The court ordered MacMahon Mining reimburse fly-in, fly-out miner Adrian Williams for unpaid annual leave entitlements after finding he was an employee, not a casual worker as his contract stated. In the absence of a definition of 'casual' worker in the IR legislation, Federal Magistrate Toni Lucev referred to a decision by Justice Michael Moore that characterised casual work by "informality, uncertainty and irregularity". He found Williams had a clear roster, he knew exactly when he was working and when he wasn't, and that his work was ongoing not temporary. He dismissed employer MacMahon Mining's argument that Williams' contract defined him as a casual, finding you cannot "contract out" of the Act. The Federal Court upheld the decision in November last year.

While the case concerned the Workplace Relations Act 1996, Stewart said the same ruling would apply under the Fair Work Act - which also lacks a definition. Further, there was nothing in the judgment that suggested it was specific to the mining industry. "In fact, I think you could find many, many long term casual arrangements, particularly in retail and hospitality industries, but also in many others, in universities for instance, where you have people who are long term casuals whose jobs are not irregular, temporary or uncertain."

"On the face of it, this is a precedent that could be used by many, many thousands, not to say
hundreds of thousands of Australian workers, who finish up their casual jobs and go back to their employer, hat in hand, saying now can I have my annual leave ... if you're in a business that has got a lot of long- term casuals and you haven't thought about the implications of this case if it's followed up - and it may not be - you're doing yourself or your client a disservice."

Deductible premiums include those for workers compensation insurance, premiums paid by a self-employed person for disability insurance against loss of income, and professional indemnity insurance premiums.

The Tax Office allows a business a deduction for premiums for fire, theft, public liability, loss of profits and motor vehicle insurance, even though the insurance may cover capital assets or losses.

Premiums for "keyman" insurance will be deductible if the policy was taken out to protect revenue items. However, it is important to note that if the policy is taken out to protect against a capital loss (for example, to pay a sum to the key employee's estate on her or his death), the premiums will not be deductible.

No tax deduction is available for premiums payable on savings investment, endowment and life insurance policies, trauma insurance premiums (if the policy provides capital benefits).
The ATO has recently specifically stated that employees are allowed a tax deduction for annual premiums paid on an income protection policy that protects them from loss of income, even if the policy does not actually produce such income (see ATO ID 2010/178). The policies generally provide them with periodic benefits to protect them against loss of income....

... The Tax Office considers that the periodic nature of the payment and other provisions in the policy which contemplate its renewal from year to year "militate against its characterisation as an outgoing of a capital nature".

Where the premiums paid are relevant and incidental to and, therefore, have a sufficient connection to the assessable income of the taxpayer, and are not of a capital, private or domestic nature, they will be deductible.

As can be seen, the basic principles surrounding the tax deductibility of insurance premiums are relatively straightforward. Insurance premiums are a necessary and important cost of doing business and all businesses should be clear on what they can claim on their tax return.

Also, if you are using an accounting software package (eg. MYOB or Quickbooks) to process payroll, you need to upload the 2011-2012 tax tables into the software.
If you need assistance with this please contact us.