Employee Share Trusts and FBT

We have had the unfortunate experience too many times of being called in to advise on employee and executive equity plans after a company has already been operating one for several years that fails on several taxation counts.  Fortunately, one of many bugbears has recently been resolved.

The ATO has decided that if the activities of a trust used in an employee share plan are limited to managing the employee share plan and the general administration of the plan then the trust will satisfy the ‘sole activities test’ and be an ‘employee share trust’.  This will prevent any FBT liability on money or property contributed or transferred to the trust and ensures the trustee is not liable for income tax on shares in the trust (employees will be liable for income tax on shares received under an employee share plan).  A trust would fail the sole activities test if, for example, it provides loans to acquire shares.

Refer ATO Interpretative Decision 2007/179 (6/9/2007) HERE.

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