Private ruling: Fringe Benefits Tax - Exempt Benefits
Date of advice: 21 September 2015
Published: September 2015
Ruling period: 1 July 2013 to 30 June 2020

Ruling: Q1: Is the Organisations provision of accommodation, utilities and telephone to the house manager exempt benefits pursuant to section 58 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No. As the duties of the house manager are not principally concerned with the care of elderly or disadvantaged persons any benefits provided to the employee will not be exempt under section 58 of the FBTAA.

Relevant facts and circumstances: The Organisation is a charitable organisation registered with the Australian Charity and Not-for-Profit Commission (ACNC) for purposes beneficial to the community. The Organisation owns a property which it uses to provide accommodation to relatives and carers of rural, interstate or international patients who have been admitted to local Hospitals. The conditions of eligibility to be a guest at the Organisation's include that the guest must: a) be referred by a welfare department, social worker or medical department as the approved carer or escort of a person who has been admitted as an inpatient receiving specialist medical treatment at a local hospital; or b) have a friend or relative who has been admitted as an inpatient receiving specialist medical treatment at a local hospital; and c) need to travel more than 100 kilometres one way to commute from their usual place of residence to the relevant hospital. Guests who stay at the property may be eligible to receive government-subsidised travel and accommodation allowances for carers of patients under the relevant Patient Transport Assistance Scheme (PTAS). Guests who are not eligible for government subsidies are usually immediate family (children, wife or husband) of the designated carer. For these guests, the accommodation charge is equivalent to the subsidy rate paid under the relevant scheme. Guests can arrive at any hours of the day or night. Accordingly, the Organisation employs a house manager who lives at the property. The house manager provides the following services for guests: • Access to professional assistance; • A contact for hospitals where the guest cannot be contacted directly; • In circumstances where the inpatient passes away, support to the guest until other family or friends arrive, including assisting with making funeral arrangements; • Directions or information or how to get to and from hospitals; • Advice regarding documentation to support a claim for government assistance; • Hospitality; • Ensuring compliance with health and safety regulations and other relevant statutory regulations; • Cleaning; and • Provision of a secure environment. The Organisation and its employees provide guests with accommodation and assistance 24 hours a day, 7 days a week. The house manager is remunerated for their role. The house manager does not pay for their accommodation, residential fuel (i.e. electricity), or telephone. The relevant Patients Travel Assistance Scheme Carers, relatives or friends of persons admitted as inpatients to local hospitals for specialist treatment may be entitled to receive government subsidies under the relevant Patient Transport Assistance Scheme. The Patient Travel Assistance Scheme subsidises the travel and accommodation costs incurred by rural patients and an approved escort, who have no option but to travel a long distance to receive approved medical specialist services. To be eligible for assistance patients must meet all of the following criteria: • be a resident of the state • live in a Department of Health designated rural region • be receiving specialist medical treatment from an approved medical specialist • need to travel more than 100 kilometres one way or on average 500 kilometres per week for a minimum of five consecutive weeks. Under the VPTAS an approved patient escort may also be eligible to seek assistance for travel and accommodation costs. An escort is responsible for the patient's transport and accommodation needs during treatment. An approved escort must be: • 18 years of age or older • Accompanying the patient whilst travelling; and • Deemed necessary by the approved specialist medical practitioner. Patients who are not the primary card holder of an approved Pensioner Concession Card or Health Care Card are required to pay the first $100 each treatment year. Once the $100 payment has been made patients receive full patient transport assistance for the remainder of the treatment year. Applicants for assistance under the relevant scheme are not subject to an income / means test. Criteria for referral to accommodation provided by the Organisation According to the Organisation, "reservations are only available by referral from the doctors, social workers or welfare workers at the hospital the patient is attending." The Organisation has met with all the hospitals that refer carers to Organisation's property. Accordingly, the social workers and doctors who refer carers to the property are aware of the Organisation's purpose. The Organisation has advised hospitals that carers who are in financial distress and emotional need should be referred with priority given to those carers in the greatest financial need. The Organisation considers that relying on professional doctors and social workers is essential in determining which individuals are most in need of the services provided by the Organisation as they are considered to be in the best situation to make an effective and efficient assessment of the financial needs of the carers. Accordingly, social workers and recommend the most in need individuals to stay at the Organisation's property.

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

Reasons for decision: Summary: Section 58 of the FBTAA provides that certain benefits such as accommodation, residential fuel, meals, and food and drink (other than meals) are exempt benefits if they are provided to live-in residential care workers whose duties principally consist of caring for disadvantaged. A reimbursement of telephone expenses is not an exempt benefit under section 58 of the FBTAA. Subsections 58(1)(a) and (b) of the FBTAA provide: | Detailed Reasoning - 58(1): Where, during a period: (a) the employer of an employee is: (i) a government body; or (ii) a registered religious institution; or (iii) a company that is registered under the Australian Charities and Not-for-profits Commission Act 2012 and does not meet the description of the subtype of entity in column 2 of item 4 of the table in subsection 25-5(5) of that Act; or (iv) a non-profit company that is not an ACNC type of entity; whose activities consist of, or include, caring for elderly persons or disadvantaged persons; and (b) the duties of the employment of the employee consist of, or consist principally of: (i) caring for elderly persons and any children of those elderly persons who reside with those elderly persons; or (ii) caring for disadvantaged persons and any children of those disadvantaged persons who reside with those disadvantaged persons; and For benefits to be exempt under section 58 of the FBTAA, the employer must be an entity that falls within one of categories of employers listed in paragraph 58(1)(a) of the FBTAA. The Organisation is a charitable organisation registered with the Australian Charities and Not for Profit Commission. It is not registered as an entity whose purpose is the advancement of religion. Accordingly, it is an employer that is referred to in subparagraph 58(1)(a)(iii) of the FBTAA. A further requirement is that the duties of the employee must consist principally of caring for either elderly persons or disadvantaged persons (paragraph 58(1)(b) of the FBTAA). A guest of the Organisation can be a person of any age, provided they are a relative, friend or an approved carer of a person who has been admitted as an inpatient to a local hospital. Therefore subparagraph 58(1)(b)(i) of the FBTAA is not applicable to the circumstances. Therefore it is necessary to consider if the clients of the Organisation are disadvantaged persons. The term 'disadvantaged person' is defined in subsection 136(1) of the FBTAA as: (a) a person who is intellectually, psychiatrically or physical handicapped; or (b) a person who is in necessitous circumstances. The term "necessitous circumstances" is not defined in the FBTAA. However the Commissioner's views on the meaning of "necessitous circumstances" are set out in Taxation Ruling TR 2000/9 which deals with public funds established and maintained for the relief of persons who are in necessitous circumstances. Paragraph 29 of TR 2000/9 lists some of the principles that have emerged from case law on the meaning of necessitous circumstances. These include: • necessitous circumstance concern financial necessity • it involves some degree of poverty, though it may be less than abject poverty or destitution • it is relative to a modest standard of living' • it is a relative term, which has no fixed quantitative measure and it may be relative to particular circumstances; and • it is distinguished from the inability to afford merely desirable advantages The Commissioner considers that "necessitous circumstances" refers to financial necessity and does not extend to more general needs. This view was taken by Kitto J in Ballarat Trustees Executors and Agency Co Ltd v FC of T (1950) 80 CLR 350 at 353: 'It was contended ... that the expression "necessitous circumstances" ... includes any circumstances of need, such as the need for hospital attention, and is not confined to circumstances of financial necessity. In my opinion so wide a construction of the expression should not be adopted, having regard to ordinary usage, the context in which the words appear and the history of the sub-section [8(5) of the Estate Duty Assessment Act 1914 - 1942 ]. I construe the expression as referring to circumstances characterized by some degree of financial necessity.' While necessitous circumstances involve financial necessity, the necessity need not be to the extent of abject poverty or destitution. In Ballarat Trustees Kitto J said at 80 CLR 355: 'The expression "necessitous circumstances" is not defined by the Act, nor has it been judicially interpreted in its present or a comparable context. It does not admit of definition in terms so precise as to provide a yardstick for the determination of every case which may arise. Yet it is an expression which is familiar in common speech, not as limited to cases of abject penury, but as conveying the notion which the Oxford Dictionary endeavours to express as "having little or nothing to support oneself by; poor, needy; hard up". None of these words or phrases can be selected as by itself precisely defining the expression. "There are degrees of poverty less acute than abject poverty or destitution, but poverty nevertheless": Lemm v . Federal Commissioner of Taxation (1942) 66 CLR 399, at 410 per Williams J; and "necessitous circumstances" refers in my opinion to some degree of poverty.' That ruling also notes that an indicator of "necessitous circumstances" can be whether the person is entitled to government welfare assistance. However, receipt of government assistance, on its own, is not conclusive evidence that a person is in necessitous circumstances. For example, in Case X13 90 ATC 165 at 171 Purvis J did not accept that being in receipt of government social welfare was sufficient evidence of necessitous circumstances: 'There was not any evidence as to the financial resources of the student beneficiaries other than that their parents or parent were or was in receipt of social security. There was not any evidence of an inability on the part of a parent or the student to afford the necessaries associated with living in Australia.' The Organisation states that: "Over 90% of house guests are eligible for, and subsequently receive government subsidies to assist with their emergency accommodation costs while caring for a patient in a hospital some distance from home." In most instances, carers, relatives or friends of persons admitted as inpatients to local hospitals for specialist treatment are entitled to receive government subsidies under the relevant Patient Transport Assistance Scheme. The scheme subsidises the travel and accommodation costs incurred by rural patients and an approved escort, who have no option but to travel a long distance to receive approved medical specialist services. To be eligible for assistance patients must meet all of the following criteria: • be a resident • live in a Department of Health designated rural region • be receiving specialist medical treatment from an approved medical specialist • need to travel more than 100 kilometres one way or on average 500 kilometres per week for a minimum of five consecutive weeks. Under the relevant scheme an approved patient escort may also be eligible to seek assistance for travel and accommodation costs. An escort is responsible for the patient's transport and accommodation needs during treatment. An approved escort must be: • 18 years of age or older • Accompanying the patient whilst travelling; and • Deemed necessary by the approved specialist medical practitioner. The guidelines for eligibility for assistance do not impose any income / means tests. Provided the above criteria are met, assistance is available to persons from all socio/economic backgrounds. On this basis the Organisation concludes: "The fact that over 90% of guests are eligible to receive government subsidies is indicative of them being in necessitous circumstances." In reaching this conclusion the Organisation appears to be relying on the Commissioner's statement in TR 2000/9 that "a strong indicator, though not the only indicator, of necessitous circumstances is where the person is eligible to receive income tested government benefits." Although it is accepted that some persons accommodated by the Organisation who receive the subsidy may be in necessitous circumstances, it does not follow that all recipients of the subsidy are in that position. The fact that the subsidy provided under the scheme is not income tested leads to the conclusion that not all recipients of the benefit must be in necessitous circumstances. The Organisation also contends that guests are in necessitous circumstances "as a result of being away from home, one (but often two) primary income earners in a family are unable to perform their usual work" It is accepted that guests accommodated by the Organisation can suffer temporary financial setbacks. However not all guests and their families would necessarily be in this position as they may have other resources to maintain a reasonable standard of living while residing at accommodation provided by the Organisation. | Detailed Reasoning - Conclusion: We are unaware of the factors/criteria doctors, social workers and welfare workers take into account in determining who is in financial need for referrals to the Organisation and how the Organisation can assure itself that primarily those in financial need are accommodated. In the absence of such information we cannot conclude that the majority of persons who are clients of the Organisation are in necessitous circumstances. Therefore the duties of the employee are not principally concerned with the care of elderly or disadvantaged persons. Accordingly, fringe benefits such as accommodation, residential fuel, meals, and food and drink (other than meals) will not be exempt under section 58 of the FBTAA.