Health and safety FBT exemption

A non-cash benefit provided by an employer to an employee is subject to fringe benefit tax. However, if the benefit relates to health and safety it could be exempt from FBT under section CX 24 of the Income Tax Act 2007. The Commissioner has recently considered how this exemption applies.

The requirements of the exemption are that there must be a benefit provided by an employer to an employee, and the benefit must:

• Relate to the employee’s health or safety;
• Is aimed at managing risks to health and safety in the workplace as provided under the Health and Safety at Work Act 2015 (HSWA); and
• The benefit would be excluded under section CX 23 if it was provided on the employer’s premises.

Every employer has an obligation under the HSWA to eliminate or minimise risks to health and safety. This can include the implementation of preventative measures to manage potential risks and hazards in the workplace.

The Commissioner considers that a benefit that targets or addresses a specific harm, hazard or risk to health and safety would meet the requirement that the benefit “is aimed at managing risks to health and safety in the workplace”. For example, a programme that specifically targets and manages stress would be considered FBT exempt. However, a gym membership that can be used at the employee’s discretion, would not qualify for the exemption, because a gym membership benefits the overall health of a person and does not target a specific risk to health and safety in the workplace.

Whether or not a benefit is provided to manage health or safety in the workplace is a highly factual exercise. It is based on the employer’s subjective assessment and identification of the actual or potential risks in that workplace.

Further, a benefit is excluded from being a fringe benefit under section CX 23 of the ITA if the benefit is used or consumed on the employer’s premises. The exclusion under section CX 23 does not apply to travel, accommodation or clothing benefits.

If you are unsure as to whether the benefit you provide falls within section CX 24 of the ITA, please consult a tax professional.