Private ruling: FBT - capping thresholds
Date of advice: 30 July 2025
Published: 7 October 2025
Ruling period: FBT year ending 31 March 20XX | FBT year ending 31 March 20XX | FBT year ending 31 March 20XX | FBT year ending 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Is the organisation considered a 'public hospital' for the purposes of paragraph (c) of Step 2 of the method statement in subsection 5B(1E) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. | Q2: Is the organisation a 'rebatable employer' for the purposes of paragraph (d) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA? | A2: No. | Q3: If the answer to questions 1 and 2 is no, will Step 3 of the Method Statement in subsection 5B(1E) of the FBTAA apply such that the individual grossed-up non-exempt amount of benefits provided to each employee of the organisation would be reduced by the higher FBT exemption cap of $30,000 (but not below nil)? | A3: Yes.

Relevant facts and circumstances: The organisation is a not-for-profit hospital. The organisation provides medical and surgical services to the broader community. The organisation is an Australian incorporated organisation which is registered as a charity with the Australian Charities and Not-for Profit Commission (ACNC) with the charity subtypes that include "Advancing social or public welfare" and "Public Benevolent Institution" (PBI). The organisation is endorsed as a PBI. The organisation offers private health services which are paid for by patients on a "fee for service" basis. The organisation holds contracts with registered Australian Private Health Insurers (" PHIs ") who sell products that provide various levels of insurance cover. The contracts held with each of these PHIs determine the terms and conditions and associated benefits paid on behalf of an insured patient. Most of the fees incurred by patients for private health services are funded by way of partial or full reimbursement from a private health fund of the patient. Alternatively, some patients are self-funded and fees are paid by the patient directly (but this does not occur very often). In addition to this, there are also care agreements with the Department of Health for whom the entity provides medical and surgical services respectively. These services are specified in an agreement which specifies that the entity must provide a defined volume of services on behalf of the relevant health service. These agreements are freely negotiated and voluntarily entered into by the entity with the respective Departments of Health. These contracts are funded via a "fee for service" arrangement and no free services are provided, but rather, the healthcare services are paid for by the government, as opposed to directly by a patient or health fund. Further in limited cases, other third parties provide payment on behalf of patients who qualify for relevant financial support in relation to fees incurred by them for private health services provided by the entity. Other income is also received in the form of donations and investment income. The organisation does not provide any services for no consideration.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 subsection 5B(1E) | Fringe Benefits Tax Assessment Act 1986 subsection 57A | Fringe Benefits Tax Assessment Act 1986 section 65J | Fringe Benefits Tax Assessment Act 1986 section 123C

Reasons for decision: Summary: The organisation is not considered to be a 'public hospital' for the purposes of paragraph (c) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Under section 57A of the FBTAA, benefits provided by the following employers in respect of the employment of an employee are exempt from Fringe Benefits Tax (FBT) up to a specified cap: • registered Public Benevolent Institutions (PBIs) endorsed under section 123C of the FBTAA • registered health promotion charities • public and not-for-profit hospitals • government employers whose employees work in public and not-for-profit hospitals, and • public ambulance services. Section 123C of the FBTAA deals with the endorsement of a PBI, which states that: The Commissioner must endorse an entity as a public benevolent institution if: (a) the entity is entitled to be endorsed as a public benevolent institution (see subsection (2)); and (b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953 . 123C(2) An entity is entitled to be endorsed as a public benevolent institution if the entity: (a) is a registered public benevolent institution; and (b) has an ABN; and (c) is not an employer in relation to which step 2 of the method statement in subsection 5B(1E) applies. Benefits provided by the employers listed above will be exempt where the total grossed-up value of certain benefits (which are benefits not otherwise exempt) provided to each employee during the FBT year is equal to, or less than, the relevant capping threshold. If the total grossed-up value of certain benefits provided to an employee is more than that capping threshold, the employer will need to pay FBT on the excess. This amount is determined by reference to the employer's 'aggregate non-exempt amount' in accordance with the Method Statement in subsection 5B(1E) of the FBTAA, which states: Step 2.If: (a) (Repealed by No. 142 of 2003) (b) the employer is a government body and the duties of the employment of one or more employees are as described in paragraph 57A(2)(b) (which is about duties of employment being exclusively performed in or in connection with certain hospitals); or (c) the employer is a public hospital; or (ca) the employer provides public ambulance services or services that support those services and the employee is predominantly involved in connection with the provision of those services; or (d) he employer is a hospital described in subsection 57A(4) (which is about hospitals carried on by societies and associations that are rebatable employers); subtract $17,000 from the individual grossed-up non-exempt amount for each employee of the employer referred to in paragraph (c), (ca) or (d), or each employee referred to in paragraph (b), for the year of tax. However, if the individual grossed-up non-exempt amount for such as employee is equal to or less that $17,000, the amount calculated under this step for the employee is nil. Step 3. If step 2 does not apply in respect of one or more employees of the employer, reduce the individual grossed-up non-exempt amount for each such employee by $30,000, but not below nil. Therefore, as per Steps 2 and 3 of the Method Statement in subsection 5B(1E) of the FBTAA, registered PBIs which do not operate a public hospital have a higher FBT exemption cap of $30,000 grossed-up value (that is, the value of the benefit plus the notional FBT liability) per employee, while a $17,000 per-employee FBT exemption cap applies to employees of government and non-government public hospitals, and hospitals run by rebatable employers (relevantly, charities that are not PBIs). As per section 123C of the FBTAA, a registered PBI cannot be endorsed as a PBI if it, amongst other things, is a 'public hospital'. As such, a registered PBI which operates a public hospital is subject to the $17,000 per employee FBT exemption cap. Meaning of a 'public hospital' and a 'private hospital' The term 'public hospital' is not defined in the FBTAA. No cases have considered the meaning of 'public hospital' in the context of the FBTAA. Authorities dealing with the meaning of 'public hospital' in other statutes have held the determination is a question of fact. These authorities include Little Company of Mary (SA) Incorporated v Commonwealth [1942] HCA 26 ( Little Mary ) and Australian Hospital Care (Latrobe) Pty Limited v Commissioner of Taxation [2000] FCA 1509 ( Latrobe ). Relevantly, the High Court held in Latrobe and Little Mary that not-for-profit hospitals carried on by religious orders were not 'public hospitals'. Those authorities considered the ordinary or common meaning of the term and equivalence between legislation in the same jurisdiction. In particular, the Court in Little Mary ruled that the hospital was not a 'public hospital', despite being non-profit, as: • it was under denominational control, being the Sisters in the State of South Australia of the Congregation of the Little Company of Mary, a congregation of nursing sisters of the Roman Catholic Church • there was no public control • the majority of patients paid for their medical treatment, and there was no offer of free or publicly funded services • it did not rely on public funding or grants, instead generating revenue from the fees it charged. The principles in Little Mary were followed in Latrobe, which despite providing public health care services, was ruled not to be a 'public hospital' based on the following factors: • The hospital was privately-owned and run to profit its members. • Whilst the hospital had obligations to provide free public health services to the public, and was controlled by the State, these controls arose out of voluntary undertakings under contracts entered into by the hospital. • Whilst the hospital received state funding, this funding was primarily in the form of payments for the free health services it was providing under contract. A range of indicia emerge from these cases that can assist in considering whether a hospital satisfies the ordinary meaning of a 'public hospital', which include: • the ownership of the hospital and whether it is run for profit • the level of public/government control over the hospital's operations (and whether any control is regulated or arises voluntarily by contract) • whether the hospital offers free/public-funded services to the public, or if it charges fees for its services • whether the hospital is funded by public grant or is self-funded. However, despite these indicia of a 'public hospital', the Full Federal Court in Commissioner of Taxation v Hunger Project Australia [2014] FCAFC 69 has, in the context of the FBTAA, abstained from approaching a question about the ordinary or common meaning of a word or expression '... as a legal question to be dealt with by the mechanical application of past authority, irrespective of the present current understanding of the expression in the currently spoken English language...' or whether its meaning could be gleaned from other statutes which may use the same term. Whilst acknowledging the Full Federal Court's comments, it is noted that Commonwealth legislation has, since at least 1953, distinguished between a 'public hospital' and a 'private hospital'. More recently, paragraph 121-5(8) of the Private Health Insurance Act 2007 requires that the Minister for Health's declaration that a facility is a 'hospital' must also include a statement as to whether the hospital is a public hospital or private hospital. The Australian Institute of Health and Welfare's Glossary, accessed 14 June 2021, contains the following definitions: Public hospital: A hospital controlled by a state or territory health authority. Public hospitals offer free diagnostic services, treatment, care, and accommodation to all eligible patients. Private hospital : A privately (non-government) owned and operated institution catering for patients who are treated by a doctor of their own choice. Patients are charged fees for accommodation and other services provided by the hospital and relevant medical and paramedical practitioners. Acute care and psychiatric hospitals are included in this category as are private free-standing day facilities. The term 'private hospital' is not used in the FBTAA and such hospitals may be operated by not-for-profit or for-profit entities. The FBTAA does not provide any concessional treatment by way of a per-employee exemption cap for a for-profit entity that operates a private hospital. Aside from any legal meaning of a 'public hospital', there exists a dichotomy between 'public' ('jointly funded by the Commonwealth and the states and territories') and 'private' ('funded through private health insurance and individual out-of-pocket payments') health in Australia's health system. Such health services are provided through 'public' and 'private' hospitals, thus espousing a current ordinary or common understanding of those terms. | Detailed Reasoning - Application to your circumstances: The organisation is a not-for-profit company which is registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC). They are registered as a PBI with the ACNC and endorsed as a PBI under section 123C of the FBTAA. The organisation provides health services which are paid for by patients on a 'fee for service' basis and operates as a not-for-profit organisation. Most of the fees incurred by patients for private health services are funded by way of partial or full reimbursement from a private health fund or are paid for by the patient directly. In other limited cases, other third parties such as the Commonwealth Department of Veteran Affairs provide payment on behalf of that patient. It is considered that these hospitals are substantially funded by patients with the minor balance funded by government under service contracts voluntarily entered into by the organisation. The organisation is not considered to be 'public hospital' for the following reasons: • The hospitals is privately owned. • The level of public/government control is nil. • The hospital charges fees for its services. • The hospitals is self-funded. The organisation is not a 'public hospital' under the common meaning of the term and does not meet the definition of a 'public hospital' for the purposes of Step 2, paragraph(c) of the Method Statement in subsection 5B(1E) of the FBTAA. | Detailed Reasoning - Question 2: Is the organisation a 'rebatable employer' for the purposes of paragraph (d) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA? | Summary: No, the organisation is not considered a 'rebatable employer' for the purposes of paragraph (d) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA. | Detailed Reasoning - Detailed reasoning: Paragraph (d) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA provides that "the employer is a hospital described in subsection 57A(4) (which is about hospitals carried on by societies and associations that are rebatable employers)." Section 57A(4) states: A benefit provided in respect of the employment of an employee is an exempt benefit if the employer of the employee is a hospital carried on by a society or association that is a rebatable employer. Subsection 65J(1) of the FBTAA outlines the criteria required to be satisfied in order for an employer to be considered a rebatable employer, as follows: (1) An employer is a rebatable employer for a year of tax if the employer: (a) Is exempt from income tax at any time during the year of tax under any of the provisions set out in the following table; and (b) Satisfies the special conditions (if any) set out in the following table. The table set out under subsection 65J(1) includes the following types of employers: • Registered charities; • Scientific institutions; • Public educational institutions; • Specific societies, associations or clubs established for certain purposes; and • Specific trades or unions. | Detailed Reasoning - Application to your circumstances: The organisation is a registered charity with the ACNC and therefore meets the first-mentioned criteria set out under subsection 65J(1). In order to be considered a rebatable employer, the organisation is also required to satisfy the specific conditions attached to this particular employer type. These conditions are set out in the table in subsection 65J(1) as follows: The registered charity is not a rebatable employer for the year of tax if it: (a) is a registered public benevolent institution; or (b) is a registered health promotion charity; or (c) is an institution of the Commonwealth, a State or a Territory; or (d) has not been endorsed under subsection 123E(1); or (e) is not an institution. An organisation is a PBI if it is registered by the ACNC as a PBI. In this case, the organisation is a registered charity and is a registered PBI with the ACNC. The organisation does not meet any of the other criteria under subsection 65J(1) and accordingly, the organisation is not a 'rebatable employer' for the purposes of paragraph (d) of Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA. | Detailed Reasoning - Question 3: If the answer to question 1 and 2 is no, will Step 3 of the Method Statement in subsection 5B(1E) of the FBTAA apply such that the individual grossed-up non-exempt amount of benefits provided to each employee of the organisation would be reduced by the higher FBT exemption cap of $30,000 (but not below nil)? | Summary: Yes. Step 3 of the Method Statement in subsection 5B(1E) of the FBTAA would apply such that the individual grossed-up non-exempt amount of benefits provided to each employee would be reduced by the higher FBT exemption cap of $30,000 (but not below nil). | Detailed Reasoning - Detailed reasoning: Benefits provided by 'section 57A employers' will be exempt where the total grossed-up value of certain benefits (which are benefits not otherwise exempt) provided to each employee during the FBT year is equal to, or less than, the relevant capping threshold. If the total grossed-up value of certain benefits provided to an employee is more than that capping threshold, the organisation will need to pay FBT on the excess. The capped benefit amount is determined by reference to the employer's 'aggregate non-exempt amount' in accordance with the Method Statement in subsection 5B(1E) of the FBTAA which states: Step 2. If: (a) (Repealed by No. 142 of 2003) (b) the employer is a government body and the duties of the employment of one or more employees are as described in paragraph 57A(2)(b) (which is about duties of employment being exclusively performed in or in connection with certain hospitals); or (c) the employer is a public hospital; or (ca) the employer provides public ambulance services or services that support those services, and the employee is predominantly involved in connection with the provision of those services; or (d) the employer is a hospital described in subsection 57A(4) (which is about hospitals carried on by societies and associations that are rebatable employers); subtract $17,000 from the individual grossed-up non-exempt amount for each employee of the employer referred to in paragraph (c), (ca) or (d), or each employee referred to in paragraph (b), for the year of tax. However, if the individual grossed-up non-exempt amount for such as employee is equal to or less than $17,000, the amount calculated under this step for the employee is nil. Step 3 If step 2 does not apply in respect of one or more employees of the employer, reduce the individual grossed-up non-exempt amount for each such employee by $30,000, but not below nil. Therefore, as per Steps 2 and 3 of the Method Statement in subsection 5B(1E) of the FBTAA, registered PBIs which do not operate a public hospital have a higher FBT exemption cap of $30,000 grossed-up value (that is, the value of the benefit plus the notional FBT liability) per employee, while a $17,000 per-employee FBT exemption cap applies to employees of government and non-government public hospitals, and hospitals run by rebatable employers (relevantly, charities that are not PBIs). | Detailed Reasoning - Application to your circumstances: The organisation is endorsed as a PBI for the purposes of section 123C of the FBTAA. It was determined that the organisation is not considered to be a 'public hospital' under paragraph c in Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA. It was determined that the organisation is not considered to be a rebatable employer under paragraph d in Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA. Therefore, it is considered that Step 3 of the Method Statement in subsection 5B(1E) of the FBTAA would apply in the current circumstances such that the individual grossed-up non-exempt amount of benefits provided to each employee would be reduced by the higher FBT exemption cap of $30,000 (but not below nil). | Detailed Reasoning - Conclusion: The organisation is an ACNC registered PBI and is endorsed by the Commissioner under section 123C of the FBTAA. The organisation is not a government body as it is independently controlled, a fee is charged for the provision of services. The organisation is not an employer in relation to which Step 2 of the Method Statement in subsection 5B(1E) of the FBTAA applies because it is not considered to be a public hospital. As such the organisation will be entitled to apply the $30,000 reduction to the taxable FBT value for each eligible employee pursuant to Step 3 of the Method Statement contained in section 5B(1E) of the FBTAA