CX 17Benefits provided to employees who are shareholders or investors

1. If a company or a trustee of a group investment fund provides a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund, the benefit is treated as having been provided in connection with the employment. The shares or investment may be held in the employee’s own right or beneficially.

2. A company or a trustee of a group investment fund that has provided a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund may choose to treat the benefit as a fringe benefit or a dividend. If the company or trustee does not make an election, the benefit is treated as a fringe benefit. If the company or trustee chooses to treat the benefit as a dividend, the FBT rules do not apply.

3. Neither subsection (1) nor subsection (2) applies to a non-cash benefit provided by a company to a non-executive director of the company.

4. Subsection (2) applies to non-cash benefits that would,—

5. in the absence of section CD 32 (Employee benefits), be dividends under section CD 4 (Transfers of company value generally) if provided to a person in their capacity as a shareholder; and
6. in the absence of section CX 4, be unclassified benefits if provided to a person in their capacity as an employee.

7. Despite subsection (4), subsection (2) does not apply and the benefit is neither a fringe benefit nor a dividend in an income year if—

8. the benefit—
   1. arises when a close company makes a motor vehicle available to a shareholder-employee for their private use; and
   2. would, in the absence of this subsection, be a fringe benefit arising under section CX 6; and
9. the total benefits the close company provides to all employees in the income year are 1 or 2 of the benefits described in paragraph (a); and
10. the close company chooses to apply subpart DE (Motor vehicle expenditure) for the motor vehicle and the shareholder-employee instead of the FBT rules.

11. An election by a close company under subsection (4B) may be made for the income year which includes the day on which the close company—

12. acquires the motor vehicle; or
13. first starts using the motor vehicle for business use.

14. An election under subsection (4B) applies for the income year described in subsection (4C), and continues to apply until the end of the income year that includes the earlier of—

15. the day on which the close company stops using the motor vehicle for business use; or
16. the day on which the close company disposes of the motor vehicle.
Notes

17. The company or trustee must give notice to the Commissioner of the election referred to in subsection (2) in the time allowed for filing a fringe benefit tax return for the period in which the benefit was provided.

18. The close company must give notice to the Commissioner of an election referred to in subsection (4B) in the time allowed for filing a return of income for the income year in which the election was made.

19. Section DG 2(4) (Application of this subpart) may apply to require a company to treat a benefit under this section as a dividend.