The AAT has held that payments for private health insurance provided to employees by a taxpayer for the 2010 FBT year were not exempt benefits as the expenditure was not “in respect of” work-related medical screening or work-related preventative health care under s 58M of the FBTAA.
The taxpayer operated a major road transport business and specialised in carrying high explosives for the mining industry. It either subsidised or met the complete cost of private health insurance cover for over 100 of its employees. The taxpayer said it did so to comply with legislative regimes governing fatigue in long distance truck drivers. According to the taxpayer, the payments were “exempt benefits” within the meaning of that term in s 58M(1) or (2) of the FBTAA.
The Tribunal noted the taxpayer’s obligations under state regulations to have in place a health management system aimed at tackling fatigue in long distance drivers. However, the Tribunal said the employer’s motivation to provide benefits was irrelevant in the present context, rather, the issue was whether the expenditure satisfied the statutory criteria.
Both parties agreed the payments meet the definition of “expense payment benefit” in s 20 of the FBTAA. However, the key dispute was whether the employee expenditure on the premium was “in respect of” work-related medical examination, work-related medical screening, work-related preventative health care or work-related counselling per subparas (i) to (iv) of s 58M(1)(a).
The Tribunal found there was an insufficient nexus between the payment of the insurance premiums and work-related medical screening and work-related preventative health care as contended by the taxpayer. The Tribunal characterised the payments as expenditure “in respect of” medical insurance. In addition, the Tribunal was of the view that the benefits paid did not answer the “purposive element” within the definitions of “work-related medical screening” and “work-related preventative health care” – ie an examination or test “in order to ascertain…” and care provided “in order to prevent…”. The Tribunal also rejected the taxpayer’s alternative argument that the payments were “associated” benefits that came within s 58M(2).
In conclusion, the Tribunal held the Commissioner was correct in substance, but was not correct as to the amount. The Tribunal noted the Commissioner appeared to have incorrectly attributed certain amounts to a “wellness program” (a preventative health program) which the taxpayer did not undertake in the 2010 FBT year. Accordingly, the Tribunal remitted the matter back to Commissioner to make an assessment to increase the amount of FBT payable for the year ended 31 March 2010.
(AAT Case [2012] AATA 265, Re Lake Fox Limited and FCT, AAT, Ref No: 2011/0407, Hack DP, 4 May 2012.)
[LTN 86, 8/5]