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.