Edited version of private advice

Authorisation Number: 1051560736173

Date of advice: 20 September 2019

Ruling

Subject: Employee share scheme

Question 1

Will Company P as head entity of the Company P income tax consolidated group obtain an income tax deduction, pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the irretrievable payments made by Company P or any subsidiary member of the consolidated group to the Trustee to fund the acquisition by the Trust of Company P's shares either on market or via a new subscription of shares?

Answer

Yes.

Question 2

Will Company P as head entity of the Company P income tax consolidated group obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of costs incurred by Company P or any subsidiary member of the consolidated group in relation to the on-going administration of the Trust?

Answer

Yes.

Question 3

Will irretrievable payments made by Company P or any subsidiary member of the Company P income tax consolidated group to the Trustee, to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares, be deductible to Company P under section 8-1 of the ITAA 1997 at a time determined by section 83A-210 of the ITAA 1997?

Answer

Yes.

Question 4

If the Trust satisfies its obligation under the PRP by subscribing for new shares in Company P will the subscription proceeds be included in the assessable income of Company P pursuant to sections 6-5 or 20-20 of the ITAA 1997, or trigger a capital gains tax ('CGT') event under Division 104 of the ITAA 1997?

Answer

No.

Question 5

Will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies to deny, in part or full, any deduction claimed by Company P in respect of the irretrievable cash contributions made by Company P or any subsidiary member of the tax consolidated group to the Trustee to fund the subscription for, or acquisition on-market, of Company P's shares by the employee share trust (EST)?

Answer

No.

Question 6

Will the provision of Rights by Company P to employees of Company P or any subsidiary of Company P under the PRP be a 'fringe benefit' within the meaning of the term in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 7

Will the irretrievable payments made by Company P or by any subsidiary of Company P to the Trustee, to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares, be treated as a 'fringe benefit' within the meaning of the term in subsection 136(1) of the FBTAA?

Answer

No.

Question 8

Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of Company P or of any subsidiary of Company P, by the amount of tax benefit obtained from irretrievable payments made by Company P or made by the subsidiary to the Trustee, to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares?

Answer

No.

This ruling applies for the following periods:

The scheme commences on:

Relevant facts and circumstances

Background

Company P is an Australian listed company which undertakes its primary business activities through a number of wholly owned subsidiaries.

Remuneration and Incentive Programme

The objective of the Company P's executive remuneration framework is to ensure reward for performance is competitive and appropriate for the results delivered. The Board of Directors of Company P (the 'Board') / Remuneration Committee ensure that executive rewards satisfy the following key criteria for good reward governance practices:

·                     competitiveness and reasonableness

·                     acceptability to shareholders

·                     performance linked

·                     transparency, and

·                     capital management.

Company P remunerates its Directors, executives and other employees by way of a fixed base salary, commission and a combination of short and long term incentives, including the following:

·                     participation in the profit share pool

·                     commission, and/or

·                     discretionary bonus.

A Plan was established as a long term incentive to assist in the reward, retention and motivation of Directors, executives and staff members. The Plan is the mechanism through which Company P provides equity awards under the profit share pool, commission and discretionary bonus remuneration mechanisms as outlined above. Company P envisages the Plan will continue to be a key part of its remuneration strategy for the foreseeable future.

Use of the Employee Share Trust (EST) to facilitate the Plan

The establishment of the EST provides Company P greater flexibility to accommodate the long-term incentive arrangements of Company P. Similarly, it allows for a streamlined approach to the administration of the Plan.

The commercial benefits of using the EST for Company P include:

·                     Greater flexibility for Company P to accommodate the long-term incentive arrangements both now and into the future as Company P continues to expand operations and therefore employee numbers.

·                     Capital management flexibility for Company P, in that the EST can use the contributions made by Company P either to acquire shares in Company P on market, or alternatively to subscribe for new shares in Company P.

·                     Providing an arm's-length vehicle through which shares in Company P can be acquired and held on behalf of the relevant employee. This assists Company P to satisfy Corporations Act requirements relating to a company dealing in its own shares.

Operation of the Plan

The purpose of the Plan is to align Employee compensation with returns to shareholders and assist with staff retention. It is targeted at the Company executives whose responsibilities provide them with the opportunity to significantly influence long-term shareholder value. The vesting of Rights is subject to satisfying performance objectives that were developed to create a link to shareholder value.

The Plan broadly operates as follows:

·                     Responsibility for the establishment and operation of the Plan rests with the Board.

·                     The Plan operates on the basis of an annual cycle, correlated to Company P's financial year. At or prior to commencement of a financial year, selected Employees will be invited to participate in the Plan under which employees are granted a Performance Right to receive any remuneration earned in Shares.

·                     The Rights represent a right, subject to vesting, to be issued, transferred or allocated a number of fully paid shares in Company P. Rights are granted for nil consideration, unless otherwise determined by the Board.

·                     Rights granted to a Participant under the Plan may not be transferred, mortgaged, charged or otherwise dealt with by an employee, other than in accordance with the terms of the Plan, and will lapse immediately if dealt with in such a way, unless the Board consents to such action or the assignment or transfer occurs by legal operation upon the death or legal incapacity to a Participant's legal personal representative.

·                     Subject to applicable laws, in the event of any reconstruction (including consolidation, subdivision, reduction, return or cancellation) of the issued capital of the company, the number of Rights which an employee has, may be adjusted by the Board on any basis in its absolute discretion to minimise any advantage or disadvantage accruing to employees.

·                     Where a Change of Control Event (defined in the Plan Rules) occurs, the Board may

determine the manner in which any or all of an employee's unvested Rights will be dealt with.

·                     If an employee ceases employment with a group company and at the date of cessation of employment has any Rights which remain unvested, those unvested Rights will automatically be forfeited, subject to the overriding discretion of the Board. The discretion of the Board will not be exercised on a routine basis to allow participants voluntarily ceasing employment to receive their unvested Rights.

·                     Performance rights are deemed to have vested if both the following have occurred:

- The Performance Hurdles, Vesting Conditions and/or other conditions applicable to

those Performance Rights have been determined by the Board (acting reasonably) to be satisfied, are waived by the Board, or are deemed to have been satisfied under the Plan Rules, and

- Company P has issued a Notice to the employee informing him or her that some or all of the Performance Rights have vested.

·                     Upon the Vesting of a Right:

- It will be exercised automatically, where the Invitation for that Performance Rights

specifies as such, or

- The Participant must deliver a signed Notice of Exercise and pay the Exercise Price (if applicable) to or as directed by Company P, at any time prior to the Expiry Date to Exercise the Right.

·                     Upon Exercise of a Right:

- Company P will allot and issue and/or transfer to the employee (whether directly, or to or by the Trustee to be held for and on behalf of the employee) the number of Shares to which the employee is entitled to, as relevantly set out in the Vesting Notice, and

- Issue a substitute Certificate to the employee for any remaining Performance Rights held by that employee.

·                     Prior to a Performance Right Vesting and being Exercised, an employee is not entitled to receive any dividends declared by Company P, by virtue of holding that Performance Right.

·                     All shares issued, transferred and/or allocated upon Vesting of the Rights will rank pari passu in all respects with shares then on issue.

·                     Subject to satisfaction of any Service and/or Disposal Restriction, an employee may submit a Withdrawal Notice to Company P in respect of some or all of the shares the Trustee holds on behalf of the employee. At this point, if the Board approves the Withdrawal Notice, the company must direct the Trustee to transfer legal title of the shares to the employee in accordance with the terms of the approved Notice.

·                     Where the Trustee holds shares on behalf of an employee following the exercise of the Performance Right:

- The dividends payable on those shares will be paid by Company P to the Trustee, and the Trustee will then pay any such dividends to the employee, and

- The employee may exercise any voting rights attaching to those Shares held by the employee (or the Trustee for and on behalf of the employee).

Operation of the EST

The EST is intended to operate as follows:

·                    The EST was established for the sole purpose of obtaining securities for the benefit of Employees, including accepting the grant of, subscribing for, acquiring, holding, allocating and delivering Employee Shares under the Company P's PRP.

·                    The EST will be funded by contributions from Company P (i.e. for the purchase of shares in accordance with the Plan) as specified in the Trust Deed.

·                    These funds will be used by the Trustee of the EST to acquire the shares in Company P either on market or via a subscription for new shares in Company P based on notification from Company P.

·                    Shares acquired by the Trustee will be allocated to the relevant employees and held on trust on their behalf immediately upon the Exercise of Rights held by employees under the Plan.

·                    Company P may contribute funding to the EST and instruct the Trustee to acquire shares prior to the vesting of Rights held by employees under the Plan. In these circumstances, Company P intends to allocate these shares to employees within 12 months from the date that the Trust first acquires the shares.

·                    The structure of the EST and the Plan are such that shares may be dealt with at any time after the Restriction Period lapses, in the following manner:

-                      Shares allocated to each employee will generally be transferred into the name of the

employee (i.e. legal title) upon a Withdrawal Notice being lodged with and approved by the Board, or

-                      The Trustee can sell shares on behalf of the employee, where permitted to do so by the employee. That is, the employee receives proceeds on sale of shares by the EST less the exercise price (if any) and any brokerage costs.

·                    The Trustee acts in an independent capacity on behalf of the beneficiaries of the EST in accordance with the terms of the Trust Deed. Company P will pay the Trustee's costs of operation to the extent they relate to the operation of the EST which will facilitate Company P's Plan.

The Trustee only holds ordinary shares in Company P. Where Company P declares dividends on ordinary shares, the Trustee will receive dividends equally on all shares it holds, whether allocated or unallocated.

The Performance Rights will be provided at a discount.

Company P has incurred or will incur costs for the on-going administration of the Trust such as:

·                    Employee plan record keeping

·                    Production and dispatch of holding statements to employees

·                    Provision of annual income tax return information for employees

·                    Costs incurred in the acquisition of shares on market (e.g. brokerage costs and the allocation of such shares to participants)

·                    Management of employee termination, and

·                    Other trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 67

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1936 section 177F

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 20-20

Income Tax Assessment Act 1997 section 83A-210

Income Tax Assessment Act 1997 Division 104

Reasons for decision

Question 1

Summary

Company P is entitled to income tax deductions pursuant to section 8-1 in respect of the irretrievable payments that it or any subsidiary makes to the Trustee to fund the acquisition by the Trust of Company P shares either on-market or via a new subscription of shares.

Detailed reasoning

In accordance with the Plan rules and Trust Deed, Company P or any subsidiary will make payments to the Trustee to enable the Trust to purchase shares in Company P to benefit employees. Shares will be acquired either on-market or via a new subscription of shares.

The Trust Deed states that contributions made by Company P or any subsidiary to the Trustee will constitute accretions to the capital of the Trust and will be irretrievable to Company P and the subsidiaries, and non-refundable by the Trustee. As the funds are not repayable by the Trustee, the contributions will represent a permanent loss or outgoing incurred by Company P.

Company P will generally incur the contributions at the time these are made to the Trust in accordance with the Plan rules and the Trust Deed. (See further the Detailed reasoning for Question 3 below as to the timing of deductions for the contributions).

The Commissioner accepts that the contributions made by Company P or any subsidiary to the Trust are or will be incurred in gaining or producing the assessable income of Company P for the purposes of section 8-1.

Company P's payments will generally be deductible when made (subject to the timing rule in section 83A-210, as they will enable Company P to meet its obligations arising from the grant of Rights under the PRP rules.

Relevantly, the ATO-view set out in ATO Interpretative Decision ATO ID 2010/103 states:

The provision of money to the trustee of an employee share trust by the employer for the purpose of remunerating its employees under an employee share scheme is an outgoing in carrying on the employer's business and is deductible under section 8-1 of the ITAA 1997.

It is not necessary to consider the 'necessarily incurred' part of this limb.

Further, the contributions made by Company P or any subsidiary are not of, nor will be of a private or domestic nature (paragraph 8-1(2)(b)).

However, paragraph 8-1(2)(a) provides that a loss or outgoing is not deductible under section 8-1 to the extent that it is a loss or outgoing of capital, or of a capital nature.

The Commissioner accepts that the contributions to the Trust to fund the acquisition of shares are on revenue account and are not capital or capital in nature (Spotlight Stores Pty Ltd v Federal Commissioner of Taxation (2004) 55 ATR 745 and Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 58 ATR 210). Therefore, the contributions will be deductible to Company P pursuant to section 8-1 on the basis that the contributions are regular and recurrent employment expenses.

Finally, the Commissioner accepts that the contributions made by Company P or any subsidiary to the Trust will be deductible irrespective of whether the Trust acquires shares on-market or via a new subscription of shares.

Paragraph 1.72 of the Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 which introducedDivision 83A recognises that a general deduction may be available to companies that provide securities under an employee share scheme and states:

The employee share trust may acquire the securities by buying them on the market or by participating in a share issue by the employer.

Question 2

Summary

Company P is entitled to an income tax deduction pursuant to section 8-1 in respect of costs it or a subsidiary incurs in relation to the on-going administration of the Trust.

Detailed reasoning

The Commissioner accepts that the on-going costs incurred by Company P or any subsidiary towards the on-going administration of the Trust are deductible to Company P under section 8-1. The on-going costs are considered to be regular and recurring expenses in connection with employees. The Commissioner also accepts these costs are deductible in accordance with the ATO-view set out in ATO Interpretative Decision ATO ID 2014/42.

Question 3

Summary

Irretrievable payments made by Company P or any subsidiary to fund the acquisition by the Trust of Company P shares either on-market or via a new subscription of shares, will be deductible to Company P pursuant to section 8-1, at the time determined by section 83A-210.

Detailed reasoning

The circumstances where some or all of the irretrievable payments are in excess of the amount required are addressed in the Detailed reasoning for Question 4 below.

Section 83A-210 states that if:

(a) at a particular time, you provide another entity with money or other property:

(i) under an *arrangement; and

(ii) for the purposes of enabling an individual (the ultimate beneficiary ) to acquire, directly or indirectly, an *ESS interest under an *employee share scheme in relation to the ultimate beneficiary's employment (including past or prospective employment); and

(b) that particular time occurs before the time (the acquisition time ) the ultimate beneficiary acquires the *ESS interest;

then, for the purposes of determining the income year (if any) in which you can deduct an amount in respect of the provision of the money or other property, you are taken to have provided the money or other property at the acquisition time.

As discussed in the Detailed reasoning for Question 1 above, a deduction is generally available to Company P pursuant to section 8-1 in the income year in which it or a subsidiary incurs the relevant outgoing.

Where Company P makes irretrievable payments to the Trustee which are not in excess of the amount required, the Commissioner accepts that Company P will be entitled to the deduction pursuant to section 8-1 in the year of income the irretrievable payments are made. Section 83A-210 will not operate to defer the timing of the deduction in this instance

Therefore, a deduction will be available to Company P once the contributions are made to the Trust, even if the relevant shares have not been acquired and allocated (i.e. exercise on vesting), provided the contributions are not in excess of the amount required, or do not purchase shares in excess of the number required, to meet the exercise of Rights that have been acquired by employees (before or during the year of income) under the PRP.

The Commissioner confirms that where contributions are made by Company P to the Trust:

·                    In the same income year or a later income year to that in which the Rights are acquired by (i.e. granted to) the employee under the PRP, then as long as the contributions do not exceed a sufficient amount to acquire the requisite number of ESS interests, the deduction under section 8-1 will be available in the income year in which the contribution is made.

Question 4

Summary

Where the Trust satisfies its obligation under the PRP by subscribing for new shares in Company P, the subscription proceeds payable by the Trust will not be included in the assessable income of Company P under sections 6-5 or 20-20, or result in a capital gains tax ('CGT') event happening under Division 104.

Detailed reasoning

Where an employee share trust subscribes for shares in the company, ATO ID 2010/155 states that:

In accordance with the ESS, the trustee either acquires the shares on market or it subscribes for the issue of shares using the funds provided by the employer. If the trustee subscribes for the issue of shares, it pays the full subscription price for the shares and the company receives a contribution of share capital from the trustee. The subscription price received by the company from the trustee is a capital receipt of the company.

Accordingly, the subscription proceeds Company P receives from the Trust do not form part of the assessable income of Company P as ordinary income under section 6-5.

1.    Recoupment by way of insurance or indemnity

Subsection 20-20(2) states that:

An amount you have received as recoupment of a loss or outgoing is an assessable recoupment if:

(a)          you received the amount by way of insurance or indemnity; and

(b) you can deduct an amount for the loss or outgoing for the current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.

In accordance with the Plan rules and the Trust Deed, subscription proceeds received by Company P are not a recoupment by way of insurance or indemnity.

Rather, the amount received by Company P is by way of subscription proceeds for the issue of shares to the Trust, which is a capital receipt of the company.

Therefore, the subscription proceeds payable by the Trust are not included in the assessable income of Company P under subsection 20-20(2).

2.    Assessable Recoupment - Other Recoupment (i.e. not by way of insurance or indemnity)

Subsection 20-20(3) states that:

An amount you have received as recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if:

(a) you can deduct an amount for the loss or outgoing for the current year; or

(b) you have deducted or can deduct an amount for the loss or outgoing for an earlier income year;

under a provision listed in section 20-30.

In accordance with the Plan rules and the Trust Deed, the subscription proceeds received by Company P will not satisfy any of the items / provisions listed in the table in section 20-30.

Therefore, the subscription proceeds will not constitute an assessable recoupment - other recoupment to Company P.

3.            Capital Gains Tax (CGT)

Section 102-20 states:

102-20 Ways you can make a capital gain or a capital loss

You can make a *capital gain or *capital loss if and only if a *CGT event happens. The gain or loss is made at the time of the event.

The only CGT events which may have possible application to the receipt of the subscription proceeds are:

·                    CGT event D1 (Creating a contractual or other rights), or

·                    CGT event H2 (Receipt for event relating to a CGT asset).

For both CGT events D1 and H2, paragraphs 104-35(5)(c) and 104-155(5)(c) respectively provide that the events do not happen to a company that issues or allots equity interests.

As the ordinary shares of Company P will satisfy the test for an equity interest as defined in subsection 974-75(1) (Item 1 of the Table) and subsection 974-70(1), neither CGT events D1 nor H2 will happen as the subscription for new Company P shares by the Trustee to which this question relates involves Company P issuing or allotting equity interests.

Question 5

Summary

The Commissioner will not seek to make a determination under section 177F (in respect of a scheme to which section 177D that is within Part IVA) to deny, in part or full, any deduction claimed by Company P in respect of the irretrievable payments made by Company P or a subsidiary to the Trustee to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares.

Detailed reasoning

Part IVA is a general anti-avoidance provision. It enables the Commissioner to cancel a tax benefit that has been obtained, or would but for section 177F be obtained, by a taxpayer in connection with a scheme to which Part IVA applies.

The following requirements must all be present before the Commissioner can make a determination under subsection 177F(1):

·                     a 'tax benefit', as defined in section 177C has been obtained or would (but for subsection 177F(1)) be obtained

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

·                     having regard to the matters in subsection 177D(2), the person or persons who entered into or carried out any part of the scheme did so for the dominant purpose of enabling a taxpayer to obtain a tax benefit in connection with the scheme.

In the present case, the PRP rules and the Trust Deed constitute a 'scheme' for the purposes of section 177A. The deduction which Company P is entitled to is a tax benefit under paragraph 177C(1)(b).

In considering the Relevant facts and circumstances and taking into account the commercial rationale for using a trust for the remuneration program, the Commissioner accepts that it cannot be objectively concluded that the person or persons who entered into or carried out any part of the scheme did so for the dominant purpose of enabling Company P to obtain a tax benefit in connection with the scheme.

Therefore, as one of the requirements is not present, the Commissioner will not seek to make a determination under subsection 177F(1).

Question 6

Summary

The provision of Rights by Company P to employees of Company P or of any subsidiary under the Plan rules will not be a 'fringe benefit' within the meaning of the term in subsection 136(1).

Detailed reasoning

The term 'fringe benefit' is defined in subsection 136(1). A fringe benefit will only arise under this section where 'benefits' are provided by 'employers' to 'employees' or 'associates of employees'.

However, paragraph (h) of the definition of 'fringe benefit' relevantly states that a fringe benefit does not include:

... 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; ...

Paragraph (h) uses the term 'ESS interest' and specifically excludes such an interest from the definition of a fringe benefit where it is acquired under an employee share scheme at a discount.

As the Rights are subject to performance hurdles, the Commissioner accepts that Subdivision 83A-C applies to the Rights.

Should Subdivision 83A-C not apply, the Commissioner accepts that Subdivision 83A-B would apply to the Rights as these will be provided at a discount.

Therefore, the provision of Rights to employees under the Plan rules will not constitute the provision of a 'fringe benefit' in accordance with paragraph (h) of the term in subsection 136(1).

Question 7

Summary

The irretrievable payments made by Company P or any subsidiary to the Trustee, to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares, will not be treated as a fringe benefit within the meaning of the term in subsection 136(1).

Detailed reasoning

Paragraph (ha) of the definition of 'fringe benefit' in subsection 136(1) states that a fringe benefit does not include:

... 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); ...

The term 'employee share trust' is defined in subsection 130-85(4) as follows:

... for an employee share scheme, 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).

The Commissioner accepts that paragraphs 130-85(4)(a) and (b) will be satisfied as

·                    the trust will acquire shares in Company P, and

·                    the trust will ensure that 'ESS interests' as defined in subsection 83A-10(1), being the beneficial interests in those shares, will be provided under an ESS, as defined in subsection 83A-10(2), by allocating those shares to the employees in accordance with the governing documents of the scheme.

For paragraph 130-85(4)(c),Draft Taxation Determination TD 2019/D8 lists a number of activities which are merely incidental.

Provided the Trustee administers the Trust according to the terms of the Trust Deed, the Commissioner accepts that the activities of the Trustee will satisfy the 'sole activities test'. The Trust will therefore constitute an 'employee share trust', as defined in subsection 130-85(4).

Accordingly, the contributions to the Trustee will not be a fringe benefit in accordance with paragraph (ha) of the definition of 'fringe benefit' in subsection 136(1).

Question 8

Summary

The Commissioner will not seek to make a determination that section 67 applies to increase the aggregate fringe benefits amount of Company P or of a subsidiary, by the amount of tax benefit gained from irretrievable payments made by Company P or made by a subsidiary to the Trustee, to fund the acquisition by the Trust of Company P shares either on market or via a new subscription of shares.

Detailed reasoning

Section 67 is a general anti-avoidance provision.

Subsection 67(1) is satisfied where a person, or one of the persons who entered into or carried out an arrangement or part of an arrangement under which a benefit is or was provided to a person, did so for the sole or dominant purpose of enabling an eligible employer, or the eligible employer and another employer, to obtain a tax benefit.

The Commissioner will only seek to make a determination under section 67 if the arrangement resulted in the payment of less fringe benefits tax than would otherwise be payable but for entering into the arrangement.

The provision of benefits to the Trustee as irretrievable contributions and to Participants as Rights under the Plan (including Company P shares provided to Participants) are excluded from the definition of a 'fringe benefit'.

As these benefits are excluded from the definition of a fringe benefit, no fringe benefit arises and no fringe benefits tax will be payable under the arrangement which includes the Trust. As there will be no fringe benefits tax payable without the operation of the Trust, the Commissioner accepts that the fringe benefits tax liability is not any less than it would otherwise be but for entering into the arrangement.

Accordingly, the Commissioner will not seek to make a determination that section 67 applies to increase the aggregate fringe benefits amount of Company P or of any subsidiary, by the amount of the tax benefit gained from the irretrievable cash contributions made to the Trustee, to fund the acquisition of shares either on-market or via a new subscription of shares in Company P.