If you run a family business through a trust, this one’s worth reading.
In a recent Federal Court case, three brothers who ran a major business group were found to have received taxable fringe benefits — even though they never took a salary, had no employment contracts, and were just “helping out” in the family enterprise.
Instead of wages, each brother had access to high-end vehicles like Bentleys, Ferraris, and McLarens — all owned by the family trust. No one was claiming tax deductions for private use. The cars weren’t listed as remuneration. It was just part of how the family managed things.
But the ATO stepped in — and the Federal Court agreed.
Here’s why that matters for your business.
The Setup: Big Business, No Wages
The business was no small operation. Over 130 petrol stations, dozens of retail outlets, thousands of employees. All of it run through a discretionary trust, with the three brothers as directors of the trustee company.
They worked full-time in the business, took care of operations, finances, and retail — but never received a wage. Instead, benefits were routed through the trust via their mother’s beneficiary loan account.
From the family’s perspective, this was just normal practice.
But the tax office saw it differently.
The Court’s View: Work = Benefits = Tax
The Federal Court took a clear line: if someone works in a business and receives benefits — even without a formal salary — those benefits can be taxed as fringe benefits.
The law says that if a benefit, had it been paid in cash, would have counted as wages, it’s still taxable even if delivered in another form. That’s exactly what the Court said happened here.
And because the brothers were the only beneficiaries getting these benefits — and they were also running the show — the link between the work and the cars was too strong to ignore.
What This Means for You
Many families operate through trusts. Many don’t pay formal salaries. And many let family members use business assets without thinking twice.
But if those benefits are:
- Only given to those actively working in the business
- Not recorded as trust distributions
- Significant in value (like vehicles, school fees, travel)
- Not available to all beneficiaries
…then there’s a risk that the ATO will say they are “in respect of employment” — and fringe benefits tax applies.
And here’s the kicker: it doesn’t matter if no deduction is claimed. FBT can apply even when the private use isn’t being written off.
Take Action Now
This case is a reminder to review your arrangements. If family members working in the business are receiving benefits — even informally — speak to your accountant.
You may need to:
- Review how those benefits are documented
- Reconsider how family members are remunerated
- Assess whether FBT obligations are being triggered
Informality doesn’t protect you. And “we’re just family” is no longer a strong defence.
Final Thought
The SEPL case is a warning sign for family-run businesses that rely on trust structures. If it walks like remuneration, talks like remuneration, and looks like a reward for working in the business — the ATO will want to tax it like remuneration.
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