Private ruling: Employee share trust
Date of advice: 23 April 2026
Published: 13 July 2026
Ruling period: Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX
Date scheme commenced: XX XX XXXX

Ruling: Q1: Will the irretrievable cash contributions made by the Company as head of the tax consolidated group (the Group) to the Trustee to fund the acquisition of, or subscription for, ordinary shares in the Company (Shares) by the Trust, for the purposes of the Plan, be assessable income of the Trust under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will a capital gain or capital loss that arises for the Trustee at the time when CGT Event E5 happens in relation to Shares held by the Trustee be disregarded under section 130-90 of the ITAA 1997, if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? | A2: Yes. | Q3: Will the irretrievable contributions made by the Company as head of the Group to the Trustee to fund the acquisition of Shares by the Trust for the purposes of the Plan be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936? | A3: No.

Relevant facts and circumstances: 1. The Company is a privately owned Australian registered company that operates in the financial services sector. 2. The Company carries on business in Australia. 3. The performance of the Company is strongly correlated with the quality of its employees. Operating conditions within the business and industry that the Company operates in have significantly heightened the need for strong and effective people leadership so as to attract and retain talent, preserve and promote a positive culture and working environment, recognise and adopt best practice with respect to social and cultural policy, and ensure work practices, processes and administration are robust practically, legally, ethically and morally. Accordingly, the Company rewards key employees with a mix of remuneration commensurate with their position and responsibilities. Remuneration structures are reviewed regularly to ensure that: • remuneration is competitive by market standards; • rewards are linked to strategic goals and performance; and • accountabilities and deliverables are clearly defined to minimise potential conflicts of interest and promote effective decision-making. 4. The remuneration of key employees at the Company is comprised of the following elements: (a) Fixed remuneration, which includes base pay and other benefits; and (b) Performance linked remuneration, which consists of: (i) Short term incentives (cash bonus); and (ii) Long term incentives (performance rights). 5. The Company maintains a strong focus on the attraction, retention and motivation of staff to facilitate continued growth of the Company over the short, medium and long-term. The retention of outstanding people is an ongoing challenge faced by many companies in Australia. Accordingly, the Company is continually evaluating ways to improve the scope and implementation of incentive programs to its employees. Fundamental to this growth strategy is the establishment of the Trust to administer the issue of performance rights under the Plan and any future equity plans. The Trust Deed was executed on XX XX XXXX. 6. The Plan is administered in accordance with the terms summarised below. The Company Employee Equity Incentive Plan 7. The Plan has been designed to allow the Company to issue rights to acquire ordinary shares in the Company (Share) (or to receive a cash equivalent value), which may be subject to service and/or performance-based vesting conditions (Rights) to eligible employees who are Australian tax resident employees of the Company (Participants). 8. The Plan is governed by the Company Employee Equity Incentive Plan Rules (Plan Rules). 9. The Plan broadly operates as follows: A. Participants may receive a grant of Rights under the Plan. B. The Board may make an Invitation to Eligible Participants on any number of occasions, and the Invitations may be made on such terms and conditions as the Board decides from time to time, in accordance with rule X C. The Board may establish, administer, operate and fund an employee share trust for the purposes of holding Shares before or after the exercise of a Right or delivering any Resulting Shares under the Plan Rules (rule X). D. Where Rights are subject to any conditions (e.g. Vesting Condition(s)), a Right will vest when a Vesting Notice is given (or is deemed to be given) to the Participant. If a Right is subject to further conditions following vesting (e.g. Exercise Conditions), the Right may only be exercised when all Vesting Conditions and Exercise Conditions have been satisfied or waived by the Company and the Company has given (or is deemed to have given) a Confirmation Notice to Participant. If a Right is not subject to any Exercise Conditions, the Right may be exercised after the Company has given (or is deemed to have given) a Vesting Notice to the Participant. (rule X). E. Cash settlement of the grant of Rights is allowed at the Board's discretion. Rules X and X state that where the Board exercises its discretion to satisfy a vested and exercised (where applicable) Right with a cash payment rather than Shares, the Company must pay to the Participant a cash amount equal to the value of the Shares that would have been granted to the Participant (less any Exercise Price if applicable and applicable taxes / other withholdings). F. In accordance with rules X, X and X, Rights may be forfeited including under the following circumstances (but not limited to): • Where a Participant becomes a Leaver and forfeits their unvested Rights (e.g. where a Participant is a Good Leaver) or forfeits their vested and unvested Rights (e.g. where a Participant is a Bad Leaver); • Other forfeiture events, such as where Vesting or Exercise Conditions are not met, the Participant becomes insolvent or has materially breached the Plan Documentation, where a Right has not been validly exercised by the Expiry Date, or where the Participant has voluntarily forfeited the Rights; and • A circumstance or event described in the rules of the Plan or the Invitation that has the effect of lapsing a Right (e.g. a Participant acts fraudulently or dishonestly, commits a material breach of their obligations to the Company, makes a material misstatement on the Company's behalf, engaged in gross negligence or misconduct etc). G. Rights are non-transferable unless in accordance with rule X. H. Rights will not entitle Participants to voting rights or rights to receive dividends or distributions or any other rights of an ordinary shareholder until Shares are allocated after vesting and exercise (if applicable) of the Rights. However, the Company may grant to a Participant an entitlement to a dividend equivalent payment on vested but unexercised Rights. The Board may determine whether a dividend equivalent payment that is payable is satisfied through a grant of Shares or the payment of a cash equivalent or a combination of both. (rule X). I. If a Participant ceases employment with the Company or any Group Company (Group): • Unless the Invitation provides otherwise, the Participant's vested Rights will not lapse on cessation of employment, and the Board will determine whether the Participant may retain some or all of their unvested Rights, unless the Participant ceases employment and becomes a Bad Leaver, in which case vested and unvested Rights will be forfeited. (rule X). • All vested and unvested Rights held by a Participant who ceases employment with the Company will be subject to the terms and conditions that the Participant held those Rights prior to ceasing employment, or such other terms and conditions determined by the Board. (rule X). J. In the event a Change of Control event, the treatment of the Participant's Rights and timing of such treatment will be dealt with as described in rule X. The Company Employee Share Trust 10. The Company Employee Share Trust (Trust) is intended to be established as a sole purpose trust for the purpose of subscribing for, acquiring, holding and transferring Shares in connection with equity incentive plans established by the Company (including the Plan established under the Plan Rules) for the benefit of participants in those plans. 11. The Board may establish, implement and operate a trust for the purposes of acquiring, holding and allocating Shares on behalf of Participants under the Plan on such terms and conditions as determined by the Board (rule X of the Plan Rules). 12. For completeness, the Trust will not be involved in the process of satisfying any cash settled Rights under the Plan. The Trust will only be used to acquire Shares for the purpose of satisfying equity settled Rights. Any cash settled Rights will be settled outside the Trust directly by the Company. 13. The Trust provides the Company with greater flexibility to accommodate the incentive arrangements of the Company both now and into the future as the group continues to expand its operations. The Trust provides capital management flexibility for the Company, in that the Trust can use the contributions made by the Company either to acquire Shares in the Company from a third party, or alternatively to subscribe for new shares in the Company. 14. The Trust provides an arm's length vehicle through which Shares in the Company can be acquired and held in the Company on behalf of employees. In effect, this aspect allows the Company to satisfy Corporations Law requirements relating to companies dealing in their own shares. 15. Additionally, as the Company is a private and unlisted company, there is no liquid market on which Participants may easily sell their Shares. The Trust therefore provides a mechanism for Participants to sell their Shares where there are no other existing shareholders or third-parties that are willing to purchase a Participant's Shares. 16. The Trustee, a separate legal entity to the Company is the Trustee of the Trust and will operate the Trust in accordance with the Trust Deed. 17. The Trust will broadly operate as follows: • The Company must provide the Trustee with the funds required for the acquisition of Shares in accordance with the Plan • Irretrievable cash contributions. • These funds are used by the Trustee to acquire Shares in the Company either by way of purchase from third parties or via a subscription for new Shares in the Company based on written instructions from the Company. • Where the Plan Rules and terms of participation (i.e. Invitation) stipulate that the Shares are to be held by the Trustee on behalf of Participants, the Trustee will hold the Company Shares as Shares in respect of a Participant(s) (i.e. on an allocated basis). • Where the Plan Rules include that the Shares may be held by the Trustee on behalf of Participants or employees, the Trustee will hold the Company Shares as unallocated Shares (Unallocated Shares) for Participants and employees of the Company generally. ­ The Board may also specify that certain Unallocated Shares are to be held by the Trustee for a particular Plan or a particular Participant (Specified Unallocated Shares). Where this occurs, the Trustee must, when directed to allocate Shares to a Participant, only use the Specified Unallocated Shares that have been held for that particular Participant, or the Participant is to be allocated Shares as a Participant under the relevant Plan (as applicable). ­ Specified Unallocated Shares are distinct from Allocated Shares, as the tagging of Unallocated Shares as Specified Unallocated Shares is merely to keep a record of which Unallocated Shares should be used for which purpose, whether that be for a Plan or Participant. In tagging Shares as Specified Unallocated Shares, no Participant has any beneficial interest in these Shares. Participants will not acquire a beneficial interest until such time that the Specified Unallocated Shares are allocated to the Participant and the Participant holds these Shares as Allocated Shares. • After a disposal restriction period lapses, the Trustee must transfer the relevant number of Shares into the name of the relevant employee or any third party as directed by the relevant employee (i.e. legal title) upon a withdrawal notice being submitted to the Trustee. Contributions to the Trust 18. The Company, where possible, will wait until the Rights vest (and to receive the exercise notice from Participants where relevant) before providing the Trust with the cash necessary to acquire Shares to satisfy the acquisition or subscription of Shares related to those Rights. 19. However, where it makes commercial sense to do so, the Company may make irretrievable cash contributions to the Trust prior to the Rights being granted, vesting, and where relevant, Rights being exercised by the Participants. In this case, the Company will contribute to the Trust enough funding to enable purchase of Shares in advance of when Rights are likely to be granted, vest or exercised to ensure there are enough Shares to satisfy anticipated grants, vests and exercises of Rights. This allows the Trustee to have enough Shares in the Trust ahead of when they need to be allocated to Participants, avoids delays and takes into account commercial circumstances. As the Company is a private company, this may also occur where a Participant or shareholder would like to sell their Shares and there are no existing shareholders that are willing to purchase the Shares, in which case the Trust will be directed to purchase the Participant's Shares to hold on an unallocated basis.

Relevant legislative provisions: Income Tax Assessment Act 1936 Division 7A | Income Tax Assessment Act 1936 subsection 109C(1) | Income Tax Assessment Act 1936 subsection 109ZB(3 ) | Income Tax Assessment Act 1936 subsection 109ZD | Income Tax Assessment Act 1936 section 318 | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-75 | Income Tax Assessment Act 1997 section 130-90 | Income Tax Assessment Act 1997 subsection 130-85(1) | Income Tax Assessment Act 1997 subsection 130-85(2) | Income Tax Assessment Act 1997 subsection 130-85(4) | Income Tax Assessment Act 1997 section 83A-10 | Income Tax Assessment Act 1997 section 104-85 | Income Tas Assessment Act 1997 subsection 960-100(2) | Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision: Summary: The irretrievable cash contributions that the Company makes to the Trustee of the Trust to fund the acquisition of, or subscription for Shares, for the purposes of the Plan, will not be assessable income of the Trust under section 6-5 or section 6-10. | Detailed Reasoning - Detailed reasoning: The total assessable income of a trust estate is calculated as if the trustee were a resident taxpayer in respect of that income (subsection 95(1) Income Tax Assessment Act 1936 (ITAA 1936)). Subsection 6(1) of the ITAA 1936 states that 'assessable income' has the meaning given by subsection 995-1(1), which relevantly has the meaning given by sections 6 5 and 6-10. The assessable income of a taxpayer includes income under ordinary concepts (section 6-5) or statutory income (section 6-10). Section 10-5 contains a summary list of the provisions for statutory income. None of the provisions listed in section 10-5 are relevant in the present circumstances. Therefore, the irretrievable cash contributions made by the Company to the Trustee of the Trust will not be assessable income under section 6-10. The contributions will only be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936 if they are assessable as income according to ordinary concepts under section 6-5. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. Additionally, in ATO Interpretative Decision ATO ID 2002/965 Income Tax - Trustee not assessable on employer contributions made to it under the employer's employee share scheme , the Commissioner expresses the view that funds provided to the trustee of an employee share scheme (ESS) for the sole purpose of providing shares under an ESS will constitute capital receipts to the trustee and are not assessable under sections 6-5 or 6-10. The contributions made by the Company are irretrievable and non-refundable to it in accordance with the Trust Deed. The contributions made by the Company to the Trustee will constitute accretions to the corpus of the Trust that will be applied for the sole purpose of acquiring, or subscribing for, Shares for the benefit of the Participants under the Plan. The cash contributions received by the Trustee constitute capital receipts and are not assessable under sections 6-5 or 6-10. | Detailed Reasoning - Question 2: Will a capital gain or capital loss that arises for the Trustee at the time when CGT Event E5 happens in relation to Shares held by the Trustee be disregarded under section 130-90, if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? | Summary: A capital gain or capital loss that arises for the Trustee at the time when the Participants become absolutely entitled to the Shares (CGT event E5) will be disregarded under section 130-90 if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee. | Detailed Reasoning - Detailed reasoning: Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee. A beneficiary becomes absolutely entitled to a CGT asset of a trust if they can call for the asset (for which they have a vested and indefeasible interest in) to be transferred to them or at their direction. The Shares held on trust for the purposes of the Plan are CGT assets of the Trust as defined in subsection 108-5(1). Subdivision 130-D of the ITAA 1997 treats an employee who acquires an ESS interest through an ESS to be 'absolutely entitled' to the share or right to which the ESS interest relates, from the time that they acquire the ESS interest (subsections 130-85(1) and 130-85(2)). Under the Plan, where a Participant becomes absolutely entitled to the Shares as against the Trustee, CGT event E5 will occur, pursuant to subsection 104-75(3) of the ITAA 1997. Any capital gain or capital loss that the Trustee makes, if CGT event E5 happens, is disregarded if section 130-90 applies. To qualify for this exemption, the Trust must be an 'employee share trust' (EST). | Detailed Reasoning - Employee Share Trust: To determine whether the Trust is an 'employee share trust' for the purposes of subsection 130-85(4) an analysis of what the Trustee actually does and its powers and duties that are prescribed in the Trust Deed is required. However, as indicated in the facts the Trustee will exercise its powers and obligations as set out in the Trust Deed. Therefore, the facts suggest subsection 130-85(4) will be satisfied as: • the Trust acquires shares in the Company. • the sole purpose being the subscribing for, acquiring, holding and transferring Shares under the Plans for the benefit of the participants • the Trustee may only carry out activities that constitute the management of the Plans established by the Company • the Commissioner accepts that the other activities undertaken by the Trustee will be merely incidental to this purpose (paragraph 130-85(4)(c)) • the Trust ensures that ESS interests as defined in subsection 83A-10(1) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating those Shares to the employees in accordance with the Trust Deed and the Plan Rules, and • the Trust Deed indicates that the Company and the Trustee agree the Trust will be managed and administered so that it satisfies the definition of 'employee share trust' for the purpose of subsection 130-85(4). Additionally, the other criteria for the exemption in section 130-90 to apply are met because: • at the time the Participant becomes absolutely entitled to the Shares as against the Trustee, CGT event E5 happens (paragraph 130-90(1)(a)) • CGT event E5 happens in relation to Shares (paragraph 130-90(1)(b)) • the Participant acquires Shares by exercising a right, option or award granted under the Plan (paragraph 130-90(1)(c)); and • the Participant will acquire the Right, under the Plan for nil consideration (i.e. at a discount) and therefore Subdivision 83A-B/Subdivision 83A-C will apply to those right, options or awards (paragraph 130-90(1)(d)). As all the conditions in section 130-90 are satisfied, any capital gain or capital loss that arises for the Trust at the time when CGT event E5 happens will be disregarded if the Shares are acquired by the employee for the same or less than the cost base of the Shares in the hands of the Trust. | Detailed Reasoning - Question 3: Will the irretrievable contributions made by the Company as head of the Group to the Trustee to fund the acquisition of Shares by the Trust for the purposes of the Plan be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936? | Summary: The contributions by the Company as head of the Group to the Trustee, to fund the acquisition of Shares by the EST for the purposes of the Plan will not be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Subsection 109C(1) of the ITAA 1936 states that a private company is taken to pay a dividend to an entity if the private company makes a payment to the entity during the year and either: • the entity is a shareholder or an associate of the shareholder in the company at the time of the payment; or • a reasonable person would conclude that the payment was made because the entity has been a shareholder or associate at some time. An entity is defined in subsection 960-100(2) and includes the trustee of a trust. Contributions made by the Company as head of the Group to the Trustee would satisfy subsection 109C(1) of the ITAA 1936 if the Trustee holds Shares at the time the contribution is made, or the Trustee is an associate of a person who holds Shares, such as a beneficiary of the Trust. Subsection 109C(2) of the ITAA 1936 would then apply to treat the amount of the contributions to be a deemed dividend, subject to the Company's distributable surplus for the relevant income year. | Detailed Reasoning - Exception: Certain payments made by a private company to an entity are excluded from the operation of section 109C of the ITAA 1936. Subsection 109ZB(3) of the ITAA 1936 provides that Division 7A does not apply to a payment made to a shareholder, or shareholder's associate, in their capacity as an employee or an associate of an employee. Subsection 109ZB(3) of the ITAA 1936 appears within a provision designed to set an 'ordering' between Division 7A and the fringe benefits tax provisions in the FBTAA. Specifically, what is meant by 'an employee' for the purpose of this provision takes on the meaning it is given in subsection 136(1) of the FBTAA. Paragraph 36 of Taxation Ruling TR 2018/07 Income tax: employer remuneration trusts , states that in considering benefits provided to employees or associates of employees in the context of the FBTAA (specifically, in the definition of a 'fringe benefit'), Edmonds J in FC of T v Indooroopilly Children Services (QLD) Pty Ltd [2007] FCAFC 16 [35] concluded that the reference to an employee is a reference to a particular employee. The Trustee is an associate of any employee who is a beneficiary of the Trust as defined in sections 109ZD and 318 of the ITAA 1936. Contributions are made by the Company as head of the Group to the Trustee once the Board resolves to provide a particular Participant a Share upon exercise of an Award. At the time of each cash contribution, the Company will provide to the Trustee a Dealing Notice outlining for each employee that has vested and/or exercised Awards: • the applicable number of Shares to be acquired • the market value of each Share • the amount of the related contribution to the EST; and • the method of acquisition of Shares to be made by the Trustee ie subscription, or acquisition from existing shareholder. As the cash contribution would be made to the Trustee in respect of a particular Company employee, it would satisfy section 109ZB of the ITAA 1936. Therefore, the contributions made by the Company to the Trustee will not be deemed to be dividends under section 109C of the ITAA 1936, as its operation would be excluded under section 109ZB of the ITAA 1936.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar . | Reasons for decision: These reasons for decision accompany the Notice of private ruling for the Trust. | This is to explain how we reached our decision. This is not part of the private ruling. | All references below are to the Income Tax Assessment Act 1997 unless otherwise stated. | Question 1: Will the irretrievable cash contributions made by the Company as head of the Group to the Trustee to fund the acquisition of, or subscription for, ordinary shares in the Company (Shares) by the Trust, for the purposes of the Plan, be assessable income of the Trust under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?