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ATO Interpretative Decision

ATO ID 2002/848 (Withdrawn)

Fringe Benefits tax
Employee Share Plan - Payments made by a Company to a Plan company

Attention This ATO ID is withdrawn because it is no longer necessary. The issue addressed in the ATO ID is covered by TR 2013/6 Fringe benefits tax: otherwise deductible rules and Division 35 of the Income Tax Assessment Act 1997 .
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 28 July 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Whether payments made by Company A to a Plan Company to cover the Plan Company's shortfall, in the event that it is required to acquire the forfeited shares, for more than their market value at the time, gives rise to fringe benefits under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?


No. The payments made by Company A to the Plan Company to cover the Plan Company's shortfall in the event that it is required to acquire the forfeited shares from the participants, for more than their market value at the time, does not give rise to fringe benefits under the FBTAA.


Company A wish to establish an employee share plan (ESP) as part of a broad remuneration strategy. To benefit under the ESP, participants are required to satisfy certain performance criteria.

The ESP does not come within Division 13A of the Income Tax Assessment Act 1936 .

Company A through its Human Resource Committee would provide selected employees with the opportunity to acquire shares in the Company. The Human Resource Committee will impose offer conditions on these shares based on performance and continued employment within Company A.

A Plan Company will be engaged to administer certain aspects of the Employee Share Plan in accordance with the Plan rules . The Plan Company will be a third party for Corporations Law reasons, it will not be controlled or owned by Company A.

The participating employees will fund the cost of the acquisition of shares by way of a loan provided by an associate of Company A. The loan provided is non-interest bearing and fully recourse in nature.

In the event that the Human Resource Committee determines that a participant's shares are to be forfeited, such shares will generally be forfeited by the Plan Company acquiring the shares for an amount being the greater of the market value of the shares or the amount of the participant's loan which ever is greater.

In these circumstances, if there are insufficient funds standing to the balance of the "Plan Account", Company A will make a payment to the Plan Company to cover the shortfall between the proceeds from the Plan Company's sale of the forfeited shares and the amount the Plan company is required to pay to acquire the forfeited shares from the participants.

Reasons for Decision

The Plan Company is not an employee of Company A or an associate of Company A. Therefore, the payment made by Company A to the Plan Company, in these circumstances are not considered benefits provided to an employee and does not come within the definition of a fringe benefit as defined in section 136(1) of the FBTAA.

Date of decision: 17 May 2002

Year of income:Other/Substituted Accounting Period 2004

Legislative references:
Fringe Benefits Tax Assessment Act 1986
   Section 16
   Subsection 136(1)
   Subsection 148(2)

Related ATO Interpretative Decisions
ATO ID 2002/847
ATO ID 2002/849

Employee share loan benefit

Siebel/TDMS reference number: CAS102162, 1-7T1EH6N

Business line: Private Groups and High Wealth Individuals

Date of publication: 23 August 2002

ISSN: 1445-2782

ATO ID 2002/848 (Withdrawn) history   Top  
   Date   Version 
   17 May 2002   Original statement   
 You are here ®  28 July 2017   Withdrawn   


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