ATO Interpretative Decision
ATO ID 2001/760 (Withdrawn)
Fringe Benefits Tax
Fringe Benefits Tax: Death & Disability group insurance coverFOI status: may be released
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This ATO ID is withdrawn as the issue is adequately covered by Class Ruling CR 2004/113This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Whether the provision of Death & Disability (D & D) insurance cover is a fringe benefit as defined under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)
Decision
Yes. The provision of D & D insurance cover is a fringe benefit as defined under subsection 136(1) of the FBTAA.
Facts
The employer has a D & D insurance policy covering nominated employees. The insurance policy provides the employee or the estate of the employee with a lump sum payment upon the death or disability of the employee. The premium is payable by the employer. The insurance cover is only provided to those employees who are current contributing members of the employer's staff superannuation fund.
Reasons for Decision
The insurance cover is a fringe benefit as defined under subsection 136(1) of the FBTAA because it is a benefit which is provided to an employee, in respect of employment. There is a sufficient and material relationship between the provision of the benefit and the employment of the employee. The provision of the benefit is a product or incident of the employment and it is not extraneous to the employment.
The decision to pay the insurance premium was to 'ensure that those that were members of the superannuation fund were not disadvantaged as a result of the decision to outsource the fund.' The employer decided that changes to the superannuation benefits may disadvantage some employees and therefore sought to recompense these employees by way of providing them with death and disability insurance cover.
The employer's letter of employment and the accompanying page explaining employment conditions includes details of the superannuation entitlements and death and disability insurance benefits which form part of the total employment entitlements.
In accordance with the test in J & G Knowles & Associates v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 45 ATR 1101, the reason why the benefit is provided is because it forms part of the total employment entitlements for some employees. Therefore as the benefits are made available under the conditions of employment they are provided solely because of the employer/employee relationship.
Date of decision: 10 October 2001Year of income: Year ended 31 March 2001 Year ending 31 March 2002 Year ending 31 March 2003 Year ending 31 March 2004
Legislative References:
Fringe Benefits Tax Assessment Act 1986
Subsection 136(1)
Case References:
J & G Knowles & Associates v. Federal Commissioner of Taxation
(2000) 96 FCR 402
2000 ATC 4151
Keywords
Residual fringe benefits
In respect of employment
Fringe benefits
Death and disability insurance
ISSN: 1445-2782
| Date: | Version: | |
| 10 October 2001 | Original statement | |
| You are here | 27 October 2004 | Archived |