FBT and Public Hospitals

FBT exemptions are amazing ways to reward employees. And one of the most used FBT exemptions relates to employees of public hospital. These employees can receive up to $17,000 worth of grossed up benefits. What does grossed up mean? That there is no FBT payable if the value of the benefits, multiplied by the appropriate gross up rate is less than $17,000.

The gross up rates are:

  • a gross-up rate of 2.0647 where the benefit provider is entitled to a GST credit for the provision of a benefit
  • a gross-up rate of 1.8692 if the benefit provider is not entitled to GST credits.

So who can get a bit over $9,000 of their mortgage payments paid by their public hospital employer under a salary package without any FBT being payable?

In draft Taxation Determination TD 2014/D17, the Commissioner considers “when are the duties of the employment of an employee of a government body exclusively performed in, or in connection with, a public hospital or ‘non-profit hospital’ for the purposes of paragraph 57A(2)(b) of the Fringe Benefits Tax Assessment Act 1986?”

Subsection 57A(2) of the Fringe Benefits Tax Assessment Act 1986 provides that where the employer of an employee is a government body and the duties of the employment of the employee are exclusively performed in, or in connection with a public hospital or a hospital carried on by a society or association that is a rebatable employer, then a benefit provided in respect of the employment of the employee is an exempt benefit.

This means that be eligible for the exemption, the duties must be performed either ‘in’ or alternatively ‘in connection with’ a hospital.

The draft Determination states that in assessing this we need to look at the employee’s statement of duties and the actual duties being performed at a particular time.

In assessing whether the employee meets this test the Commissioner states you need to look to see if either:

  • The duties are performed ‘in’ the hospital such that the employee performs their duties in the physical location of the hospital facility and within that facility at a place where activities are conducted that enable the hospital to carry out its functions, or
  • The duties are performed ‘in connection with’ the hospital such that the employee is engaged in activities that enable the hospital to carry out its functions. These duties may be performed at places other than ‘in’ the hospital.

Using these tests the draft Determination considers 9 employees and assesses if they can take advantage of the exemption in subsection 57A(2). These employees are:

  • A hospital employed cleaner performing duties ‘in’ two or more public hospital or a non-profit hospital – Can get the exemption.
  • A hospital employed clinical nurse performing duties ‘in, or in connection with… a public hospital’ both in the hospital and in the homes of patients – Can get the exemption.
  • A construction project manager working on a hospital site building new facilities – Cannot get the exemption
  • An administrative support officer across a number of metropolitan public hospitals doing procurement of hospital goods and services and payment of suppliers – Can get the exemption
  • A shared services manager providing services across government entities, some of which are hospitals – Cannot get the exemption
  • Employees changing jobs – each gets assessed separately
  • Employees being moved from a job at the hospital to a corporate role in government not at the hospital – Cannot get the exemption once they move to the second role.
  • The CEO of a public hospital – Can get the exemption

This, especially the CEO decision, is a minor change from the Commissioner’s previous position. In ATO Interpretative Decision 2003/40 the Commissioner concluded that a State Government employee who had the job of finding alternate funding options for public hospital, monitored spending at public hospitals and advised the Minister about funding allocation and performance of public hospitals could not claim the section 57A exemption.

Therefore, it is worth considering any clients you have who work for a public hospital or for the appropriate Department.


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