Edited version of private advice

Authorisation Number: 1051896970730

Date of advice: 9 September 2021

Ruling

Subject: Employee share schemes

Question 1

Company A as head company of the Company A tax consolidated group be entitled to deduct an amount under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the irretrievable cash contributions it makes to the Trustee, as trustee of the Company A Share Plan Trust (the Trust), to fund the subscription for, or acquisition on-market of, Company A shares by the Trustee to satisfy ESS interests issued pursuant to the Executive Share Plan (the Executive Plan) and the Employee Share Purchase Plan (the General Plan), in respect of employees based in Australia?

Answer

Yes

Question 2

Will the irretrievable cash contributions made by Company A to the Trustee of the Trust, to fund the subscription for, or acquisition on-market of, Company A Shares by the Trustee, be deductible to Company A under section 8-1 of the ITAA 1997 at a time determined by section 83A-210 of the ITAA 1997 if the irretrievable cash contributions are made before the acquisition of the relevant ESS interests?

Answer

Yes

Question 3

Will the irretrievable cash contributions made by Company A to the Trustee of the Trust to fund the subscription for, or acquisition on-market of, Company A Shares by the Trustee, be deductible to Company A under section 8-1 of the ITAA 1997 in the income year the contributions are made if the irretrievable cash contributions are made after the acquisition of the relevant ESS interests?

Answer

Yes

Question 4

Will the Commissioner seek a determination that Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies to deny, the whole or a part of, a deduction claimed by Company A as head company for the Company A consolidated group for the irretrievable cash contributions made by Company A to the Trustee of the Trust to fund the subscription for, or acquisition on-market of, Company A Shares by the Trustee?

Answer

No

Issue 2 - Fringe Benefits Tax

Question 5

Will the irretrievable contributions made by Company A to the Trustee of the Trust, to fund the subscription for or acquisition on-market of Company A Shares, be treated as a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 6

Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount to Company A or any subsidiary of Company A, by the amount of the tax benefit gained from irretrievable cash contributions made by Company A or any subsidiary of Company A to the Trustee of the Trust, to fund the acquisition of Company A Shares?

Answer

No

The rulings for questions 1 to 4 inclusive each apply for the following periods:

Income tax year ended 30 June 20XX

The ruling for question 5 and 6 applies for the following periods:

Fringe benefits tax year ended 31 March 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Company A is an ASX listed company and the head company of a tax consolidated group. Company A has two primary employee share schemes in operation, namely:

• Employee Share Purchase Plan (General Plan), and
• Executive Incentive Plan (Executive Plan).

Operation of the General Plan

Broadly, the General Plan is an employee share scheme which allows the Board to invite Eligible Employees to participate by purchasing Company A shares via a salary sacrifice arrangement.

Each year Eligible Employees are invited to participate in the General Plan.

Participants nominate an amount up to $X,000 AUD of pre-tax salary to sacrifice for the financial year. The Trustee receives the deducted salary amount, and in the same month acquires shares in Company A on behalf of the Participant on market (Purchased Shares).

The Purchased Shares acquired with salary sacrificed contributions are then held in trust for the Participant for another two years. During this time the Participant maintains the right to vote and receive all dividends (and any other entitlement) associated with the Purchased Shares.

At the end of that financial year Participants also receive 'Matched Rights'. Matched Rights provide for Participants to receive additional Company A shares equivalent to the number of Purchased Shares acquired by the Participant from their salary sacrificed contributions during the year.

Upon satisfaction of the Matching Conditions, the Matched Rights convert to Company A shares when the Participant is entitled to sell or transfer their Purchased Shares (the additional Company A shares acquired upon the Matched Rights converting are referred to as Matched Shares).

At the end of two financial years after the end of the original salary sacrificed arrangement during which Purchased Shares were acquired on behalf of the Participant, the Participant is entitled to hold, sell or transfer both their Purchased Shares and the associated Matched Shares.

The General Plan is available to permanent Australian and New Zealand resident employees of the Company A Group, other than executives.

The General Plan operates in accordance with the Employee Share Purchase Plan Rules and is a scheme to which Subdivision 83A-C of the ITAA 1997 applies, subject to the requirements of the ITAA 1997.

The Board may, in its discretion, impose transfer or other restrictions in respect of Shares allocated to a Participant. If exceptional circumstances exist in relation to a Participant, they may write to the Board and request the removal of said transfer or other restrictions imposed.

Where a Participant ceases to be an employee, they will cease to participate in the General Plan, subject to certain rules around Matched Shares. They are:

•         if the Participant has not yet become entitled to any Matched Shares, all conditional rights to the Matched Shares cease;

•         a Participant will not lose their entitlement to any Matched Shares to which they have become entitled (but which have not yet been allocated to them);

•         if the Participant ceases their employment due to death, disability or other reason approved by the Board (excluding resignation or termination for cause), before they became entitled to Matched Shares, the Board may, in its discretion, determine that they are entitled to some or all of those Matched Shares.

The Board may determine how Shares purchased by a Participant are to be held under the General Plan, including by establishing a trust.

When the Matching Conditions and any transfer restrictions have been satisfied, the Trustee will continue to hold the Purchased and Matched Shares on trust on behalf of the Participant, until directed to transfer them into the Participant's name.

Company A must ensure that Participants are regularly notified of any Shares that are acquired and registered in the name of the Trustee on their behalf.

Operation of the Executive Plan

Under the Executive Plan, Company A has offered both a long-term and short-term incentive (LTI and STI respectively).

LTI

Under the terms of the LTI, Participants are granted Performance Rights on 1 July 20XX. The number of LTI Performance Rights granted on 1 July 20XX is calculated according to the formula:

(Total Fixed Remuneration x XX%) / VWAP of Company A Shares for 5 days up to and including 1 July 20XX)

LTI Performance Rights vest based on a three-year performance period commencing 1 July 20XX.

The number of LTI Performance Rights that actually vest (as opposed to initially granted) is determined in accordance with an index return calculation. The index takes into account Total Shareholder Return (TSR) plus an additional Compound Annual Growth Rate (CAGR).

LTI Performance Rights can be exercised after three years, for a for a two-year period, at no cost. LTI Performance Rights not exercised within the two years will lapse.

STI

Under the terms of the STI, Participants are granted Rights calculated by reference to a percentage maximum of a Participant's Total Fixed Remuneration (TFR). Prior to any STI Award becoming available, there are overall company performance hurdles which determine how many STI Awards are potentially available to each Participant. These are:

•         Total Shareholder Return (TSR), and

•         Return on Capital (ROCE).

If both company performance hurdles are met, then Participants are eligible for a maximum of 100% of their own individual STI Award amount. If only one of the company performance hurdles are met, then the maximum is 50%, and if neither are achieved then no STI is available to any STI Participant.

Having determined the maximum percentage entitlement achievable, then individual employee participants are assessed against Company Goals. Once the value of the STI is determined for the Participant, then 50% is payable in cash (inclusive of superannuation), and the other 50% takes the form of Performance Rights. The number of Performance Rights acquired is calculated by dividing the STI value entitlement by the 5-day VWAP up to (and including) 30 June 20XX.

That number of Performance Rights then vest:

•         50% on 1 July 20XX, and

•         the balance on 1 July 20XX.

The offers made under the Executive Plans operates in accordance with the Executive Incentive Share Plan Rules.

An Award is defined in the Rules as an award made under the Plan in the form of a Cash Reward, Performance Right and/or Option.

An Award granted under the Executive Plan will not vest unless the Conditions (if any) advised to the Participant have been satisfied.

Notwithstanding the above, the Board may, in its discretion, determine that an Award vests prior to the date specified by the Board in the information provided at the time of grant or invitation.

If an Award is in the form of Performance Rights or Options, upon vesting (and, if applicable, exercise of the Award), Company A must procure the transfer to the Participant (or the Trustee to be held on behalf of the Participant), one Share for each Award that has vested or, if applicable, is exercised.

Where a Participant ceases to be an employee of the Group after the Award has vested, and the Award is an Option or a Performance Right to which an exercise period applies, the vested Award must be exercised within 30 days of cessation (or such other period determined by the Board) or the Award will lapse.

Subject to the Board's discretion, a Participant's unvested Award will lapse (or be forfeited) for various reasons, including ceasing to be an employee of the Group.

The Board may, in its discretion, impose any transfer or other restrictions in respect of Shares allocated in respect of an Award.

The Board has absolute and unfettered discretion concerning administration of the Executive Plan.

The Company A Share Plan Trust

Company A and the Trustee executed the Deed which established the Company A Share Plan Trust (Trust).

The purpose in establishing the Trust was to facilitate the provision of Shares to Participants under the Plans.

The Trustee is neither a subsidiary nor a related body corporate of Company A for the purposes of the Corporations Act 2001.

Operation of the Trust

The Deed sets out the manner in which contributions can be made to the Trustee of the Trust to acquire Company A Shares. It provides:

•         the Trust is required to acquire Shares determined appropriate and necessary by the Board;

•         Company A must provide the Trustee with the funds required to comply with its obligations;

•         the Trustee is not obliged to acquire Shares if it does not receive sufficient funds to do so;

•         all funds received by the Trustee from Company A will constitute Accretions to the corpus of the Trust (except for the Trustee's remuneration, and where it subscribes for Shares in Company A), and will not be repaid to the Company. No Participant shall be entitled to receive such funds.

The Deed further sets out how the Trust will hold Shares and on what basis. It provides;

•         until Shares acquired by the Trustee are allocated to a Participant, the Trustee will hold them on trust for the benefit of Participants generally;

•         before the allocation or transfer to a Participant of an Unallocated Share held by the Trustee, the Trustee;

­   (if it is an associate of the company), must not, at its own discretion, exercise any voting rights in relation to the Unallocated Share;

­   (if it is not an associate of the company), may exercise voting rights in relation to the Unallocated Share, but only where the Trustee determines that voting in those circumstances are 'merely incidental' to obtaining, holding and providing Shares in Company A to the Participant;

­   may apply any capital receipts, dividends or other distributions received in respect of the Unallocated Share to purchase further Shares to be held on trust for the purposes of the Trust; and

­   must not participate in any rights issue or hold any bonus Shares issued in respect of the Unallocated Shares.

•         the Trustee may accumulate any income of the Trust to which no Participant is presently entitled as an Accretion to the Trust and cannot return any capital to Company A or any entity that Company A controls.

The Trust Deed sets out the powers of the Trustee. It provides, amongst other things, that;

•         the Trustee has the power to subscribe for, purchase or otherwise acquire and to sell or otherwise dispose of property, rights or privileges which the Trustee is authorised to acquire or dispose of on terms and conditions it thinks fit, pursuant to the Plan Rules;

•         the Trustee may receive dividends in respect of Unallocated Shares and interest from bank accounts and use those funds to:

­   acquire additional Shares for the purposes of the Plans, and

­   pay necessary and incidental costs of administering the Trust.

More generally, the Trust Deed sets out how the Trust will operate;

•         the Trust must operate in accordance with the Deed and the Plan Rules, and the Trustee must follow any direction given to it by the Board in relation to the operation of the Trust, subject to the Deed and applicable law.

•         Company A will pay all Trust expenses, outgoings, costs and charges incurred in the establishment and ongoing operation of the Trust.

•         Company A is not a beneficiary of the Trust and has no entitlement to any Shares or other trust property or any return of contributions made to the Trust.

•         The Trustee, on termination of the Trust, must apply any remaining part of the Fund for the benefit of one or more beneficiaries at the direction of Company A or, if no direction is provided, at the discretion of the Trustee, but must not pay any remaining amounts left in the Fund to Company A or any of its subsidiaries.

•         the Trust will be managed and administered so that it satisfies the definition of "employee share trust" for the purposes of subsection 130-85(4) of the ITAA 1936.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 subsection 83A-10(1)

Income Tax Assessment Act 1997 section 83A-210

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

Income Tax Assessment Act 1997 section 701-1

Income Tax Assessment Act 1997 subsection 995-1(1)

Income Tax Assessment Act 1936 Part IVA

Income Tax Assessment Act 1936 subsection 177D(2)

Fringe Benefits Tax Assessment Act 1986 section 67

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

All legislative references are to provisions of the Income Tax Assessment Act 1997, unless otherwise indicated.

Questions 1 to 4 - application of the single entity rule in section 701-1

The consolidation provisions of the ITAA 1997 allow certain groups of entities to be treated as a single entity for income tax purposes. Under the single entity rule (SER) in section 701-1 the subsidiary members of an income tax consolidated group are taken to be parts of the head company. As a consequence, the subsidiary members cease to be recognised as separate entities during the period that they are members of the income tax consolidated group, with the head company of the group being the only entity recognised for income tax purposes.

The meaning and application of the SER is explained in Taxation Ruling TR 2004/11 Income tax: consolidation: the meaning and application of the single entity rule in Part 3-90 of the Income Tax Assessment Act 1997.

As a consequence of the SER, the actions and transactions of the subsidiary members of the Company A consolidated group are treated, for income tax purposes, as having been undertaken by Company A as the head company of the consolidated group.

Questions 5 and 6

The SER in section 701-1 has no application to the FBTAA.

Issue 1 - Income Tax

Question 1

'ESS interest' is defined in subsection 83A-10(1) as a beneficial interest in a share in the company, or a right to acquire a beneficial interest in the company. Under the Plans certain Awards are granted to Participants, some of which are ESS interests, and one of which is not, i.e. cash payments under the Executive Plan. For the purposes of this Ruling, the ESS interests granted as Awards shall be collectively referred to as 'Rights' and excludes the cash payments made under the Executive Plan.

For present purposes, subsection 8-1(1) will allow you to deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, pursuant to subsection 8-1(2), you cannot deduct a loss or outgoing to the extent that it is a loss or outgoing of capital, or of a capital nature.

Company A carries on a business which produces assessable income. Company A operates an ESS as part of its renumeration strategy.

Under the Plans, Company A grants Rights to employees and makes irretrievable contributions to the Trust (in accordance with the General Plan rules, the Executive Plan rules and the Deed) which the Trustee will use to acquire Shares (either on-market or by subscription) for allocation to Participants to satisfy their Rights.

Incurred in carrying on a business

Company A must provide the Trustee with all the funds required to enable the Trustee to subscribe for or acquire those relevant Shares.

The contributions made by Company A are irretrievable and non-refundable to Company A in accordance with the Trust Deed as:

•         all funds received by the Trustee will constitute accretions to the corpus of the Trust and will not be repaid to Company A;

•         Company A is not a beneficiary of the Trust and has no entitlement to any Shares or other trust property, or any entitlement to any return of contributions made to the Trust; and

•         on termination of the Trust, Company A and members of the consolidated group do not have any entitlement to any part of the capital or income of the Trust, including any shares or cash that may form part of the Trust Fund, at any time.

Company A has granted (and will in the future grant) Rights under the Plans as part of its renumeration and reward program for Participants. The costs incurred by Company A for the acquisition of Shares to satisfy those Rights arise as part of these renumeration arrangements, and contributions to the Trust are part of an on-going series of payments in the nature of renumeration of its employees.

Not capital or of a capital nature

The costs will be an outgoing incurred for periodic funding of a bona fide employee share scheme for employees of the Company A consolidated group. Costs incurred are likely to be in relation to more than one grant of Rights (rather than being one-off), and Company A intends to continue satisfying outstanding Rights using Shares acquired by the Trust. This indicates that the irretrievable contributions to the Trust are ongoing in nature and are part of the broader remuneration expenditure of Company A.

While the contributions may secure an enduring or lasting benefit for the employer that is independent of the year to year benefits that the employer derives from a loyal and contented workforce, that enduring benefit is considered to be sufficiently small.

Therefore, the payments are not capital, or of a capital nature, and are therefore, deductible to Company A under section 8-1.

Question 2

Section 83A-210 applies to determine the timing of Company A's deduction, but only in respect of the contribution provided to the Trust to purchase Shares in excess of the number required to meet obligations arising from the grant of Rights arising in the year of income the grant is made under an ESS.

The Plans are ESSs for the purposes of subsection 83A-10(2) as they are schemes under which ESS interests (i.e. a beneficial interest in a share or a beneficial interest in a right to acquire a beneficial interest in a share) are provided to employees in relation to their employment with Company A.

The Plans contain a number of interrelated components which includes the provision of irretrievable cash contributions by Company A to the Trustee of the Trust. These contributions enable the Trustee to acquire Company A shares for the purpose of enabling each Participant, indirectly as part of the Plans, to acquire ESS interests.

The irretrievable cash contribution can only be deducted from the assessable income of Company A in the income year when the relevant beneficial interest in a Share in Company A, or beneficial interest in a Right to a beneficial interest in a share in Company A, is acquired by a Participant under the Plans.

Further information is available in 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 3

Consistent with the analysis in question 2 (above), where the contribution is made after the acquisition of the relevant ESS interests, irretrievable contributions made by Company A to the Trustee to fund the subscription for, or acquisition on-market of Shares by the Trustee, to satisfy the ESS interests granted to Participants, will be deductible in the income year in which the contribution is made by the Company.

Question 4

Part IVA of the Income Tax Assessment Act 1936 ('ITAA 1936') is a general anti-avoidance provision which gives the Commissioner the power 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.

The Commissioner generally accepts that a general deduction may be available where an employer provides money or other property to an employee share trust where the conditions of Division 83A are met.

In this case, the scheme does not contain the elements of artificiality or unnecessary complexity and the commercial drivers sufficiently explain the entry into the use of the employee share trust arrangement.

Therefore, having regard to the eight factors set out in subsection 177D(2) of the ITAA 1936, the Commissioner has concluded that the scheme is not being entered into or carried out for the dominant purpose of enabling Company A to obtain a tax benefit.

Issue 2 - Fringe Benefits Tax

Question 5

'Fringe benefit' is defined in section 136 of the FBTAA. It specifically excludes, amongst other things, a benefit constituted by the acquisition of money or property by an employee share trust within the meaning of the ITAA 1997 (paragraph 136(1)(ha)).

Subsection 995-1(1) states that the expression an 'employee share trust' has the same meaning given by subsection 130-85(4), which states:

An employee share trust, 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 interest 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).

Paragraph 130-85(4)(c) provides that a trustee can engage in activities that are merely incidental to those described in paragraphs 130-85(4)(a) and (b). The phrase 'merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). Accordingly, the phrase takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. The Macquarie Dictionary defines 'merely' to mean 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'.

For the purposes of paragraph 130-85(4)(c), activities which are merely incidental, as set out in 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 (ATOID 2010/108), and Taxation Determination 2019/13 Income tax: what is an 'employee share trust'?, (TD 2019/13) include:

•         the opening and operation of a bank account to facilitate the receipt and payment of money;

•         the receipt of dividends in respect of shares held by the trust on behalf of an employee, and their distribution to the employee;

•         the receipt of dividends in respect of unallocated shares and using those dividends to acquire additional shares for the purposes of the employee share scheme;

•         dealing with shares forfeited under an employee share scheme including the sale of forfeited shares and using the proceeds of sale for the purposes of the employee share scheme;

•         the transfer of shares to employee beneficiaries or the sale of shares on behalf of an employee beneficiary and the transfer to the employee of the net proceeds of the sale of those shares;

•         the payment or transfer of trust income and property to the default beneficiary on the winding up of the trust where there are no employee beneficiaries; and

•         receiving and immediately distributing shares under a demerger.

Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered merely incidental.

The Deed includes a clause that provides that Company A and the Trustee agree that the Trust will be managed and administered so that it satisfies the definition of "employee share trust" for the purposes of subsection 130-85(4).

In examining whether the requirements of subsection 130-85(4) are met, it is the activities of the trustee in relation to a particular trust that is relevant. To qualify as an employee share trust, a trustee's activities must be limited to those described in paragraphs 130-85(4)(a), (b) and (c).

Paragraph 130-85(4)(a), (b) and (c) are satisfied because:

•         the Trust acquires shares in a company, namely Company A;

•         the Trust ensures that ESS interests as defined in subsection 83A-10(1) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating those shares to the employees in accordance with the Deed and the General and Executive plan rules; and

•         the Trust Deed does not provide for the Trustee to participate in any activities which are not considered merely incidental to a function of managing the employee share scheme and administering the trust.

As paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA excludes the contributions to the Trustee of the Trust from being a fringe benefit, Company A will not be required to pay FBT in respect of irretrievable contributions made to the Trustee of the Trust to fund the acquisition of Company A shares.

Question 6

PS LA 2005/24 has been written to assist those who are contemplating the application of Part IVA or other general anti-avoidance rules to an arrangement. Relevantly, it succinctly explains how section 67 of the FBTAA operates. Most notably, paragraphs 185-188 of PS LA 2005/24 provide as follows:

185. Section 67 is the general anti-avoidance provision in the FBTAA. The operation of section 67 is comparable to Part IVA, in that the section requires the identification of an arrangement and a tax benefit, includes a sole or dominant purpose test and is activated by the making of a determination by the Commissioner. The definition of 'arrangement' in subsection 136(1) of the FBTAA is virtually identical to the definition of 'scheme' in section 177A of Part IVA.

186. Subsection 67(1) of the FBTAA 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(s) to obtain a tax benefit.

187. An objective review of the transaction and the surrounding circumstances should be undertaken in determining a person's sole or dominant purpose in carrying out the arrangement or part of the arrangement. Section 67 differs from paragraph 177D(b) in Part IVA in that it does not explicitly list the factors that should be taken into account in determining a person's sole or dominant purpose.

188. Subsection 67(2) of the FBTAA provides that a tax benefit arises in respect of a year of tax in connection with an arrangement if under the arrangement:

(i) a benefit is provided to a person;

(ii) an amount is not included in the aggregate fringe benefits amount of the employer; and

(iii) that amount would have been included or could reasonably be expected to have been included in the aggregate fringe benefits amount, if the arrangement had not been entered into.

It is clear, therefore, that the Commissioner would only seek to make a determination under section 67 of the FBTAA if the arrangement resulted in the payment of less fringe benefits tax than would be payable but for entering into the arrangement. The point is made effectively in Miscellaneous Taxation Ruling MT 2021 under the heading 'Appendix, Question 18' where, on the application of section 67 of the FBTAA, the Commissioner states:

...As mentioned in the explanatory memorandum to the FBT law, section 67 may only apply where there is an arrangement under which a benefit is provided to a person and the fringe benefits taxable amount in respect of that benefit is either nil or less than it would have been but for the arrangement...

Further, paragraph 151 of PS LA 2005/24 provides:

191. The approach outlined in this practice statement (refer to paragraphs 75 to 150) to the counterfactual and the sole or dominant purpose test in Part IVA is relevant and should be taken into account by Tax officers who are considering the application of section 67 of the FBTAA.

Under the Plans, if a Trust was not used, no fringe benefits tax would be payable and nor is it likely that benefits provided to employees under alternative remuneration plans would result in fringe benefits tax being payable.

In addition, under such an arrangement (with a Trust), the benefits provided by way of irretrievable contributions to the Trust and the provision of Rights (and the Company A shares received on their exercise) to Eligible Employees are excluded from the definition of a fringe benefit for the reasons given in the response to question 5 above. Therefore, as these benefits have been excluded from the definition of a fringe benefit, no fringe benefit arises, and no fringe benefits tax will be payable by using an Trust. As there would be no fringe benefits tax payable under both Plans without the use of a Trust (and nor likely would fringe benefits tax be payable under alternative remuneration plans), the fringe benefits tax liability is not any less than it would have been but for the arrangement.

Accordingly, the Commissioner will not make a determination that section 67 of the FBTAA applies to include an amount in the aggregate fringe benefits amount of Company A, in relation to a tax benefit obtained from the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for or acquisition on-market of shares in Company A.