The case emphasises that outcomes depend on how benefits are structured and documented, directly influencing remuneration design, governance practices, and a business’s overall tax risk. The court delivered its decision on 27 March 2026 in SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36, allowing SEPL’s appeal. The ruling is also relevant for trustees, directors, and advisers providing non‑cash benefits to working family members.

Key questions on FBT

SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation is one of the most instructive FBT cases in recent years, tracing a path from the Administrative Appeals Tribunal (AAT), through to a single judge of the Federal Court, and finally to the Full Federal Court.

The litigation pivots on two deceptively simple questions:

• When are working owners of a family trust business ‘employees’ for FBT purposes?
• When is the provision of luxury motor vehicles a ‘fringe benefit’ rather than a benefit conferred by reason of ownership or beneficial entitlement?

The answers, it turns out, are far from straightforward.

The background: A large family business

SEPL Pty Ltd was the corporate trustee of the SFT Trust, a commercially substantial family business. The trust was established in 1987 and following the father’s death in 2009 and the mother’s retirement as director in 2014, control passed to three brothers who became the sole directors and shareholders of SEPL.

The brothers worked long hours in executive roles. Despite this, they received no salary. Instead, they benefited in two ways:

• profits were distributed to each brother’s family trust
• each brother had exclusive personal use of luxury motor vehicles owned by SEPL.

Over 40 such vehicles were held during the relevant FBT years (2016–2020).

Vehicle expenses were debited to their mother’s beneficiary loan account and subsequently cleared through grossed-up trust distributions to cover her resulting income tax liability. There were no board resolutions authorising the vehicles as distributions to the brothers individually, and no amounts were recorded as distributions to their personal beneficiary accounts.

The Commissioner issued amended FBT assessments on the basis that the brothers were employees and the vehicles constituted fringe benefits. SEPL objected, and on disallowance, applied to the AAT for review.

The AAT confirms the brothers were owners, not employees

The AAT set aside the Commissioner’s assessments. Applying what it described as a holistic analysis — informed in part by common law employment principles — the Tribunal concluded the brothers were not employees of SEPL for FBT purposes.

The Tribunal emphasised the absence of written employment contracts, formal remuneration, and board resolutions establishing employment. It also noted that the brothers operated at the apex of the business rather than within a conventional hierarchy. These factors pointed away from a contract of service and towards proprietorial control.

On the second issue — whether the vehicles were provided ‘in respect of’ any employment — the Tribunal also found in favour of SEPL. Drawing on the Full Federal Court’s reasoning in J & G Knowles and Associates Pty Ltd v Commissioner of Taxation [2000] FCA 196, the Tribunal held that the test requires a sufficient or material connection between the benefit and the employment, not merely a causal link. It concluded that the brothers accessed the vehicles as beneficiaries and proprietors of the family trust, reflecting their status as ultimate controllers of the business, rather than as remuneration for services rendered.

Federal Court affirms the FBT assessments

The Commissioner appealed, and Justice O’Sullivan allowed the appeal, setting aside the AAT’s decision and affirming the FBT assessments.

On the employment question, the primary judge held that the Tribunal had erred by importing common law concepts of employment into a statutory framework that provided its own complete definitions. The fringe benefits tax assessment act (FBTAA) was to be read on its own terms. The key provision was section 137, which the Court treated as a deeming mechanism: if a non-cash benefit, had it been paid in cash, would have constituted ‘salary or wages’, then the recipient is to be treated as an employee. Applying this test, the Court found the condition satisfied, noting that a cash payment of equivalent value would have engaged the withholding obligations, and therefore held that the brothers were employees.

On the ‘in respect of’ question, the Court rejected the Tribunal’s focus on the brothers’ subjective belief that they were entitled to the vehicles as beneficiaries. The correct inquiry was objective: was there a sufficient or material connection between the benefit and the employment? Given the brothers’ executive roles, their operational immersion in the business, and the absence of any resolution treating the vehicles as trust distributions, the Court found the connection clear. The appeal was allowed, and the assessments were reinstated.

Full Federal Court restores the AAT outcome

SEPL appealed. A Full Court allowed the appeal and restored the AAT’s outcome.

On the first issue, the Full Court identified four errors in the primary judge’s approach.

• First, the primary judge had focused on the definition of ‘employment’ in section 136(1) rather than the operative concept of ‘employee’. The Full Court explained that ‘employment’ is descriptive of what a person has once they are an employee — it does not expand or lead the inquiry into whether a person qualifies as one.

• Second, section 137 was misconstrued. The Full Court emphasised that section 137 is a confined hypothetical exercise, not a free-standing deeming mechanism. Before section 137 can operate to treat a benefit as ‘salary or wages’, the third condition in section 137(1)(c)(i) must be met: the hypothetical cash payment must constitute salary or wages paid to the person, which, via the definition of ‘salary or wages’ and the reference to section 12-35 of Schedule 1 to the TAA, requires that the cash would have been paid to the person ‘as an employee’. This inquiry necessarily invokes the ordinary, common law, meaning of ‘employee’. The Tribunal was therefore correct to consider common law principles in this context.

• Third, the primary judge treated section 137 as automatically converting every non-cash benefit received by a person performing work into salary or wages. That was an error. The provision does not deem an employment relationship into existence, it merely operates on the concept of salary or wages where all three statutory conditions are independently satisfied.

• Fourth, the primary judge had also relied on section 12-40 of Schedule 1 (relating to payments to company directors), even though the Commissioner had expressly disavowed reliance on that provision before the Tribunal and the primary judge, and it was not part of the questions of law that enlivened the Court’s section 44 jurisdiction. That reliance was not permissible.

Applying the proper statutory framework, the Full Court held that it was open to the Tribunal to conclude that any hypothetical cash payment would have been made to the brothers in their capacities as proprietors and beneficiaries, not as employees, and that the condition in section 137(1)(c)(i) was therefore not satisfied. The Tribunal’s conclusion that the brothers were not employees was not only available but also well-supported by the facts.

On the second issue, the Full Court confirmed the Tribunal’s approach. The ‘in respect of’ test requires a sufficient or material connection between the benefit and the employment; causation alone is insufficient. In this case, the brothers’ access to the vehicles was tied to their proprietorial and beneficial capacities: the mechanism of debiting vehicle costs to the matriarch’s beneficiary account and clearing those debits through grossed-up trust distributions was fundamentally inconsistent with a remuneration arrangement. The Full Court rejected the primary judge’s approach of treating operational involvement in the business as determinative without separately considering the materiality of the employment connection against the competing proprietorial explanation.

The Full Court confirmed that a benefit may be causally referable to multiple sources. The presence of an employment relationship does not compel a finding that the benefit is provided ‘in respect of’ that employment if a sufficiently material explanation lies elsewhere, in this case, in the brothers’ ownership and beneficiary status.

Key takeaways

Common law still matters under the FBTAA. To apply section 137, you must ask whether a hypothetical cash payment would have been made to the person as an employee. That question calls for the ordinary common law meaning of the term. The statute does not fully define it away.

Section 137 has a limited and targeted role and is not a mechanism that converts all non-cash benefits into remuneration. Each of the three conditions in section 137(1) must be independently satisfied, including, critically, that the hypothetical cash equivalent would have been paid to the person as an employee rather than as a proprietor or beneficiary.

The ‘in respect of employment’ test requires substantive connection, not mere proximity. Benefits that arise from ownership, family relationship, or beneficial entitlement may properly sit outside the FBT regime, even where the recipient also performs executive functions in the business.

Documentation matters enormously in family business contexts. The absence of resolutions recording vehicle access as a trust distribution — while ultimately supporting SEPL’s case — created the ambiguity that drove three rounds of litigation. Clear and consistent documentation of the basis on which benefits are provided will always reduce exposure.

Where business is conducted through a company rather than a trust, Division 7A may also be relevant. If a private company provides a non-cash benefit to a shareholder-director, it is necessary to consider whether that benefit constitutes a deemed dividend under section 109CA of the ITAA 1936, noting that Division 7A operates to the exclusion of FBT in relation to loans and forgiven amounts (section 109ZB, ITAA 1936).

How SW can help

The SEPL decision provides welcome clarity on the limits of FBT in family trust structures, but it also highlights how finely balanced these issues can be. Outcomes will continue to turn on facts, characterisation, and documentation. Engaging our experts early will help you navigate complex FBT rules with confidence, protect family business arrangements, minimise FBT exposure, and reduce the risk of prolonged disputes.

Please contact your SW advisor for tailored support from our team.

Contributors

Rahul Sanghani

Natalie Wang

The post SEPL case update: Ownership vs employment implications for fringe benefits tax appeared first on SW Accountants & Advisors.

During the session, our experts will provide insights and actionable knowledge that will empower your organisation to navigate the complexities of the current tax landscape with confidence.

During these webinars our tax experts will provide an update on:

• New Developments: Examine recent cases and the Australian Taxation Office’s (ATO) Fringe Benefits Tax (FBT) compliance activities. This session will cover hot topics including guidance on electric vehicles, and recent updates in the application of the otherwise deductible rule, helping you understand their implications on your organisation.
• FBT Focus: In addition to a recap on the basics of some common benefits, explore hot topics in FBT, including FBT record-keeping concessions and recent updates in the application of the otherwise deductible rule, helping you understand their implications on your sector. Special emphasis on exempt electric vehicles, reflecting the shift towards sustainable practices.
• Global Mobility: Learn about proposed tax residency changes and how they intertwine with flexible remote working arrangements.
• Superannuation: Gain insights into ATO audit activities, powers of the FWO and their potential impact on your organisation. Additionally, prepare for the upcoming legislative changes requiring employers to pay super on payday from 1 July 2026, aligning superannuation guarantee payments with wage payment frequencies.
• Employee vs Contractor: Understand the ATO’s updated rulings and how they affect your workforce management.
• Payroll Tax: Stay informed about the latest developments in Payroll Tax. This segment will focus on the application of relevant contract provisions, the implications of the new temporary Payroll Tax surcharge, new payroll tax obligations for some private schools in Victoria and the impact of increased thresholds. We will also speak about how to make your payroll tax return preparation processes more efficient and reduce the chance of error. 
• Wage remediation: Wage underpayments continue to be the focus of media and government scrutiny and can have immense adverse effects on employers. We will speak about some common causes of wage underpayments, how STP 2 and payday super may super charge audit activity and the role of tax practitioners in the wage remediation process.

Webinar recordings

Session details

Session 1 | Employment Tax update: Corporate sector

Date

Wednesday 20 March 2024

Location

Online nationally – via Zoom webinar

Time

1.30pm – 2.30pm (AEDT)

10.30am – 11.30am (Perth)

12.30pm – 1.30pm (Brisbane)

Register

Session 2 | Employment Tax update: Not-for-Profit and Government sectors

Date

Thursday 21 March 2024

Location

Online or SW Melbourne office, Level 10, 530 Collins Street, Melbourne

Time

1.00pm arrival for a 1.30pm start, concludes 2.30pm (AEDT)

Light lunch will be provided in the SW Melbourne office for those attending in person

Register

Expert speakers

Stephen O’Flynn
Tax Director
SW

Sam Morris
Director
SW

Paul Hum
Employment Taxes Director
SW

Helen Wicker
Director
SW

Justin Batticciotto
Associate Director 
SW

Rahul Sanghani
Associate Director 
SW

The post Employment Taxes update 2024   appeared first on SW Accountants & Advisors.

The draft legislative instruments specify acceptable alternative record-keeping obligations (other than an employee declarations) in respect of expense payment fringe benefits.  Whilst they are still in draft, they are intended to apply for the year ending 31 March 2023.

This is welcome news for many employers, as the changes will significantly reduce the volume of record duplication and the ever-challenging task of chasing employees for declarations to calculate FBT liability.

Draft FBT instruments

Following a review of record keeping requirements last year, proposed changes to travel diary and relocation transport records were released, and the ATO has now issued the following four draft instruments for consultation:

1. LI 2023/D3 in respect of overseas employment holiday transport
2. LI 2023/D4 in respect of travel to an employment interview or selection test
3. LI 2023/D5 in respect of remote area holiday transport
4. LI 2023/D6 in respect of car travel for a work-related medical examination, work-related medical screening, work-related preventative health care, work-related counselling or migrant language training

The draft instruments propose that employers be able to maintain alternate records to reduce the taxable value of transport benefits.

It has been clarified that this information can come from different records, but must be in English. This will allow employers to rely on existing corporate records, including travel calendars.

Records include:

• details of the employee and associates, including the number of family members who travelled in the car (if applicable)
• the make and model of the vehicle driven
• departure and arrival location, including the address
• the dates of travel, and
• the total number of whole kilometers travelled, not excluding any kilometers travelled whilst at the destination.

How can SW help?

With the intended date of application to be from 1 April 2023, it is an ideal time for employers to review their current FBT processes, with a view to adjustments for these alternative records from 31 March.

The majority of FBT lodgments are due by 21 May.

Assisting employers to ease the FBT return preparation process is a key service of the SW Tax team. Our experts are on hand to advise you, and our proprietary CTSplus FBT software is highly automated to assist employers. Please reach out to the team for a complimentary exploratory conversation.

If you have any thoughts or suggestions regarding the draft legislative instruments, please contact your SW advisor or the contacts here.

Contributor

Rahul Sanghani

The post FBT record keeping relief for employers – ATO draft changes appeared first on SW Accountants & Advisors.

During these webinars our tax experts will provided an update on:

• New and topical developments including recent cases and ATO FBT compliance activity
• FBT recap and hot topics – including exempt electric vehicles
• Global mobility – including proposed tax residency changes and flexible remote working arrangements 
• Superannuation and ATO audit activity 
• ATO’s updated ruling on employee v contractors
• CTSplus FBT demo – Flexible cloud solution that makes FBT simple

Expert speakers

Stephen O’Flynn
Director, Tax
SW

Helen Wicker
Director, Tax
SW

Justin Batticciotto
Associate Director, Tax
SW

Tony Principe
Associate Director, Tax 
SW

Rahul Sanghani
Senior Manager, Tax 
SW

Alice Mulvogue
Assistant Manager, Tax
SW

The post Employment Taxes update 2023 appeared first on SW Accountants & Advisors.

Electric Vehicles and FBT 

On 25 November 2022, the Australian Government passed the Treasury Laws Amendment (Electric Car Discount) Bill 2022, which provides a fringe benefits tax (FBT) exemption for low and zero-emission cars from 1 July 2022. 

The exemption will only apply to the following cars:  

• battery electric vehicles –which use only an electric motor and are not fitted with either a fuel cell or an internal combustion engine
• hydrogen fuel cell electric vehicles – vehicles charged by a fuel cell
• plug-in hybrid electric vehicles – a motor vehicle that uses an electric motor that can be plugged in and charged with electricity but also contain an internal combustion engine. 

Key points to note in relation to this exemption are: 

• the exemption only applies to current employees
• the exemption is only available to cars valued below the luxury car tax threshold. For fuel-efficient vehicles the threshold for the 2022-23 financial year is $84,916
• unlike other exemptions, the value of the exempt car benefit will be included in an employee’s reportable fringe benefits amount
• this exemption will be reviewed after three years to assess electric car uptake.  

This exemption is available even if the vehicle is salary packaged.  This is, therefore, a great opportunity for employees to salary package these cars, which can result in significant savings for them.  It is estimated that the annual tax savings on a $74,000 electric car is $14,400. 

FBT Record keeping changes 

Proposed changes¹ have been released to give the Commissioner powers to modify, existing FBT record-keeping obligations, which will allow employers to rely on existing corporate records, instead of existing employee declarations and other prescribed records. 

The purpose of the change is to reduce compliance costs for employers when finalising their FBT returns by providing them with an option to rely on existing or other alternative records that they may hold.  However, where an employer wants to continue with the current practice, they may continue to obtain employee declarations. 

Treasury has also released two draft legislative instruments that provide guidance on what alternative records may be acceptable with respect to travel diaries and the relocation transport declaration.  These are summarised below: 

There is no limit on the number of records that may, in aggregate, meet the information requirements, and information can come from multiple sources.  So, in practice if the employee’s calendar includes sufficient details, it may be the only record that employers need to maintain. 

If the bill receives Royal Assent by 31 March 2023, it is expected that the measures will be first effective from the FBT year commencing 1 April 2023. 

If you have any questions in relation to this FBT exemption, please contact your usual SW advisor. 

Contributors:

Rahul Sanghani, Senior Manager

Ophelia Katrivessis, Senior Consultant

¹ The Treasury Laws Amendment (2022 Measures No 4) Bill 2022 

The post Electric Car Discount Bill passed to exempt EV from FBT appeared first on SW Accountants & Advisors.

During these webinars our tax experts provided an update on:

• New and topical developments including recent cases and ATO FBT compliance activity
• FBT recap and hot topics – including impacts of COVID-19 in Australia
• Global mobility – including proposed tax residency changes and flexible remote working arrangements
• Superannuation and ATO audit activity
• Payroll tax – including the impact of recent cases on employee v contractors

Not-for-profit | Government

Corporate

Your guides online

Stephen O’Flynn Director, SW	Sam Morris Director, SW	Helen Wicker Director, SW
Justin Batticciotto Associate Director, SW	Tony Principe Associate Director, SW	Rahul Sanghani Senior Manager, SW

The post Employment Taxes update 2022 appeared first on SW Accountants & Advisors.

Designed by SW, CTSplus FBT is a flexible cloud solution that takes the complexity out of completing an FBT return and employee reports.

User-friendly Excel workpapers means there will be no new systems to learn. CTSplus FBT is intuitive and will save you hours in processing time.

CTSplus FBT is a cost-effective solution that simplifies compliance and reduces administrative workload.

CTSplus FBT features:

• Online collaboration
• Secure access with Microsoft Azure
• Suitable for all business types, including:
  • Concessional employers
  • Government departments
  • Tax-exempt entities
  • Tax agents.
• Easy to use Excel workpapers – no new systems to learn
• Calculates all benefits, including:
  • Car parking
  • LAFHA
  • Expense payment
  • Entertainment.
• Cost centre allocation
• FBT checklist and validations
• Import and link Excel workings
• Upload other supporting files for record-keeping purposes
• Produces:
  • FBT Return
  • Payment Summary
  • Individual Payment Summaries
  • RFBA Letters.
• SBR electronic lodgement.

Want to find out more? 

To learn more about how CTSplus FBT can benefit your business, download our flyer below or simply click here to email our CTS team and a team member will be in touch with you within the next business day.

*CTSplus FBT system requirements: Latest version of Microsoft Edge or Chrome and Microsoft Power Apps Premium license (included with Year 1 subscription).

The post CTSplus FBT appeared first on SW Accountants & Advisors.

Fringe Benefits Tax

Fringe Benefits Tax (FBT) is a complex area when dealing with tax exempt organisations, such as schools.

In particular, entertainment can be a challenging area to work with as:

• the minor and infrequent benefits exemption is not available to tax exempt organisations; and
• the on-premises exemption is not available to tax exempt organisations.

Most organisations have documented policies and procedures in place for internal use that provides guidance on what constitutes entertainment for FBT purposes. ShineWing Australia’s employment tax team has assisted many tax exempt organisations including education institutions with preparation and implementation of internal policies and procedures on FBT.

A ‘FBT manual’ is an easy to access guide that:

• provides a general guidance on FBT benefits
• sets out the school’s position on FBT
• sets out whether the expenditure itself is allowable under the school’s policies (regardless of FBT)
• acts a repository of various forms and declarations.

Payroll tax and superannuation review

The introduction of single touch payroll means that the ATO have real-time visibility and transparency over the data organisations are reporting. The ATO are able to pick up on errors more easily and a similar level or internal controls are expected from employers.

Payroll tax audits and superannuation reviews are also rising due to single touch payroll. Various data sets lodged across sectors are being examined by the State Revenue Offices and any anomalies are flagged promptly. Payroll tax payments to contractors have always been a complex issue and a favourite one for ATO and State Revenue Offices. Data matching identifies contractor engagements and highlights impacted employers to tax authorities for further investigation.

ShineWing Australia’s data analytics capabilities will prove invaluable in situations like these to help quickly work through large amounts of data, including arrangements between principles and contractors. Our payroll tax experts can help to identify any potential risks that may cause an issue in a payroll tax audit.

GST governance

In a changing environment, it is more critical than ever to manage indirect taxes, with a focus on reducing risk and managing processes efficiently. In a digitalised environment, the increased prevalence of GST means keeping pace with the changes in GST rules can be difficult.

ShineWing Australia can provide expertise and processes that help to:

• reduce the risk of non-compliance
• reduce adverse impacts on cash-flow
• avoid penalties from tax authorities and large tax debts by identifying risks prior to any compliance activity by the ATO.

ShineWing Australia’s GST team has assisted many organisations with GST governance procedures including data analytics, policy and procedure review.

Get in touch

Do any of these matters affect you? Reach out to one of our experts below for more information on how to navigate these tax issues for your organisation.

The post Schools Tax Guide appeared first on SW Accountants & Advisors.

The seminar will discuss the latest tax news and changes and provide an update on the following:

• What’s new and recent developments
• FBT recap
• Superannuation and amnesty update
• SRO / OSR payroll tax activity
• Global mobility / Tax residency trends
• Employee share schemes insights
• Other employment tax issues

Who should attend?

• Tax managers and their support staff

• Human resource management/remuneration and benefits managers

• Other staff interested in employer tax compliance, such as CFOs, financial controllers, CEOs and directors. 

Presenters

Stephen O’Flynn – Partner
Sam Morris – Partner
Helen Wicker – Partner
David Wilson – Associate Director
Leo Luan – Associate Director
Justin Batticciotto  – Associate Director
Rahul Sanghani – Senior Manager

Event details 

There will be five seminars hosted over the duration of two weeks, all of which are free to attend.

Melbourne

Employment Taxes Update: Corporate
Date: Tuesday, 5 March 2019
Time: 8:00am – 10:00am

Employment Taxes Update: Not-for-profit
Date: Wednesday, 6 March 2019
Time: 8:30am – 10:30am

Employment Taxes Update: Government
Date: Thursday, 7 March 2019
Time: 8:30am – 10:30am

Brisbane

Employment Tax Update
Date: Tuesday, 12 March 2019
Time: 12pm – 2pm

Sydney

Employment Tax Update
Date: Wednesday, 13 March 2019
Time: 8:00am – 10:00am

For more information about these events, or if you have any queries, please contact the ShineWing Australia Marketing team via marketing@sw-au.com

We look forward to your attendance!

The post Employment Taxes Update 2019 appeared first on SW Accountants & Advisors.