Private ruling: Fringe benefits tax - work-related counselling
Date of advice: 1 July 2016
Published: August 2016
Ruling period: Year ending 31 March 2017 | Year ending 31 March 2018 | Year ending 31 March 2019
Date scheme commenced: The scheme has commenced.

Ruling: Q1: Is the reimbursement of financial advice paid to current and former employees impacted by the entity's decision to cease a major business operation in the nature of work-related counselling and thus exempt from fringe benefits tax under section 58M of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes.

Relevant facts and circumstances: The entity has decided to cease a major business operation. A significant number of employees will be made redundant as a result of that decision. In recognition of the fact that all employees will need to consider how they will transition from employment with the entity to employment in the same or a different endeavour elsewhere, or, in some cases, retirement, the entity has developed a program designed to provide a range of services to assist all current and former employees who are or have been impacted by redundancy. The program assistance includes traditional outplacement services such as resume writing and job interview skill training. Additionally, the program also provides employees with financial assistance for the cost of undertaking training courses and seeking financial advice. Employees will be reimbursed up to a certain limit for services delivered by a licensed financial adviser. In addition, the employee must produce an invoice and confirmation of payment.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 - Section 20 | Fringe Benefits Tax Assessment Act 1986 - Section 58M | Fringe Benefits Tax Assessment Act 1986 - Subsection 136(1)

Reasons for decision: Summary: The entity will reimburse the cost of financial advice incurred by employees who are faced with the prospect of redundancy as a result of the entity's decision to cease a major business operation. The financial assistance is one of the services provided to assist all employees impacted by the decision. The entity seeks advice as to whether the reimbursement constitutes work-related counselling and thereby an exempt benefit for the purpose of section 58M of the FBTAA. Section 58M of the Fringe Benefits Tax Assessment Act 1986 ('FBTAA') exempts from fringe benefits tax various expense payment benefits including, among other things, work-related counselling. For the purpose of this ruling the relevant subparagraph is subparagraph 58M(1)(a)(iv) which states: "Where any of the following benefits is provided in respect of the employment of an employee: (a) An expense payment benefit where the recipients expenditure is in respect of … (iv) work-related counselling of the employee or of an associate of the employee … the benefit is an exempt benefit." Therefore, the reimbursement paid to the employee for the cost of financial advice will be exempt where: 1. The benefit is an expense payment benefit being provided to the entity's employees. 2. The benefit consists of the provision of work-related counselling. | Detailed Reasoning - 1. Is an expense payment benefit being provided to the entity's employees?: Paragraph 20(b) of the FBTAA provides that a reimbursement is an expense payment benefit. Paragraph 20(b) states: Where a person (in this section referred to as the provider ): (a) …; or (b) reimburses another person (in this section also referred to as the recipient ), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the making of … the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. Under the arrangement the benefit for the cost of financial advice is paid by the entity as an employer to its current and former employees. The benefit will be paid by way of reimbursement. The term 'employee' is defined at subsection 136(1) of the FBTAA to mean a current, future or former employee. Hence, the benefit will be provided to an employee whether or not the employee's employment has been terminated. Therefore, the reimbursement for a financial adviser fee to the employee is a benefit that falls within the meaning of an expense payment benefit pursuant to section 20 of the FBTAA. | Detailed Reasoning - 2. Does the benefit consist of the provision of work-related counselling.: 'Work-related counselling' is defined in subsection 136(1) of the FBTAA as follows: "work-related counselling : (a) in relation to an employee of an employer, means counselling attended by the employee; and (b) in relation to an associate of an employee of an employer, means counselling attended by the associate where the associate is accompanied by the employee; where all of the following conditions are satisfied: (c) the attendance of: (i) if paragraph (a) applies - the employee; and (ii) if paragraph (b) applies - both the employee and the associate; at the counselling gives effect to an objective, purpose, plan or policy devised, adopted or required to be followed, by the employer to: (iii) improve or maintain the quality of the performance of employees' duties; or (iv) prepare employees for retirement; (d) the counselling relates to any of the following matters: (i) safety; (ii) health; (iii) fitness; (iv) stress management; (v) personal relationships; (vi) retirement problems; (vii) drug or alcohol abuse; (viii) rehabilitation or prevention of work-related trauma or of other disease or injury; (ix) first aid; (x) any similar matter; (e) there is no benefit that: (i) is provided in respect of the employment of the employee; (ii) consists of the provision of, or relates to, the counselling; and (iii) is provided wholly or principally as a reward for services rendered or to be rendered by the employee." Therefore, the expenditure incurred by the employee in relation to financial advice will be considered "work-related counselling" where the relevant conditions as set out in subsection 136(1) of the FBTAA are met. Each of those conditions is discussed below. | Detailed Reasoning - Is the financial advice considered to be counselling attended by the employee?: The term "counselling" is defined in subsection 136 of the FBTAA which states: "counselling includes the giving of advice or information in a seminar." The financial advice is provided by a licenced financial adviser relating to the employee's financial circumstances surrounding the prospect of terminating employment with the entity. The financial advice is 'counselling' as defined in subsection 136(1) of the FBTAA which include the giving of advice. The reimbursement will be made where an invoice is produced and the payment is confirmed by the employee. Therefore, the seeking of financial advice is considered to be counselling attended by the employee. Does the attendance of the employee at the counselling give effect to an objective, purpose, plan or policy devised, adopted or required to be followed, by the employer to either improve or maintain the quality of the performance of employees' duties; or prepare employees for retirement? The entity has created a policy to support employees exiting the business. Under the arrangement employees are able to access various services provided by the entity, such as career guidance, skills recognition and training, and financial advice. The intention in providing for the reimbursement of the cost of financial advice to be paid was to meet the goal of assisting the affected employee transition to a new career and a secure future. Therefore, it is accepted that the attendance of an employee at financial counselling will give effect to a policy adopted by the entity to maintain the quality of the performance of its employees' duties. Does the financial advice relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling in subsection 136(1) of the FBTAA? In explaining the circumstances in which the exemption with regard to "work-related counselling" will apply the Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 stated in Part B: ... 'work-related counselling' is being defined under amendments proposed by clause 48 to mean, broadly, individual or group counselling (e.g., a seminar) related to matters such as safe work practices, stress management, fitness, drug or alcohol abuse or retirement problems. It is also necessary that the benefit is provided by the employer in order to improve or maintain the efficiency of employees or to prepare them for retirement and not as a form of remuneration. The financial advice service is a financial support to staff who are faced with the prospect of redundancy. The service is provided to assist staff to arrange their financial affairs when exiting the entity. The Commissioner's view on the application of the exemption under section 58M of the FBTAA to outplacement services is discussed in Taxation Determination TD 93/153 entitled " Fringe Benefits Tax: are outplacement services provided to current and former employees in the nature of work-related counselling and thus exempt from fringe benefits tax under section 58M of the Fringe Benefits Tax Assessment Act 1986? ('TD 93/153'). Paragraph 3 of TD 93/153 states: "Outplacement services are quite commonly provided by employers to employees before and after they are made redundant to assist them to organise their skills and experience in order to obtain satisfactory new employment. Such services, as they are normally provided, are considered to fall within the meaning of counselling as defined in paragraph (d) of the definition of "work-related counselling" in subsection 136(1)." At paragraph 4 of TD 93/153 it is stated that: "It is considered that as the provision of outplacement services to employees made redundant improve or maintain the quality of the performance of the remaining employees, these services fall within the definition of "work-related counselling" and as such are exempt benefits under section 58M. In the present case, the financial advice service is provided to employees to prepare them for redundancy. The service provides employees with certainty concerning their financial circumstances in the event of terminating employment with the entity, which can be terminated via voluntary redundancy, or forced redundancy or resignation. The counselling obtained is decisive to the employee in their consideration in exiting the entity and pursuit to a new employment elsewhere. Therefore, it is considered that the reimbursement of the cost of financial advice involves the provision of outplacement services which are consistent with TD 93/153, and as such fall within the definition in paragraph (d) of the definition of 'work-related counselling in subsection 136(1) of the FBTAA. | Detailed Reasoning - Is the reimbursement provided wholly or principally as a reward for services rendered or to be rendered by the employee?: Counselling of employees or associates of employees is not exempt as work-related counselling if it is provided wholly or principally as a reward for services rendered or to be rendered by the employee. The counselling must not be a form of remuneration. The reimbursement is paid as the employee may have been identified as potentially excess. The reimbursement is not being provided by the entity either by way of salary sacrifice or as a reward for services performed by the employee, therefore, it is accepted that the reimbursement is not provided wholly or principally as a reward for services. As all the conditions of the term "work-related counselling" have been met, the reimbursement paid to the employee for financial adviser fees constitutes "work-related counselling" as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Conclusion: The reimbursement of the cost of financial advice paid to the employee is an exempt benefit under subsection 58M(1)(a)(iv) of the FBTAA, being an expense payment benefit in respect of "work-related counselling".