• Service: Tax, Global Mobility
  • Type: Regulatory update
  • Date: 20/03/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Ben Travers

Ben Travers
Partner, Global Mobility Services

+61 3 9288 5279

ATO indicates thinking on Employee Reward Trusts 

by Ben Travers, Executive Remuneration Specialist

The Australian Taxation Office (ATO) recently released draft Taxation Ruling 2014/D1, dealing with employee remuneration trusts. The draft ruling addresses issues including the deductibility of contributions made to the trust, withholding implications arising for the company and trustee, fringe benefits tax implications, and the treatment of benefits received by an employee. The ruling also addresses issues previously highlighted by the ATO in a number of Taxpayer Alerts released over the past 5 years.

As the types of arrangements that utilise employee reward trusts can vary significantly between companies, the ruling includes the ATO’s views on a number of different arrangements. Many companies use a form of an employee reward trust in connection with their employee share schemes. Under these arrangements, an employee share trust is established to assist with the administration of the share scheme arrangements (to which Division 83A of the ITAA 97 applies).


The draft ruling considers these arrangements and outlines a number of considerations in determining the deductibility of any contribution to the trust, including the reasons for the establishment of the trust, the length of time the funds remain within the trust, any capital advantage it is considered the company may receive in respect of the arrangement, and what the employee actually receives (e.g. do they receive an employee share scheme interest).


Although there are a number of issues that will need to be clarified during the consultation process, it appears that the ATO treatment of common employee share trust arrangements that will result in employees receiving Division 83A assessable income is consistent with the approach adopted prior to its release. KPMG will be involved in this consultation process, as we consider it an important opportunity for clarifying aspects of the ruling, to provide certainty to taxpayers who utilise employee reward trusts in their various forms.


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