Contact: Amanda Kennedy
Deloitte
Media and Communications
+61 (0) 418 806 477

Contact: Elizma Bolt
Deloitte
Employment Taxes Partner
0411 144 405

Employers issuing shares to employees as part of an employee share scheme may be paying fringe benefits tax to the Tax Office unnecessarily says Deloitte Employment Taxes Partner, Elizma Bolt.

In a recent case involving ABC Learning Centres Ltd, the Federal Court has ruled that the provision of such benefits does not give rise to a "fringe benefit" if the benefits are provided in relation to employees generally.

"In order to fall within the definition of fringe benefit in the FBT Act, the arrangements must specifically identify the individual employees in connection with the benefit being provided," Ms Bolt said.

"If the arrangements apply to employees in general, then no FBT liability arises for the employer.

"This decision is the latest in a line of decisions handed down by the Federal Court on the issue in recent years.

"Even though the Court has ruled consistently on this aspect of the meaning of "fringe benefit" since Essenbourne's case in 2002, the Tax Office has refused to accept the Court's interpretation of the law.

"Throughout this period, the ATO has required employers to pay FBT on the provision of benefits regardless of whether the arrangements apply to identified employees or employees in general.

"With this most recent decision the Tax Office should finally accept the umpire's decision and give employers a fair go", said Ms Bolt.

"As things stand, employers with employee share schemes in place should examine the underlying arrangements carefully.

"Depending on the nature of the arrangements, there may be opportunities to seek a refund of FBT amounts previously paid to the Tax Office."