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ATO Warns About Employer Loan Repayments

Friday, July 1, 2011

The Australian Tax Office (ATO) has issued a taxpayer alert warning people to be cautious when entering into arrangements where an employer repays a loan made to an employee by an employee share trust.

Under these arrangements, an employer establishes an employee benefit arrangement for employees to acquire share units in a purported employee share trust. An employee's acquisition of the trust units is funded by a loan from the trustee. The loan is repaid by the employer from amounts which have been salary sacrificed by the employees.

"I'm concerned that some employers have not considered the potential consequences that may result from the provision of such benefits and the application of fringe benefits tax (FBT)," Tax Commissioner Michael D'Ascenzo said.

"An employer in such an arrangement needs to ensure that they include the taxable value of the benefit provided in its FBT liability. An employer who fails to do so could be subject to penalties.

"Employers who are unsure of their situation should seek independent advice or contact the ATO for advice on their individual circumstances," the Tax Commissioner said.