Case: J &amp; G Knowles and Associates Pty Ltd v Commissioner of Taxation [2000] FCA 196 ; (2000) 96 FCR 402
Outcome: cited
Her Honour agreed with the contention of Essenbourne Pty Ltd that the definition of 'fringe benefit' required reference to a particular employee in connection with the benefit said to be provided. This requirement of the definition was not, in Kiefel J's view, satisfied in Essenbourne . Given the nature of the contest before me, it is important and relevant to set out her Honour's reasoning on this point: '[54] In my view Essenbourne is correct in its contention that the definition of "fringe benefit" requires reference to a particular employee in connexion with the benefit said to have been provided. This is reflected in the references to a benefit being "provided to the employee or to an associate of the employee" and to the benefit being provided "in respect of the employment of the employee" (emphasis added). The latter reference, in particular, can only be to a particular person's employment. The Commissioner submitted that the reference to "an employee" in the definition should be read as "employees", in the case of certain benefits, as s 23 Acts Interpretation Act 1901 (Cth) would permit. In my view the Assessment Act requires that the particular employee be identified in connexion with the benefit. It is their employment which, after all, provides the necessary "link" to the benefit: see J &amp; G Knowles &amp; Associates Pty Ltd v FC of T [2000] FCA 196 ; (2000) 96 FCR 402. The definition does not admit of a reference to a number of employees in connexion with the benefit, the subject of the assessment. ... [56] The link between the benefit and the employment of the employee is required to be sufficient or material: J &amp; G Knowles, 409, 410. It arises because of the words 'in respect of the employment'. A mere causal link with the employment of the employee will not be sufficient. Essenbourne submits that, at least until the issue of Bonus Units, there is not a sufficient connexion with the brothers' employment. It seems to me that the substantial link at this point is as between the payment and the deduction sought by Essenbourne. It is not necessary for me to further consider the point for, in my view, the payment by Essenbourne to the trustee does not qualify as a fringe benefit as it is defined.' 56 The words 'in respect of the employment' in the context of the definition of 'fringe benefit' were explained by the Full Court of the Federal Court in J &amp; G Knowles and Associates Pty Ltd v Commissioner of Taxation [2000] FCA 196 ; (2000) 96 FCR 402. Their Honours pointed out that what needs to be established is whether there is a sufficient or material causal connection or relationship between the benefit and the employment. Considering in individual circumstances whether the benefit is a product or incident of the employment is useful if it is not, then the benefit is likely to be extraneous to the employment and not bear fringe benefits tax, notwithstanding that the employment might have been a causal factor (at 410). 57 In the case before me there is clearly some connection between a beneficiary of the CSP receiving the ABC Public shares, and a beneficiary being an employee of an RMC who has satisfied nominated criteria. Further, on the facts of this case the trustee of the CSP appears to be an associate of the employees as defined by s 159 FBTAA . Accordingly, the question in the case before me becomes: (a) whether employees are identified with sufficient particularity to come within the definition of 'fringe benefit' in s 136(1) FBTAA ; and if so, (b) whether there is a sufficient or material causal connection or relationship between the benefit and the employment of the employees to satisfy the definition of 'fringe benefit' in s 136(1) FBTAA . 58 If, as the applicant contends, the employees are not identified with sufficient particularity, in my view the question of the benefit being 'in respect of' their employment does not arise. As Kiefel J pointed out in Essenbourne , 'It is their employment which, after all, provides the necessary "link" to the benefit: see J &amp; G Knowles &amp; Associates Pty Ltd v Commissioner of Taxation [2000] FCA 196 ; (2000) 96 FCR 402.'