Edited version of your written advice

Authorisation Number: 1012790143470

Ruling

Subject: Remuneration trust arrangement

Question 1

Will the irretrievable contributions made by the taxpayer to the Trustee of the Plans trust (the Trustee) to fund the subscription for and/or acquisition of shares in the taxpayer in accordance with the Trust Deed (as amended) for the Plans be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Answer

Yes.

Question 2

Will the form of the shares, options or performance rights provided to participants under the Plans affect the deductibility of the irretrievable contributions made by the taxpayer to the Trustee as mentioned in Question 1?

Answer

No.

Question 3

Will the irretrievable contributions made by the taxpayer to the Trustee to fund costs incurred in relation to the implementation and on-going administration of the Plans be an allowable deduction under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 4

Will the irretrievable contributions made by the taxpayer to the Trustee to fund the subscription for and/or acquisition of shares in accordance with the Trust Deed (as amended) be deductible to the taxpayer under section 8-1 of the ITAA 1997 at a time determined by section 83A-210 of the ITAA 1997?

Answer

Yes, where the amount of irretrievable contributions provided to the Plans trust is used by the Trustee to purchase or subscribe for shares is in excess of those required to satisfy the ESS interests under the Plans in a given income year.

Question 5

Will the consideration received by the taxpayer from the participants upon exercising options that are granted under the Plans to acquire shares in the taxpayer held by the Plans trust be included in the taxpayer's assessable income under section 6-5 of the ITAA 1997?

Answer

Yes.

Question 6

Will the taxpayer be liable for Fringe Benefits Tax (FBT) to be paid in respect of the ESS interests provided to participants under the Plans?

Answer

No.

Question 7

Will the taxpayer be liable for FBT to be paid in respect of the irretrievable contributions it makes to the Trustee to fund the acquisition of shares in the taxpayer in accordance with the Trust Deed (as amended)?

Answer

No.

Question 8

Does Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to deny, in part or in full, any deduction claimed by the taxpayer in relation to the irretrievable contributions made to the Trustee to fund the acquisition of shares in the taxpayer in accordance with the Trust Deed (as amended)?

Answer

No.

This ruling applies for the following periods:

Income year ended 30 June 2014

Income year ended 30 June 2015

Income year ended 30 June 2016

Income year ended 30 June 2017

Income year ended 30 June 2018

Income year ended 30 June 2019

Income year ended 30 June 2020

The scheme commences on:

1 July 2013

Relevant facts and circumstances

The taxpayer has share plans (the Plans) in place operated via a trust. Participation is offered at the discretion of the board of directors to participants.

The Trustee of the Plans trust is a company.

The Plans, offering shares, options or performance rights, are operated in accordance with the Trust Deed (as amended) and respective Plan Rules.

Under the Plans, shares in the taxpayer are issued at no cost to participants subject to the satisfaction of certain performance criteria and the meeting of certain conditions.

As part of the operation of the taxpayer's employee share schemes, the Plans trust incurs ancillary costs such as brokerage fees, audit fees, bank charges and other ongoing administrative expenses associated with the costs of operating the Plans. In accordance with the Trust Deed (as amended), the taxpayer reimburses the Plans trust for such charges.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 66

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1936 Part IVA

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 83A-210

Reasons for decision

Question 1

Subsection 8-1(1) of the ITAA 1997 allows a deduction for any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income or;

(b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

However, under subsection 8-1(2) of the ITAA 1997, you cannot deduct a loss or outgoing to the extent that:

(a) it is capital or of a capital nature;

(b) it is a loss or outgoing of a private or domestic nature;

(c) it is incurred in relation to gaining or producing your exempt income or your non-assessable non-exempt income; or

(d) a provision of this Act (as defined in subsection 995-1(1) of the ITAA 1997) prevents you from deducting it.

Pursuant to the Trust Deed (as amended) the taxpayer must provide the Trustee with sufficient funds (contributions) required to enable it to purchase or subscribe for shares in the taxpayer. These contributions made to the Trustee by the taxpayer will be irretrievable and non-refundable to the taxpayer.

The Plans trust was established for the purposes of motivating and retaining key personnel and by creating a greater alignment between the financial benefits received by senior office holders and taxpayer shareholders. Since the initial establishment of the Plans trust, the taxpayer has implemented additional share plans for the purpose of motivating and retaining other participants aligned to the taxpayer. Such purposes seek to achieve the overarching aim of improving the taxpayer's financial performance.

On this basis it is considered that there is sufficient nexus between the irretrievable contributions made by the taxpayer and the derivation of its assessable income pursuant to subsection 8-1(1) of the ITAA 1997 (refer to Herald and Weekly Times Ltd v. FCT (1932) 48 CLR 113; (1932) 2 ATD 169, Amalgamated Zinc (De Bavay's) Ltd v. FCT (1935) 54 CLR 295; (1935) 3 ATD 288).

From time to time, having regard to offers made to participants, the taxpayer makes contributions of funds to the Plans trust for the purposes of the Trustee purchasing taxpayer shares on-market or to subscribe for new shares in the taxpayer. No large upfront payments are made to the Plans trust to provide for subscriptions or purchases for several years into the future.

The taxpayer's contributions will be recurring and will be made from time to time as and when taxpayer shares are to be subscribed for or acquired pursuant to the Trust Deed (as amended).

In Pridecraft Pty Ltd v. FC of T [2004] FCAFC 339; 213 ALR 450; 2005 ATC 4001 (Pridecraft) the Court held that payments by an employer company to a trust established for the purpose of providing incentive payments to employees were on revenue account and not capital or of a capital nature. This confirms the view expressed in ATO Interpretative Decision ATO ID 2002/1074 Income Tax - deductibility - irretrievable employer contributions paid to the Trustee of its employee share scheme to acquire a share or right under the employee share scheme (ATO ID 2002/1074).

Although ATO ID 2002/1074 was drafted in relation to the previous employee share schemes provisions in Division 13A of the ITAA 1936, paragraph 1.72 of the Explanatory Memorandum to Income Tax (TFN Withholding Tax (ESS)) Bill 2009 (that inserted the re-write of Division 13A of the ITAA 1936 as Division 83A of the ITAA 1997) recognises the availability of a general deduction in relation to the indirect provision of shares to employees via an employee share trust. It is considered the view expressed in ATO ID 2002/1074 would equally apply to the employee share scheme rules in Division 83A of the ITAA 1997.

Accordingly, as subsection 8-1(2) of the ITAA 1997 has no application, it is considered that the irretrievable contributions made by the taxpayer to the Trustee form part of the taxpayer's employee remuneration costs and are deductible pursuant to section 8-1 of the ITAA 1997.

Question 2

The form of the shares, options or performance rights provided to participants under the Plans does not affect the deductibility of the irretrievable contributions made by the taxpayer to the Trustee as mentioned in Question 1.

Question 3

As part of the operation of the taxpayer's employee share schemes, the Plans trust incurs ancillary costs such as brokerage fees, audit fees, bank charges and other ongoing administrative expenses associated with the costs of operating the Plans. In accordance with the Trust Deed (as amended), the taxpayer reimburses the Plans trust for such charges.

Consistent with the reasoning provided in response to Question 1 and ATO Interpretative Decision ATO ID 2014/42 Income: employer costs for the purpose of administering its employee share scheme are deductible it is considered that the irretrievable contributions made by the taxpayer to the Trustee in relation to the implementation and on-going administration of the Plans are deductible pursuant to section 8-1 of the ITAA 1997.

Question 4

A deduction under section 8-1 of the ITAA 1997 is generally allowed in the income year in which the relevant outgoing is incurred. However, under certain circumstances, the timing of the deduction is specifically determined under section 83A-210 of the ITAA 1997.

The irretrievable contributions made by the taxpayer to the Trustee is for the purpose of enabling the participants, indirectly, as part of the employee share scheme relating to the participants, to receive a beneficial interest in, and subsequently acquire performance shares, performance rights or options. Note that the Commissioner accepts that the Plans are employee share schemes for the purposes of Subdivision 83A-C of the ITAA 1997 under which relevant ESS interests are acquired by participants.

A deduction under section 8-1 of the ITAA 1997 for the irretrievable contributions made by the taxpayer to the Trustee is available in the income year in which the contributions are made to the Trustee to purchase or subscribe for shares to satisfy the obligations arising under the Plans.

Where the amount of irretrievable contributions provided to the Plans trust is used by the Trustee to purchase or subscribe for shares is in excess of those required to satisfy the ESS interests under the Plans in a given income year, section 83A-210 of the ITAA 1997 will apply and the excess payment will be deductible to the taxpayer in the year of income when the relevant ESS interests are granted to the participants (refer ATO Interpretative Decision ATO ID 2010/103 Income Tax Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust).

Question 5

Under subsection 6-5(1) of the ITAA 1997, assessable income includes amounts that are income according to ordinary concepts.

Whether a particular receipt has the character of the derivation of income depends upon its quality in the hands of the recipient: Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; (1966) 14 ATD 286; (1966) 10 AITR 367, GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; (1990) 21 ATR 1; 90 ATC 4413.

A receipt that is part of the proceeds of a taxpayer's business, or a product of or incidental to the conduct of the business, is income of the taxpayer according to ordinary concepts even though the amount may not be regarded as a usual or normal receipt: HR Sinclair Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; (1966) 14 ATD 194, Automatic Totalisators Ltd v. Federal Commissioner of Taxation (1968) 119 CLR 666; (1968) 15 ATD 170; (1968) 10 AITR 763, FC of T v. Reynolds (1981) 11 ATR 629; 81 ATC 4131.

ATO Interpretative Decision ATO ID 2010/155 Income Tax Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee states:

Whether the trustee acquires shares on market, or by subscription, the payment of the exercise price by the employee to the employer is not a payment for the issue of a share in the capital of the company, but rather a payment, under the terms of the ESS, for the delivery of a share from the trustee of the employee share trust.

The Plans are part of the remuneration strategy of the taxpayer and as such is an integral part of the conduct of its business. The exercise price is a receipt of the company derived in the course of operation of the Plans as an integral part of its business operations.

On this basis, the exercise price paid by the participants to the taxpayer to acquire shares under the Plans is included in the taxpayer's assessable income as income according to ordinary concepts under section 6-5 of the ITAA 1997.

Question 6

A liability for FBT arises under section 66 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for a year of tax. The fringe benefits taxable amount is calculated under the FBTAA by reference to the taxable value of each fringe benefit provided.

Broadly, a 'fringe benefit' is defined under subsection 136(1) of the FBTAA as a benefit provided by an employer to an employee or associate of an employee in respect of the employment of the employee, unless the benefit is specifically excluded from the definition of a fringe benefit.

Paragraph (h) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA specifically excludes from the definition of a fringe benefit:

a benefit constituted by the acquisition of an ESS interest under an employee share scheme (within the meaning of the Income Tax Assessment Act 1997) to which Subdivision 83A-B or 83A-C of that Act applies.

The Commissioner accepts that the Plans are employee share schemes for the purposes of Subdivision 83A-C of the ITAA 1997 under which relevant ESS interests are acquired by participants. Therefore, the provision of those ESS interests will not be subject to FBT because they are specifically excluded from the definition of fringe benefit. However, shares granted under the relevant Plans to satisfy the rights acquired on acceptance of participation in the relevant Plans are not ESS interests acquired under an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 apply (see subsection 83A-20(2) of the ITAA 1997 and paragraph 83A-105(1)(a) of the ITAA 1997). Therefore, the providing of these shares will not be specifically excluded from the definition of fringe benefits under paragraph (h) of the definition in subsection 136(1) of the FBTAA.

Question 7

Broadly, a 'fringe benefit' is defined under subsection 136(1) of the FBTAA as a benefit provided by an employer to an employee or associate of an employee in respect of the employment of the employee, unless the benefit is specifically excluded from the definition of a fringe benefit.

Paragraph (ha) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA specifically excludes from the definition of a fringe benefit:

a benefit constituted by the acquisition of money or property by an employee share trust (within the meaning of the Income Tax Assessment Act 1997).

An 'employee share trust' is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by subsection 130-85(4) of the ITAA 1997.

Subsection 130-85(4) of the ITAA 1997 provides that an employee share trust for an 'employee share scheme' (having the meaning given by subsection 83A-10(2) of the ITAA 1997) is a trust whose sole activities are:

a)  obtaining shares or rights in a company; and

b)  ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to associates of employees, of:

(i)  the company; or

(ii) a subsidiary of the company; and

c)  other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b).

ATO Interpretative Decision ATO ID 2010/108 Income Tax Employee share trust that acquires shares to satisfy rights provided under an employee share scheme and engages in other incidental activities (which reflects the view expressed in ATO ID 2007/179 (Withdrawn)) states that a trust will satisfy the 'sole activities' test where the activities of the trustee of the trust are limited to managing the employee share scheme and administering the trust.

The Trust Deed (as amended) sets out the power of the Trustee. The sole activities of the Trustee are related to acquiring shares in the taxpayer for participants. Accordingly, any benefit provided to participants by way of irretrievable contributions by the taxpayer to the Plans trust will fall within the exclusion from the definition of a fringe benefit in paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA and hence not be liable for FBT.

Question 8

Part IVA of the ITAA 1936 gives the Commissioner the discretion to cancel a 'tax benefit' that has been obtained, or would, but for section 177F of the ITAA 1936, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. This discretion is found in subsection 177F(1) of the ITAA 1936.

Before the Commissioner can exercise the discretion in subsection 177F(1) of the ITAA 1936, the requirements of Part IVA of the ITAA 1936 must be satisfied. These requirements are that:

• the tax benefit was or would have been obtained in connection with a 'scheme' as defined in section 177A;

• a 'tax benefit', as identified in section 177C, was or would, but for subsection 177F(1), have been obtained; and

• having regard to section 177D, the scheme is one to which Part IVA applies.

Schedule 1 to the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 amended the general anti-avoidance provision in Part IVA of the ITAA 1936 and applies to schemes entered into, or commenced to be carried out, on or after 16 November 2012.

Scheme - subsection 177A(1)

Subsection 177A(1) of the ITAA 1936 defines a 'scheme' very broadly as:

(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

(b) any scheme, plan, proposal, action, course of action or course of conduct.

The broad nature of the definition of scheme is confirmed in case law. In Federal Commissioner of Taxation v. Hart (2004) 217 CLR 216; [2004] HCA 26; 2004 ATC 4599, Callinan J stated:

The use of the singular, narrow words, proposal, action or course of action in s177A(1)(b) in juxtaposition with, for example, agreement or arrangement in s177A(1)(a) indicates that something done which is less than the whole of an arrangement or agreement may be capable of itself being a scheme. This view is I think not only consistent with, and a true reflection of the statutory language, but also with the legislative intention discernible from the Explanatory Memorandum.

It is considered that this definition is sufficiently broad to cover the present arrangements.

Tax benefit - section 177C

Relevantly, subsection 177C(1) of the ITAA 1936 states:

Subject to this section, a reference in this Part to the obtaining by a taxpayer of a tax benefit in connection with a scheme shall be read as a reference to: …

(b) a deduction being allowable to the taxpayer in relation to a year of income where the whole or a part of that deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to that year of income if the scheme had not been entered into or carried out.

The identification of a tax benefit necessarily requires consideration of the income tax consequences, but for the operation of Part IVA of the ITAA 1936, of an 'alternative postulate' or counterfactual. This is what would have happened or might reasonably be expected to have happened if the particular scheme had not been entered into or carried out. This alternative hypothesis or postulate also forms the background against which the objective ascertainment of the dominant purpose of a person occurs in accordance with section 177D of the ITAA 1936.

The Plans are provided to participants that are considered key contributors to the business of the taxpayer. The predominant commercial result to be achieved by the scheme is to provide incentives to motivate and retain such persons and enable them to share the rewards of the success of the taxpayer.

There are a variety of alternative ways in which the taxpayer could have chosen to provide incentives to its participants, for example, via bonuses, superannuation contributions, the provision of fringe benefits, or via another form of employee equity plan.

A comparison between these counterfactuals and the scheme would likely reveal no tax benefit because of the fact that expenditure incurred in providing these incentives would be likely to be deductible expenditure to the taxpayer.

However, there is at least one other reasonable counterfactual to the scheme, being the issue of new shares to the participants. If the taxpayer were to issue new shares, it would not be entitled to any deduction unless section 83A-205(1) of the ITAA 1997 was satisfied. This subsection requires:

(a) The taxpayer to have provided one or more ESS interests to an individual under an employee share scheme;

(b) The taxpayer must have done this as the individual's employer (or as the holding company of the employer); and

(c) With the exception of paragraph 83A-35(2)(b) of the ITAA 1997, section 83A-35 of the ITAA 1997 must have been applied to reduce the amount included in that individual's assessable income under subsection 83A-25(1) of the ITAA 1997.

If the shares did meet these conditions, the taxpayer would be entitled to a deduction equal to the amount of the reduction allowable to the individual under section 83A-35 of the ITAA 1997 (a maximum of $1,000).

It is probable that this amount would be less than what would be allowable pursuant to sections 8-1 of the ITAA 1997 under the scheme. Therefore, to the extent of any increased deductions because of the scheme, the taxpayer obtains a tax benefit.

Whilst it is unlikely that the taxpayer would choose any other incentive plan that did not give rise to an allowable deduction (and therefore there would not be the necessary tax benefit), the analysis below proceeds on the assumption that the Commissioner would in fact be able to identify a relevant tax benefit.

Section 177D - objective purpose

Subsection 177D(2) of the ITAA 1936 sets out the following factors that must be considered in deciding whether a scheme was entered into for the purpose of obtaining a tax benefit:

(a) the manner in which the scheme was entered into or carried out;

(b) the form and substance of the scheme;

(c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out;

(d) the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme;

(e) any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme;

(f) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme;

(g) any other consequence for the relevant taxpayer, or for any person referred to in subparagraph (f), of the scheme having been entered into or carried out; and

(h) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in subparagraph (f).

Subsection 177A(5) of the ITAA 1936 requires the purpose of obtaining a tax benefit to be the dominant purpose of the taxpayer.

(a) the manner of the scheme

In considering whether Part IVA of the ITAA 1936 applies or not, the necessary comparison to be made in relation to the factors listed in paragraph 177D(2) of the ITAA 1936 is between the scheme as proposed and the relevant counterfactual.

The manner in which the scheme was entered into includes considerations such as the degree of unnecessary complexity, the commercial viability absent tax benefits, and the commercial rationale of particular features of the scheme.

As discussed above, the scheme arguably gives rise to a tax benefit in comparison to the other alternative postulates. However, use of the Trust provides other forms of benefits to the taxpayer. In particular, it is the most practical means for acquiring and warehousing shares and accumulating dividend income. It is also independent of the taxpayer, and has a fiduciary obligation to act in the best interests of the participants. Further, it is an accepted commercial practice to use a trust arrangement to administer an employee share scheme.

Further, it is noted that the arrangement was not established close to the end of the taxpayer's income year nor with a large up-front payment intended to provide for the trust's operations for several years into the future, as was the case in Pridecraft. Rather, it is the taxpayer's intention to fund the Plans trust on a recurring basis, as and when the relevant circumstances permit in accordance with the Trust Deed (as amended).

It is considered the Plans trust provides benefits to the operation of the scheme that would not be available if the shares were provided directly by the taxpayer in the relevant counterfactual.

(b) the form and substance of the scheme

The substance of the scheme is the provision of remuneration in the form of shares to eligible participants in the employee share scheme. It takes the form of payments by the taxpayer to the Trust which acquires the shares and transfers them to participants subject to the satisfaction of certain criteria which includes exercising an option.

There is nothing in the form and substance of the scheme that indicate that a person entered into or carried out the scheme for the purpose of enabling the taxpayer to obtain a tax benefit in connection with the scheme.

(c) the timing and length of the scheme

As noted above, the scheme has not been established at a time to provide a substantial year-end deduction to the taxpayer nor with a contribution sufficiently large to fund the Plans trust for several years, but by recurring contributions as indicated by way of example in the Plan Rules.

There is nothing in this factor to suggest a dominant purpose of seeking to obtain a tax benefit in relation to the scheme.

(d) (d) the result of the scheme

The result of the scheme is to provide the taxpayer with allowable income tax deductions for the contributions it makes to the Plans trust. However, it is noted that the contributions are irretrievable and reflect genuine revenue outgoing on the part of the taxpayer that are made in order to achieve a business outcome. It is to be expected that a deduction would normally be allowable in these circumstances. However when the Trustee opts to subscribe for shares, the irretrievable contributions are returned to the company in the form of the subscription price for the shares.

This factor does not indicate that any person entered into the scheme for the dominant purpose of enabling the taxpayer to obtain a tax benefit.

(e) (e) any change in the financial position of the taxpayer

As noted above, the taxpayer makes irretrievable contributions to the Plans trust and those contributions constitute a real expense with the result that the taxpayer's financial position is changed to that extent. It is noted, that when shares are subscribed for by the Trustee, the irretrievable contributions will in effect be returned to the company in exchange for the issue of shares.

This factor does not indicate that any person entered into the scheme for the dominant purpose of enabling the taxpayer to obtain a tax benefit.

(f) (f) any change in the financial position of other persons or entities

The contributions by the taxpayer to the Plans trust will form part of the corpus of the Plans trust and must be dealt with by the Trustee in accordance with the terms of the Trust Deed (as amended), that is, for the acquisition of shares to provide to participants in the Plans. The taxpayer is not a beneficiary of the Plans trust and its contributions cannot be returned in any form except where the Trustee acquires shares from it by subscribing for new shares. Therefore, the contributions made by the taxpayer amount to an actual change to the financial position of the Trustee. The financial position of participants will also undergo a change upon achieving the required performance criteria and exercising any options.

This factor does not indicate that any person entered into the scheme for the dominant purpose of enabling the taxpayer to obtain a tax benefit.

(g) (g) any other consequence

This factor is considered to be of neutral consequence in determining whether the taxpayer had a dominant purpose of entering the scheme to obtain a tax benefit.

(h) (h) the nature of any connection between the taxpayer and other persons

The relationship between the taxpayer and the participants in the schemes is one of employer/employee or service receiver/service provider. The Trustee is independent and is under a fiduciary obligation to act in the interests of the participants who participate in the Plans. The contributions made by the taxpayer to the Trustee are commensurate with its stated aim of providing the participants with competitive remuneration amounts and type so as to retain them. There is nothing to suggest that the parties to the Plans are not acting at arm's length to one another. Accordingly, there is nothing in relation to this factor to indicate a dominant purpose of obtaining a tax benefit.

A consideration of all the factors referred to in paragraph 177D(2) of the ITAA 1936 leads to the conclusion that the dominant purpose of the schemes is to provide remuneration to the participants who participate in the scheme in a form that promotes its business objectives, rather than to obtain a tax benefit. In these circumstances it is not appropriate to apply Part IVA of the ITAA 1936 to deny, in part or in full, any deduction claimed by the taxpayer in relation to the irretrievable contributions made to the Trustee to fund the acquisition of shares in the taxpayer in accordance with the Trust Deed (as amended).