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@@ -558,3 +558,4 @@ Westley Nominees Pty Ltd v Coles Supermarkets Australia Pty Ltd,VID 719 of 2005,
 Commissioner of Taxation v Hall [2026] FCAFC 43,VID 779 of 2025,Full Federal Court of Australia,10 April 2026,17 June 2026,Decision Impact Statement,,"1. This Decision impact statement outlines the ATO's response to this case, which considered the taxpayer's entitlement to deductions for occupancy (rent) expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), and car expenses under section 28-12 of the ITAA 1997 or, alternatively, section 8-1 of the ITAA 1997. | 2. The Full Federal Court determined that the taxpayer was not entitled to claim a deduction under section 8-1 of the ITAA 1997 for occupancy expenses, nor a deduction for car expenses under section 28-12 of the ITAA 1997 or, alternatively, section 8-1 of the ITAA 1997 in the income year ended 30 June 2021 (relevant income year). | 3. All judgment references in this Decision impact statement are to the judgment of Commissioner of Taxation v Hall [2026] FCAFC 43 unless otherwise indicated. | 4. All further legislative references in this Decision impact statement are to the ITAA 1997 unless otherwise indicated.","5. During the relevant income year, the taxpayer was employed full time by the Australian Broadcasting Commission (ABC) in Melbourne as a sports presenter and producer. [1] His role comprised 2 components: a predominantly digital role [2] , and a live broadcast role performed at the ABC's Southbank Studios. [3] | 6. After moving to Melbourne in June 2020, the taxpayer rented a 2-bedroom apartment. [4] The taxpayer was required by his employer to work from home [5] , and therefore he set aside one bedroom for this purpose. COVID-19 lockdowns and employer directions prevented [6] him from attending the ABC's Southbank Studios for the digital production duties, requiring that work to be performed from home, and attending the studios only for live broadcast duties. [7] His work pattern involved either working entirely from home or undertaking the digital production duties at home before travelling to the studios for live broadcasts. [8] | 7. The taxpayer used the second bedroom exclusively as a workspace, though it was not physically distinct from the rest of the apartment. [9] His wife separately conducted online yoga classes from the living area. [10] The taxpayer travelled by private car between his home and Southbank Studios when performing live broadcast duties. [11] | 8. The taxpayer claimed deductions of $5,878.87 for occupancy expenses [12] relating to the home workspace and $1,148.40 for car expenses [13] for travel between home and the studios on mixed-duty days. These claims were disallowed at audit and objection, and the taxpayer subsequently sought a review of the Commissioner's objection decision in the then Administrative Appeals Tribunal. [14] | 9. The Administrative Review Tribunal [15] (Tribunal) set aside the Commissioner's objection decision and allowed the deductibility of both expenses in full. [16] | 10. The Commissioner appealed the Tribunal's decision to the Federal Court. The appeal was heard by the Full Court of the Federal Court, which allowed the Commissioner's appeal, set aside the Tribunal's decision and affirmed the Commissioner's objection decision. [17]","11. The Court considered the Commissioner's appeal from the Tribunal's decision, addressing the following questions of law, being whether: (a) a portion of rent paid for domestic accommodation referable to use as a home office is deductible under section 8-1; and (b) car expenses for travel between a home office and a workplace, calculated by reference to paragraph 28-25(3)(a), are deductible. (a) a portion of rent paid for domestic accommodation referable to use as a home office is deductible under section 8-1; and (b) car expenses for travel between a home office and a workplace, calculated by reference to paragraph 28-25(3)(a), are deductible. | Occupancy expenses – characterisation of expenditure under section 8-1: 12. Subsections 8-1(1) and 8-1(2) operate cumulatively [18] but address distinct inquiries. Subsection 8-1(1) requires that the loss or outgoing be sufficiently connected to gaining or producing assessable income. This involves identifying the essential character of the expenditure. [19] That character is not determined by use, necessity, or lack of choice [20] , and is not displaced merely by apportionment. [21] By contrast, subsection 8-1(2) asks whether the outgoing is nevertheless of a kind expressly excluded from deductibility, including because it is private or domestic in character (paragraph 8-1(2)(b)). [22] 13. The Court confirmed and applied the High Court authorities of Faichney [23] , Handley [24] and Forsyth [25] , which establish that a home office ordinarily remains part of the home and does not become a business premises merely because it is used regularly or necessarily for income-earning activities. A separate enquiry is still required as to whether the expense is private or domestic. The Court found that the Tribunal erred in identifying and applying the correct legal principles of the High Court authorities by treating the necessity to use, and the use of, the second bedroom as determinative of the essential character of the rent. [26] 14. The Court considered Swinford [27] , a case relied on by the taxpayer, where Hunt J of the New South Wales Supreme Court held that a self-employed scriptwriter's home office constituted a business premises. It observed that Hunt J appeared to treat satisfaction of the positive limb in former subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936) (now subsection 8-1(1)) as sufficient, without separately addressing whether the expense was private or domestic under the negative limb in former subsection 51(1) of the ITAA 1936 (now subsection 8-1(2)). [28] Hunt J held that the second bedroom was the scriptwriter's business premises because it was the 'sole base of operations'. [29] However, the Court observed that the correct test is drawn from Handley and Forsyth, that the determinative question is instead the essential character of what the outgoing secured. [30] 15. The Court found that the Tribunal erred in allowing a deduction for occupancy expenses [31] by treating a single outgoing for rent as 2 outgoings where one was 'additional expenditure' for the second bedroom. [32] The Tribunal placed undue weight on work-related use, necessity to use, and exclusivity of the space [33] without separately considering the essential character test. The Court confirmed that an expense can be connected to income-earning activities yet remain non-deductible if its essential character is private or domestic. [34] The Court indicated that it was not appropriate to treat part of the rent as a separate outgoing [35] or that the use of the second bedroom for income-producing activities makes it a business premises. [36] The Court confirmed that an outgoing does not need to be 'purely' private or domestic to be excluded by paragraph 8-1(2)(b). [37] 16. In applying subsection 8-1(1), the Court considered that the outgoing for rent had a connection to the derivation of assessable income, in that part of the premises was used for income-producing activities and not merely for personal convenience. [38] However, the Court emphasised that this did not conclude the inquiries. [39] 17. In separately considering paragraph 8-1(2)(b), the Court held that the essential character of the expenditure was rent paid to secure domestic accommodation. That character was not altered by the taxpayer's use of part of the premises for work, nor by the circumstances requiring him to work from home. Accordingly, the outgoing was excluded from deductibility as private or domestic in nature. [40] The deduction for occupancy expenses was denied on these grounds. | Car expenses – travel to work versus travel in work: 18. Section 28-12 allows a deduction for car expenses if a taxpayer owned or leased a car [41] for an amount calculated using one of 2 prescribed methods: the cents per kilometre method or the logbook method. [42] A taxpayer must use one of these methods unless an exception applies. If neither method can be used, no deduction is available for car expenses. 19. Section 28-25 sets out the formula for the cents per kilometre method, limiting deductions to travel that qualifies as income-producing or between workplaces. [43] Subsection 25-100(3) excludes home-to-work travel. [44] In such a case, the only available basis for claiming a deduction is car expenses incurred in the course of producing assessable income under paragraph 28-25(3)(a). [45] 20. The Court found that the Tribunal erred in allowing a deduction for car expenses [46] on the basis of its finding that the taxpayer was 'at work the entire time' while travelling between home and the Southbank Studios. [47] This finding did not support the conclusion that the travel was in the course of producing assessable income or that the expenses were incurred in gaining that income. [48] 21. Accordingly, distinct duties performed by the taxpayer at different locations constitute separate income-earning activities, which cease and commence as the taxpayer moves between the locations. [49] Travel between those locations is not income-producing where no work is performed during the journey. [50] Such travel is properly characterised as travel 'to' perform work, or after work has ceased, rather than travel 'in' performing work. [51] Travel is not in the course of employment unless it forms part of an activity already under way at the time of the journey. [52]","22. The Court's decision supports the ATO views in the following public advice and guidance dealing with the deductibility of occupancy expenses and work-related transport expenses: • Taxation Ruling TR 93/30 Income tax: deductions for home office expenses • Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? • Employees guide for work expenses. | • Taxation Ruling TR 93/30 Income tax: deductions for home office expenses • Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? • Employees guide for work expenses. | Occupancy expenses | 23. Occupancy expenses (for example, rent, mortgage interest, rates) are generally private and not deductible and may only be apportioned on a reasonable basis where the home (or a part of it) is a place of business, not merely a place of convenience for performing work. | 24. The Court's reasoning is consistent with this approach: even where substantive work is performed at home, that does not, of itself, alter the essential character of the expenses that relate to the home. Necessity or employer requirement to work from home is not, of itself, determinative of deductibility of occupancy expenses. What matters is whether the home is properly characterised as a place of business forming part of the income-earning structure, rather than simply a location where work is undertaken. | 25. The Court's analysis of the relevant High Court authorities reaffirms that a home office remains part of the home. It does not become business premises merely because it is used regularly or necessarily for income-earning activities. A separate assessment is always required to determine whether an occupancy expense is private or domestic. This position is consistent with long-standing High Court authorities and is unaffected by contemporary or pandemic-era working arrangements. | 26. Running expenses (for example, internet, electricity, depreciation of equipment) of a home office differ to occupancy expenses and may be deductible to the extent those expenses relate to work use. | Work-related transport expenses | 27. The cost of travel between home and a regular workplace is generally private and not deductible (subject to very limited exceptions). Travel expenses are not deductible where they are incurred merely as a prerequisite to commencing income-earning activities, rather than in the course of performing those activities. | 28. The Court's decision aligns with this approach: where duties at home and another location are separate and no work is undertaken during travel, the travel is to commence or resume work, not in performing it. | 29. Accordingly, working from home does not, of itself, convert home-to-work and work-to-home travel into income-producing travel, nor alter its character as ordinary commuting. This position is unaffected by contemporary or pandemic-era working arrangements.",30. We are reviewing the impact of this decision on the public advice and guidance listed at paragraph 22 of this Decision impact statement.,2026 ATC 21-010 | TR 93/30 | TR 2021/1 | ITAA 1997 8-1 | ITAA 1997 8-1(1) | ITAA 1997 8-1(2) | ITAA 1997 8-1(2)(b) | ITAA 1997 25-100(3) | ITAA 1997 28-12 | ITAA 1997 28-25 | ITAA 1997 28-25(3)(a) | Administrative Review Tribunal Act 2024 172 | 72 ATC 4245 | 81 ATC 4157 | 148 CLR 182 | 81 ATC 4165 | 55 ALJR 345 | 84 ATC 4803 | 2025 ATC 10-758 | Employees guide to work expenses,ITAA 1936 51(1) ITAA 1997 8-1 ITAA 1997 8-1(1) ITAA 1997 8-1(2) ITAA 1997 8-1(2)(b) ITAA 1997 25-100(3) ITAA 1997 28-12 ITAA 1997 28-25 ITAA 1997 28-25(3)(a) Administrative Review Tribunal Act 2024 172,Federal Commissioner of Taxation v Faichney [1972] HCA 67 129 CLR 38 72 ATC 4245 3 ATR 435 47 ALJR 35 Federal Commissioner of Taxation v Forsyth [1981] HCA 15 148 CLR 203 81 ATC 4157 11 ATR 657 55 ALJR 340 Handley v Federal Commissioner of Taxation [1981] HCA 16 148 CLR 182 81 ATC 4165 11 ATR 644 55 ALJR 345 Swinford v Federal Commissioner of Taxation [1984] 3 NSWLR 118 80 FLR 1 84 ATC 4803 15 ATR 1154 Hall and Commissioner of Taxation [2025] ARTA 600 2025 ATC 10-758 Commissioner of Taxation v Hall [2026] FCAFC 43 315 FCR 189 2026 ATC 21-010,,Employees guide to work expenses,False,https://www.ato.gov.au/law/view/document?docid=LIT/ICD/vid779of2025-final/00001,"Implications for affected advice or guidance | Commissioner of Taxation 17 June 2026 | Footnotes: [1] Hall and Commissioner of Taxation [2025] ARTA 600 ( Hall – first instance ) at [2]. | [2] Hall – first instance at [9]. | [3] Hall – first instance at [10]. | [4] Hall – first instance at [7]. | [5] Hall – first instance at [64]. | [6] In 2021, no Victorian Chief Health Officer restrictions prevented the taxpayer from working at the Southbank Studios between 26 March and 27 May ( Hall – first instance at [28]). Although the ABC allowed some staff to return to the Southbank Studios between 29 March and 25 May, the taxpayer was not among those permitted to do so full-time ( Hall – first instance at [30–31]). | [7] Hall – first instance at [22-30]. | [8] Hall – first instance at [11]. | [9] Hall – first instance at [2], [14] and [15]. | [10] Hall– first instance at [8]. | [11] Hall– first instance at [19] and [20]. | [12] This amount represented the portion of the total rent paid during the year attributable to the second bedroom, calculated on a per square metre basis. | [13] This amount was calculated using the cents per kilometre method for motor vehicle expenses. | [14] The Administrative Appeals Tribunal was replaced by the Administrative Review Tribunal on 14 October 2024. | [15] Hall – first instance . | [16] Hall – first instance at [6] and [83]. | [23] At [11-16] ( Federal Commissioner of Taxation v Faichney [1972] HCA 67). | [24] At [17-22] ( Handley v Federal Commissioner of Taxation [1981] HCA 16). | [25] At [23-31] ( Federal Commissioner of Taxation v Forsyth [1981] HCA 15). | [26] At [67] and [70]. Also refer to [104]. | [27] Swinford v Federal Commissioner of Taxation [1984] 3 NSWLR 118. | [31] At [75] and [100]. Also refer to [104]. | [35] At [62] and [71–74]. | [44] At [79–81] and [85]. | [48] At [98]. Also refer to [104]."
 Ziegler v Commissioner of Taxation [2025] FCAFC 168,QUD 617 and 618 of 2024,Full Federal Court of Australia,26 November 2025,17 June 2026,Decision Impact Statement,,"1. This Decision impact statement outlines the ATO's response to this case, which considered the tax effect of various transactions undertaken by Mr Ziegler (taxpayer) and associated entities following the settlement of earlier disputes with the Commissioner. | 2. In particular, this case considered: • whether a credit recorded on an income tax account was relevantly received as an assessable recoupment where a corresponding amount had been deducted from assessable income in an earlier income year • the Commissioner's duty to assess penalties and notify liability to penalties where a previously notified liability is considered incorrect • the proper identification of 'scheme' and 'purpose' relevant to a determination made under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 (ITAA 1936) that no imputation benefit is to arise, and • the statutory meaning of 'excessive' and the taxpayer's onus of proof in proceedings under Part IVC of the Taxation Administration Act 1953 (Part IVC proceedings). | • whether a credit recorded on an income tax account was relevantly received as an assessable recoupment where a corresponding amount had been deducted from assessable income in an earlier income year • the Commissioner's duty to assess penalties and notify liability to penalties where a previously notified liability is considered incorrect • the proper identification of 'scheme' and 'purpose' relevant to a determination made under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 (ITAA 1936) that no imputation benefit is to arise, and • the statutory meaning of 'excessive' and the taxpayer's onus of proof in proceedings under Part IVC of the Taxation Administration Act 1953 (Part IVC proceedings). | 3. The decision provides authoritative guidance on each issue and confirms key aspects of the Commissioner's existing administrative practice. | 4. All judgment references in this Decision impact statement are to the judgment of Ziegler v Commissioner of Taxation [2025] FCAFC 168 unless otherwise indicated.","5. Following settlement of earlier disputes with the Commissioner, an income tax assessment of Orrong Strategies Pty Ltd (Orrong) for the 2008 income year was made. | 6. In accordance with the terms of the settlement, the tax liabilities were payable in 2 instalments, the first on 20 August 2009, the second on 21 July 2010. | 7. The first amount of $550,000 was paid on time. The balance of $3.35 million plus general interest charge (GIC) was paid early, in the 2010 income year. | 8. The taxpayer and associated entities undertook various transactions which ultimately resulted in the taxpayer getting an imputation credit of $2,993,610 from a dividend declared by Orrong. The Court found that, taking into account deductions to which the taxpayer considered he was entitled, and carried forward losses, the taxpayer received a refundable tax offset of $2,993,610 in the 2010 income year. | 9. The Commissioner made a determination under paragraph 177EA(5)(b) of the ITAA 1936 that no imputation benefit was to arise and gave the taxpayer an administrative overpayment notice under section 8AAZN of the Taxation Administration Act 1953 (TAA). | 10. Additionally: • In the 2009 income year, the taxpayer had claimed, and was allowed, a deduction under former paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) for GIC of $13,698,643. • To give effect to the settlement, among other things, the Commissioner had recalculated the taxpayer's liability to the GIC and recorded a credit on the taxpayer's income tax account in the sum of $13,698,643 on 16 August 2010. • The taxpayer returned that amount as an assessable recoupment in the 2011 income year but later took the position that it was not an assessable recoupment under subsection 20-20(3) of the ITAA 1997. | • In the 2009 income year, the taxpayer had claimed, and was allowed, a deduction under former paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) for GIC of $13,698,643. • To give effect to the settlement, among other things, the Commissioner had recalculated the taxpayer's liability to the GIC and recorded a credit on the taxpayer's income tax account in the sum of $13,698,643 on 16 August 2010. • The taxpayer returned that amount as an assessable recoupment in the 2011 income year but later took the position that it was not an assessable recoupment under subsection 20-20(3) of the ITAA 1997. | 11. Following an audit, the Commissioner issued penalty notices to the taxpayer for the 2011 and 2012 income years, and to Wellton Holdings Pty Ltd for the 2011 to 2014 income years assessed on the basis of 25% of the relevant shortfall amounts. | 12. Upon further review, the Commissioner concluded that the shortfall amounts resulted from intentional disregard of a taxation law and issued penalty notices recording administrative penalties calculated at 75% or 90% of the relevant shortfall. The Commissioner did not seek to disturb the Administrative Appeals Tribunal's decision [1] on review that the relevant shortfalls were instead the product of recklessness that ought to be calculated on 50% of the relevant shortfall.","'Assessable recoupment' issue: 13. The Court held that a credit recorded on an Income Tax Account reflecting a recalculation of a liability to the GIC is relevantly 'received' as an assessable recoupment where a corresponding amount has in fact been deducted from assessable income in an earlier year. [2] 14. In particular, the Court found that the Commissioner's credit to the taxpayer's Income Tax Account of an amount for refund of the GIC reflected an actual transaction that was 'received as recoupment of a loss or outgoing' within the meaning of subsection 20-20(3) of the ITAA 1997. [3] 15. Importantly, the Court confirmed that paragraph 20-20(3)(b) of the ITAA 1997 is engaged where an amount has been actually deducted, regardless of whether the taxpayer was lawfully entitled to that deduction. | 'Power to amend an assessment of administrative penalty' issue: 16. The Court held that the Commissioner's duty under subsection 298-30(1) of Schedule 1 to the TAA to assess administrative penalties is not spent when first exercised. Rather, the Commissioner has a continuing duty and power to assess liability to administrative penalties as the occasion requires. [4] 17. This decision is now the binding authority for the proposition that [5] : … if the Commissioner, having made an assessment of penalties under s 298-30(1), reaches the view that the assessment is incorrect, then the Commissioner must continue his obligation of assessment under s 298-30(1) and notify the liability to pay the penalty under s 298-10. … A taxpayer dissatisfied with the assessment as altered may object by reason of s 298-30(2). | '177EA determination' issue: 18. The Court confirmed that: • a scheme for the disposition of membership interests may comprise a single step • the purpose in paragraph 177EA(3)(e) of the ITAA 1936 is that of persons who entered into or carried out the scheme, determined objectively having regard to the relevant circumstances, and • it is not necessary to incorporate those circumstances as a step in the scheme. • a scheme for the disposition of membership interests may comprise a single step • the purpose in paragraph 177EA(3)(e) of the ITAA 1936 is that of persons who entered into or carried out the scheme, determined objectively having regard to the relevant circumstances, and • it is not necessary to incorporate those circumstances as a step in the scheme. 19. The decision reinforces the breadth of section 177EA of the ITAA 1936, including the inclusive nature of the 'relevant circumstances' in subsection 177EA(17) of the ITAA 1936. | 'In Part IVC proceedings, an assessment is shown to be excessive only by reference to the proper operation of the relevant statutory provisions' issue: 20. The Court confirmed that, in Part IVC proceedings, 'excessiveness' concerns the taxpayer's substantive liability under the tax law. 21. A taxpayer must establish what the correct assessment should have been; it is not sufficient to simply identify error. 22. In particular, a (contended) departure from the terms of a settlement deed does not establish excessiveness, as liability is determined by the operation of the tax law unless statutory effect is given to such arrangements (such as by way of a binding taxation ruling).","23. We consider that the decision confirms and strengthens the Commissioner's existing views. | 24. In particular, the decision provides authority for the following propositions: • A recoupment is assessable under section 20-20 of the ITAA 1997 where an amount has been in fact deducted, irrespective of entitlement. • The Commissioner has a continuing duty to assess administrative penalties and may amend a penalty assessment where it is considered incorrect. • For the purposes of section 177EA of the ITAA 1936, a scheme may be identified broadly, including as a single step, and purpose is determined objectively by reference to the relevant circumstances. • In Part IVC proceedings, 'excessiveness' depends on the correct application of the tax law, and not on administrative conduct or contractual arrangements. | • A recoupment is assessable under section 20-20 of the ITAA 1997 where an amount has been in fact deducted, irrespective of entitlement. • The Commissioner has a continuing duty to assess administrative penalties and may amend a penalty assessment where it is considered incorrect. • For the purposes of section 177EA of the ITAA 1936, a scheme may be identified broadly, including as a single step, and purpose is determined objectively by reference to the relevant circumstances. • In Part IVC proceedings, 'excessiveness' depends on the correct application of the tax law, and not on administrative conduct or contractual arrangements.",25. The decision does not require any change to existing ATO advice and provides additional judicial support for current administrative practice.,2025 ATC 20-983 | ITAA 1936 177EA | ITAA 1936 177EA(3)(e) | ITAA 1936 177EA(5)(b) | ITAA 1936 177EA(17) | ITAA 1997 20-20 | ITAA 1997 20-20(3) | ITAA 1997 20-20(3)(b) | ITAA 1997 20-30 | 2024 ATC 10-735,ITAA 1936 177EA ITAA 1936 177EA(3)(e) ITAA 1936 177EA(5)(b) ITAA 1936 177EA(17) ITAA 1997 20-20 ITAA 1997 20-20(3) ITAA 1997 20-20(3)(b) ITAA 1997 20-30 ITAA 1997 25-5(1)(c) TAA 1953 8AAZN TAA 1953 Sch 1 298-30(1),BSKF and Commissioner of Taxation [2024] AATA 3377 2024 ATC 10-735 121 ATR 182 Ziegler v Commissioner of Taxation [2025] FCAFC 168 313 FCR 574 2025 ATC 20-983 Ziegler v Commissioner of Taxation [2026] HCADisp 89,,,False,https://www.ato.gov.au/law/view/document?docid=LIT/ICD/QUD617of2024/00001,"ATO view of this decision | Implications for affected advice or guidance | Aaron.Elbourne@ato.gov.au | Commissioner of Taxation 17 June 2026 | [2] In this way, an equivalent outcome is achieved where a reduced liability to GIC is the result of a recalculation of that liability (following an amended assessment) to that achieved under subsection 20-25(2A) of the ITAA 1997 where the Commissioner remits an amount of GIC. Under subsection 20-25(2A), the remitted amount of GIC is taken to be received as a recoupment. | [3] See [20] and [21] (compare with taxpayer's contention recorded at [16(a)]). | [4] See [71-78] (in particular [72], [74] and [78])."
 Commissioner of Taxation v Bendel [2026] HCA 18,M47/2025,High Court,10 June 2026,26 June 2026,Decision Impact Statement,,"1. This Decision impact statement outlines the ATO's response to this case which concerns whether a private company's failure to call for payment of entitlements to income of an associated trust was the provision of 'financial accommodation' or a transaction 'which in substance effects a loan' and, therefore, a loan for the purposes of section 109D of the Income Tax Assessment Act 1936. | 2. All legislative references in this Decision impact statement are to the Income Tax Assessment Act 1936 unless otherwise indicated.","3. This case was an appeal by the Commissioner from the Full Federal Court's decision of 19 February 2025 [1] , which held that a private company's unpaid present entitlements (UPEs) to trust income were not loans for the purpose of section 109D. | 4. The Steven Bendel 2005 Discretionary Trust (the Trust) was a discretionary trust. Its trustee was Gleewin Pty Ltd (the Trustee). | 5. The beneficiaries of the Trust included Mr Bendel and Gleewin Investments Pty Ltd (Gleewin) (together, the Respondents). | 6. Mr Bendel was the sole shareholder and director of the Trustee and Gleewin. | 7. Mr Bendel and Gleewin were made presently entitled to income of the Trust for each of the 2013 to 2016 income years by way of resolutions by the Trustee to 'set aside' identified amounts for them (the Resolutions). | 8. The Trust deed provided that any amount set aside ceased to form part of the Trust Fund, was instead held by the Trustee on separate trust for the beneficiary absolutely, and the Trustee was empowered to invest, apply or deal with the funds of that separate trust under other relevant provisions in the deed. | 9. However, the accounting records prepared by the Trustee did not separately record the amounts set aside for Gleewin. Those amounts were instead booked to a 'Beneficiaries Current Account' balance in the liabilities section of the Trust's balance sheet. | 10. In each of the 2013 to 2017 income years, the Trust made some payments for, or on behalf of, Gleewin that had the effect of reducing Gleewin's current account balance. However, that balance remained substantially unpaid by Gleewin's lodgment day [2] for each of its 2013 to 2016 income year income tax returns. | 11. The accounting records of the Trust also showed that in the 2014 to 2017 income years, it made significant payments to Mr Bendel, shown as owing to the Trust. | 12. Gleewin had never called for payment of any of the Trust income set aside for its benefit in any of the years in question. It remained relevantly passive. | 13. The Commissioner issued amended assessments to the Respondents for each of the 2014 to 2017 income years. Those assessments reflected additional amounts included in their assessable income under section 97, on the basis that: • the outstanding amounts represented loans from Gleewin to the Trust within the meaning of subsection 109D(3) that were taken to be dividends paid to the Trust under subsection 109D(1), and • the beneficiaries entitled to the Trust's income had a corresponding proportion of each deemed dividend included in their assessable income by section 97. | • the outstanding amounts represented loans from Gleewin to the Trust within the meaning of subsection 109D(3) that were taken to be dividends paid to the Trust under subsection 109D(1), and • the beneficiaries entitled to the Trust's income had a corresponding proportion of each deemed dividend included in their assessable income by section 97. | 14. The Commissioner made no argument that there had been a breach of trust or of the fiduciary duties of the Trustee.","Issue 1: What was the character of the amounts set aside for Gleewin by the Resolutions?: 15. It was not in dispute that the Resolutions made Gleewin and Mr Bendel presently entitled to a share of the income of the Trust for the relevant income years. 16. The majority (Gageler CJ, Gordon, Edelman, Steward and Gleeson JJ) considered that the exercise of the power in the Trust deed to 'set aside' (as distinct from the power to pay or apply) a share of income, in conjunction with the directions in the Trust deed about the Trustee was to deal with amounts so set aside, meant that each of those amounts were held by the Trustee on separate trusts. 17. In reaching that view, their Honours rejected the Commissioner's contentions that: • there was insufficient certainty as to the property which would be the subject of any separate trusts over the amounts set aside, and • the Trust's accounts expressed an admission by the Trustee that there existed an unconditional relationship of debtor and creditor between Gleewin and the Trustee. • there was insufficient certainty as to the property which would be the subject of any separate trusts over the amounts set aside, and • the Trust's accounts expressed an admission by the Trustee that there existed an unconditional relationship of debtor and creditor between Gleewin and the Trustee. 18. In her dissenting judgement, Jagot J found that: • the Resolutions did not give rise to separate trusts, and • a debtor–creditor relationship had arisen between the Trustee and Gleewin. • the Resolutions did not give rise to separate trusts, and • a debtor–creditor relationship had arisen between the Trustee and Gleewin. 19. Beech-Jones J considered that there was no basis for the High Court to depart from the position accepted in the Full Court of the Federal Court that there existed a debtor–creditor relationship between Gleewin and the Trustee, nor should it entertain revisiting the Full Court's concurrent findings that Gleewin's entitlements were not held on separate trust. | Issue 2: Did Gleewin make a loan within the meaning of subsection 109D(3) to the Trust during each of the 2014 to 2017 years in respect of the Trust income set aside for it?: 20. The majority decided that Gleewin did not make a loan to the Trustee within the meaning of subsection 109D(3). There was, therefore, no dividend deemed to have been paid by Gleewin to the Trust under subsection 109D(1). 21. In reaching its decision, the majority considered that, for the purposes of subsection 109D(3): • the 'provision of financial accommodation' requires the company to do something which transfers, supplies or grants value or pecuniary assistance, involving some bilateral activity • there is no 'provision of financial accommodation' when a private company does nothing • mere inactivity cannot satisfy the language of 'advance', 'provision', 'payment' or 'transaction', and • simply doing nothing, or acquiescing to the retention of funds, is not a transaction which in substance effects a loan. • the 'provision of financial accommodation' requires the company to do something which transfers, supplies or grants value or pecuniary assistance, involving some bilateral activity • there is no 'provision of financial accommodation' when a private company does nothing • mere inactivity cannot satisfy the language of 'advance', 'provision', 'payment' or 'transaction', and • simply doing nothing, or acquiescing to the retention of funds, is not a transaction which in substance effects a loan. 22. The majority also relied on the statutory context and legislative history of Division 7A in support of its conclusion. In particular: • the structure of Division 7A distinguishes between loans (and their forgiveness, including under section 109F) and UPEs addressed separately under Subdivision EA, and • the replacement of former section 109UB with Subdivision EA, indicated that Parliament considered it necessary to enact specific provisions dealing with UPEs, rather than relying on the definition of 'loan'. • the structure of Division 7A distinguishes between loans (and their forgiveness, including under section 109F) and UPEs addressed separately under Subdivision EA, and • the replacement of former section 109UB with Subdivision EA, indicated that Parliament considered it necessary to enact specific provisions dealing with UPEs, rather than relying on the definition of 'loan'. 23. Both Jagot and Beech-Jones JJ considered that Gleewin had provided financial accommodation within the meaning of paragraph 109D(3)(b) to the Trustee. | Issue 3: Did section 6-25 of the Income Tax Assessment Act 1997 prevent a deemed dividend from being included in the Trust's net income or, alternatively, the Applicant's assessable income?: 24. Consistent with its conclusion for Issue 2 (that is, section 109D was not engaged by the circumstances of Gleewin and the Trust), the majority found it unnecessary to decide this issue. 25. Jagot and Beech-Jones JJ considered that section 6-25 of the Income Tax Assessment Act 1997 did not apply.","26. The High Court's reasoning makes it clear that section 109D does not apply in relation to a private company's entitlement to a share of trust income that remains unpaid where the company does not take action in respect of that entitlement. | 27. However, a private company beneficiary's inaction in respect of an unpaid entitlement to trust income may be insufficient to spare potential implications under other taxation laws, including Subdivision EA and section 100A. | 28. Relevantly, the majority observed that 'the facts here broadly correspond with the circumstances to which Subdivision EA is addressed'. [3] That is consistent with their characterisation of the amounts set aside by the Trustee – albeit on separate trust for Gleewin – as an 'unpaid present entitlement'. While their Honours were not determining the issue, their language suggests that Subdivision EA may apply where the funds to which a private company has been made presently entitled have been set aside on a separate trust and other relevant requirements are met. | 29. These outcomes contradict the position the Commissioner has taken in Taxation Determination TD 2022/11 Income tax: Division 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of 'financial accommodation'? (which we will withdraw) and other advice as detailed in paragraphs 44 to 46 of this Decision impact statement, which we will review and amend as appropriate. | 30. This decision also highlights the need to carefully examine the particular facts and circumstances in determining the character of an amount to which a beneficiary is presently entitled, including: • terms of the trust deed • terms of any resolutions by the trustee or trustees • accounting records of the parties, and • any other dealings in respect of that amount (for example, making it subject to a loan agreement). | • terms of the trust deed • terms of any resolutions by the trustee or trustees • accounting records of the parties, and • any other dealings in respect of that amount (for example, making it subject to a loan agreement). | 31. Depending on those matters, the beneficiary's entitlement and the trustee's subsequent dealings with that amount may support the conclusion that the parties have entered into a separate trust relationship or another form of financial arrangement. In some circumstances, a beneficiary's present entitlement to a share of trust income may be dealt with in a way which gives rise to a presently enforceable debt owed by the trustee to the beneficiary.","Application of section 109D | 32. The Commissioner will apply section 109D to arrangements involving UPEs on the basis of the ATO view of the decision described in paragraphs 27 to 32 of this Decision impact statement. | 33. Accordingly, where a private company beneficiary has not taken any relevant action in respect of its UPE, the Commissioner will not treat the UPE as a loan for the purposes of section 109D. This will be the case whether or not the amount in question is held on a separate trust. | 34. In contrast, where parties have taken steps that result in a UPE being satisfied, replaced or otherwise dealt with in a manner that gives rise to a loan within subsection 109D(3), the arrangement will be characterised accordingly. The entitlement will not be treated as remaining unpaid merely because those steps were taken based on a mistaken understanding of the law. Where the entitlement has already been satisfied or converted into a loan, it has ceased to be a UPE. This decision does not reinstate it as a mere UPE. The tax consequences of any additional dealings with funds associated with a former UPE will depend on the particular circumstances of those dealings. | Other provisions | 35. In situations where a private company beneficiary has a UPE and the trust (including any relevant separate trust) pays, makes a loan to, forgives a debt of a shareholder or associate of a shareholder of that company, we may have cause to consider the application of Subdivision EA. | 36. Further, in situations where the UPE arises out of, or in connection with, an arrangement intended to reduce someone's tax liability, where someone else benefits, and that is entered into outside the course of ordinary family or commercial dealing, section 100A may apply, making the trustee liable to tax at the top marginal rate. [4] | Implications for previous arrangements | 37. Where arrangements involving UPEs have been implemented in accordance with TD 2022/11 or prior ATO administrative guidance, including Law Administration Practice Statement PS LA 2010/4 Division 7A: trust entitlements (now withdrawn), those UPEs will not be treated as loans unless the parties have taken steps that result in an arrangement falling within subsection 109D(3). | 38. For example, for the purposes of Division 7A: • UPEs that have simply been left outstanding will not, without more, be loans • UPEs set aside and held on separate sub-trusts in accordance with PS LA 2010/4 will not be loans, but • UPEs that have been made subject to complying loan terms are, as a matter of fact, loans, and will continue to be treated consistently as loans. | • UPEs that have simply been left outstanding will not, without more, be loans • UPEs set aside and held on separate sub-trusts in accordance with PS LA 2010/4 will not be loans, but • UPEs that have been made subject to complying loan terms are, as a matter of fact, loans, and will continue to be treated consistently as loans. | 39. A variation to the terms of an investment agreement between a separate or sub-trust and the main trust (for example, changes to interest rate or term) will not, of itself, result in the arrangement constituting a loan or in the amount being treated as an UPE for the purposes of Subdivision EA. However, this will depend on the nature and effect of the variation having regard to all the circumstances. | Objections | 40. Taxpayers who have been assessed on the basis that UPEs without more were loans for the purposes of section 109D may seek an amendment (where they remain within amendment periods) or lodge an objection (where they are outside of amendment periods). | 41. Decisions in respect of amendment requests or objections will involve a consideration of relevant facts and circumstances, including the terms of the trust deed, resolutions of the trustee, accounting records, and any subsequent dealings with the entitlement, to confirm whether the circumstances are within the scope of the High Court's reasoning. | 42. For objections that are outside the standard time limits, requests for an extension of time will be considered having regard to the taxpayer's circumstances, including whether the objection arises as a result of this decision.",2026 ATC 21-021 | TR 2022/4 | TR 2015/4 | TD 2022/11 | TD 2015/20 | TD 2011/15 | ITAA 1936 Div 6 | ITAA 1936 97 | ITAA 1936 100A | ITAA 1936 Div 7A | ITAA 1936 Subdiv EA | ITAA 1936 109D | ITAA 1936 109D(1) | ITAA 1936 109D(3) | ITAA 1936 109D(6) | ITAA 1936 109F | ITAA 1997 6-25 | 2025 ATC 20-946 | PCG 2022/2 | PCG 2017/13 | PS LA 2010/4W,ITAA 1936 Div 6 ITAA 1936 97 ITAA 1936 100A ITAA 1936 Div 7A ITAA 1936 Subdiv EA ITAA 1936 109D ITAA 1936 109D(1) ITAA 1936 109D(3) ITAA 1936 109D(6) ITAA 1936 109F ITAA 1936 109UB ITAA 1997 6-25,Commissioner of Taxation v Bendel [2025] FCAFC 15 307 FCR 544 122 ATR 197 2025 ATC 20-946,,PCG 2022/2 PCG 2017/13 PS LA 2010/4W,False,https://www.ato.gov.au/law/view/document?docid=LIT/ICD/M47/2025/00001,"Taxpayers can rely on this Decision impact statement to provide them with protection from interest and penalties in the following way. If a statement turns out to be incorrect and taxpayers underpay their tax as a result, they will not have to pay a penalty, nor will they have to pay interest on the underpayment provided they reasonably relied on this Decision impact statement in good faith. However, even if they do not have to pay a penalty or interest, taxpayers will have to pay the correct amount of tax provided the time limits under the law allow it. | ATO view of this decision | Implications for affected advice or guidance | Implications for affected advice or guidance: 43. As a consequence of this decision, we will withdraw TD 2022/11. | • Taxation Ruling TR 2022/4 Income tax: section 100A reimbursement agreements • Taxation Ruling TR 2015/4 Income tax: CGT small business concessions: unpaid present entitlements and the maximum net asset value test • Taxation Determination TD 2015/20 Income tax: Division 7A: is a release by a private company of its unpaid present entitlement a 'payment' within the meaning of Division 7A of Part III of the Income Tax Assessment Act 1936? • Taxation Determination TD 2011/15 Income tax: Division 7A – unpaid present entitlements – factors the Commissioner will take into account in determining the amount of any deemed entitlement arising under section 109XI of the Income Tax Assessment Act 1936 • Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach • Practical Compliance Guideline PCG 2017/13 Division 7A – PS LA 2010/4 sub-trust arrangements maturing in or after the 2016–17 income year. | 45. To the extent that we withdraw a public ruling, it will continue to apply to schemes that had begun to be carried out before the withdrawal, where favourable to the taxpayer. [5] | 46. We may also issue further guidance, as appropriate, to assist taxpayers and their advisers to understand the implications of the decision and to support the consistent administration of Division 6 and Division 7A. | Footnotes: [1] Commissioner of Taxation v Bendel [2025] FCAFC 15. | [2] As defined in subsection 109D(6), being the earlier of the due date for lodgment of the private company's income tax return or the date on which that return is lodged. | [3] Commissioner of Taxation v Bendel [2026] HCA 18 at [64]. | [4] See Taxation Ruling TR 2022/4 Income tax: section 100A reimbursement agreements | [5] Subsection 358-20(3) of Schedule 1 to the Taxation Administration Act 1953 ."
+SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36,SAD 127 of 2025,Full Federal Court,27 March 2026,1 July 2026,Decision Impact Statement,,"1. This Decision impact statement outlines the ATO's response to this case, which considered: • whether 3 brothers, who together comprised all of the directors of a corporate trustee of a discretionary trust, were each an 'employee' within the meaning of that term in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), and • if the brothers were each found to be an employee, whether car benefits provided to them by the corporate trustee of the discretionary trust were provided 'in respect of' their employment. | • whether 3 brothers, who together comprised all of the directors of a corporate trustee of a discretionary trust, were each an 'employee' within the meaning of that term in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), and • if the brothers were each found to be an employee, whether car benefits provided to them by the corporate trustee of the discretionary trust were provided 'in respect of' their employment. | 2. All legislative references in this Decision impact statement are to the FBTAA unless otherwise indicated. | 3. All judgment references in this Decision impact statement are to the judgment of SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36, unless otherwise indicated.","4. The taxpayer, SEPL Pty Ltd in its capacity as the corporate trustee of a discretionary trust (SFT Trust), was engaged in a business involving petrol stations, convenience stores, fast food and tobacco outlets, and gift shops that was initially established by the parents of the 3 brothers as a small operation. [1] The business grew over time. [2] | 5. Following the death of the father and the retirement of the mother as director, the 3 brothers became the only shareholders and directors of SEPL Pty Ltd. [3] They collectively comprised the Trustee Board. [4] The Trustee Board allocated responsibility to each of the brothers for particular aspects of the taxpayer's business, and the brothers described the allocated roles they performed as that of 'Chief Executive Officer', 'Managing Director' and 'Executive Director'. [5] | 6. The 3 brothers and the mother were also among a lengthy list of eligible beneficiaries of the SFT Trust, which included extended family members. [6] | 7. The 3 brothers did not receive salaries and there were no written contracts of employment for any of them. There was also no record of any board resolution to enter into such an employment agreement, and managers were employed to oversee all relevant business functions. [7] | 8. The 3 brothers 'worked in the business' and 'played an active ""hands on"" role in the management of the [taxpayer's] affairs'. [8] They were 'completely immersed' in the business, leaving 'little time for other pursuits'. [9] | 9. The 3 brothers benefited from the taxpayer's business in 2 ways. Firstly, sharing the taxpayer's business profits through an informal arrangement reached between the brothers, with the profits being distributed to each of the brother's family trusts (also eligible beneficiaries of the SFT Trust). [10] Secondly, each brother had the exclusive use of luxury and high-performance cars owned by the taxpayer in its capacity as trustee of the SFT Trust. [11] | 10. The 3 brothers genuinely believed they were entitled to benefits (specifically, the private use of cars) as beneficiaries of the SFT Trust, not because they saw it as a reward for their work as directors or as employees. [12] | 11. Each brother used the cars allocated to them for both business and private use over the 2016 to 2020 fringe benefits tax (FBT) years (the relevant FBT years). [13] The expenses associated with the private use of the cars were debited to the mother's beneficiary loan account with the SFT Trust, which was then cleared by trust distributions. [14] The taxpayer claimed tax deductions for the estimated business use of the cars by the 3 brothers. [15] | 12. The taxpayer did not pay any FBT during the relevant FBT years in respect of the private use of the cars by the 3 brothers. | History of the dispute | 13. At audit, the Commissioner was of the view that the taxpayer was liable to pay FBT on the value of the car benefits provided to the 3 brothers. As a result, the Commissioner included the taxable value of the private use of the cars in amended FBT assessments for the relevant FBT years. | 14. The taxpayer objected to the amended FBT assessments. The objection was disallowed. The taxpayer sought review of the objection decision by the Administrative Appeals Tribunal (Tribunal). | 15. The Tribunal set aside the Commissioner's objection decision and substituted it with a decision that the objection be allowed. [16] | 16. On appeal to the Federal Court, the Commissioner contended that the Tribunal had erred on both issues and the appeal was allowed. [17] The primary judge held that the 3 brothers were 'employees' within the meaning of the FBTAA and the car benefits were therefore provided 'in respect of' their employment. [18] | 17. The primary judge in the Federal Court set aside the Tribunal's decision, affirming the Commissioner's objection decision and dismissing the taxpayer's application for review. [19] | 18. The taxpayer then appealed this decision to the Full Federal Court. On 27 March 2026, the Full Federal Court (Perry, O'Callaghan and Thawley JJ) (Full Court) unanimously allowed the taxpayer's appeal on both issues. [20]","Meaning of 'employee' in subsection 136(1): Statutory scheme of the FBTAA 19. The Full Court explained that the question whether each of the 3 brothers were an employee of the taxpayer depended on the meaning of the term 'employee', as it appeared in the definition of 'fringe benefit' in subsection 136(1). [21] 20. 'Employee' is defined in subsection 136(1) as a 'current employee', which is further defined in subsection 136(1) as 'a person who receives, or is entitled to receive, salary or wages'. 21. The expression 'salary or wages' is defined in subsection 136(1) as a payment from which an amount must be withheld under a provision in Schedule 1 to the Taxation Administration Act 1953 (TAA). Table item 1 of subparagraph (b)(ii) of the definition of 'salary or wages' in subsection 136(1) refers to a 'payment to employee' in section 12-35 of Schedule 1 to the TAA, which in turn refers to withholding an amount from salary, wages, commission, bonuses or allowances paid to an individual 'as an employee'. 22. The Full Court held that it was also relevant to consider section 137. [22] Section 137 operates on the concept of 'salary or wages' and, only through that mechanism, affects whether a person is an employee. [23] 23. The Full Court observed that the term 'employment' appeared in paragraph 137(1)(b) and then only for the limited purpose of ascertaining whether the person is an 'employee' under the FBTAA. [24] Definition of 'employment' 24. The Full Court did not accept that the word 'employment' expanded the statutory meaning of employee and explained that the definition of employment depended upon a 'person being treated as an employee'. [25] 25. The Full Court held that the word 'employment' was descriptive of what a person has if they are an employee. [26] It did not lead the statutory inquiry into whether a person was an employee or whether they performed some kind of expanding function. [27] Operation and scope of section 137 26. The Full Court approached section 137 on the same basis as the Tribunal, holding that: • Section 137 did not itself supply the meaning of 'employee'. [28] • The answer to the hypothetical question posed by paragraph 137(1)(c) depended upon whether a cash payment would have been made to a person 'as an employee', and that this permitted consideration of the ordinary (common law) meaning of the word 'employee'. [29] • Any hypothetical cash payment would have been made to the relevant brother not 'as an employee' but in his capacity as a proprietor, controller, and discretionary beneficiary of the trust. [30] • This meant that the condition in subparagraph 137(1)(c)(i), that the hypothetical cash payment 'would constitute salary or wages' under section 12-35 of Schedule 1 to the TAA, was not satisfied. [31] • Section 137 did not itself supply the meaning of 'employee'. [28] • The answer to the hypothetical question posed by paragraph 137(1)(c) depended upon whether a cash payment would have been made to a person 'as an employee', and that this permitted consideration of the ordinary (common law) meaning of the word 'employee'. [29] • Any hypothetical cash payment would have been made to the relevant brother not 'as an employee' but in his capacity as a proprietor, controller, and discretionary beneficiary of the trust. [30] • This meant that the condition in subparagraph 137(1)(c)(i), that the hypothetical cash payment 'would constitute salary or wages' under section 12-35 of Schedule 1 to the TAA, was not satisfied. [31] Ordinary meaning of 'employee' 27. The word 'employee' in section 12-35 of Schedule 1 to the TAA bears its ordinary meaning, which is its common law meaning. [32] Reliance on section 12-40 of Schedule 1 to the TAA 28. Table item 2 of the definition of 'salary or wages' in subsection 136(1) concerns section 12-40 of Schedule 1 to the TAA, and addresses payments to company directors. The Full Court considered that the Commissioner's reliance on section 12-40 of Schedule 1 to the TAA did not assist their case and that the primary judge erred in relying on that provision. [33] | Whether benefits are provided 'in respect of' employment: 29. The Full Court considered the issue of whether, on the hypothetical basis that each of 3 brothers were an employee under subsection 136(1), the car benefits were provided to them 'in respect of' their employment. [34] 30. The definition of 'fringe benefit' in subsection 136(1) requires that the benefit be provided 'in respect of the employment of the employee'. [35] 31. While the definition of 'in respect of' in subsection 136(1) is broad, the Full Court held that the breadth of the definition did not displace the need for a meaningful connection between the benefit and the employment. [36] That is consistent with the reasoning of the Full Federal Court in J & G Knowles v Commissioner of Taxation [2000] FCA 196 (J & G Knowles), the existence of some causal relationship is not of itself determinative and the connection must be sufficient or material having regard to the object and structure of the FBT regime. [37] 32. J & G Knowles recognised that the capacity in which the benefit was received is relevant. [38] The Full Court held that the 'Tribunal did not err in considering the basis on which the benefits were received, including – in addition to the objective circumstances – how the brothers themselves understood the arrangements'. [39] 33. The Full Court considered that 'J & G Knowles makes clear that, even if employment is a cause, the benefit may still properly be characterised as arising from a different relationship, with the employment relationship not being sufficiently material to satisfy the statutory test'. [40] 34. The Full Court held that it was open for the Tribunal to conclude that the arrangement, taken as a whole, was one operating by reason of the brothers' relationship to the trust and family structure rather than by reason of any employment relationship. [41]","Meaning of the term 'employee' within the statutory scheme of the FBTAA | 35. We accept that whether an individual is an employee depends upon the relevant definitions in subsection 136(1), including the meaning of the terms: • 'employee' as it appears in the definition of 'fringe benefit' [42] • 'current employee' within the meaning of the definition of 'employee' [43] • 'salary or wages' [44] , and • the operation of section 12-35 of Schedule 1 to the TAA, through the definition of 'salary or wages'. [45] | • 'employee' as it appears in the definition of 'fringe benefit' [42] • 'current employee' within the meaning of the definition of 'employee' [43] • 'salary or wages' [44] , and • the operation of section 12-35 of Schedule 1 to the TAA, through the definition of 'salary or wages'. [45] | 36. In noting that the meaning of employee in section 12-35 of Schedule 1 to the TAA is an undefined legislative term, the Full Court concluded that, in the absence of any countervailing indications in the context or purpose, the term bears it ordinary meaning. [46] | 37. The High Court in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) held that the 'ordinary meaning' of 'employee' was its common law meaning. [47] Further, the High Court in Personnel Contracting and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 explained how to determine whether a person is an employee within the common law meaning of the term. [48] Subject to its modifications, the FBTAA used the word 'employee' in a similar way. [49] We accept the Full Court's adoption of the High Court's explanation of how to determine whether a person is an employee within the common law meaning of the term. [50] | 38. We acknowledge that the Full Court held that the FBTAA extends or varies who might be an employee, but in applying the relevant provisions in this case, which involved section 12-35 of Schedule 1 to the TAA, we are required to determine whether any benefits (if they had been paid in cash) would have been paid to an individual 'as an employee' within the common law meaning of the term. [51] | Definition of 'employment' and operation and scope of section 137 | 39. We accept that the word 'employment' is descriptive of what a person has if they are an employee and does not lead an inquiry into whether a person is an employee or whether they perform some kind of expanding function. [52] | 40. We also acknowledge that section 137 has a limited function and operates as a safeguarding measure to ensure that the FBT legislation could still operate where remuneration was provided only in non-cash form. [53] | Unique and unusual factual circumstances of this case | 41. The Full Court's understanding of the statutory scheme of the FBTAA reflects the importance of correctly identifying an employee, particularly in circumstances where an individual is: • a shareholder and a director of the corporate trustee (SEPL Pty Ltd), and • an appointor (with the power to appoint to remove the trustee and to appoint discretionary objects) and an eligible beneficiary of the discretionary trust (SFT Trust). | • a shareholder and a director of the corporate trustee (SEPL Pty Ltd), and • an appointor (with the power to appoint to remove the trustee and to appoint discretionary objects) and an eligible beneficiary of the discretionary trust (SFT Trust). | 42. We recognise that the finding that the 3 brothers were each not an employee was based on the unique and unusual factual circumstances in this case, including: • a closely held family arrangement involving a discretionary trust • no employment contracts and no payment of salary or wages to the 3 brothers who, as directors, played an active, hands on role in the management of the business, and • the debit to the mother's beneficiary account, reflecting the private use of the vehicles by the 3 brothers, which was then cleared by trust distributions. | • a closely held family arrangement involving a discretionary trust • no employment contracts and no payment of salary or wages to the 3 brothers who, as directors, played an active, hands on role in the management of the business, and • the debit to the mother's beneficiary account, reflecting the private use of the vehicles by the 3 brothers, which was then cleared by trust distributions. | 43. The particular facts and circumstances of a case will always need to be closely considered, and as a result, we consider: • Directors of a corporate trustee of a discretionary trust may still fall within the definition of 'employee' for FBT purposes, even if the common law meaning of the term is applied. • The capacity in which persons, including directors of a corporate trustee of a discretionary trust, receive benefits from the trust will need to be determined having regard to all of the facts and circumstances of a case. This includes, but is not limited to, the terms of the trust deed, the actions of the trustee in exercising their duties under the trust, as well as the nature of the benefit provided. | • Directors of a corporate trustee of a discretionary trust may still fall within the definition of 'employee' for FBT purposes, even if the common law meaning of the term is applied. • The capacity in which persons, including directors of a corporate trustee of a discretionary trust, receive benefits from the trust will need to be determined having regard to all of the facts and circumstances of a case. This includes, but is not limited to, the terms of the trust deed, the actions of the trustee in exercising their duties under the trust, as well as the nature of the benefit provided. | 44. Even though the provision of car benefits were not subject to FBT in this case, we note that different taxing provisions may apply to other arrangements involving the private use of car benefits and trusts (for example, Division 7A of the Income Tax Assessment Act 1936 (ITAA 1936) may be considered where there are loans from private companies or unpaid present entitlements to private companies, including provisions that treat the use of company assets by shareholders or their associates as a payment (such as section 109CA of the ITAA 1936)). | Meaning of 'in respect of' their employment | 45. We consider that the Full Court was correct in confirming that while the definition of 'in respect of' in subsection 136(1) is broad, the existence of some causal relationship is not, of itself, determinative. [54] The definition still requires a meaningful connection which is sufficient or material, having regard to the object and structure of the FBT regime. [55] | 46. We accept that it was open for the Tribunal to regard the arrangement which the 3 brothers were participating in, taken as a whole, to be operating by reason of the brothers' relationship to the trust and family structure rather than by reason of any employment relationship. [56] We accept that the absence of a direct distribution by the taxpayer of the cars, or of their value, to the brothers did not necessarily result in a conclusion that the benefit was provided 'in respect of' their employment. [57] | 47. In addition to the objective circumstances, we note that the subjective intention of the individual (that is, how they themselves understood the arrangement) may be a relevant factor in determining whether the benefits were provided 'in respect of' their employment. [58]","48. We are reviewing the impact of this decision on related advice, including: • Miscellaneous Taxation Ruling MT 2019 Fringe benefits tax: shareholder employees of family private companies and directors of corporate trustees • Miscellaneous Taxation Ruling MT 2016 Fringe benefits tax: benefits not taxable unless provided in respect of employment • Chapters 1, 7 and 22 of Fringe benefits tax – a guide for employers . | • Miscellaneous Taxation Ruling MT 2019 Fringe benefits tax: shareholder employees of family private companies and directors of corporate trustees • Miscellaneous Taxation Ruling MT 2016 Fringe benefits tax: benefits not taxable unless provided in respect of employment • Chapters 1, 7 and 22 of Fringe benefits tax – a guide for employers .",2026 ATC 21-008 | MT 2019 | MT 2016 | FBTAA 1986 136(1) | FBTAA 1986 137 | TAA 1953 Sch 1 12-35 | TAA 1953 Sch 1 12-40 | 2025 ATC 20-963 | [2022] HCA 1 | 2000 ATC 4151 | [2022] HCA 2 | 96 ALJR 144,FBTAA 1986 136(1) FBTAA 1986 137 TAA 1953 Sch 1 12-35 TAA 1953 Sch 1 12-40,"BQKD and Commissioner of Taxation [2024] AATA 1796 120 ATR 107 Commissioner of Taxation v SEPL Pty Ltd as trustee of the SFT Trust [2025] FCA 581 2025 ATC 20-963 123 ATR 179 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 275 CLR 165 96 ALJR 89 398 ALR 404 J & G Knowles v Commissioner of Taxation [2000] FCA 196 96 FCR 402 2000 ATC 4151 44 ATR 22 SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36 315 FCR 1 2026 ATC 21-008 ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 275 CLR 254 96 ALJR 144 398 ALR 603",,,False,https://www.ato.gov.au/law/view/document?docid=LIT/ICD/SAD127of2025/00001,"ATO view of this decision | Implications for affected advice or guidance | Aruni.Abeysinghe@ato.gov.au | Commissioner of Taxation 1 July 2026 | Footnotes: [1] BQKD and Commissioner of Taxation [2024] AATA 1796 ( BQKD ) at [17–19]. | [5] BQKD at [41], [54] and [61]. | [8] BQKD at [3], [56] and [77]. | [10] Commissioner of Taxation v SEPL Pty Ltd as trustee of the SFT Trust [2025] FCA 581 ( SEPL FCA ) at [5]. | [13] At [4] and SEPL FCA at [5]. | [14] At [4] and SEPL FCA at [6] and [127]. | [18] SEPL FCA at [88–89], [96-97] and [151]. | [20] At [1], per Perry J, at [2], per O'Callaghan J and at [81], per Thawley J. | • first, that a benefit has been provided by one person to another (paragraph 137(1)(a)), • second, that 'but for' section 137 the benefit would not be regarded as having been provided 'in respect of the employment' of the recipient (paragraph 137(1)(b)), and • third, that if the benefit were instead provided by way of a cash payment, that cash payment would constitute 'salary or wages' under the definition in subsection 136(1) (subparagraph 137(1)(c)(i)). | If all 3 conditions are met, paragraph 137(1)(d) applies so that, for 'the purpose only of ascertaining whether a person is an employee or an employer', the benefit is treated 'as if' it were salary or wages paid to the second person when applying the definitions in subsection 136(1). | [25] At [33–34] and [38–40]. | [29] At [46] and BQKD at [14–15]. | [30] At [47] and BQKD at [21], [62–66], [90–92]. | [32] At [15]. The Full Court at [49-50] referred to the High Court decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 to explain how to determine whether a person is an employee within the common law meaning of the term. | [37] At [68] and J & G Knowles at [26] and [29]. | [47] Personnel Contracting at [93], per Gageler and Gleeson JJ, and at [161], per Gordon J. | [55] At [68] and J & G Knowles at [26] and [29]."