Private ruling: Fringe benefits tax: benefits provided under a health program
Published: November 2013
Ruling period: 1 April 2013 - 31 March 2014 | 1 April 2014 - 31 March 2015 | 1 April 2015 - 31 March 2016.
Date scheme commenced: 1 April 2013.

Ruling: Q1: Will a fringe benefit arise when a 'Bio-Age' assessment is provided to an employee who is not selected to participate in the Program? | A1: No. The provision of a 'Bio-Age' assessment to an employee not selected to participate in the Program will be an exempt benefit under section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). | Q2: Will a fringe benefit arise when a 'Bio-Age' assessment is provided to an employee who subsequently participates in the Program? | A2: A 'Bio-Age' assessment will not be an exempt benefit under section 58M of the FBTAA. However, depending upon the number of motivational and physical training sessions attended by the employee and the amount that the employee would be required to pay for a 'Bio-Age' assessment and the motivational and physical training sessions, the provision of a 'Bio-Age' assessment may be an exempt benefit under section 58P of the FBTAA. | Q3: Will a fringe benefit arise from the initial consultation attended by an employee who participates in the Program? | A3: No. The benefit that arises from the attendance at the initial consultation will be an exempt benefit under section 58M of the FBTAA. | Q4: Will a fringe benefit arise when an employee who participates in the Program attends a group information nutritional/motivation session? | A4: No. The benefit that arises from the attendance at the attendance at a group information nutritional/motivation session will be an exempt benefit under section 58M of the FBTAA. | Q5: Will a fringe benefit arise when an employee who participates in the Program attends an individual consultation? | A5: No. The benefit that arises from the attendance at an individual consultation will be an exempt benefit under section 58M of the FBTAA. | Q6: Will a fringe benefit arise when an employee who participates in the Program attends a motivational and physical training session? | A6: The benefit that arises from the attendance at a motivational and physical training session will not be an exempt benefit under section 58M of the FBTAA. However, depending upon the number of motivational and physical training sessions attended by the employee and the amount that the employee would be required to pay for a 'Bio-Age' assessment and the motivational and physical training sessions, the attendance at a motivational and physical training session may be an exempt benefit under section 58P of the FBTAA.

Relevant facts and circumstances: You have engaged an external organisation to provide a health program (the Program) to your employees. The objectives of the program are to: · educate employees on health, fitness and wellbeing; · promote healthy eating; · provide health coaching; · use fitness as a means of stress relief; and · promote exercise in a fun and engaging manner. Each employee will receive: · a 'Bio-Age' assessment by a trained and certified Sports Therapist and Metabolic Precision Transformation specialist (but not a medical practitioner or registered nurse); and · will undergo a health assessment, including a blood test performed by a registered nurse. On the basis of these assessments the employees who are likely to gain the most benefit from the Program will be selected to participate in the Program. Once an employee is selected to participate in the Program he or she is provided with a printed report about his or her Bio-Age and advice on how to lose weight and become fitter. Employees are challenged to set individual goals. To assist participants to meet these goals, each participant: · receives a folder containing nutritional guidelines aligned to each week of the program; · participates in a group information nutritional/motivation sessions to support their understanding of the nutritional folder, including lectures and practical demonstrations; · is given access to the Metabolic Precision Transformation specialist; · is asked to participate in 12 motivational and physical training sessions over a 12 week period; and · have their progress monitored throughout the Program.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 58M | Fringe Benefits Tax Assessment Act 1986 section 58P | Fringe Benefits Tax Assessment Act 1986 subsection 136(1).

Reasons for decision: Detailed Reasoning - Will a fringe benefit arise from the benefits provided to employees under the Program?: In general terms, the definition of 'fringe benefit' in subsection 136(1) provides that a fringe benefit will arise when: (a) a benefit is provided; (b) to an employee or an associate of an employee; (c) by one of the four providers listed in paragraphs (c) to (ea) of the 'fringe benefit' definition; (d) the benefit is provided in respect of the employment of the employee; (e) the benefit does not come within paragraphs (f) to (s) of the fringe benefit definition. For the purposes of this ruling, the relevant paragraph is paragraph (g) which provides that an exempt benefit will not be a fringe benefit | Detailed Reasoning - (a) Does the Program involve the provision of a benefit?: Subsection 136(1) contains an inclusive definition of 'benefit' which states: benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; (ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; or (c) an arrangement for or in relation to the lending of money. In addition to this definition, several sections within the FBTAA specify that a benefit will be taken to be provided when the stated conditions are met. For example, section 40 states: Where, at a particular time, a person (in this section referred to as the ``provider'') provides property to another person (in this section referred to as the ``recipient''), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. Each of the specific sections applies to a particular category of benefit. For example, a benefit that arises under section 40 will be a property benefit. An employee who participates in the Program will receive a folder containing nutritional guidelines. Although this comes within the property benefit definition in section 40 of the FBTAA, section 153 provides that where a person carries on a business that includes the entering into of contracts for the provision of property together with the provision of residual benefits, the property will be deemed to be part of the residual benefit. The folder is provided in relation to the group information nutritional/motivation sessions. As discussed below the provision of these sessions will be a residual benefit. Therefore, as the folder is provided together with a residual benefit, the provision of the residual benefit will be taken to include the provision of the property. A benefit that does not come within any of the specific sections will be a residual benefit under section 45. This may include the provision of a 'service'. In this regard, 'service' is defined by the Macquarie Dictionary to mean: 2 . the supplying or supplier of any articles, commodities, activities, etc., required or demanded. Every employee will receive a Bio-Age assessment. This is a residual benefit. In addition, employees selected to participate in the Program may receive the following services: · an initial consultation at which the employee receives advice about how to loose weight and become fitter; · a series of group information nutritional/motivation sessions; · individual consultations with a specialist; and · a series of motivational and physical training sessions. Each of these services will be a residual benefit. | Detailed Reasoning - (b) Are the benefits provided to an employee or an associate of an employee?: Each of the benefits will be provided to an employee. | Detailed Reasoning - (c) Will the benefits be provided by one of the four providers listed in paragraphs (c) to (ea) of the 'fringe benefit' definition?: For a benefit to be a fringe benefit the benefit must be provided by one of the providers listed in paragraphs (c), (d), (e) or (ea) of the fringe benefit definition. Paragraphs (c) to (ea) of the fringe benefit definition state: … being a benefit provided to the employee or to an associate of the employee by: (c) the employer; or (d) an associate of the employer; or (e) a person (in this paragraph referred to as the arranger ) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between: (i) the employer or an associate of the employer; and (ii) the arranger or another person; or (ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer: (i) participates in or facilitates the provision or receipt of the benefit; or (ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; 'Provider' is defined in subsection 136(1) to mean 'the person who provides the benefit'. This will be the external organisation that you engage to provide the Program. As the external organisation is neither the employer, nor an associate of the employer, paragraphs (c) and (d) of the fringe benefit definition will not apply in relation to the provision of the benefits. In considering paragraph (e) of the fringe benefit definition, paragraph (a) of the definition of 'arrangement' in subsection 136(1) states: any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings As you will enter into an agreement with the external organisation for the provision of the benefits to your employees, the provision of the benefits will come within paragraph (e) of the fringe benefit definition. | Detailed Reasoning - (d) Are the benefits provided in respect of the employment of the employee?: 'In respect of' is defined in subsection 136(1) to include: … by reason of, by virtue of, or for or in relation directly or indirectly to, that employment. As the benefits provided under the Program will only be provided to a person who is your employee, the employment of the employees is considered to be the reason for the benefits being provided under the Program. | Detailed Reasoning - (e) Will any of the benefits be exempt benefits?: The FBTAA specifies that certain benefits are exempt benefits. For the purpose of this ruling the relevant exemptions are those contained in subsection 58M and section 58P of the FBTAA. The FBTAA specifies certain benefits will be exempt benefits. For the purpose of this ruling the relevant exempt benefits to be considered are the exemptions for: · 'work-related medical examination', 'work-related medical screening', 'work-related preventative health care' and 'work-related counselling' under section 58M; and · minor benefits under section 58P. | Detailed Reasoning - The application of section 58M: In general terms, section 58M provides an exemption from fringe benefits tax for a 'work related medical examination', 'work-related medical screening', 'work-related preventative health care', 'work-related counselling' and 'migrant language training'. For the purpose of this ruling the relevant exemptions to be considered are those that apply for a 'work-related medical examination', a 'work-related medical screening', 'work-related preventative health care' and 'work-related counselling'. In explaining the circumstances in which these exemptions will apply the Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 stated in Part B: ... 'work-related medical examination' is being defined under amendments proposed by clause 48 to mean, broadly, an examination or test carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist where the employee is required to undergo the examination or test in order to commence new employment, to transfer to a different job with the same employer or to gain entry to a superannuation fund. ... 'work-related medical screening' is being defined under amendments proposed by clause 48 to mean, broadly, an examination or test carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist for the purpose of determining whether the employee is suffering from an injury or illness related to the employee's employment. It is also a requirement for exemption that the examination or test is carried out as part of a screening program which applies generally to employees with similar work-related risks. ... 'work-related preventative health care' is being defined under amendments proposed by clause 48 to mean, broadly, any form of care provided by a medical practitioner, nurse, dentist or optometrist for the purpose of preventing the employee from suffering from an injury or illness related to the employee's employment. It is also a requirement for exemption that the care is provided as part of a screening program which applies generally to employees with similar work-related risks. The provision of drugs, vaccines or other medical preparations in connection with the preventative health care will also be exempt. ... '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. In considering whether any of these exemptions apply to the residual benefits provided as part of the program it is necessary to consider paragraph 58M(1)(c). Paragraph 58M(1)(c) provides that a residual benefit will be an exempt benefit where it consists of the provision of a 'work-related medical examination' of an employee, 'work-related medical screening' of an employee, 'work-related preventative health care' of an employee or 'work-related counselling' of an employee or an associate of an employee. As each of the exemptions has different conditions it is necessary to initially identify the relevant exemption to be considered. The process for doing this and the conditions that need to be satisfied in relation to each of the exemptions are summarised in flowcharts. (Flowcharts are not included in this published version). | Detailed Reasoning - Will the Bio-Age assessment be an exempt benefit under section 58M?: As illustrated in flowchart 1, for the Bio-Age assessment to be an exempt benefit under section 58M it must be undertaken for either a work-related medical examination purpose or a work-related trauma purpose. Purposes listed in the definition of 'work-related medical examination' To be a 'work-related medical examination' the examination must be wholly or principally conducted for any or all of the following purposes: · the commencement of the employment of the employee; · the confirmation of probationary employment of the employee; · a change in duties or location of the employment of the employee; or · the employee becoming a member of a superannuation fund. As the Bio-Age assessment is not carried out for one of these purposes, the provision of the assessment will not be a work-related medical examination. Where an examination or test is not undertaken for a work-related medical examination purpose it can only come within section 58M if it is wholly or principally undertaken in order to ascertain whether the employee has suffered, is suffering or is at risk of suffering from work related trauma. 'Work-related trauma' is defined in subsection 136(1) to mean: (a) the injury of the employee (including the aggravation, acceleration or recurrence of an injury of the employee); (b) the contraction, aggravation, acceleration or recurrence of a disease of the employee; (c) the loss or destruction of, or damage to: (i) an artificial limb or other artificial substitute; (ii) a medical, surgical or similar aid or appliance used by the employee; or (iii) clothing worn by the employee; or (d) the coming into existence, the aggravation, acceleration or recurrence of any other physiological or psychological condition in relation to the employee that is or may be harmful or disadvantageous to, or result in harm or disadvantage to, the employee; that is related to any employment of the employee. As the 'Bio-Age' assessment includes a number of tests that are used to determine whether the employee is suffering, or at risk of suffering from the contraction, aggravation, acceleration or recurrence of a disease of the employee that is related to the employment of the employee they are undertaken for a work-related trauma purpose. Therefore, the 'Bio-Age' assessment will be an exempt benefit under section 58M if the following conditions are met: (a) the examination or test is carried out by, or on behalf of a medical professional listed in the definition of 'work-related medical screening' in subsection 136(1); (b) the examination or test is carried out on an employee; and (c) the examination or test is available generally to all employees who come within paragraphs (a) to (c) of the definition of 'work-related medical screening in subsection 136(1). These are employees: · who are likely to have suffered, be suffering or be at risk of suffering from similar 'work-related trauma'; · who perform their duties of employment at or near the place where the employee performs their duties of employment; and · whose duties are similar to those of the employee. Will the 'Bio-Age' assessment be carried out by, or on behalf of a medical professional listed in the definition of 'work-related screening' in subsection 136(1)? The definition of 'work-related screening' in subsection 136(1) requires the examination or test to be carried out by, or on behalf of an audiometrist, a legally qualified medical practitioner, nurse, dentist or optometrist. You have advised that the 'Bio-Age' assessment is conducted by a trained and certified Sports Therapist and Metabolic Precision Transformation specialist who is not a medical professional listed in the definition of 'work-related screening' in subsection 136(1). While a registered nurse attends the 'Bio-Age' assessment for the purpose of conducting a blood test, you have also advised that the role of the registered nurse is minor, is in support of and subordinate to the sports therapists, and the entire assessment is conducted and controlled by the sports specialist. Therefore, as the 'Bio-Age' assessment is not carried out by or on behalf of a medical professional listed in the definition of 'work-related screening' it will not be an exempt benefit under section 58M of the FBTAA. | Detailed Reasoning - Will the initial consultation be an exempt benefit under section 58M?: An employee selected to participate in the Program will attend an initial consultation at which he or she is provided with a printed report about his or her Bio-Age and advice about how to lose weight and become fitter. In addition, the goals are set for the employee to achieve throughout the Program. As discussed above, the initial consultation is not an examination or test. Therefore, the relevant tests to consider in determining whether the initial consultation is an exempt benefit are those summarised in flowchart 2. As set out in flowchart 2, the initial question to consider is whether the initial consultation is provided by or on behalf of a medical professional set out in the definition of 'work-related preventative health care' in subsection 136(1)? This is a legally qualified medical practitioner, nurse, dentist or optometrist. As discussed above, the initial consultation is conducted by a trained and certified Sports Therapist and Metabolic Precision Transformation specialist who does not come within any of the categories of medical professional listed in the definition of 'work-related preventative health care' in subsection 136(1). As the initial consultation is not provided by a medical professional listed in the definition of 'work-related preventative health care', it will not be 'work-related preventative health care'. Therefore, it will only be an exempt benefit if it is work-related counselling. As illustrated by flowchart 2, care that is not provided by or on behalf of a listed medical professional will be 'work-related counselling' where the following tests are satisfied: (a) the care is counselling; (b) the counselling is attended by either an employee, or an employee and an associate; (c) the attendance of the employee or the employee and associate gives effect to an objective, purpose, plan or policy devised, adopted or required to be followed by the employer to improve or maintain the quality of performance of employees' duties; (d) the counselling relates to any of the following matters: · safety; · health; · fitness; · stress management; · personal relationships; · retirement problems; · drug or alcohol abuse; · rehabilitation or prevention of work-related trauma or of other disease or injury; · first aid; or · any similar matter, and (e) the benefit is not provided wholly or principally as a reward for services rendered or to be rendered by the employee. (a) Is the initial consultation counselling? Class Ruling CR 2009/67 Fringe benefits tax: health services provided by Good Health Solutions Pty Ltd (CR 2009/67) provides guidelines on what constitutes counselling for the purposes of the definition of 'work-related counselling'. Paragraphs 190 to195 of CR 2009/67 state: | Detailed Reasoning - What is counselling?: 190. In understanding the meaning of this term it is helpful to refer to the ordinary dictionary meanings. 191. The Macquarie Dictionary defines the word 'counsel' as 'advice; opinion or instruction given in directing the judgment or conduct of another'. The Australian Concise Oxford Dictionary defines 'counselling' as the act or process of giving counsel' and relevantly the noun 'counsel' as 'advice, esp. formally given', and the verb as ' 1 ... advise (a person) 2a give advice to (a person) on social or personal problems, esp. professionally' and ' b assist or guide (a person) in resolving personal difficulties'. 192. The wording of the definitions in paragraphs 190 and 191 indicates 'counselling' involves a suitably qualified person providing advice or guidance to someone else in relation to their established area of expertise. 193. The Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 indicates the advice or information can be given either on an individual basis, or in a group situation such as a seminar. This is reflected in the definition of 'counselling' in subsection 136(1) which states that 'counselling' 'includes the giving of advice or information in a seminar'. 194. The advice or information can be in relation to a wide range of matters. For example, the Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 indicates it can be related to matters such as safe work practices, stress management, fitness, drug or alcohol abuse or retirement problems. This list of examples is extended by Taxation Determination TD 93/153 to include outplacement services such as assistance in writing a resume and job application, guidance on seeking new employment or training for employment interviews and selection tests. 195. Although the advice or information provided can be in relation to a wide range of areas a benefit will not be considered to be 'counselling' unless the provision of advice is the principal purpose for the benefit being provided to the employee. For example, although 'counselling' can include training or advice about how to undertake various physical activities, a physical activity session with limited instruction undertaken by an employee for the purpose of keeping fit will not constitute 'counselling'. The Explanatory Memorandum referred to in paragraph 193 of CR 2009/67, indicates that 'work-related counselling' is not limited to group sessions, but can extend to include individual counselling. The initial consultation comes within this definition as it involves a suitably qualified person providing advice or guidance to someone else in relation to their established area of expertise. (b) Is the counselling attended by either an employee, or an employee and an associate? The initial consultation is provided to the employee. (c) Will the attendance of your employees give effect to a specified objective? The attendance of the employee at the initial consultation will give effect to the specified objective of improving or maintaining the quality of the performance of employees' duties through reduced absenteeism, increased productivity and increased energy levels. (d) Does the counselling relate to a specific matter? As the initial consultation relates to health, fitness and stress it relates to the specified matters. (e) Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee? The initial consultation is not provided as a reward for services rendered or to be rendered by the employee. Conclusion regarding the initial consultation As the initial consultation meets all the tests contained in the definition of 'work-related counselling, the provision of an initial consultation to an employee will be an exempt benefit under paragraph 58M(1)(c) of the FBTAA. | Detailed Reasoning - Will the group information nutritional/motivation sessions be an exempt benefit under section 58M?: An employee selected to participate in the Program will attend group information nutritional/motivation sessions that include lectures and practical demonstrations. The purpose of these sessions is to support the participant's understanding of the advice and guidance provided in the nutritional folder and at the initial consultation. As discussed above, the group sessions are not an examination or test. Therefore, the relevant tests to consider in determining whether the group sessions are exempt benefits are those summarised in flowchart 2. In applying the above discussion in relation to the initial consultation, the group sessions cannot be 'work-related preventative health care' as the sessions are not provided by a medical professional listed in the definition of 'work-related preventative health care'. The tests that apply to work-related counselling which were discussed above in relation to the initial consultation are considered below. (a) Are the group sessions counselling? As the group sessions involve a suitably qualified person providing advice or guidance to someone else in relation to their established area of expertise the group sessions are considered to be counselling. (b) Is the counselling attended by either an employee, or an employee and an associate? The group sessions are attended by the employee. (c) Will the attendance of your employees give effect to a specified objective? The attendance of the employee at the group sessions will give effect to the specified objective of improving or maintaining the quality of the performance of employees' duties through reduced absenteeism, increased productivity and increased energy levels. (d) Does the counselling relate to a specific matter? As the group sessions relate to health, fitness and stress they relates to the specified matters. (e) Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee? The group sessions are not provided as a reward for services rendered or to be rendered by the employee. Conclusion regarding the group sessions As the group sessions meet all the tests contained in the definition of 'work-related counselling, the provision of group sessions to an employee will be an exempt benefit under paragraph 58M(1)(c) of the FBTAA. | Detailed Reasoning - Will the individual consultations be an exempt benefit under section 58M?: An employee selected to participate in the Program is able to receive individual consultations from a metabolic precision transformation specialist. This individual advice is intended to support the participant's understanding of the advice and guidance provided in the nutritional folder and at the initial consultation. As discussed above, the individual consultations are not an examination or test. Therefore, the relevant tests to consider in determining whether the individual consultations are exempt benefits are those summarised in flowchart 2. In applying the above discussion in relation to the initial consultation, the individual consultation cannot be 'work-related preventative health care' as the sessions are not provided by a medical professional listed in the definition of 'work-related preventative health care'. The tests that apply to work-related counselling which were discussed above in relation to the initial consultation are considered below. (a) Is the individual consultation counselling? As the individual consultation involves a suitably qualified person providing advice or guidance to someone else in relation to their established area of expertise, the individual consultations are considered to be counselling. (b) Is the counselling attended by either an employee, or an employee and an associate? The individual consultations are attended by the employee. (c) Will the attendance of your employees give effect to a specified objective? The attendance of the employee at the individual consultations will give effect to the specified objective of improving or maintaining the quality of the performance of employees' duties through reduced absenteeism, increased productivity and increased energy levels. (d) Does the counselling relate to a specific matter? As the individual consultation relate to health, fitness and stress they relates to the specified matters. (e) Is the benefit provided wholly or principally as a reward for services rendered or to be rendered by the employee? The individual consultations are not provided as a reward for services rendered or to be rendered by the employee. Conclusion regarding the individual consultations As the individual consultations meet all the tests contained in the definition of 'work-related counselling, the provision of individual consultations to an employee will be an exempt benefit under paragraph 58M(1)(c) of the FBTAA. | Detailed Reasoning - Will the motivational and physical training sessions be an exempt benefit under section 58M?: An employee selected to participate in the Program is able to attend X motivational and physical training sessions. These sessions consist of a weigh in; a discussion of the previous week's eating and training outcomes and a group physical training session. As discussed above, the motivational and physical training sessions are not an examination or test. Therefore, the relevant tests to consider in determining whether the motivational and physical training sessions are exempt benefits are those summarised in flowchart 2. In applying the above discussion in relation to the initial consultation, the motivational and physical training session cannot be 'work-related preventative health care' as the sessions are not provided by a medical professional listed in the definition of 'work-related preventative health care'. The tests that apply to work-related counselling which were discussed above in relation to the initial consultation are considered below. (a) Are the motivational and physical training sessions counselling? Although the motivational and physical training sessions may include a discussion about the previous week's eating and training outcomes, this is not considered to be the principal purpose of the motivational and physical training sessions. As set out in paragraph 195 of CR 2009/67: … a benefit will not be considered to be 'counselling' unless the provision of advice is the principal purpose for the benefit being provided to the employee. For example, although 'counselling' can include training or advice about how to undertake various physical activities, a physical activity session with limited instruction undertaken by an employee for the purpose of keeping fit will not constitute 'counselling'. As the motivational and physical training sessions are not predominantly for the purpose of providing advice or guidance they do not constitute the provision of counselling and the attendance of an employee will not constitute the provision of work-related counselling. Conclusion regarding the motivational and physical training sessions The attendance at the motivational and physical training sessions will not be an exempt benefit under section 58M. | Detailed Reasoning - The application of section 58P: Section 58P of the FBTAA provides that a benefit will be an exempt benefit where: (a) the benefit is not an airline transport benefit; (b) the benefit is not an in-house benefit; (c) the benefit is not tax-exempt body entertainment (apart from two limited circumstances); (d) the notional taxable value of the benefit is less than $300; and (e) it would be concluded that it would be unreasonable having regard to the specified criteria in paragraph 58P(1)(f) to treat the benefit as a fringe benefit. Guidance on the application of these tests in section 58P is provided in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12). | Detailed Reasoning - Is the provision of a 'Bio-Age' assessment an exempt benefit under section 58P?: (a) Is the 'Bio-Age' assessment an airline transport benefit? As discussed above, the provision of a 'Bio-Age' assessment will be a residual benefit. Therefore, it is not a X transport benefit. (b) Is the 'Bio-Age' assessment an in-house benefit? In general terms a residual benefit will be an in-house benefit if the benefit is provided by the employer (or an associate) and the employer (or associate) is in the business of providing identical or similar benefits principally to outsiders. As discussed above, the 'Bio-Age' assessment is provided by the external organisation engaged to provide the Program. As the external organisation is not your associate and you do not sell the 'Bio-Age' assessments to the external organisation, the 'Bio-Age' assessment will not be an in-house benefit. (c) Is the 'Bio-Age' assessment tax-exempt body entertainment benefit? As discussed above, the provision of a 'Bio-Age' assessment will be a residual benefit. Therefore, it is not a tax-exempt body entertainment benefit. (d) Is the notional taxable value less than $300? The term 'notional taxable value' as it applies to a residual benefit is defined in subsection 136(1) of the FBTAA to be the amount that would be the taxable value of the benefit if it was a fringe benefit. Subdivision B of Division 12 of the FBTAA provides a number of methods for calculating the taxable value of a residual fringe benefit. The relevant method depends upon whether the benefit is provided over a period and whether it is an in-house residual benefit. As discussed above, the Bio-Age assessment is not an in-house benefit. Therefore, as the assessment is conducted on a particular day it will be an external non-period residual fringe benefit. Section 50 of the FBTAA provides three alternate methods that can be used to calculate the taxable value of an external non-period residual fringe benefit. The relevant method depends upon whether: · the provider was the employer or an associate of the employer who purchased the benefit under an arm's length transaction; and · if the provider was not the employer or an associate of the provider, the employer or associate incurred expenditure to the provider under an arm's length transaction. As discussed above, the external organisation that you have engaged to provide the Program is the provider of the benefit. You do not pay the external organisation for the 'Bio-Age' assessments that it conducts. Therefore, the taxable value under paragraph 50(c) of the FBTAA will be the notional value of the benefit. 'Notional value' is defined in subsection 136(1) of the FBTAA to mean: … the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm's length transaction. In Walstern v. Federal Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423, at FCR 96; ATC 5092; at ATR 442, Hill J examined the application of this provision, and stated: As already noted, the valuation formula depends upon the 'notional value' in relation to the provision whether of property or of a benefit to each of the Medichs. From the definition it follows that the question to be asked is what is the amount that each of the Medichs could reasonably be expected to have been required to pay to obtain the benefit from the provider under an arm's length transaction. The provider in the present case is Walstern. Hence the question in relation to Mr Ronald Medich, is how much he could reasonably be expected to have been required (i.e., by Walstern) to pay to Walstern to obtain the interest obtained by him in the fund, assuming the transaction between Walstern and him to be at arm's length. In applying this to the 'Bio-Age' assessment, the notional value is the amount an employee would be charged for an assessment. (e) Is it unreasonable for the provision of a 'Bio-Age' assessment to be treated as a fringe benefit? Paragraph 58P(1)(f) of the FBTAA states that regard is to be had to various criteria in concluding if it is unreasonable to treat a minor benefit as an exempt benefit. The criteria which paragraph 58P(1)(f) of the FBTAA requires to be considered are: · the infrequency and irregularity with which associated benefits, being identical or similar benefits, are provided; · the sum of the notional taxable values of the benefit and any associated benefits which are identical or similar to the minor benefit in relation to the current year of tax or any other year of tax; · the sum of the notional taxable values of any other associated benefits in relation to the current year of tax or any other year of tax; · the practical difficulty in determining the notional taxable values of the benefit and any associated benefits; and · the circumstances surrounding the provision of the benefit and any associated benefits. Infrequency and irregularity with which associated benefits that are identical or similar are provided For the purposes of the minor benefit exemption, the term 'associated benefit' is defined in subsection 58P(2) of the FBTAA to mean: For the purposes of this section, a benefit is an associated benefit in relation to a minor benefit if, and only if: (a) any of the following subparagraphs applies: (i) the benefit is identical or similar to the minor benefit; (ii) the benefit is provided in connection with the provision of the minor benefit; (iii) the benefit is identical or similar to a benefit provided in connection with the provision of the minor benefit; (b) the benefit and the minor benefit both relate to the same employment of a particular employee; and (c) the benefit is not an exempt benefit by virtue of a provision of this Act other than this section. In applying this definition, the only benefit that is not otherwise exempt which may be provided in connection with a 'Bio-Age' assessment is a motivational and physical training session which will be provided if the employee becomes a Program participant. As this is not similar or identical to a 'Bio-Age' assessment and only one 'Bio-Age' assessment is provided no associated benefits that are identical or similar are provided. The sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar As there are no other associated benefits that are identical or similar this value will be nil. The sum of the notional taxable values of any other associated benefits This is the sum of the notional taxable values that would arise from the attendance at the motivational and physical training sessions by the employees who participate in the Program. The notional taxable value of these sessions will also be calculated under paragraph 50(c) as the sessions are not provided by the employer or an associate and the payments paid to the external provider are paid for the Program in general, rather than the specific motivational and physical training sessions. Therefore, the sum of the notional taxable values of the associated benefits for an employee who is a Program participant will be the amount the employee would have been required to pay to attend the motivational and physical training sessions. The sum of the notional taxable values for the employees not selected to be a Program participant will be nil as these employees do not receive any associated benefits. The practical difficulties in valuing the minor benefit and associated benefits Although you will need to obtain details from the external organisation of the number of motivational and physical training sessions attended by each individual employee and the amount the employee would otherwise have been required to pay to attend those sessions, it is possible for you to obtain this information under the terms of the agreement with the external organisation. The circumstances surrounding the provision of the benefits In considering the circumstances surrounding the provision of the benefit subparagraph 58P(1)(f)(v) provides it is necessary to consider whether: · the benefit was provided to assist the employee to deal with an unexpected event; and · whether the benefit was provided as a reward for services. In considering these two criteria the 'Bio-Age' assessment is not provided as a result of an unexpected event and is not a reward for services. Conclusion In summarising the five criteria that are required to be considered under paragraph 58P(1)(f): · the 'Bio-Age' assessment is a once off assessment which is not provided regularly or frequently; · as no identical or similar associated benefits are provided, the sum of the notional taxable values of the benefit and the identical or similar benefits will be the amount an employee would be required to pay for a 'Bio-Age' assessment; · the amount that is the sum of the benefit and any other associated benefits will be the amount the employee would be required to pay for a 'Bio-Age' assessment (if the employee does not become a Program participant), or the amount an employee would be required to pay for the 'Bio-Age' assessment and the motivational and physical training sessions (if the employee is a Program participant); · although it is necessary for you to obtain the details of any sessions attended by each employee, it is possible to obtain this information under the terms of the agreement with the external organisation; and · the 'Bio-Age' assessment is not provided as a result of an unexpected event and is not a reward for services. In evaluating these factors, the provision of a 'Bio-Age' assessment will be an exempt minor benefit under section 58P where the employee does not become a Program participant. However, where the employee becomes a Program participant, the classification of the benefit will depend upon the number of motivational and physical training sessions attended during the 12 week period and the amount that the employee would be required to pay for the 'Bio-Age' assessment and the motivational and physical training sessions. | Detailed Reasoning - Will the attendance at a motivational and physical training session be an exempt benefit under section 58P?: (a) Is a motivational and physical training session an airline transport benefit? As discussed above, the provision of a motivational and physical training session will be a residual benefit. Therefore, it is not a transport benefit. (b) Is the motivational and physical training session an in-house benefit? In accordance with the discussion above in relation to the 'Bio-Age' assessment, the motivational and physical training session will not be an in-house benefit as the external organisation is not your associate and you do not sell the motivational and physical training sessions to the external organisation. (c) Is the motivational and physical training session a tax-exempt body entertainment benefit? As discussed above, the provision of a motivational and physical training session will be a residual benefit. Therefore, it is not a tax-exempt body entertainment benefit. (d) Is the notional taxable value less than $300? As discussed above, the notional taxable value will be the amount the employee would be required to pay the external organisation to attend a motivational and physical training session. (a) Is it unreasonable for the provision of a motivational and physical training session to be treated as a fringe benefit? The five factors listed in paragraph 58P(1)(f) of the FBTAA are discussed below. Infrequency and irregularity with which associated benefits that are identical or similar are provided The associated benefits that are identical or similar are the other motivational and physical training sessions attended by the employee. This could be between 0 and 12 sessions during a 12 week period. Depending upon the number of sessions attended, the attendance could be considered to be both frequent and regular. The sum of the notional taxable values of the minor benefit and associated benefits which are identical or similar This will be the sum of the amounts that the employee would have been required to pay to attend the motivational and physical training sessions. The sum of the notional taxable values of any other associated benefits This is the notional taxable value of a 'Bio-Age' assessment. The practical difficulties in valuing the minor benefit and associated benefits Although you will need to obtain details from the external organisation of the number of motivational and physical training sessions attended by each individual employee and the amount the employee would otherwise have been required to pay to attend those sessions, it is possible for you to obtain this information under the terms of the agreement with the external organisation. The circumstances surrounding the provision of the benefits In considering the two criteria listed in subparagraph 58P(1)(f)(v), the motivational and physical training session is not provided as a result of an unexpected event and is not a reward for services. Conclusion In summarising the five criteria that are required to be considered under paragraph 58P(1)(f): · an employee may receive X benefits from attending motivational and physical training sessions in the X week period in which the employee is able to receive the benefit. This can be considered to be both regular and frequent for the given period; · the sum of the notional taxable values of the benefit and the identical or similar benefits will be the amount an employee would be required to pay to attend the motivational and physical training sessions; · the amount that is the sum of the benefit and any other associated benefits will be the amount the employee would be required to pay for the motivational and physical training sessions and a 'Bio-Age' assessment; · although it is necessary for you to obtain the details of any sessions attended by each employee, it is possible to obtain this information under the terms of the agreement with the external organisation; and · the motivational and physical training sessions are not provided as a result of an unexpected event and are not a reward for services. In evaluating these factors, the classification of the benefit will depend upon the number of motivational and physical training sessions attended during the X week period and the amount that the employee would be required to pay for the 'Bio-Age' assessment and the motivational and physical training sessions.