This Draft Ruling, issued on Wed 5.3.2014, outlines the taxation consequences for employers, trustees and employees who participate in employee remuneration trust arrangements (ERT). In particular, it explains how the taxation laws apply, when a contribution is made by an employer to the trustee of an ERT and benefits are paid or provided by the trustee of the ERT to employees.
Broadly, the Draft states that an employer is entitled to a deduction under s 8-1 of the ITAA 1997 for a contribution paid to the trustee of an ERT that is either incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
In relation to the trustee, it says gains made by a trustee of an ERT on the realisation of trust assets should be included in the trust’s s 95 net income, as ordinary income.
For employees, subject to limitations set out in the Draft, a benefit provided or an amount paid under an ERT will generally be assessable to the employee under s 6-5 of the ITAA 1997 where the benefit has the character of ordinary income, is derived by the employee, is in the form of money or money’s worth, and is not derived by way of the provision of a fringe benefit.
DATE OF EFFECT: Subject to transitional arrangements, when the final Ruling is issued, it is proposed to apply both before and after its date of issue.
COMMENTS are due by 18 April 2014. ATO contact: Faith Garnar – Tel: (03) 8601 9845; Fax: 1300 300 591; Email: ATP-Technical-Advice@ato.gov.au.
[LTN 43, 5/3/14]