Case: Spotlight Stores Pty Ltd v Commissioner of Taxation [2004] FCA 650 ; (2004) 55 ATR 745; (2004) ATC 4674
Outcome: followed
I have referred to four cases in which this interpretation has been applied. These cases are: 1. Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577 ; (2002) ATC 5201; (2002) 51 ATR 629 (a decision of Kiefel J); 2. Walstern Pty Ltd v Commissioner of Taxation [2003] FCA 1428 ; (2003) 138 FCR 1; (2003) 54 ATR 423 (a decision of Hill J); 3. Spotlight Stores Pty Ltd v Commissioner of Taxation [2004] FCA 650 ; (2004) 55 ATR 745; (2004) ATC 4674 (a decision of Merkel J); and 4. Caelli Constructions (Vic) Pty Ltd v Commissioner of Taxation [2005] FCA 1467 ; [2005] 147 FCR 449; (2005) 60 ATR 542; (2005) ATC 4938 (a decision of Kenny J). 45 In each of the Federal Court decisions Walstern , Spotlight Stores and Caelli Constructions , the learned judge followed and applied the principles decided by Kiefel J in Essenbourne . 47 Similarly, in Spotlight Stores , Merkel J agreed with Kiefel J. His Honour said: '[121] In Essenbourne...Kiefel J concluded that the definition requires that for the benefit to be provided in respect of the employment of "the employee", a "particular employee" must be able to be identified in connection with the benefit. In Walstern...Hill J agreed with Kiefel J's view. In the present case, it is clear that when the benefit (that is, the $15 million contribution) was provided it was not provided, whether to "the employee" or to Spotlight Incentive as an "associate" of "the employee", in respect of the employment of any particular employee because the employees of Spotlight were not beneficiaries of the Incentive Trust at that time. The Commissioner contended that I should not follow Essenbourne or Walstern but I am not satisfied those decisions are clearly wrong and, accordingly, propose to follow them. It must follow that Spotlight is entitled to succeed in its appeal in relation to its FBT objection.' 49 As I have already noted, in Walstern (at FCA par 87 per Hill J) and Caelli Constructions (at FCA par 61 per Kenny J) their Honours stated their views that the decision of Kiefel J in Essenbourne was correct, and stated the law. Merkel J in Spotlight Stores did not need to discuss the Essenbourne case in great detail, however his Honour observed that he proposed to follow Essenbourne and Walstern as, notwithstanding the submissions of the Commissioner in Spotlight Stores , his Honour was not satisfied that those decisions were clearly wrong (at FCA par 121). Hill J in Walstern had also indicated that, as a matter of comity, he would have followed the decision of Kiefel J in Essenbourne unless he had formed the view either it was distinguishable or that the decision was clearly wrong, neither of which was the case (at par 87). 53 Notwithstanding powerful submissions by the Commissioner, I am not satisfied that the principle articulated by Kiefel J in Essenbourne is clearly wrong. With respect, there is little to add to the reasons provided by Kiefel J in Essenbourne or Hill J in Walstern which have been repeated in this judgment. I agree with the four judges in Essenbourne, Walstern, Spotlight Stores and Caelli Constructions that the identification of particular employees is a requisite element in the application of the definition of 'fringe benefit' under the FBTAA . Like the judges in Walstern , Spotlight Stores and Caelli Constructions I propose to follow the Essenbourne decision and, to the extent it is applicable to the facts of the case before me, apply it. 64 The circumstances before me are in some ways comparable with those in Spotlight Stores . There Merkel J found that when the $15 million contribution which was the benefit was provided, it was not provided, either to the employee or to the trustee as an associate of the employee, in respect of the employment of any particular employee because the employees of Spotlight were not beneficiaries of the Incentive Trust at that time. Although the fringe benefits tax assessment issue did not require full exploration by his Honour, relevant facts in that case were: &#8226; the employer contributed sums to a fund established to reward employees; &#8226; the frequency and amount of the contributions would be determined by the employer in its absolute discretion; &#8226; a separate trustee was incorporated, the directors of which were also directors of the employer; &#8226; the discretion of the trustee was absolute and uncontrolled, although in making determinations as to amounts to be paid as benefits, it was required to consult with the employer, and it could have regard to the criteria in clause 10 of the trust deed; and &#8226; beneficiaries were defined as 'persons who immediately prior to the date on which an amount is proposed to be paid by the Trustee...has been or is an Employee of [Spotlight] and, in the opinion of the Trustee, fulfils the criteria set out in Clause 10'. Clause 10 criteria included the contribution made by the beneficiary to the revenues or profits of the employer and the business or operation of the employer, the extent to which the beneficiary had attracted new clients to the employer, the length of service with the employer, and the seniority of the beneficiary. 65 Similar facts existed in the case before me, although again I note that the contributor of the capital to the trust fund was not the employer RMCs, but ABC Public, and the trustee in the case before me was an independent professional trustee.