Private ruling: Employee share scheme
Date of advice: 27 October 2023
Published: 11 December 2023
Ruling period: In relation to income tax: | Year ending 30 June 2023 | Year ending 30 June 2025 | Year ending 30 June 2026 | Year ending 30 June 2027 | In relation to fringe benefits tax: | Year ending 31 March 2023 | Year ending 31 March 2024 | Year ending 31 March 2025 | Year ending 31 March 2026 | Year ending 31 March 2027
Date scheme commenced: XX/XX/20XX

Ruling: Q1: Will the Taxpayer obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of the irretrievable cash contributions made by the Taxpayer to the Trustee to fund the subscription for or acquisition from other shareholders of the Taxpayers shares by the Trust? | A1: Yes. | Q2: Will the Taxpayer obtain an income tax deduction in relation to costs associated with the on-going administration of the Trust and tax advisor fees on implementation of the Trust? | A2: Yes. | Q3: Will irretrievable cash contributions made by the Taxpayer to the Trustee, to fund the subscription for or acquisition from other shareholders of the Taxpayer's shares by the Trust, be deductible to the Taxpayer at a time determined by section 83A-210 of the ITAA 1997? | A3: Yes. | Q4: If the Trust satisfies its obligation under the Plan by subscribing for new shares in the Taxpayer, will the subscription proceeds be included in the assessable income of the Taxpayer under section 6-5 or 20-20 of the ITAA 1997 or trigger a CGT event under Division 104 of the ITAA 1997? | A4: No. | Q5: Will the Commissioner seek to make a determination that Part IVA of the ITAA 1936 applies to deny, in part or full, any deduction claimed by the Taxpayer in respect of the irretrievable cash contributions made by the Taxpayer to the Trustee to fund the subscription for or acquisition from other shareholders of the Taxpayer's shares by the Trust? | A5: No. | Q6: Will the provision of the following be a Fringe Benefit within the meaning of subsection 136(1) of the FBTAA 1986: a) provision of Share Rights under the Plan? b) provision of Resulting Shares in satisfaction of the exercise of the Share Rights? c) provision of Plan Shares to Participants under the Plan? | A6: No. | Q7: Will the irretrievable cash contributions made by the Taxpayer to the Trustee, to fund the subscription for or acquisition from other shareholders of the Taxpayer's shares, be treated as a fringe benefit within the meaning of section 136(1) of the FBTAA 1986? | A7: No. | Q8: Will the Commissioner seek to make a determination that section 67 of the FBTAA 1986 applies to increase the fringe benefits taxable amount to the Taxpayer and other employer entities within the Taxpayer by the amount of tax benefit gained from irretrievable cash contributions made by the Taxpayer to the Trustee, to fund the subscription for or acquisition from other shareholders of the Taxpayer shares? | A8: No.

Relevant facts and circumstances: The Taxpayer is an unlisted Australian company and parent company of an income tax consolidated group. The Taxpayer is seeking to implement an employee share scheme through an Employee Share Trust with a third-party unrelated trustee. The ESS satisfies the requirements in subdivision 83A-B and 83A-C of the ITAA 1997. The Taxpayer will provide irretrievable cash contributions to fund the acquisitions of shares in itself by the Employee Share Trust for the purposes of the ESS The Taxpayer may incur ongoing expenses, including costs to manage tax affairs, on behalf of the EST and ESS. On termination of the EST, any residual Trust Assets must be paid to another EST established and maintained for the benefit of the Taxpayer's Employees, or a charity with a deductible gift recipient status. The Trustee must not pay any remaining assets (Surplus Assets) to any Group Company.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 8-10 | Income Tax Assessment Act 1997 section 20-20 | Income Tax Assessment Act 1997 section 25-5 | Income Tax Assessment Act 1997 section 83A-10 | Income Tax Assessment Act 1997 section 130-85 | Income Tax Assessment Act 1997 section 83A-210 | Income Tax Assessment Act 1997 section 83A-340 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-35 | Income Tax Assessment Act 1997 section 104-155 | Income Tax Assessment Act 1936 section 177D | Fringe Benefits Tax Assessment Act 1986 section 67 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision: Summary: Yes, the Taxpayer will be entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the irretrievable cash contributions made by them to the Trustee of the Trust to fund the subscription for, or acquisition of ESS Shares, as the contributions are payments by the employer to the Trust incurred as part of its remuneration strategy and is connected to gaining or producing The Taxpayer's assessable income. | Detailed Reasoning - Detailed reasoning: Pursuant to Section 701-1, subsidiary members of a tax consolidated group are taken to be parts of the head entity rather than separate entities for the purposes of determining the head company's and entity's liability for income tax and the amount of loss in a particular year. Subsection 8-1(1) of the ITAA 1997 allows 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. Under the Plan, The Taxpayer may grant stock options to eligible employees and will make irretrievable cash contributions to the Trust (in accordance with the Trust Deed) which the Trustee uses to acquire shares or subscribe for new shares for allocation to Participants to satisfy their options. The cash contributions made by the Taxpayer to the Trust are irretrievable and non-refundable to the Taxpayer in accordance with the Trust Deed, as: a. All funds provided to the Trustee will constitute accretions to the corpus of the Trust and will not be repayable by the Trustee; and b. The Trustee must not pay any of the Surplus Assets on termination of the trust to any Group Company. The cash contributions will be an outgoing incurred for periodic (rather than once-off) funding of an ESS for employees of the Taxpayer. The cash contributions are made as part of an ongoing process of remunerating employees, with the Trust expected to acquire shares regularly. As such, it is incurred in the process of carrying on a business for gaining or producing the Taxpayer's assessable income. The Taxpayer will be entitled to a deduction under section 8-1 of the ITAA 1997 in respect of the irretrievable cash contributions made by the Taxpayer to the Trustee of the Trust to fund the subscription for, or acquisition of Shares | Summary: Yes, the Taxpayer will obtain a deduction pursuant to section 8-1 and section 25-10 of the ITAA 1997 in respect to the costs incurred by The Taxpayer in relation to the on-going administration of the Trust. | Detailed Reasoning - Detailed reasoning: Pursuant to Clause 4.3, the Trust Deed prohibits the Trustee from being reimbursed from the Trust Assets or any Participant for any fees and charges incurred in administering the Trust but does not prohibit the Trustee from charging The Taxpayer for these expenses. Taxation Determination TD 2022/8 Income Tax: deductibility of expenses incurred in establishing and administering an 'employee share scheme' confirms the Commissioners view that ongoing expenses associated with administration of an ESS are deductible under section 8-1. For completeness, section 25-5(1) enables the deduction of expenditure incurred to manage your tax affairs. Where the Taxpayer incurs the expense to manage the tax affairs of the Trust, those expenses will be deductible under section 25-5(1). | Summary: Yes, pursuant to section 83A-210 of the ITAA 1997, where irretrievable cash contributions are made at a time before the ultimate beneficiaries acquire the relevant ESS interest, the irretrievable cash contribution can only be deducted from the assessable income of the Taxpayer in the income year when the ESS interest is acquired by the Participant under the Plan. | Detailed Reasoning - Detailed reasoning: 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. 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. Section 83A-210 of the ITAA 1997 provides that if: (a) at a particular time, you provide another entity with money or other property: (i) under an arrangement; and (ii) for the purpose 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 purpose 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. The effect of section 83A-210 of the ITAA 1997 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 . It is important to note that an indeterminate right which is satisfied by the provision of cash by the Taxpayer never becomes an ESS interest and the deduction in relation to the contribution to the Trust in respect of the provision of that right is permanently deferred. However, where that ESS interest is subsequently issued to another participating employee, this employee becomes the 'ultimate beneficiary' and the deduction is available in the income year that this participating employee acquired this ESS interest. 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 the Taxpayer 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. | Summary: No, if the Trust satisfies its obligation under the Taxpayer's Plan by subscribing for new shares in the Taxpayer, the subscription proceeds will not be included in the assessable income of the Taxpayer under either sections 6-5 or 20-20 of the ITAA 1997 nor will they trigger a capital gains tax (CGT) event under Division 104. | Detailed Reasoning - Ordinary Income: Section 6-5 of the ITAA 1997 provides that your assessable income includes income according to ordinary concepts which is called ordinary income. 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] HCA 25, 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 contribution of share capital received by the Taxpayer from the Trustee can be determined by the character of the right or thing disposed of in exchange for the receipt. Here, the Taxpayer is issuing the Trustee 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. This view is supported by the reasoning in ATO Interpretative Decision ATO ID 2010/155 Income Tax - Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee . In conclusion, when the Taxpayer receives subscription proceeds from the Trustee where the Trustee has subscribed for new Shares to satisfy obligations to Participants, the subscription proceeds received by the Taxpayer is a capital receipt, and will not be ordinary income in the hands of the Taxpayer under section 6-5 of the ITAA 1997. | Detailed Reasoning - Section 20-20: Subsection 20-20(2) of the ITAA 1997 provides that if you receive an amount as a recoupment of a loss or outgoing, it will be assessable income if you received it by way of insurance or indemnity and that amount can be deducted as a loss or outgoing in the current year or earlier income year. The Taxpayer will receive an amount for the subscription of Shares by the Trustee. There is no insurance contract in this case, so the amount is not received by way of insurance. Further, the amount is not an indemnity because the receipt does not arise under a statutory or contractual right of indemnity, and the receipt is not in the nature of compensation. Subsection 20-20(3) of the ITAA 1997 establishes that an amount received by you as 'recoupment' of a loss or outgoing is an 'assessable recoupment' if you can deduct the loss or outgoing for an earlier income year under a provision listed in section 20-30. None of the provisions listed in section 20-30 are relevant to the current circumstances. Therefore, the subscription proceeds will not be an assessable recoupment under section 20-20 of the ITAA 1997. | Detailed Reasoning - Division 104: Section 102-20 of the ITAA 1997 states that you make a capital gain or loss if and only if a CGT event happens. The relevant CGT events that may be applicable when the subscription proceeds are received by The Taxpayer are CGT events D1 (creating a contractual or other rights) and H2 (receipt for event relating to a CGT asset). However, paragraphs 104-35(5)(c) and 104-155(5)(c) of the ITAA 1997 respectively states that CGT events D1 and H2 do not happen if a company issues or allots equity interests or non-equity shares in the company. In addition, paragraphs 104-35(5)(e) and 104-155(5)(e) of the ITAA 1997 respectively states that CGT events D1 and H2 do not happen if a company grants an option to acquire equity interests, non-equity shares or debentures in the company. In this case, the Taxpayer is issuing shares, being equity interests as defined in section 974-75, to the Trustee. Therefore, neither CGT events D1 nor H2 will occur. Since no CGT event occurs, there is no amount that will be assessable as a capital gain to the Taxpayer under Division 104 of the ITAA 1997. | Summary: No, Part IVA of the ITAA 1936 will not apply to deny, in part or in full, any deduction claimed by the Taxpayer in respect of the irretrievable cash contributions made by the Taxpayer to the Trustee to fund the subscription for or acquisition of off-market of Shares by the Trust. | Detailed Reasoning - Detailed reasoning: 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. 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 Taxpayer's ESS. All the components constitute an arrangement for the purposes of section 83A-210 of the ITAA 1997 that must be carried out so that the scheme can operate as intended. Therefore, based on the current facts and 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 the Taxpayer to obtain a tax benefit. | Summary: No, the provision of Share Rights under the Plan, Resulting Shares in satisfaction of the exercise of the Share Rights, and Plan Shares to Participants under the Plan by the Taxpayer to employees under the Plan will not be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as they are excluded by paragraph 136(1)(h) of the FBTAA as ESS interests acquired under an 'employee share scheme' | Detailed Reasoning - Detailed reasoning: An employer's liability to fringe benefits tax (FBT) arises under section 66 of the FBTAA, 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 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 excludes the following from being a 'fringe benefit': 136(1) In this Act, unless the contrary intention appears: ..... Fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: ... In respect of the employment of the employee, but does not include: ... (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) of the ITAA 1997 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 Participants pursuant to the Plan, are ESS interests for the purposes of section 83A-10(1). Therefore, the Taxpayer's Plan constitutes an 'employee share scheme' within the meaning of subsection 83A-10(2) of the ITAA 1997 because it is a scheme under which ESS interests in the Taxpayer are provided to the employees of the Taxpayer in relation to their employment with the Taxpayer. As the stock options to acquire Shares or Shares 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. According to the Plan, the offer is intended to operate in accordance with Subdivision 83A-B. Accordingly, the provision of stock options to acquire Shares by the Taxpayer to Participants 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 will apply) and are thereby excluded from being a fringe benefit by virtue of paragraph 136(1)(h) of the FBTAA. In addition, when a right to acquire ordinary shares is later exercised, it will not give rise to a fringe benefit as defined in subsection 136(1) of the FBTAA as any benefit received by the employee (i.e. the beneficial interest in a Share) would be in respect of the exercise of the right to acquire shares 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 ). | Summary: No, the irretrievable cash contributions made by the Taxpayer to the Trustee pursuant to the Trust Deed, to fund the subscription for or acquisition off-market of the Taxpayer's shares will not be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA by virtue of the exclusion in paragraph 136(1)(ha) on the basis that the Trust Deed satisfies the definition of an employee share trust in subsection 130-85(4) of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Paragraph 136(1)(ha) of the FBTAA 1986 excludes from the definition of 'fringe benefit': 136(1) In this Act, unless the contrary intention appears: ..... Fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: ... In respect of the employment of the employee, but does not include: ... (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) of the ITAA 1997 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). | Detailed Reasoning - Paragraphs 130-85(4)(a) and (b) of the ITAA 1997: The beneficial interest in a share received by a Participant when a share in the Taxpayer is provided to them under the terms of the draft Trust Deed and the Plan is an ESS interest within the meaning of subsection 83A-10(1) of the ITAA 1997. Subsection 83A-10(2) of the ITAA 1997 defines an employee share scheme as being 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 employees' employment. The Plan is an ESS within the meaning of subsection 83A-10(2) of the ITAA 1997 because it is a scheme under which rights to acquire Shares in the Taxpayer (being ESS interests) are provided to employees in relation to the employees' employment. The Taxpayer has established the Trust to acquire shares in the Taxpayer and to allocate those Shares to employees in order to satisfy ESS interests acquired by those employees under the Plan. The beneficial interest in the Taxpayer's share is itself provided under an employee share scheme because it is provided under the same scheme under which the rights are provided to employees in relation to their employment. Paragraphs 130-85(4)(a) and (b) of the ITAA 1997 are therefore satisfied because: • the Trust acquires Shares in the Taxpayer; and • the Trust ensures that ESS interests (as defined in subsection 83A-10(1) of the ITAA 1997, being beneficial interests in the Shares of the Taxpayer), are provided under an ESS (as defined in subsection 83A-10(2) of the ITAA 1997) by allocating those Shares to the employees in accordance with the draft Trust Deed and the Plan; | Detailed Reasoning - Paragraph 130-85(4)(c) of the ITAA 1997: Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 will also require that the Trustee undertake incidental activities that are a function of managing the Trust. Paragraph 130-85(4)(c) of the ITAA 1997 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). Paragraph 12 of TD 2019/13 list examples of activities which are merely incidental for the purposes of paragraph 130-85(4)(c) of the ITAA 1997 that include (but not limited to): • the opening and operation of a bank account to facilitate the receipt and payment of money • bookkeeping, preparing financial, tax and regulatory statements, and other record-keeping and administrative actions necessary to operate the trust and undertake the activities described in paragraphs 130-85(4)(a), (b) and (c) • the receipt of dividends in respect of shares held by the trustee on behalf of a participating employee and their distribution to the employee • borrowing money for the purpose of acquiring shares or rights in the employer company, where no security is provided over the trust assets and the interest payable on such a loan is not more than arm's length commercial rates • the receipt of dividends in respect of unallocated shares and interest from bank accounts and using those funds to: • acquire additional shares for the purposes of the ESS • pay necessary and incidental costs of administering the trust and undertaking the activities described in paragraphs 130-85(4)(a), (b) and (c), for example costs relating to the audit of the trust, fees for professional services provided to the trustee in relation to the trust • pay interest on loans provided for the acquisition of shares or rights in the employer company, where the interest payable does not exceed arm's length commercial rates • paying a dividend equivalent payment to a participating employee under the rules of the ESS, where: • the amount paid is equal to or less than the amount of dividends paid to the trustee (net of tax paid by the trustee on the dividends), in relation to the number of shares being received by the participating employee, during the accumulation period, and • the payment is made at or around the time, and because, the shares vest or are transferred to the participating employee (as required by the ESS) • dealing with shares forfeited under an ESS including the sale of forfeited shares and using the proceeds of sale for activities permitted under subsection 130-85(4) • the transfer of shares to participating employees, or the sale of shares on behalf of such employees and the transfer to the employee of the net proceeds of the sale of those shares, when required under the rules of the ESS, and • receiving and immediately distributing shares under a demerger or actions in order to participate in a takeover or restructure covered by section 83A-130. Paragraph 13 of TD 2019/13 lists examples of activities that are not merely incidental for the purposes of paragraph 130-85(4)(c) of the ITAA 1997 that include (but not limited to): • providing financial assistance, such as providing a loan to an employee to purchase shares or interests in the employer company • payment of income or accrued capital from unallocated shares to any beneficiaries (or to employees who do not hold a beneficial interest in the employer company under the trust) • waiving or relinquishing certain entitlements, such as waiving the right to be paid or credited dividends pursuant to a dividend waiver clause contained in the governing trust documents • exercising a general discretion to make distributions of income or capital to pay a class of participating employees or other beneficiaries of the trust amounts unrelated to their ESS interests or entitlements under the ESS rules • borrowing money: • for a purpose other than purchasing shares or rights in the employer company, • with security provided over any of the trust's assets for the loan, or • where the interest payable on the loan is more than arm's length commercial rates • investing in assets other than shares or rights to shares in the employer company • engaging in trading activities in relation to shares in the employer company, other than purchasing and selling shares to satisfy obligations under the ESS • distributing mainly cash payments to participating employees rather than shares or ESS interests under the ESS • providing 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. Clause 4.8 of the Trust Deed requires the Trust to be managed and administered in a way that it satisfies the definition of employee share trust under subsection 130-85(4) of the ITAA 1997. It is considered that this clause requires the trustee to manage and administer the trust consistent with the definition of an "employee share trust" for the purpose of subsection 130-85(4) of the ITAA 1997. Under the Trust Deed, it is intended that the activities of the Trustee are limited to the sole purpose of exercising its powers and discharging its obligations under the Trust Deed and the relevant Plan Rules (and for no other purpose). It is intended that all other activities of the Trust are incidental to the Trustee undertaking these sole activities. Therefore paragraph 130-85(4)(c) of the ITAA 1997 will be satisfied as all other activities to be undertaken by the Trustee are merely incidental to managing the Plan. Conclusion The Trust satisfies the definition of an employee share trust in subsection 130-85(4) of the ITAA 1997. Paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA therefore excludes the contributions to the Trustee from being a fringe benefit. Accordingly, the irretrievable cash contributions made by the Taxpayer or any group member of the Taxpayer's tax consolidated group to the Trustee to fund the subscription for, or acquisition off-market of, shares will not constitute a fringe benefit within the meaning of subsection 136(1) of the FBTAA. | Summary: No, the Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount to the Taxpayer by the amount of tax benefit gained from irretrievable cash contributions made by the Taxpayer (or any subsidiary) to the Trustee, to fund the subscription for the Taxpayer's shares. | Detailed Reasoning - Detailed reasoning: Law Administration Practice Statement PS LA 2005/24 Application of General Anti-Avoidance Rules explains the application of Part IVA of the ITAA 1936 and other general anti-avoidance rules to an arrangement, including the operation of section 67 of the FBTAA (refer to paragraphs 185-191 of PS LA 2005/24). The Commissioner would only seek to make a determination under section 67 of the FBTAA if the arrangement resulted in the payment of less FBT than would be payable but for entering into the arrangement. Paragraph 191 of PS LA 2005/24 states: 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 (except that amendments corresponding to the 2013 amendments of Part IVA have not been made to section 67) and should be taken into account by Tax officers who are considering the application of section 67 of the FBTAA. As discussed in Questions 6 and 7, the irretrievable cash contributions made by the Taxpayer to the Trust will not be a fringe benefit as defined in subsection 136(1) of the FBTAA, nor would the grant of ESS interest (or cash payments) to Participants under the Taxpayer Plans, if an EST was not used. As a result, the FBT liability of the Taxpayer is not any less than it would have been but for the existence of the arrangement (i.e. the EST). Therefore, the Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of the Taxpayer by the amount of the tax benefit gained from the irretrievable cash contributions made by the Taxpayer to the Trustee.