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Whether payments made by Company A to a Plan Company to cover the Plan Company's shortfall, in the event that it is required to acquire the forfeited shares, for more than their market value at the time, gives rise to fringe benefits under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

No. The payments made by Company A to the Plan Company to cover the Plan Company's shortfall in the event that it is required to acquire the forfeited shares from the participants, for more than their market value at the time, does not give rise to fringe benefits under the FBTAA.

Company A wish to establish an employee share plan (ESP) as part of a broad remuneration strategy. To benefit under the ESP, participants are required to satisfy certain performance criteria.

The ESP does not come within Division 13A of the Income Tax Assessment Act 1936 .

Company A through its Human Resource Committee would provide selected employees with the opportunity to acquire shares in the Company. The Human Resource Committee will impose offer conditions on these shares based on performance and continued employment within Company A.

A Plan Company will be engaged to administer certain aspects of the Employee Share Plan in accordance with the Plan rules . The Plan Company will be a third party for Corporations Law reasons, it will not be controlled or owned by Company A.

The participating employees will fund the cost of the acquisition of shares by way of a loan provided by an associate of Company A. The loan provided is non-interest bearing and fully recourse in nature.

In the event that the Human Resource Committee determines that a participant's shares are to be forfeited, such shares will generally be forfeited by the Plan Company acquiring the shares for an amount being the greater of the market value of the shares or the amount of the participant's loan which ever is greater.

In these circumstances, if there are insufficient funds standing to the balance of the "Plan Account", Company A will make a payment to the Plan Company to cover the shortfall between the proceeds from the Plan Company's sale of the forfeited shares and the amount the Plan company is required to pay to acquire the forfeited shares from the participants.

The Plan Company is not an employee of Company A or an associate of Company A. Therefore, the payment made by Company A to the Plan Company, in these circumstances are not considered benefits provided to an employee and does not come within the definition of a fringe benefit as defined in section 136(1) of the FBTAA.