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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051479920316

Date of advice: 15 March 2019

Ruling

Subject: Employee share scheme

Question 1

Will Company A be entitled to deduct an amount under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for its irretrievable cash contributions made to the trustee of A Trust (Trustee)?

Answer

Yes.

Question 2

Question 3

Will the Commissioner seek to make a determination under subsection 177F(1) of the Income Tax Assessment Act 1936 (ITAA 1936), as a result of section 177D of the ITAA 1936, to deny, in part or in full, a deduction claimed by Company A for the irretrievable cash contributions made to the Trustee to fund the acquisition of shares in Company A by the Trustee, pursuant to the Plan?

Answer

No.

Question 4

Will the provision of Rights and shares to employees of Company A under the Plan constitute a ‘fringe benefit’ within the meaning of that term in subsection 136(1) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 5

Will the irretrievable cash contributions made by Company A to the Trustee to fund the acquisition of shares pursuant to the Plan, constitute a ‘fringe benefit’ within the meaning of that term in subsection 136(1) of the FBTAA?

Answer

No.

Question 6

Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A, by the amount of tax benefit gained from irretrievable contributions made by Company A to the Trustee to fund the acquisition of shares by the Trustee?

Answer

No.

Relevant facts and circumstances

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 67

Fringe Benefits Tax Assessment Act 1986 subsection 67(1)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1936 section 177D

Income Tax Assessment Act 1936 subsection 177F(1)

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 83A-210

Income Tax Assessment Act 1997 subsection 130-85(4)

Reasons for decision

Questions 1 and 2

Company A is entitled to deduct its irretrievable cash contributions to the Trustee under section 8-1 of the ITAA 1997 as they are expenses directly related to the production of Company A’s assessable income.

The deduction for the contributions will be allowed in the year of income when the contribution is made to the Trustee, provided it is in respect of rights to acquire shares that have previously been granted to employees. If the contributions are made before the rights to acquire shares have been granted to employees, the contributions will be deductible at the time determined by section 83A-210 of the ITAA 1997.

Question 3

The Commissioner will not make a determination under subsection 177F(1) of the ITAA 1936, as a result of section 177D of the ITAA 1936, to deny, in part or in full, any deduction claimed by Company A in respect of the irretrievable cash contributions made by Company A to the Trustee.

Questions 4 and 5

The provision of Rights and shares to the Participants under the Plan satisfies the exclusion in paragraph (h) of the definition of ‘fringe benefit’ under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

The contribution of funds by the Company A to the Trustee in order to acquire shares satisfies the exclusion in paragraph (ha) of the definition of ‘fringe benefit’ under subsection 136(1) of the FBTAA.

Question 6

As the requirements of subsection 67(1) of the FBTAA are not satisfied, the Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A, by the amount of tax benefit gained from irretrievable contributions made by Company A to the Trustee to fund the acquisition of shares by the Trustee.


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