SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36

D & R Henderson (Manufacturing) Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132

Federal Commissioner of Taxation v Raptis [1989] 89 ATC 4994

Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315

J & G Knowles & Associates v Commissioner of Taxation [2000] FCA 196; 96 FCR 402

Metwally v University of Wollongong (1985) 60 ALR 68

Pantorno v The Queen [1989] HCA 18; 166 CLR 466

State Chamber of Commerce and Industry v Commonwealth [1987] HCA 38; 163 CLR 329

Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418

ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; 275 CLR 254

Explanatory Memorandum, A New Tax System (Taxation Laws Amendment) Bill (No 1) 1999 (Cth)

Explanatory Memorandum, Fringe Benefits Tax Assessment Bill 1986 (Cth)

Herzfeld P and Prince T, Interpretation (3rd ed, Thomson Reuters, 2024)

Litigation and Legal Services, Australian Taxation Office

1. The appeal be allowed.
2. Orders 1 and 2 of the orders made by the primary judge on 5 June 2025 be set aside and replaced by an order that the appeal from the Administrative Appeals Tribunal be dismissed.
3. The respondent pay the appellant's costs of this appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. I am grateful to Thawley J whose reasons I have read in draft. I agree with those reasons and with the orders which his Honour has proposed.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Perry.

1. I agree with the reasons of Thawley J and with the orders proposed by his Honour.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.

1. The appellant taxpayer, SEPL Pty Ltd, is a corporate trustee engaged in business involving petrol stations, convenience stores, fast food and tobacco outlets, and gift shops. The shareholders and directors of SEPL were three brothers. The three brothers were also among the beneficiaries of the trust of which SEPL was trustee, the SFT Trust. They had the power, under the trust deed, to appoint or remove the trustee, and to appoint discretionary objects of the trust.
2. As trustee of the SFT Trust, SEPL owned a number of luxury motor vehicles which it made available for the brothers' business and personal use. The costs of personal use were debited to the matriarch's beneficiary account, which was then cleared by trust distributions.
3. The Commissioner of Taxation assessed fringe benefits tax (FBT) on the personal use of the vehicles by the brothers. SEPL objected to the assessment under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA). The objection was disallowed.
4. SEPL succeeded in having the Commissioner's objection decision set aside in its application for review by the Administrative Appeals Tribunal: Re BQKD and Commissioner of Taxation [2024] AATA 1796 (T). There were two main issues before the Tribunal, both relating to the definition of "fringe benefit" in s 136(1) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA), which provides:

fringe benefit, in relation to an employee, in relation to the employer of the employee ... means a benefit ... provided to the employee ... by the employer ... in respect of the employment of the employee ...

1. The first issue was whether each brother was an "employee", a term which is defined in s 136(1). After a careful analysis of the facts, the Tribunal concluded that the brothers were not employees, emphasising the following:
   • there were no written employment contracts for the brothers; there was no board resolution suggesting any employment contract; the brothers were not paid wages; they had no other entitlements associated with employment such as leave; and there were employed managers for all relevant functions in the business - see: T[52], [53], [56], [71];
   • the brothers' conduct was consistent with control as proprietors; they were not subject to controls like those with employment contracts; and to the extent that there was "control" over the brothers, it was referable to the company constitution and the collective decision-making processes of the board which, being associated with corporate governance, was therefore of limited value as an indicium of employment - see: T[21], [62] to [66], [72].
2. In reaching the conclusion that the brothers were not employees of SEPL, the Tribunal noted that the definition of "employee", and other associated definitions, ultimately relied on common law concepts of employment and the characterisation of employment relationships: T[14], [15]. Read fairly, the Tribunal used common law employment concepts as an aid to construction of the word "employee" as it appeared in the statute. It did not use the common law meaning of the word as a free-standing test or as a substitute for the statutory text.
3. The second issue was whether, if the three brothers were employees, the benefits were paid to them "in respect of" their employment. The Tribunal held that the luxury cars were not provided "in respect of" the assumed employment because there was no sufficiently material connection between the benefit and any such employment: T[92]. The Trust Deed permitted the trustee to provide beneficiaries use of trust property, including vehicles: T[74] to [76]. Private use of the luxury cars was debited to the matriarch's beneficiary account and offset via trust distributions, a process consistent with the benefits being accessed as an incident of beneficial ownership of the business rather than as remuneration: T[79] to [81]. The benefit was provided by reason of the relationship of the brothers to the trust and not in any material way by reason of any employment relationship: T[92].
4. Having concluded that the brothers were not employees, the Tribunal set aside the Commissioner's objection decision and substituted that decision for a decision that the objection be allowed.
5. A single judge of the Federal Court allowed an appeal brought by the Commissioner under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) and affirmed the Commissioner's objection decision: Commissioner of Taxation v SEPL Pty Ltd as trustee of the SFT Trust [2025] FCA 581 (J). The two issues underlying the contended questions of law for the purposes of s 44 were the same as the two issues before the Tribunal.
6. As to the first issue, the primary judge held that the statutory definitions were exhaustive, that common law concepts of employment had "no role to play", and that the Tribunal erred because its conclusion was not based upon the application of established facts to the legislation "but was based upon erroneous concepts": J[69] to [71], [90]. The primary judge considered that the application of the relevant provisions to the facts admitted of no possible conclusion other than that the brothers were employees: J[88], [89].
7. As to the second issue, applying the ordinary meaning of the words in the s 136(1) definition of "in respect of", the primary judge considered that the only conclusion open to the Tribunal was that the use of the motor vehicles was "in respect of" the employment of the brothers as employees in the business of the trust: J[150].
8. SEPL appeals. The two main issues remain the same.
9. The appeal should be allowed. In summary:

(a) As to the first issue, contrary to the primary judge's conclusion, it was open for the Tribunal to conclude that the brothers were not employees. The Tribunal did not err in its understanding of the meaning of the word "employee" as used in s 136(1) or s 12‑35 of Sch 1 or fail correctly to apply the statute. The primary judge erred in the following ways:

(i) In directing attention to the word "employment" rather than "employee" as the operative concept, his Honour misunderstood the definitional architecture: J[76], [77];

(ii) His Honour misunderstood the operation of s 137. It provides for a confined hypothetical exercise to be undertaken for a limited purpose. In substance, the primary judge treated s 137 as if it expanded the category of "employee" by deeming beneficiaries performing functions for the company to be employees whenever they received non‑cash benefits: J[84], [91].

(iii) His Honour erred in concluding that common law concepts had no role to play and in concluding that the Tribunal's decision was erroneous in having regard to such concepts. In particular, it was necessary for the Tribunal to determine whether each brother would have received a hypothetical cash payment "as an employee" within the meaning of s 12-35 of Sch 1, which necessarily required recourse to the ordinary (common law) meaning of "employee".

(iv) His Honour erred in relying on s 12-40 of Sch 1. The Commissioner had not raised s 12-40 in his objection decision or before the Tribunal and disavowed reliance upon it before the primary judge. Section 12-40 was not raised as part of the questions of law which engaged the Court's jurisdiction on the s 44 "appeal" heard by the primary judge. No application was made to raise a new question of law on this appeal. It could not apply to tax the correct entity.

(b) As to the second issue, contrary to the primary judge's conclusion, on the hypothetical assumption there was an employment relationship, it was open to the Tribunal to conclude that the benefit was provided by reason of the relationship of the brothers to the trust and not the employment relationship.

1. The question whether the brothers were employees of SEPL depends upon the meaning of the term "employee" as it appears in the definition of "fringe benefit" in s 136(1) of the FBTAA.
2. The definition of "fringe benefit" is repeated for convenience:

fringe benefit, in relation to an employee, in relation to the employer of the employee ... means a benefit ... provided to the employee ... by the employer ... in respect of the employment of the employee ...

1. "Employee" is defined in s 136(1) of the FBTAA as meaning "(a) a current employee; (b) a future employee; or (c) a former employee". A "current employee" is defined as meaning "a person who receives, or is entitled to receive, salary or wages".
2. "Salary or wages" is defined in s 136(1) to mean, relevantly:

(a) a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income ...

1. The table listing the relevant provisions in Sch 1 to the TAA includes:

Section 12-35

Section 12-40

Section 12-45

1. The only Item relied upon by the Commissioner before the Tribunal and the primary judge was s 12-35: "payment to employee". Section 12-35 in Sch 1 to the TAA provides that "[a]n entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)" (emphasis added).
2. There is no definition of "employee" in Sch 1, or in the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), which is applicable to Sch 1 by virtue of s 3AA(2) of the TAA.
3. Relevantly to the present case, the statutory scheme up until this point leads to s 12-35 in Sch 1 to the TAA. In substance, the statutory scheme up until this point provides that a person is an "employee" if the person is paid an amount of money "as an employee". The term "employee" in s 12-35 must be given content.
4. This understanding of the statutory architecture is consistent with the explanation given when the PAYG withholding regime replaced the former PAYE provisions: the amendments were directed to standardising and simplifying the withholding machinery, while leaving the operation of the FBT provisions tied to the withholding provisions through the definition of "salary or wages", not "employment" - see: Explanatory Memorandum, A New Tax System (Taxation Laws Amendment) Bill (No 1) 1999 (Cth) at [1.190],[1.191].
5. Returning to the meaning of "employee" in s 12-35, it is of course not necessarily the case that an undefined legislative term refers to the term's common law meaning. The context and purpose of the legislation may lead to the conclusion that a term has a meaning "according to commercial and trade usage", that it adopts the term's "natural and ordinary meaning" (to the extent that a term's natural and ordinary meaning might differ from its legal meaning) or that it has a meaning peculiar to that specific legislation: D & R Henderson (Manufacturing) Pty Ltd v Collector of Customs (NSW) (1974) 48 ALJR 132 at 135 (Mason J). However, where a term in legislation has an established legal meaning, in the absence of any countervailing considerations of context or purpose, there is a presumption that the legislation adopts that meaning subject to any modifications contained in the statute - see, for example: Herzfeld P and Prince T, Interpretation (3rd ed, Thomson Reuters, 2024) at [2.180]. In the absence of any countervailing indications in context or purpose, the term "employee" in s 12-35 bears its established legal meaning. Subject to its modifications, the FBTAA uses the word "employee" in a like way.
6. In Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 275 CLR 165, the High Court considered the meaning of the term "employee" in the Fair Work Act 2009 (Cth). The legislation provided that "employee" had its "ordinary meaning": s 11. The High Court held that the "ordinary meaning" of "employee" was its common law meaning: at [93] (Gageler and Gleeson JJ), [161] (Gordon J).
7. The provisions so far mentioned are not exhaustive of the sections that are relevant to determining whether a person "is an employee". Section 137 is relevant to that question. Section 137 imposes a requirement to undertake a hypothetical exercise, if certain conditions exist, in order to determine whether a person is an employee. It operates on the concept of "salary and wages" and, only through that mechanism, does it affect whether a person is an employee.
8. Section 137 relevantly provides:

(1) For the purpose only of ascertaining whether a person is an employee or an employer within the meaning of this Act, where:

(a) a benefit is provided by a person (in this subsection referred to as the first person) to, or to an associate of, another person (in this subsection referred to as the second person);

(b) but for this subsection, the benefit would not be regarded as having been provided in respect of the employment of the second person; and

(c) either of the following conditions is satisfied:

(i) if the benefit were provided by the first person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the first person to the second person;

(ii) ...

a definition in subsection 136(1) applies as if the benefit were salary or wages paid to the second person by:

(d) in a case to which subparagraph (c)(i) applies - the first person;

(e) ...

1. Section 137 requires a hypothetical issue to be determined in assessing whether a person is an employee. Its operation (in the present context) depends upon satisfying each of three statutory preconditions:
   • first, that a benefit has been provided by one person to another: s 137(1)(a);
   • second, that but for s 137 the benefit would not be regarded as having been provided "in respect of the employment" of the recipient: s 137(1)(b); and
   • third, that if the benefit were instead provided by way of a cash payment, that cash payment would constitute "salary or wages" under the definition in s 136(1): s 137(1)(c)(i).
2. If all three conditions are met, sub-s (d) of s 137(1) applies so that, for "the purpose only of ascertaining whether a person is an employee or an employer", the benefit is treated "as if" it were salary or wages paid to the second person when applying the definitions in s 136(1).
3. It will be observed that "employment" appears in this part of the definitional architecture only by reason of s 137(1)(b), and then only for the limited purpose of engaging the statutory hypothesis required to ascertain whether the person is an "employee" under the Act.
4. The word "employment" is defined in s 136(1) in the following way:

employment, in relation to a person, means the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee.

1. The definition of "employment" in s 136(1) depends upon a "person being treated as an employee". The definition is not directed to determining whether a person is an employee within the meaning of the word "employee" in s 136(1). Rather, it defines what a person has - employment - where a person's office or duties have resulted or will result in the person being treated as an employee. As Brennan J said in State Chamber of Commerce and Industry v Commonwealth [1987] HCA 38; 163 CLR 329 at 364-5, the question whether a person is an employee under the FBT regime:

... is not resolved by pointing to the phrase "the holding of any office" in the definition of "employment" in s 136(1) ... for the critical part of the definition of "fringe benefit" requires that the benefit be provided in respect of the "employment" not of a "person" but of "the employee", and the term "employee", which has its own exhaustive catena of definitions, is not expanded by the definition of "employment".

1. Justice Deane's remarks at 371 were to similar effect. The plurality's reasons do not assist the Commissioner's argument that the word "employment" expands the statutory meaning of "employee". Their Honours accepted, for constitutional purposes, that the FBT regime was not confined to a strict master-servant relationship. But their Honours also observed that that "the definition of 'current employee' is given without reference to the definition of 'employment' and there is no requirement that it be construed in a corresponding sense": at 353. The plurality did not treat "employment" as expanding the statutory meaning of "employee". Rather, their Honours recognised that the two concepts must be read consistently, while remaining textually distinct.
2. The definition of "employment" is necessary for various reasons. One important reason is to carve out from the FBT regime benefits paid by an employer to an employee which are not paid in respect of the employment of the employee, but for other purposes.
3. It will also be observed that the hypothetical exercise provided for by s 137(1)(c)(i) picks up the concept of "salary and wages", defined in s 136(1), and therefore the table listing relevant provisions in Sch 1 to the TAA. Where it is only s 12-35 that is relevant, the condition in s 137(1)(c)(i) operates to require that, if one hypothesises that a cash payment were made to a person, rather than the non-cash benefit, that cash payment would have been provided to the person "as an employee". In that way, s 137 involves the concept of "employee", but it does not give content to that word any more than the definitional provisions discussed earlier.
4. The primary judge misapprehended this statutory scheme in four respects.

The definition of "employment" is not the operative concept

1. Urged on by the Commissioner's submission that the definition of "employment" expanded the meaning of the word "employee", a submission which had not been advanced before the Tribunal, the primary judge began the central part of his analysis of the relevant provisions with the word "employment" rather than the word "employee": at J[75], [76].
2. The primary judge appears to have considered that the question whether there was "employment" was anterior to, or an independent way of answering, the question whether a person is an "employee" - see: J[76], [77], [91]. Assuming that is the correct understanding of his Honour's reasons, then his Honour erred.
3. As explained above, the definition of "employment" depends upon a "person being treated as an employee". The word "employment" is descriptive of what a person has if they are an employee. It does not lead the statutory inquiry into whether a person is an employee or perform some kind of expanding function.

The operation and scope of s 137

1. Contrary to the view adopted by the primary judge, s 137(1) is not a free‑standing "deeming" provision that converts every non‑cash benefit provided to a person performing work into "salary or wages". Section 137 has a limited function. It relates to "salary or wages" but does not itself create or deem an employment relationship.
2. That limited role is also apparent from the Explanatory Memorandum to the Fringe Benefits Tax Assessment Bill 1986 (Cth) at page 146, which described s 137 as a safeguarding measure to ensure that the legislation could still operate where remuneration was provided only in non-cash form.
3. In considering the application of s 137, the primary judge concluded that s 137(1)(c)(i) was satisfied because, if the benefit had been provided by the trustee "by way of a cash payment to the Directors, the payment would constitute a salary or wages paid by the Trustee to the Directors": J[88(c)].
4. The basis for this conclusion was unexplained. Section 12-35 required a conclusion about whether the cash payment, hypothesised by reason of s 137(1), would have been made to the person "as an employee". The primary judge did not consider or explain why - if the trust had made a cash payment rather than provide use of an asset (the cars) - that cash payment would not have been made to the relevant brother as a proprietor or beneficiary, consistently with the Tribunal's findings of fact, rather than a payment made to the relevant brother "as an employee" within the meaning of s 12-35 of Sch 1.
5. The primary judge treated s 137 as if it were a mechanism that expanded the category of "employee" by deeming persons performing functions relevant to the company to be employees whenever they received non‑cash benefits: J[84] to [91]. That was an error.
6. The Tribunal approached s 137 on the basis that it did not itself supply the meaning of "employee", that the answer to the hypothetical question posed by s 137(1)(c) depended upon whether a cash payment would have been made to a person "as an employee", and that this permitted consideration of the ordinary (common law) meaning of the word "employee": T[14], [15]. That approach was correct.
7. Once the operation of s 137 is properly understood, it is clear that the Tribunal's conclusion on the first issue was open. The Tribunal found that any hypothetical cash payment would have been made to the relevant brother not "as an employee" but in his capacity as a proprietor, controller, and discretionary beneficiary of the trust: T[21], [62] to [66], T[90] to [92]. The trust deed structure and the practice of funding private expenditure through the matriarch's beneficiary account supported that conclusion: T[74] to [81]. These findings meant that the condition in s 137(1)(c)(i) - that the hypothetical cash payment "would constitute salary or wages" under s 12-35 - was not satisfied. That is because the hypothetical payment would not have been made to the brother "as an employee" within the meaning of s 12-35 of Sch 1.
8. Contrary to the primary judge's conclusion, s 137 did not operate to compel a conclusion that the brothers were employees. The Tribunal's interpretation and application of s 137 involved no error.

1. The operation of s 12-35 cannot be understood without giving content to the word "employee". The word bears its ordinary meaning in s 12-35, which is its common law meaning.
2. The High Court in Personnel and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; 275 CLR 254 explained how to determine whether a person is an employee within the common law meaning of the term. The Tribunal considered the general guidance in Personnel and Jamsek in determining whether the brothers were employees within the meaning of s 136(1) of the FBTAA and s 12-35 of Sch 1: T[41], [49] to [50].
3. The Tribunal did not err in this respect. The common law meaning of the word "employee" is engaged through the statute. The operation of the relevant definitions in s 136(1) of the FBTAA cannot be determined without understanding the proper operation of s 12-35 in Sch 1 or the meaning of "employee". The primary judge erred in stating that common law concepts had no role to play and in concluding that the Tribunal's decision was "based on erroneous concepts".
4. The FBTAA extends or varies who might be an "employee" for the purposes of the FBTAA through the various provisions referred to earlier. However, the application of the relevant provisions in this case, which involved s 12-35 in Sch 1, required determination of whether - if the benefits had been paid in cash - those benefits would have been paid to each brother "as an employee" within the ordinary (common law) meaning of the word. The Tribunal proceeded on that basis.

1. The primary judge considered that Item 2 - concerning s 12-40 of Sch 1, addressing payments to company directors - also led to the conclusion that there was no available decision other than that the brothers were employees. Section 12-40 of Sch 1 provides that "[a] company must withhold an amount from a payment of remuneration it makes to an individual ... as a director of the company, or as a person who performs the duties of a director of the company".
2. Before the primary judge, the Commissioner stated that he did not rely, and had never relied, upon s 12-40 as being applicable: T60. In his written submissions on this appeal, the Commissioner contended that the primary judge correctly relied upon s 12-40: RS[17]. In oral argument on this appeal, the Commissioner framed the case around s 12‑35, and submitted that s 12‑40 was not needed, but also did not abandon reliance upon it.
3. Several problems arise with reliance on s 12-40.
4. First, if s 12-40 were engaged, the "entity" which would be liable to pay FBT would be SEPL in its own capacity, rather than in its capacity as trustee of the SFT Trust. The definition of "entity" in s 136(1) of the FBTAA picks up s 960‑100 of the ITAA 1997 which operates to deem a corporation acting as a trustee to be two separate "entities" for the purposes of taxation liability: a body corporate entity and a trustee entity. Section 960‑100 is relevant to the interpretation of s 12-40 by virtue of s 3AA(2) of the TAA.
5. Section 960-100(4) provides that, "[i]f a provision refers to an entity of a particular kind, it refers to the entity in its capacity as that kind of entity, not to that entity in any other capacity".
6. The consequence is that, if s 12-40 were to apply, it would operate to make the brothers employees, for FBT purposes, of SEPL in its capacity as a body corporate, rather than in its capacity as trustee of the SFT Trust, and any liability would be imposed on SEPL in its former capacity. The Commissioner did not explain on this appeal how s 12-40 could have been relied upon for a conclusion that the brothers were employees of SEPL in its capacity as trustee, a proposition inconsistent with what had been submitted to the primary judge: T60.
7. Second, before this appeal, s 12-40 in Sch 1 had never been in issue. It had not been relied upon by the Commissioner in his objection decision. It was not a part of the case before the Tribunal. Reliance on the provision was expressly disavowed by the Commissioner before the primary judge.
8. Third, s 12-40 did not form a part of the questions of law which engaged the Court's jurisdiction on the s 44 "appeal" heard by the primary judge. No application was made to raise a new question of law on this appeal.
9. The primary judge erred in relying on s 12-40 of Sch 1.

1. The Tribunal did not misunderstand the operation of the statute or misapply it. The Tribunal understood that the benefits were non-cash benefits and that the Commissioner contended those benefits were paid to the brothers as employees: T[1], [9], [32]. The Tribunal identified several factors pointing against the brothers being employees within the ordinary meaning of that term. The question was not whether another conclusion was available, or even preferable, but whether the Tribunal's conclusion was not open as a matter of law. Given the Tribunal's findings summarised at [5] above, it was open for the Tribunal to conclude that the brothers were not employees of SEPL within the meaning of the FBTAA.
2. For these reasons, the appeal must be allowed.

1. It is not strictly necessary to address the second issue on the hypothetical basis that the brothers were employees within the meaning of the FBTAA. Nevertheless, it is preferable to address the issue in circumstances where the Tribunal adopted the correct approach and the primary judge erred in concluding otherwise.
2. It should be emphasised that, as with the first issue, the question for the primary judge in relation to the second issue was not whether a different conclusion was preferable, but whether the Tribunal's conclusion was not open as a matter of law.
3. The definition of "fringe benefit" in s 136(1) requires that the benefit be provided "in respect of the employment of the employee". Of more direct relevance to the present case, s 7(1) applies to "car benefits" provided "in respect of the employment of the employee".
4. The definition of "in respect of" in s 136(1) is broad:

in respect of, in relation to the employment of an employee, includes by reason of, by virtue of, or for or in relation directly or indirectly to that employment.

1. The definition recognises that the existence of employment may be one contributing circumstance to the conferral of a benefit, even an indirect one. The definition is broad, but the existence of some causal relationship is not, of itself, determinative. The breadth of the definition does not displace the need for a meaningful connection, that is, one which is sufficient or material having regard to the object and structure of the FBT regime: J & G Knowles & Associates v Commissioner of Taxation [2000] FCA 196; 96 FCR 402 at [26], [29].
2. The Full Court in J & G Knowles emphasised that the purpose of the FBT regime, as articulated in the Second Reading Speech, is to "ensure that all forms of remuneration paid to employees bear a fair measure of tax". That statutory purpose informs the inquiry: the question is whether the benefit is, in substance, part of the employee's remuneration package, direct or indirect, or otherwise a product or incident of the employment relationship.
3. Section 148(1) reinforces this conclusion. It provides that a benefit is taken to be provided in respect of employment "whether or not" it is also provided for other reasons. This provision confirms that a benefit may be causally referable to multiple sources, and that the presence of a non‑employment source does not necessarily remove the benefit from the statutory net. But again, as J & G Knowles makes clear, this does not dispense with the requirement that the benefit have at least some material connection with the employment.
4. J & G Knowles also recognised that the capacity in which the benefit was received is relevant. The material which had been before the Tribunal pointed in two directions. The first was that the directors drew upon the assets of the unit trust because ultimately the trust was established, and its assets were to be held and applied, for their benefit and that of their families. The second was that it was agreed between the directors that, as an incident of their directorship, each of them were entitled to draw upon the appellant's funds by way of loans for their personal benefit. In the first case it was unlikely that there would be a sufficient connection with the employment, while in the second the loans were likely to be an incident or product of the employment relationship: J & G Knowles at [33].
5. Here, as in J & G Knowles, the Tribunal was confronted with two competing or overlapping explanations for the payment of the benefits.
6. The Commissioner contended that the benefits were provided because the brothers were engaged in running the business and performed extensive managerial and operational functions. The primary judge accepted that this employment‑related explanation was the only one open: J[150].
7. SEPL contended, and the Tribunal found, that: (a) the benefits were provided because the brothers were beneficiaries, owners, and controlling family members; (b) any employment related explanation was not sufficiently material.
8. The Tribunal expressly referred to J & G Knowles and correctly approached the task by asking whether there was a sufficiently material connection between the benefit and employment.
9. The Tribunal considered: the trust mechanism used to fund private use: T[74] to [81]; the absence of any evidence that the vehicles were provided in lieu of remuneration: T[74]; the status of the brothers as beneficiaries and family proprietors: T[90] to [92]; the consistency of the arrangement with longstanding family practices.
10. Having regard to that evidence, the Tribunal concluded that the benefit arose because of the brothers' relationship to the trust and not because of any relationship of employment.
11. This conclusion was open. The question was whether the employment relationship explained the benefit in any sufficient or material way, even indirectly. The Tribunal did not consider that the brothers' operational involvement required a finding that the benefit was sufficiently related to employment (on the assumption they were employees). The brothers had many capacities: they were directors, shareholders, appointors, discretionary beneficiaries, and controllers of trust and corporate structures. Their private access to motor vehicles was woven into their beneficiary and proprietorial capacities and funded through trust mechanisms inconsistent with remuneration. The Tribunal did not err in considering the basis on which the benefits were received, including - in addition to the objective circumstances - how the brothers themselves understood the arrangements.
12. The Commissioner's submissions tended to obscure two distinct questions: first, why the brothers had access to the vehicles; secondly, how that use was accounted for or funded. The Tribunal treated those matters separately. Access to trust property was explained by the brothers' position within the family and trust structure. The use of the vehicles was then recorded through the matriarch's beneficiary account and cleared by trust distributions. The absence of a direct distribution of the vehicles, or of their value, to the brothers did not compel a conclusion that the benefit was provided in respect of employment. It was open to the Tribunal to regard the arrangement, taken as a whole, as one operating by reason of the brothers' relationship to the trust and family structure rather than by reason of any employment relationship.
13. The primary judge erred by collapsing the inquiry into one solely about causation. The primary judge's reasoning treated the brothers' operational involvement in the business as determinative. His Honour reasoned that because the brothers "devote their whole life to the running of the business and ... used the motor vehicles allocated ... for business and personal use" (J[129]), the benefits must have been provided "in respect of" employment: J[150] to [151]. There was no separate consideration of the materiality of the connection with the (assumed) employment relationship, or of competing causes, or of the materiality of those competing causes. J & G Knowles makes clear that, even if employment is a cause, the benefit may still properly be characterised as arising from a different relationship, with the employment relationship not being sufficiently material to satisfy the statutory test.

1. The primary judge's orders should be set aside and replaced by orders that the appeal from the Tribunal be dismissed. The agreed position before the primary judge was that there be no order as to costs: J[155]. The parties did not adopt the same position on this appeal. The respondent should be ordered to pay the costs of the appeal.

I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.