Private ruling: Employee share scheme
Date of advice: 14 August 2020
Published: September 2020
Ruling period: For ruling questions 1 to 5, the income tax years ended 30 June 20XX to 30 June 20XX. | For ruling questions 6 to 8, the ruling period is the fringe benefit tax years ended 31 March 20XX to 31 March 20XX.

Ruling: Q1: Will Company X obtain an income tax deduction, pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), in respect of the irretrievable cash contributions made by Company X to the trustee of the employee share trust (Trustee) to fund the subscription for or acquisition on-market of shares in Company X by the employee share trust (Trust)? | A3: Yes | Q2: Will irretrievable cash contributions made by Company X to the Trustee, to fund the subscription for or acquisition on-market of shares in Company X by the Trust, be deductible to Company X at a time determined by section 83A-210 of the ITAA 1997? | A4: Yes | Q3: If the Trust satisfies its obligation under the Employee Incentive Plan (Plan) by subscribing for new shares in Company X, will the subscription proceeds be included in the assessable income of Company X under section 6-5 or 20-20 of the ITAA 1997 or trigger a CGT event under Division 104 of the ITAA 1997? | A5: No | Q4: 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 in full, any deduction claimed by Company X in respect of the irretrievable cash contributions made by Company X to the Trustee to fund the subscription for or acquisition on-market of shares in Company X by the Trust? | A6: No | Q5: Will the provision of ESS interests by Company X to employees under the Plan be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)? | A9: No | Q6: Will the Commissioner seek to make a determination that section 67 of the FBTAA 1986 applies to increase the fringe benefits taxable amount to Company X by the amount of tax benefit gained from irretrievable cash contributions made by Company X to the Trustee, to fund the subscription for or acquisition on-market of shares in Company X? | A10: No

Relevant facts and circumstances: Company X is the head company of an income tax consolidated group. Company X carries on a business which produces assessable income. Company X established an Employee Incentive Plan (Plan) as part of its remuneration strategy. Incentives may be in the form of performance rights or options, which represent rights to acquire shares in Company X (Awards), shares in Company X (Plan Shares) and shares in Company X that may be treated as tax exempt (Tax Exempt Shares). Under the Plan: a) Eligible employees (Participants) may receive a grant of Awards, Plan Shares or Tax Exempt Shares; b) Invitation letters sent to the Participants will outline: (i) The grant date applicable to the Awards, Plan Shares or Tax Exempt Shares; (ii) Details of any Vesting Conditions; (iii) The method and form of applying for, accepting, or rejecting a grant of the Award, Plan Shares or Tax Exempt Shares as applicable; (iv) The number of Awards, Plan Shares or Tax Exempt Shares the Participant is eligible to apply for; (v) The amount payable (if any) for the grant of each Award, Plan Share or Tax Exempt Share or how such amount is calculated; (vi) The manner in which the Awards, Plan Shares or Tax Exempts will be settled upon vesting; and (vii) Any other supplementary terms and conditions considered relevant by the Board. c) The Plan allows Company X to use an employee share trust to facilitate the allocation of shares to a Participant. d) Where there is a Change of Control event prior to the vesting of Awards, Plan Shares or the Tax Exempt Shares, the Board may determine the treatment of the Participant's Awards, Plan Shares and Tax Exempt Shares in its absolute discretion. The Board also has absolute discretion to determine the treatment of the Participant's vested but unexercised Awards, where they remain unexercised on the third business day prior to the Change of Control event. e) All shares issued under the Plan will rank pari passu in all respects with the shares of the same class from the date of issue. f) Participants must not sell, assign, transfer or grant a security interest over or otherwise deal with their Awards unless Company X in its absolute discretion provides approval to do so. g) Where a Participant ceases employment, then: i) Vested Awards and Plan Shares will be retained; and ii) Unvested Awards will be forfeited and Plan Shares will be compulsorily divested on a date determined by the Board, unless the Board provides express written consent that the Awards or Plan Shares may be retained. h) Where a Participant, prior to vesting of the Awards or Plan Shares, acts fraudulently or dishonestly, or commits a material breach of his or her obligations, the Board may deal with or take any actions, in relation to Awards, Plan Shares, shares resulting from the exercise of Awards or cash settlement so as to ensure no unfair benefit is obtained by the Participant. i) Tax Exempt Shares face no risk of forfeiture and are not subject to leaver provisions. j) Participants must not dispose of, or grant any security interest over, their Tax Exempt Shares or Plan Shares until the disposal restrictions no longer apply. k) Company X may make arrangements and do all things necessary to prevent the Participant from disposing of their Tax Exempt Shares, Plan Shares or shares resulting from Awards. l) From the date of issue, the Tax Exempt and Plan Shares will entitle the Participant to bonus issues and to participate in rights issues. Company X will only make cash contributions in relation to Australian tax-resident employees. The shares and awards to be granted under the Plan will be acquired at a discount by the employees of Company X. Company X established the Employee Share Trust (Trust) for the purposes of acquiring, holding and transferring shares in connection with the Plan for the benefit of the Participants pursuant to an original Employee Share Trust Deed (Original Trust Deed). The trustee of the Trust (Trustee) is neither a subsidiary nor a related body corporate of Company X. Broadly, the Trust operates as follows: a) Company X must provide the Trustee with the funds required for the purchase of shares in accordance with the Plan and all funds provided to the Trustee will constitute accretions to the corpus of the Trust and will not be repayable by the Trustee. b) These funds are used by the Trustee to acquire shares in Company X either on-market or via subscription for new shares in Company X based on written instructions from Company X. c) Where the Plan Rules stipulate that the shares are to be held by the Trustee on behalf of Participants, the Trustee will hold shares in Company X as shares in respect of a Participant(s) (i.e. on an allocated basis), although the Participants will be the beneficial owner of and absolutely entitled to their Allocated Shares. d) Where the Plan Rules include that the shares may be held by the Trustee on behalf of Participants or employees, the Trustee will hold the shares as unallocated shares for Participants generally. e) The Trust is precluded from exercising voting rights in relation to the unallocated shares. f) After a disposal restriction period lapses, the Trustee must transfer the relevant number of shares into the name of the relevant employee or any third party as directed by the relevant employee (i.e. legal title) upon a withdrawal notice being submitted to the Trustee. g) The Trustee can sell shares on behalf of a Participant where permitted to do so by the Participant. h) The Trustee may make investments and subscribe for, sell or otherwise dispose of privileges. i) The Trustee is not entitled to receive from the Trust any fees, commission or other remuneration for operating or administering the Trust. However, Company X must pay or reimburse to the Trustee from Company X's own resources any such fees, commission or other remuneration incurred by the Trustee, as Company X and the Trustee agree from time to time. j) In the event that the Trust is terminated, the Trustee must not pay any of the Surplus Assets to Company X or its subsidiaries. Company X subsequently made amendments to the Original Trust Deed and executed an Amended Trust Deed (Amended Trust Deed). Under the Amended Trust Deed, the Trustee may make only ancillary investments and the Trustee is no longer able to subscribe for, sell or otherwise dispose of privileges. Ancillary investments encompass only investing in shares in Company X and retaining excessive cash in the bank account and nothing further. Company X has confirmed that the Trustee had not, to that date, undertaken any investments or dealt with any privileges except for the acquisition of shares in Company X and holding those shares on behalf of the Participants. Company X intends to make cash contributions to the Trust up to 6 months in advance of shares being allocated or awards vesting or being exercised. Company X will incur various on-ongoing administration costs associated with the services provided by the Trustee of the Trust in respect of the on-going administration and management of the Trust, such as: a) Employee plan record-keeping; b) Production and dispatch of holding statements to employees; c) Costs incurred in the acquisition of shares on-market (e.g. brokerage costs and the allocation of shares to Participants); d) Preparing the annual audit of the financial statements of the Trust; e) Preparing the annual income tax returns of the Trust; and f) An annual trustee fee. Company X will also incur costs in managing its own tax affairs, including: a. Obtaining accounting, tax and legal advice in relation to the employee share scheme; and b. Tax advisor fees associated with the private binding ruling application.

Relevant legislative provisions: 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 20-20 | Income Tax Assessment Act 1997 s ubsection 25-5(1) | Income Tax Assessment Act 1997 subsection 83A-10 | Income Tax Assessment Act 1997 section 83A-210 | Income Tax Assessment Act 1997 Division 104 | Income Tax Assessment Act 1997 subsection 130-85(4) | Fringe Benefits Tax Assessment Act 1986 section 67 | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Summary: Subsection 8-1(1) of the ITAA 1997 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 X carries on a business which produces assessable income and operates an ESS as part of its remuneration strategy. The cash contributions made by Company X to the Trust are irretrievable and non-refundable to Company X in accordance with the Original or Amended Trust Deed (as the case may be), as: c. All funds provided to the Trustee will constitute accretions to the corpus of the Trust and will not be repayable by the Trustee; and d. On termination of the Trust, the Trustee must not pay any of the Surplus Assets to Company X or any of its subsidiaries. Therefore, if Company X makes a cash contribution to the Trust to acquire or subscribe for shares in Company X, the amount has been incurred for the purposes of subsection 8-1(1) of the ITAA 1997. The costs incurred by Company X for the acquisition of shares to satisfy its obligations under the Plan arise as part of Company X's remuneration arrangements, and contributions to the Trust are part of an on-going series of payments in the nature of remuneration of its employees. As such, it is incurred in the process of carrying on a business for gaining or producing assessable income. The cash contributions will be an outgoing incurred for periodic (rather than once-off) funding of an ESS for employees of Company X. The cash contributions are made as part of an ongoing process of remunerating employees, with the Trust expected to acquire shares regularly. 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. Company X will be entitled to a deduction under section 8-1 of the ITAA 1997 in respect of the irretrievable cash contributions made by Company X to the Trustee of the Trust to fund the subscription for, or acquisition on-market, of shares in Company X. | Detailed Reasoning - Question 2A: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, incurred in producing exempt or non-assessable non-exempt income or where a provision of the tax law prevents the deduction. Company X will incur various on-ongoing administration costs associated with the services provided by the Trustee of the Trust in respect of the on-going administration and management of the Trust, such as: a) Employee plan record keeping; b) Production and dispatch of holding statements to employees; c) Costs incurred in the acquisition of shares on-market (e.g. brokerage costs and the allocation of shares to Participants); d) Preparing the annual audit of the financial statements of the Trust; e) Preparing the annual income tax returns of the Trust; and f) An annual trustee fee (paid by Company X to the Trustee for the administration of the Trust by the Trustee). The Trustee is not entitled to receive from the Trust any remuneration in respect of its performance of its obligations as trustee of the Trust. Instead, Company X is required to pay or reimburse to the Trustee any fees, commission or other remuneration incurred by the Trustee, as Company X and the Trustee agree from time to time. These costs are regular and recurrent employment expenses which are deductible to Company X under section 8-1 of the ITAA 1997 as they are costs necessarily incurred in operating the ESS while carrying on its business for the purpose of gaining or producing its assessable income. For completeness, these costs are not capital or of a capital nature as the loss or outgoings are regular and recurrent and are part of the ordinary employee remuneration costs of the company (see also ATO ID 2014/42 Employer costs for the purpose of administering its employee share scheme are deductible). | Detailed Reasoning - Question 2B: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature. Section 8-10 of the ITAA 1997 states that if more than one provision applies, the most appropriate provision should be used (i.e. the specific provision should override the general provision). Division 12 of the ITAA 1997 sets out particular types of deductions that are dealt with by a specific provision of either the ITAA 1936 or the ITAA 1997. Section 25-5 of the ITAA 1997 is such a provision listed in Division 12 dealing with tax-related expenses. Subsection 25-5(1) of the ITAA 1997 allows a deduction for tax-related expenses, such as, managing your tax affairs. Company X incurs costs in managing its own tax affairs, including: e. Obtaining accounting, tax and legal advice in relation to the ESS; and f. Tax advisor fees associated with the private binding ruling applications. These costs are tax-related expenses deductible under subsection 25-5(1) of the ITAA 1997. | Detailed Reasoning - Question 3: It is often the case that an outgoing will be both incurred and paid in the same year of income, and as such, the amount is deductible in that income year for the purposes of section 8-1 of the ITAA 1997. [1] However, section 83A-210 of the ITAA 1997 modifies this rule in certain circumstances in respect of contributions provided by an employer to a trust to purchase shares under an ESS. The effect of section 83A-210 is to deem the timing an employer incurred the outgoing to be the time when the ESS interest is acquired by a beneficiary under an arrangement, rather than the time when the employer makes the contribution to the trust, if the contribution was made before the ESS interests are acquired. 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 . An ESS interest in a company is defined in subsection 83A-10(1) as either a beneficial interest in a share in the company, or a beneficial interest in a right to acquire a beneficial interest in a share in the company. Shares that are purchased by the Trustee, and subsequently granted to employees of Company X pursuant to the Plan, are ESS interests for the purposes of section 83A-210. The ESS established by the Plan satisfies the definition of an 'employee share scheme' in subsection 83A-10(2) as it is a scheme under which ESS interests in Company X are provided to the employees of Company X in relation to their employment with Company X. The granting of the ESS interest to the Participants, the provision of the cash contributions to the Trustee, the acquisition and holding of shares by the Trustee and the allocation of shares to Participants are all interrelated components of the ESS. All the components constitute an arrangement for the purposes of section 83A-210 that must be carried out so that the scheme can operate as intended. Company X intends to make cash contributions to the Trust up to 6 months in advance of shares being allocated or awards vesting or being exercised. Therefore, where irretrievable cash contributions are made at a time before the Participants acquire the relevant ESS interest, the irretrievable cash contribution can only be deducted from the assessable income of Company X in the income year when the ESS interest is acquired by the Participant under the Plan, as provided by section 83A-210 of the ITAA 1997. | Detailed Reasoning - Section 6-5: Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts. The expression " income according to ordinary concepts " is not a defined term. However, case law has identified certain factors which may assist in determining whether a receipt is properly characterised as income according to ordinary concepts. As a general rule, amounts received as a result of carrying on a business should represent ordinary income. However, receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In GP International Pipecoaters v. Federal Commissioner of Taxation (1990) 170 CLR 124; (1990) 64 ALJR 392; (1990) 93 ALR 193; (1990) 21 ATR 1; 90 ATC 4413; [1990] HCA 25 ( Pipecoaters ), the High Court of Australia found that: To determine whether a receipt is of an income or of a capital character, various factors may be relevant. Sometimes, the character of receipt will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business. The character of the subscription proceeds received by Company X from the Trust can be determined by the character of the right or thing disposed of in exchange for the receipt. Where Company X issues the Trust with new shares in itself, the character of the newly issued share is one of capital. Therefore, the receipt of the subscription proceeds takes the character of share capital, and accordingly, is of a capital nature. In conclusion, the subscription proceeds should not be treated as ordinary income assessable in the hands of Company X under section 6-5 of the ITAA 1997. | Detailed Reasoning - Section 20-20: Subsection 20-20 relevantly provides for the assessment of recoupment received by way of insurance or indemnity or under a provision listed in section 20-30. By its very nature, the subscription proceeds received by Company X from the Trust will not represent an amount received by way of insurance or indemnity. There is no insurance contract involved; and the receipt does not arise because of a statutory right or contract of indemnity nor in the nature of compensation. Therefore, the receipt of the subscription proceeds does not constitute an assessable recoupment under subsection 20-20(2) of the ITAA 1997. As for subsection 20-20(3), an amount that Company X receives as recoupment of a loss or outgoing, except by way of insurance or indemnity, is an assessable recoupment if such loss or outgoing is deductible in the current or a prior income year because of a provision listed in the table in section 20-30. None of the provisions listed in section 20-30 are relevant to the current circumstances. Therefore, the subscription amount also does not constitute an assessable recoupment under subsection 20-20(3) of the ITAA 1997. | Detailed Reasoning - Division 104: A capital receipt will only be included as an assessable net capital gain only if it arises as a result of a CGT event (section 102-20 of the ITAA 1997). The only CGT events that may have possible application to the receipt of the subscription proceeds are CGT event D1 (Creating a contractual or other rights) and/or CGT event H2 (Receipt for event relating to a CGT asset). Paragraphs 104-35(5)(c) and 104-155(5)(c) of the ITAA 1997 respectively provide that CGT event D1 and CGT event H2 do not apply if a company issues or allots equity interests or non-equity shares in the company. As the ordinary shares of Company X constitute "equity interests" (see subsection 974-75(1) of the ITAA 1997), neither CGT event D1 nor CGT event H2 will occur. Accordingly, the subscription proceeds will not be assessable as a capital gain to Company X. | Detailed Reasoning - Question 5: Part IVA of the 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, 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 of the ITAA 1997 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 X to obtain a tax benefit. | Detailed Reasoning - Question 6: An employer's liability to fringe benefits tax ( FBT ) arises under section 66 of the FBTAA 1986, which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax. In general terms, a 'fringe benefit' is defined in subsection 136(1) of the FBTAA 1986 as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee. However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs (f) to (s) of the definition. Paragraph (h) of subsection 136(1) of the FBTAA 1986 excludes the following from being a 'fringe benefit': (h) 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; An 'employee share scheme' is defined in subsection 83A-10(2) of the ITAA 1997 as a scheme under which ESS interests in a company are provided to employees, or associates of employees (including past or prospective employees) in relation to the employee's employment. An ESS interest in a company is defined in subsection 83A-10(1) as either a beneficial interest in a share in the company, or a beneficial interest in a right to acquire a beneficial interest in a share in the company. Shares that are purchased by the Trustee to satisfy its obligation under the Plan, and subsequently granted to employees of Company X pursuant to the Plan, are ESS interests for the purposes of section 83A-10(1). Therefore, Company X's ESS constitutes an 'employee share scheme' within the meaning of subsection 83A-10(2) because it is a scheme under which ESS interests in Company X are provided to the employees of Company X in relation to their employment with Company X. As the ESS interests granted under the Plan will be acquired by the employees at a discount, they are ESS interests to which subdivision 83A-B or 83A-C of the ITAA 1997 applies. Accordingly, the provision of ESS interests by Company X to employees under the Plan will not be subject to FBT on the basis that they are acquired by Participants under an 'employee share scheme' (to which subdivision 83A-B or 83A-C will apply) and are thereby excluded from being a fringe benefit by virtue of paragraph 136(1)(h) of the FBTAA 1986. In addition, when an Award is later exercised, it will not give rise to a fringe benefit as any benefit received would be in respect of the exercise of the Award and not in respect of employment (refer ATO ID 2010/219 Fringe Benefits Tax Fringe benefit: shares provided to employees upon exercise of rights granted under an employee share scheme ). | Detailed Reasoning - Question 7A: Paragraph (ha) of subsection 136(1) of the FBTAA 1986 excludes from the definition of 'fringe benefit': (ha) 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 ); Therefore, for the irretrievable cash contributions to be excluded from the definition of 'fringe benefit', the Trust must be an 'employee share trust' as defined in subsection 130-85(4) of the ITAA 1997. Subsection 130-85(4) provides that 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 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). In the present case, paragraphs 130-85(4)(a) and (b) are satisfied because: g. The Trust acquires shares in a company; and h. The Trust ensures that ESS interests as defined in subsection 83A-10(1) (discussed above in Questions 3 and 6) are provided under an employee share scheme (discussed above in Questions 3 and 6) by allocating those shares to the employees of Company X in accordance with the Original Trust Deed and the Plan. 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 Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? (TD 2019/13). According to paragraph 13 of TD 2019/13, 'investing in assets other than shares or rights to shares in the employer company' is not an activity that is 'merely incidental' as it is not a natural incident or consequence of administering an ESS. [2] Neither is the provision of 'additional benefits to participants and/or employees, over and above the delivery of the ESS interests or resulting shares and any dividend equivalent payment that accrues directly from the employee's ESS interest'. The Original Trust Deed grants the Trustee the power to make investments (without limitation) and subscribe for, sell or otherwise dispose of privileges (privileges is undefined and therefore may amount to additional benefits that may be provided to the Participants). However, whilst the relevant trust documents may include powers and/or duties that are broad reaching, the mere existence of those powers or duties in the trust document does not, of itself, mean that the trustee has breached the requirements to be an employee share trust. In examining whether the requirements of subsection 130-85(4) are met, it is necessary to examine the actual activities that the trustee has undertaken. [3] Company X has confirmed that the Trustee has not undertaken any investments or dealt with any privileges except for the acquisition of shares in Company X and holding those shares on behalf of the Participants. Therefore, while the Original Trust Deed contains powers and/or duties that are not merely incidental, the Commissioner is satisfied that the Trust does satisfy the definition of an employee share trust on the basis that the Trustee has not in fact breached the requirements to be an employee share trust in subsection 130-85(4) of the ITAA 1997. As such, the irretrievable cash contributions made by Company X to fund the subscription for or acquisition on-market of shares in Company X by the Trust pursuant to the Original Trust Deed will be excluded from being a fringe benefit by virtue of paragraph 136(1)(ha) of the FBTAA 1986. | Detailed Reasoning - Question 7B: Under the Amended Trust Deed, the Trustee may make only ancillary investments and the Trustee is no longer able to subscribe for, sell or otherwise dispose of privileges. Ancillary investments encompass only investing in shares in Company X and retaining excessive cash in the bank account and nothing further. Accordingly, the Amended Trust Deed contains only powers and/or duties that are merely incidental, as required by subsection 130-85(4)(c) of the ITAA 1997. The Amended Trust Deed, therefore, satisfies the definition of an employee share trust in subsection 130-85(4) of the ITAA 1997 and, in turn, paragraph 136(1)(ha) of the FBTAA 1986 applies to exclude the irretrievable cash contributions made by Company X to the Trustee under the Amended Trust Deed from being a fringe benefit. | Detailed Reasoning - Question 8: PSLA 2005/24 Application of General Anti-Avoidance Rules (PSLA 2005/24) provides guidance on the application of Part IVA of the ITAA 1936 and other general anti-avoidance rules. In respect of section 67 of the FBTAA 1986, guidance is provided at paragraphs 185 to 188 of PSLA 2005/24. As discussed above, the irretrievable cash contributions made by Company X to the Trustee (pursuant to both the Original Trust Deed and the Amended Trust Deed) will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA 1986. Therefore, the fringe benefits liability is not any less than it would have been but for the existence of the arrangement. In conclusion, the Commissioner will not seek to make a determination that section 67 of the FBTAA 1986 applies to increase the aggregate fringe benefits amount by the amount of the tax benefit gained from the irretrievable cash contributions made by Company X to the Trustee to fund the subscription for, or acquisition on market of, shares in Company X. [1] Paragraph 15 of TR 97/7. [2] See also paragraph 11 of TD 2019/13. [3] Paragraph 6 of TD 2019/13.

Will Company X obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of costs incurred by Company X in relation to the on-going administration of the Trust? | Will Company X obtain an income tax deduction, pursuant to subsection 25-5(1) of the ITAA 1997, in respect of costs incurred by Company X in managing its own tax affairs in relation to the Employee Share Scheme (ESS)? | Will the irretrievable cash contributions made by Company X to the Trustee pursuant to the Original Trust Deed, to fund the subscription for or acquisition on-market of shares in Company X, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA 1986? | Will the irretrievable cash contributions made by Company X to the Trustee pursuant to the Amended Trust Deed, to fund the subscription for or acquisition on-market of shares in Company X, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA 1986?