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Edited version of your written advice
Authorisation Number: 1051511008473
Date of advice: 10 May 2019
Ruling
Subject: Employee share scheme – fringe benefits
Question 1
Will the provision of Options or Performance Rights by the Company to employees of the Employer Entities under the Plans be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Answer
No
Question 2
Will the irretrievable cash contributions made by the Company or any subsidiary of the Company to the Trustee, to fund the subscription for, or acquisition on-market, of the Shares, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA?
Answer
No
Question 3
Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits taxable amount for any of the Employer Entities by the amount of tax benefit gained from the irretrievable cash contributions made by the Company or any subsidiary of the Company TCG to the Trustee, to fund the subscription for, or acquisition on-market, of the Shares?
Answer
No
This ruling applies for the following period:
XXXX
The scheme commences on:
XXXX
Relevant facts and circumstances
1. The Company is an Australian resident company.
2. The Company is the head company of the Company TCG.
3. The Employer Entities for the group are subsidiary members of the Company TCG.
4. The Company operates the Plans as part of its remuneration strategy. The Plans are operated pursuant to a number of governance documents.
5. The Company and subsidiary members of the Company TCG pay for all the on-going administration costs of the Trust.
6. The Company and members of the group are not beneficiaries of the Trust or have, at any time, any legal or beneficial entitlement to any of the Shares held by the Trustee.
7. The Plans operate as follows:
● The Company established the Trust by executing the trust deed (Trust Deed) to facilitate the acquisition, holding and allocation of the Shares to eligible employees (Participants) in accordance with the Trust Deed.
● The Company or any subsidiary member of the Company TCG may make irretrievable cash contributions to the Trustee to enable the Trustee to acquire Shares in order to satisfy the grants of Options or Performance Rights. The contributions will be determined in accordance with certain protocols.
● The offer of Options or Performance Rights to Participants is subject to certain conditions.
● When a Participant satisfies the conditions of the Options and Performance Rights, the Trustee releases the Shares to the Participant.
● Once the Shares are transferred to a Participant by the Trustee, the Participant becomes absolutely entitled to such Shares.
● The Trustee holds all the Shares pursuant to the Plans on capital account.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 67
Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)
Reasons for decision
Questions 1 and 2
The provision of Options or Performance Rights by the Company to employees of the Employer Entities under the Plans will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA.
The irretrievable cash contributions made by the Company or any subsidiary of the Company to the Trustee, to fund the subscription for, or acquisition on-market, of the Shares will not be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA.
Question 3
In view of the answer to questions 1 and 2 there is no fringe benefit provided by the Employer Entities under the Plans. Therefore, the Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits taxable amount for any of the Employer Entities, by the amount of tax benefit gained from irretrievable cash contributions made by the Company or subsidiary members of the Company TCG to the Trustee, to fund the subscription for, or acquisition on-market, of the Shares.
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