FBT health and safety exclusion: Start with the workplace risk
QB 26/02 confirms that the health and safety exclusion depends on the workplace risk being managed—not simply the benefit provided.
In brief
-
Start with the workplace risk, not the benefit.
- General wellbeing benefits won't automatically qualify.
- Different parts of a wellbeing program may have different FBT outcomes.
"I've started offering staff flu vaccinations, ergonomic equipment for employees working from home, gym memberships and access to an Employee Assistance Program (EAP). Which of these are exempt from FBT?"
It's a question many advisers are hearing as employers continue investing in employee health and wellbeing. Inland Revenue's recently released Question We've Been Asked (QB 26/02) makes it clear that a benefit will not qualify for the health and safety exclusion in section CX 24 of the Income Tax Act 2007 merely because it supports employees’ general wellbeing. The real question is: What workplace health and safety risk is the employer seeking to manage?
That shift in focus is important. Whether a benefit qualifies depends less on what it is and more on why the employer provides it.
The legal test
QB 26/02 explains that, for the exclusion to apply, there must be a connection between the benefit and the employer's duty to manage workplace health and safety risks under the Health and Safety at Work Act 2015 (HSWA).
Broadly, the benefit must:
- relate to an employee's health or safety
- be aimed at managing risks to health and safety in the employer's workplace under the HSWA
- satisfy section CX 23 (the on-premises exemption) or it is qualifying personal protective equipment (PPE)), and
- be provided because of the employment relationship.
Whether those requirements are met depends on the employer's particular circumstances. Advisers should encourage clients to identify the workplace risk being managed and retain evidence supporting why the benefit was provided.
Practical examples
|
Benefit |
Will the exclusion generally apply? |
Adviser tip |
|
Flu and COVID-19 vaccinations |
Generally yes |
Document the workplace rationale. |
|
Ergonomic equipment for employees working from home |
Generally yes, where provided to address identified ergonomic risks |
Support purchases with workstation assessments or ergonomic recommendations. |
|
Workstation assessments |
Generally yes |
Keep assessment reports. |
|
One-on-one counselling through an Employee Assistance Program (EAP) |
May qualify |
Inland Revenue’s position is that employers should distinguish counselling services from broader wellbeing resources, where possible. |
|
General wellbeing resources (for example, seminars, wellness events or app subscriptions) |
Generally no |
Inland Revenue’s position is that employers should review bundled wellbeing programs carefully, as different components may have different FBT outcomes. |
|
Gym memberships |
Generally no |
Improving employee wellbeing alone is not enough. |
|
Hearing tests for employees exposed to excessive workplace noise |
Generally yes |
Keep records identifying employees exposed to the workplace hazard. |
|
Hearing tests for office-based employees |
Generally no |
The outcome depends on the workplace risk, not the type of health service. |
|
General health checks |
Generally no |
They may qualify where required by legislation or industry regulation, where employees are exposed to workplace hazards, or to assess fitness for hazardous work. |
|
Sunscreen and insect repellent for outdoor workers |
Generally yes |
Ensure the connection with outdoor work is documented. |
|
Hard hats, safety glasses, hearing protection and other PPE |
Generally yes |
Remember that PPE may not always give rise to a fringe benefit in the first place if it remains work equipment. |
These examples should not be treated as automatic outcomes. Inland Revenue's analysis depends on the facts of each case, the employer's health and safety obligations and whether there is a sufficient connection between the benefit and the workplace risk being managed.
Common pitfalls
QB 26/02 highlights several practical points advisers should discuss with clients.
General wellbeing isn't enough. Gym memberships, wellness apps and routine health checks may improve employees' health, but they will not generally qualify unless they are sufficiently connected with managing workplace health and safety risks.
Working from home doesn't change the analysis. Ergonomic equipment and workstation assessments may qualify, but employers must still be able to demonstrate why they were provided.
Different parts of the same program may have different FBT outcomes. Wellbeing programs often combine counselling, seminars, digital wellbeing tools and other services. Some components may qualify while others do not. Inland Revenue expects, where possible, employers to apportion the costs.
EAPs: a broader approach
One significant change between the draft and final QB relates to EAPs. The draft QB largely limited the exclusion to counselling for work-related stress. During consultation, CA ANZ submitted that this was not practical and did not adequately reflect employers' obligations under the HSWA or the confidential nature of EAP services. The final QB adopts a broader approach.
One-on-one counselling may qualify where it is provided to help manage psychosocial risks affecting employees' health and safety at work, even where the circumstances affecting the employee extend beyond work. That broader approach does not extend to general wellbeing resources such as wellness seminars or app subscriptions. Where programs include both counselling and broader wellbeing resources, the QB states employers should consider whether the costs need to be apportioned. This would likely be difficult in practice.
Final thoughts
The key message from QB 26/02 is simple: start with the workplace risk, not the benefit.
For advisers, that means helping clients identify the workplace risk being managed, explain why the benefit is being provided and determine whether different elements of a wellbeing program require different FBT treatment.