Private ruling: Fringe Benefits Tax: work-related counselling
Published: March 2014
Ruling period: 1 April 2013 to 31 March 2016
Date scheme commenced: 1 April 2013

Ruling: Q1: Will the reimbursement of the cost of financial and/or career counselling paid under the terms of your Enterprise Agreement to an employee who has been declared excess be an exempt benefit? | A1: Yes.

Relevant facts and circumstances: The terms and conditions of the employer's employees are established in an Enterprise Agreement. The Enterprise Agreement includes an Excess Staff Policy which provides for the reimbursement of expenses incurred by employees declared to be excess employees in obtaining financial and/or career counselling.

Relevant legislative provisions: Fringe Benefit Assessment Act 1986 Section 20 | Fringe Benefit Assessment Act 1986 Section 58M | Fringe Benefit Assessment Act 1986 Subsection 136(1) | Income Tax Assessment Act 1936 Subsection 23L(1A)

Reasons for decision: Summary: Will the reimbursement of the cost of financial and/or career counselling paid under the terms of your Enterprise Agreement to an employee who has been declared excess be an exempt benefit? Under the arrangement you will reimburse an employee declared excess for costs incurred in receiving financial and/or career counselling. In general terms, the definition of a 'fringe benefit' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that this reimbursement will be a fringe benefit if the following conditions are satisfied: (a) the reimbursement is a benefit; (b) the benefit is provided to an employee or an associate of an employee; (c) the benefit is provided by the employer, an associate or a third party under an arrangement; (d) the benefit is provided in respect of the employment of the employee, and (e) the benefit does not come within any of paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. These conditions are considered in relation to your circumstances below. | Detailed Reasoning - (a) Is the reimbursement a benefit?: Paragraph 20(b) of the FBTAA provides that a reimbursement is a 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. | Detailed Reasoning - (b) Is the benefit provided to an employee or an associate of an employee?: The reimbursement is paid to an employee. It is noted that an 'employee' is defined at subsection 136(1) of the FBTAA to mean a current, future or former employee. Therefore, the benefit will be provided to an employee whether or not the employee's employment has been terminated. | Detailed Reasoning - (c) Is the benefit provided by the employer, an associate or a third party under an arrangement?: The reimbursement is paid by the employer. | Detailed Reasoning - (d) Will the benefit be provided in respect of the employment of the employee?: The term 'in respect of' is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. As the reimbursement is paid under the terms of the Agreement that sets out the employment conditions it is provided in respect of the employment of the employee. | Detailed Reasoning - (e) Will the benefit come within any of paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA?: Paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA list certain benefits and payments that are not included in the definition of a fringe benefit. For the purpose of this ruling the relevant paragraph is paragraph (g) which that a fringe benefit does not include a benefit that is an exempt benefit. One such exempt benefit is found at section 58M of the FBTAA. Paragraph 58M(1)(a) sets out the circumstances in which an expense payment benefit will be an exempt benefit under section 58M. 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 of the cost of financial and/or career counselling will be an exempt benefit under subparagraph 58M(1)(a)(iv) of the FBTAA if the employee's expenditure is 'in respect of … work-related counselling of the employee'. '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, in this case, the employee's expenditure will be 'in respect of … work-related counselling of the employee' as required by subsection 58M(1) of the FBTAA where the following requirements are met: • the financial and/or career counselling is 'counselling attended by the employee'; • the attendance of the employee at the counselling gives 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 financial and/or career counselling relates to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA, and • the reimbursement is not provided wholly or principally as a reward for services rendered or to be rendered by the employee. These requirements are considered below. | Detailed Reasoning - Is the financial and/or career counselling considered to be 'counselling attended by the employee'?: The meaning of the term counselling in the context of the work-related counselling definition is discussed in paragraphs 112 to 117 of Class Ruling CR 2011/41 Fringe benefits tax: health services provided by BUPA Wellness Pty Ltd (CR 2011/41). Paragraphs 112 to 117 of CR 2011/41 state: | Detailed Reasoning - What is counselling?: 112. In understanding the meaning of this term it is helpful to refer to the ordinary dictionary meanings. 113. The Macquarie Dictionary 6 defines the word 'counsel' as 'advice; opinion or instruction given in directing the judgment or conduct of another'. The Australian Concise Oxford Dictionary 7 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'. 114. The wording of the definitions in paragraphs 112 and 113 indicates 'counselling' involves a suitably qualified person providing advice or guidance to someone else in relation to their established area of expertise. 115. 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'. 116. 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. 117. 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'. It is accepted that the financial and/or career counselling that is reimbursed meets the requirements of paragraph (a) of the work-related counselling definition. 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 them for retirement? One of the listed policies in the Agreement is the 'Excess Staff Policy' which provides for the reimbursement of expenses incurred by employees who are declared excess in obtaining financial and/or career counselling. The intention in providing for this reimbursement to be paid was to maintain the quality of the performance of your employees by reducing the stress that may otherwise arise in employees. Therefore, it is accepted that the attendance of an employee at financial and/or career counselling gives effect to a policy adopted by the employer to maintain the quality of the performance of the employees' duties. Does the financial and/or career counselling relate to any of the matters listed at paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA? Paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA states that the counselling must relate 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; (ix) rehabilitation or prevention of work-related trauma or of other disease or injury; (ix) first aid; (x) any similar matter; Taxation Determination TD 93/153 provides guidance on the application of section 58M of the FBTAA to 'outplacement services' provided by employers to employees before after they are made redundant. These 'outplacement services' are provided to assist such employees to organise their skills and experience in order to obtain satisfactory new employment. In relation to the 'outplacement services', paragraph 3 of TD 93/153 states: … 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). An example of 'outplacement services' is given at paragraph 5 of TD 93/153 as 'guidance on seeking new employment'. Financial and/or career counselling is akin to such services. Consistent with TD 93/153, it is accepted that the financial and/or career counselling relates to a relevant matter. | Detailed Reasoning - Is the reimbursement provided wholly or principally as a reward for services rendered or to be rendered by the employee?: It accepted that the reimbursement is not provided wholly or principally as a reward for services rendered or to be rendered by the employee. | Detailed Reasoning - Conclusion: As all of the requirements of the definition of work-related counselling are met, the reimbursement of the financial and/or career counselling expenses incurred by an employee declared to be an excess employee will be an exempt benefit under subparagraph 58M(1)(a)(iv) of the FBTAA. As the reimbursement is an exempt benefit it is exempt income of the employee under subsection 23L(1A) of the Income Tax Assessment Act 1936 and will not be an employment termination payment.