Ruling Compendium TR 2010/6EC







The edited version of the Compendium of Comments is a Tax Office communication that is not intended to be relied upon as it provides no protection from primary tax, penalties, interest or sanctions for non-compliance with the law. In accordance with PS LA 2008/3 it only affords level 3 protection. | This is a compendium of responses to the issues raised by external parties to draft TR 2009/D4 - Income tax, Pay As You Go Withholding and fringe benefits tax: tax consequences on the issue, holding and redemption of bonus units as part of an employee benefits trust arrangement | This compendium of comments has been edited to maintain the anonymity of entities that commented on the draft ruling. | ATO Response/Action taken | The following suggestions relate to the structure of TR 2009/D4: | 1.1 The situation described in TD 2009/D5 is similar to TR 2009/D4 and, therefore, should be included as a third variant or at least referred to in the Part IVA section of the Taxation Ruling. | Paragraph 87 of the final Ruling refers to the Part IVA analysis in Taxation Determination TD 2010/10. | 1.2 A paragraph should be included in the summary section highlighting the differences between the two variants of the arrangement. This would include highlighting the differences noted at issue 2 of this compendium. | The beginning of paragraph 7 of the final Ruling now recognises that the different elements in the paragraph are not dependant on the cancellation of an employee's ordinary units. | As noted at issue 1.2 of this compendium, paragraph 7 of the final Ruling identifies that what happens with the bonus units is not dependant on the cancellation of an employee's ordinary units. How, and when, value in the employer contribution capital account is transferred to an employee's bonus units, and, then the bonus units are redeemed, depends on the particular arrangements between the employer and the trustee of the trust. | It is clarified in paragraphs 7(d) and 7(e) of the final Ruling that the bonus units do not give the holders rights to, and interests in, the assets of the trust. Rather, a bonus unit gives its holder rights to a value held in the employer contribution capital account or in the holder's bonus unit account. | It is also noted that, in paragraph 5 of the final Ruling, both an employee's ordinary units and bonus units are cancelled at the same time, and that the employee's outstanding loan balance will usually equal, and be offset against the cancellation entitlement for the bonus units. Those assumptions do not apply to the arrangement in paragraph 7. | Paragraphs 16 and 17 of TR 2009/D4 should state clearly that where the arrangement results in a taxable fringe benefit, the Commissioner will not apply Part IVA to any perceived tax benefit. | Paragraph 16 of the final Ruling now recognises that Part IVA will not apply to include in the assessable income of a taxpayer, the non-assessable, non-exempt income under section 23L of the Income Tax Assessment Act 1936 that is referred to in paragraph 21 of the final Ruling. | Concerns raised in respect of the application of Fringe benefits tax (FBT) to the arrangement. | The following issues were raised: | The application of FBT is considered in the final Ruling at paragraphs 18 to 24 and 87 to 106. In particular: | The edited version of the Compendium of Comments is an Australian Taxation Office (ATO) communication that is not intended to be relied upon as it provides no protection from primary tax, penalties, interest or sanctions for non-compliance with the law. In accordance with PS LA 2008/3 it only affords level 3 protection.