Tax Savings Strategy 224 | Employee Remuneration Trusts
A contribution is deductible to an employer where:
- It is an irrevocable payment of cash.
- The employer reasonably expects their business to benefit from the contribution via an improvement in employee performance, morale, efficiency or loyalty, and
- The contribution is intended to be entirely dissipated in remunerating employees of the business within a relatively short period of time (less than 5 years).
The contributions to a ERT will not be deductible when the contribution is applied for the benefit of owners, controllers or shareholders or when the contribution is capital in nature. The prepayment provisions also need to be considered.
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