public hospital
Date of advice: 25 September 2018
Published: November 2018
Ruling period: FBT year 1 April 2018 to 30 March 2019 | FBT year 1 April 2019 to 30 March 2020 | FBT year 1 April 2020 to 30 March 2021 | FBT year 1 April 2021 to 30 March 2022 | FBT year 1 April 2022 to 30 March 2023
Date scheme commenced: Not applicable

Ruling: Q1: Will the benefits provided to Relevant Medicine employees who perform their duties in a public hospital be exempt benefits pursuant to subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: Will the benefits provided to Relevant Medicine employees who perform their duties in connection with a public hospital be exempt benefits pursuant to subsection 57A(2) of the FBTAA? | A2: Yes

Relevant facts and circumstances: A Ministry of Health in a State or Territory in Australia administers the public health system in that State or Territory, particularly through Local Health Districts (LHD). Health Pathology is a division of a public health administration corporation established under legislation within the State or Territory. The constituent document for Health Pathology indicates that the organisation's primary purpose is to support the public health system in the State or Territory, particularly the various LHD as follows: A division … is established to: ● Manage and co-ordinate the Relevant Analytical Science Service (FASS) that has been established as a unit of the Division to ensure the provision of integrated, sustainable, responsive, efficient, high quality Relevant and analytical science services; ● Improve and maintain supportive clinical linkages of pathology services with clinicians in public and primary health services and ensure that public pathology services are closely integrated with local health districts and speciality services. Relevant Medicine is a department within Health Pathology which is a State or Territory Government Entity. Health Pathology’s Relevant Medicine services are exclusively responsible for conducting post-mortem examinations on behalf of the Coroner as part of investigations into reportable deaths under the relevant legislation. This includes unexplained and unexpected deaths, and deaths of a suspicious nature. Health Pathology's Relevant Medicine facilities also provide non-coronial post-mortem examinations services to various public hospitals in the State or Territory. Relevant Medicine employs a multi-disciplinary team of experts across three sites in the State or Territory. The Relevant Medicine team includes the following roles: ● Relevant pathologists; ● Radiologists; ● Radiographers; ● Relevant odontologists; ● Anthropologists; ● Relevant post-mortem technicians; ● Social workers; and ● Specialist administrative staff. Some employees undertake their duties in a public hospital. Two of the three premises where Relevant Medicine employees undertake their duties are co-located on the site of a public hospital. Some employees undertake their duties on the third site, Health Pathology's own separate premises. Relevant Medicine employees utilise a full spectrum of relevant pathology ancillary testing such as post-mortem toxicology, histology, clinical chemistry, microbiology and industry-leading technology in post-mortem radiology services (CT scanning and X-rays).

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Subsection 57A(2)

Reasons for decision: Summary: The benefits provided to Relevant Medicine employees who perform their duties at facilities in two public hospitals are exempt benefits pursuant to subsection 57A (2)(b) of the FBTAA. | Detailed Reasoning - 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; …l a benefit provided in respect of the employment of an employee is an exempt benefit. | Detailed Reasoning - Is Health Pathology 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." Health Pathology is a division of a public health administration corporation established under legislation and as such meets the definition of a state or territory government body. | Detailed Reasoning - Is Health Pathology considered a public hospital?: As the term "hospital" is not defined within the FBTAA, it is necessary to consider the ordinary meaning of that term. 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. Health Pathology does not provide accommodation to patients, which is an integral part of a public hospital and as such Health Pathology is not considered to be a public hospital. Although Health Pathology may not be a public hospital in its own right, two out of the three Relevant Medicine facilities are co-located on public hospital sites and the services offered by Relevant Medicine employees are an integral part of the core services offered by public hospitals. | Detailed Reasoning - The "in" test: The first test in subsection 57A (2)(b) of the FBTAA requires that the duties be performed exclusively “in” a public hospital. Paragraphs 44 and 45 of Taxation Determination 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. 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 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. | Detailed Reasoning - Hospital functions: Health Pathology Relevant Medicine Services is the sole provider of coronial autopsies for Public Hospitals in the State or Territory, a service which is within the scope of practice of public hospitals in that State or Territory. Paragraph 131(1)(f) of the National Health Reform Act 2011 (NHRA) provides that the Independent Hospital Pricing Authority (IHPA) will determine public hospitals’ functions that are funded in the States and Territories by the Commonwealth. The in-scope public hospital services as per the IHPA are noted in the National Efficient Price Determination. These include pathology services (including Relevant pathology (autopsy and mortuary services)). The services provided by Relevant Medicine are formally identified to be a function of a public hospital. The constituent document for Health Pathology indicates that the organisation’s primary purpose is to support services within the public health system of the State or Territory and to ensure public pathology services are closely integrated with Local Health Districts. Post mortems performed by Relevant Medicine employees are integral to the health care system as they provide valuable information that improves clinical care at public hospitals. It is a legislative requirement of public hospitals to certify the facts and circumstances of a person's death and where the public hospital is unable to determine the cause of death, the matter is required to be resolved by the Department of Relevant Medicine or the Coroner. As such it is a legislative requirement of public hospitals to provide or facilitate the cause of death certification. Two of the three Health Pathology's Relevant medicine facilities are located on the grounds of a public hospital. The annual reports for these hospitals provide that the Relevant Medicine facilities are 'owned' by the relevant Local Health District and appear in their financial statements as land and buildings. The Relevant Medicine facilities are locations where activities of the relevant hospital are being conducted. We therefore consider that the employees at two of the three Relevant Medicine facilities located on the grounds of two public hospitals are performing duties exclusively in a public hospital and are also performing duties for the public hospital. The benefits provided to Relevant Medicine employees who perform duties at both these facilities are exempt benefits pursuant to subsection 57A (2) of the FBTAA. | Summary: The benefits provided to Relevant Medicine employees who perform their duties in connection with a public hospital, at their own facilities on the third site that is not on the grounds of a public hospital, are exempt benefits pursuant to subsection 57A (2)(b) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Relevant Medicine facilities located at the third site are not located on public hospital grounds and do not satisfy the requirement under the first test in subsection 57A (2)(b) of the FBTAA. As such, we must consider whether the duties undertaken by the Relevant Medicine employees at this site are performed exclusively "in connection with" a public hospital. | Detailed Reasoning - The "in connection with" test: The second test in subsection 57A(2)(b) of the FBTAA requires that the duties be performed exclusively “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 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'. 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 a member of the 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. | Detailed Reasoning - Hospital functions: The services provided by the Relevant Medicine employees at the third site are reflective of the services provided by the Relevant Medicine employees that are located on the two hospital sites. The duties of Relevant Medicine employees at the third site are so involved with the hospital activities that the employee supports the operation of the public hospital on the following basis: ● Relevant Medicine supports the operation of a public hospital via providing a service that is deemed to be inside the scope of public hospitals; ● The NHRA considers the various service categories of Relevant Medicine to be a function of a public hospital; ● The constituent document of Relevant Medicine provides that its primary purpose is to support services within the public health system of the State or Territory and to ensure public pathology services are closely integrated with LHDs; ● Post mortems performed by Relevant Medicine employees are integral to the health care system as they provide valuable information that improves clinical care at public hospital; ● Relevant Medicine services are engaged by public hospitals to certify the facts and circumstances of a reportable death; and ● Relevant Medicine employees provide expert advice to public hospitals to support their legislative requirement to determine if any death is a reportable in a public hospital facility. Conversely, Relevant Medicine employees are also dependent on public hospitals in performing their duties as follows: ● To review all deaths within a public hospital facility to determine if they are reportable; ● To provide copies of medical records to the Pathologist or medical officer conducting the post mortem; ● To provide information to Relevant Medicine employees outlining a synopsis of clinical notes relating to the death of a reportable patient; ● To consult with experts in the Public Hospital system in other medical and scientific specialities to support Relevant medicine services. We consider that the services provided by the Relevant Medicine employees at the third facility are within the scope of Public Hospital functions. As such, the benefits provided to Relevant Medicine employees who perform duties “in connection with” public hospitals at the third facility are exempt benefits pursuant to subsection 57A(2)(b) of the FBTAA.