Company taxed for keeping workers alive

A COMPANY can get a tax deduction for an employee’s funeral but not for helping keep the employee alive. Supply Side by Noel Dyson
Company taxed for keeping workers alive Company taxed for keeping workers alive Company taxed for keeping workers alive Company taxed for keeping workers alive Company taxed for keeping workers alive


Noel Dyson

Lake Fox, which transports high explosives around Australia decided that it needed to keep its employees healthy to meet the requirements of fatigue management rules.

To this end it entered into an arrangement with MBF to pay for its employees’ health insurance.

It believed that some of this – certainly not all – would be exempt from fringe benefits tax.

Sadly, the Australian Tax Office and, ultimately, Administrative Appeal Tribunal deputy president Philip Hack disagreed.

That left Lake Fox with a sour taste in its mouth and a bigger than expected FBT bill.

Lake Fox operates a road transport business known as Rocky’s Own Transport. It is based in Rockhampton but has depots and workers in other parts of Queensland and Western Australia.

The company employs more than 230 people spread across transport, maintenance and administration.

Lake Fox specialises in carrying high explosives for the mining industry and lays claim to being the largest carrier of such goods in Australia.

Its drivers are on the road driving for long periods of time.

For example it has two trucks that permanently circumnavigate Australia distributing product from an explosives manufacturer. Another of its routes has its trucks travelling from Kalgoorlie to a mine in the Tanami Desert in the Northern Territory.

Governments have long been concerned about drivers operating over such distances.

In Lake Fox’s native Queensland that led to the Transport Operations (Road Use Management – Fatigue Management) Regulation 2008.

This regulation imposes upon people in the “chain of responsibility” the obligation to “take all reasonable steps to ensure a person … does not drive the vehicle on a road while the person is impaired by fatigue”.

There are similar rules in place in Western Australia.

The Queensland regulations allow for accreditation to two levels – basic fatigue management and advanced fatigue management.

Lake Fox is accredited to the AFM standard.

Part of that accreditation requires it to have a fatigue management system.

This fatigue management system includes ensuring that each of the drivers is in a fit state to safely perform their required duties and to meet any specified medical requirements.

With this in mind Lake Fox entered into the arrangement with MBF. It would pay for part or, in some cases all of their premium – depending on length of service.

Paying for employees’ medical insurance normally draws full FBT.

Lake Fox, though, argued that because the health insurance was to, in part, ensure its workers were safe, it should be entitled to claim an exemption for some of the FBT.

Sadly it was not to be so.

Gadens Lawyers represented Lake Fox in the case.

Corporate tax partner Damian O’Connor said the decision by the AAT went against the increasing legal obligations on employers to put in place effective health management systems in the workplace.

“It is hard to fathom why the cost of an employee funeral would be exempt from FBT while employers are taxed to help keep them alive,” he said.

“As an employer in a high-risk industry, this decision limits Lake Fox’s ability to offer competitive employment packages to attract and retain employees.

“This decision may result in knock-on effects for Lake Fox and other organisations who are struggling to find staff in this environment.”

This article first appeared in ILN's sister publication

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