"We see that phrase as requiring the payment to make provision for, in the sense of provide, individual personal benefits, for an existing employee or employees. Where the decision to provide such benefits is at the discretion of the trustee, both in relation to making a payment and in deciding who is to be the beneficiary of such payment, merely augmenting the funds under the control of the trustee is not sufficient to provide individual personal benefits for an existing employee or employees."
Their Honours continued, at para 5:
"Given that our view is that there is no deduction available under s 82AAE, it is necessary to deal with s 8–1 of the 1997 Act. (There was no debate about the availability of s 8–1 as a basis for deductibility in these circumstances.) In our view, there is also no deduction available under s 8–1. Although we are prepared to accept that the payment was an outgoing satisfying s 8–1(1), we consider that the payment was an outgoing of capital for the purposes of s 8–1(2)."
However, the Full Court upheld the taxpayer's appeal on the question of penalty, holding that "the question of construction and interpretation of s 82AAE was reasonably open and arguable": Cameron Brae Pty Limited v FCT  FCAFC 135 ( Full Federal Court; Stone, Allsop and Jessup JJ; 21 August 2007).
For a copy of the decision, go here