Private ruling: Employee share trust
Date of advice: 9 April 2024
Published: 3 June 2024
Ruling period: Income year ended 31 December 20XX to 31 December 20XX
Date scheme commenced: [date]

Ruling: Q1: Will irretrievable cash contributions made by Company A to the Trustee as trustee of the Company A Limited Employee Share Trust (the Trust) to fund the subscription or acquisition of fully paid ordinary shares in Company A (Shares) pursuant to the Company Plans (Plans) be assessable income of the Trust under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997),and therefore form part of the net income of the Trust under section 95 of Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A3: Yes | Q2: Will dividends received and distributed by the Trustee, on Shares which have been allocated to a Participant, be included in the calculation of the net income of the Trust under subsection 95(1) of the ITAA 1936? | A4: Yes | Q3: Will dividends and other income received by the Trustee on Shares held as part of General Trust Property be included in the calculation of the net income of the Trust under subsection 95(1) of the ITAA 1936? | A5: Yes | Q4: Will the net income of the Trust under subsection 95(1) of the ITAA 1936 be assessed to the Trustee under section 99A of the ITAA 1936? | A6: Yes, to the extent it relates to dividends and income received by the Trustee on unallocated Shares held as part of General Trust Property. | Q5: Will the Trustee be entitled to a tax offset for the franking credits attached to the franked dividend on Shares held as part of General Trust Property under Subdivision 207-B of the ITAA 1997? | A7: Yes, provided the Trustee has held the Share designated as General Trust Property for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires that Share and ending on the 45 th day after that Share becomes ex-dividend

Relevant facts and circumstances: Background Company A is the head of company of the tax consolidated group (Company TCG). Plan A Company A established the Plan A, under the terms and conditions set out in the Plan A. Plan A was adopted by the Board on [date]. Invitations The Board will in its discretion determine those Eligible Persons who will receive Invitations and the procedure for making invitations (including the terms and content of any offer or invitation or acceptance procedure) in accordance with Plan A. Invitations will set out a number of matters including: • the type of awards that are the subject of the Invitation • the name of the Eligible Person • the number of each type of award in each Tranche that may be applied for • the price of the awards which will be nil, unless otherwise determined by the Board • any Settlement Restrictions including the specific form of settlement applicable to awards • the Exercise Price, which will be nil unless otherwise determined by the Board • the Term of awards in each Tranche if other than 15 years • the Vesting Conditions which are apply to awards • the Measurement Period applicable to each Tranche, in the case of certain awards • the Vesting date or how the Vesting Date will be determined. The Measurement Period applicable to each Tranche of awards will be specified in the Invitation. The Measurement Periods for awards will relate to periods when service conditions must be satisfied for them to vest. The Measurement Period for grants of awards will commence on the first day of the financial year in which the grant is made unless otherwise determined by the Board and specified in the Invitation. An Eligible Person who receives an Invitation from the Board to participate in Plan A must submit an Application (annexed to the Invitation) within the Application Period to apply for awards under Plan A. The Board will consider valid Applications made in response to Invitations and determine whether or not to accept them. Once the Board accepts an Application from an Eligible Person, that person becomes a Participant in Plan A. Participants will be advised in writing when awards have been granted and the date of grant, via a Grant Notice or Holding Statement. Vesting Conditions Vesting Conditions may relate to: Vesting Conditions, if applicable, must be specified in the Invitation, along with the relationship between various levels of performance and levels of vesting that may occur. Performance conditions may vary between different Invitations and between different Tranches of Rights specified in an Invitation. Vesting of awards The Measurement Period applicable to a group of awards which has identical terms and features (Tranche) of will be three years unless otherwise specified in the Invitation. The Measurement Period for awards subject to performance conditions will relate to periods when performance conditions must be satisfied for them to vest. Prior to the end of the Measurement Period, the Board may determine that some or all of the awards held by a Participant will vest in which case the Board will notify Participants in a Vesting Notice of the extent of Vesting Date. The Board also has absolute discretion to determine that Exercise Restrictions are lifted, and that some or all of any remaining unvested awards will be forfeited. The Board retains discretion to increase or decrease, including to nil, the extent of vesting in relation to each Tranche of awards if it forms the view that it is appropriate to do so given the circumstances that prevailed during the Measurement Period. Vesting of Restricted awards Restricted awards are fully vested at the Grant Date. That is, the Grant Date is also the Vesting Date for Restricted Rights. Lapsing of awards Awards will lapse automatically on the earlier of: • for unvested awards, when there is no opportunity for them to vest at the later date • the end of the Term of the awards. Exercise and Exercise Restrictions Restricted Rights are subject to an Exercise Restriction for 90 days following the Grant Date, unless a longer period is determined by the Board and specified in the Invitation. Awards may be exercised at any time between the latter to occur of the Vesting Date or elapsing of the Exercise Restriction (if applicable) and the end of their Term, by the Participant submitting an Exercise Notice. If an Invitation so specifies, the exercising of vested and unexercised award may be completed automatically on a specific date following the end of the Measurement Period in which case the submission of an Exercise Notice is not required. If the Exercised Awards Value is to be provided in Shares, the Board will in its discretion, either: • issue Shares to the Participant • arrange for Shares to be acquired for the benefit of Participants by the trustee of the EST. Company A or another Company Group will contribute such funds as are needed to the EST trustee to enable the EST trustee to acquire Shares and the trustee shall apply those funds to acquire Shares as directed by the Board either by market purchase or subscription to a new issue. • if the Exercised Awards Value is to be paid in cash it will be paid via payroll less any legally required withholding such as PAYG tax. Disposal Restrictions Any attempt by a Participant to deal in or dispose of certain awards will result in forfeiture in those awards by the Participant, and the Board may require the Participant to facilitate a transfer of forfeited Shares to another party nominated by the Board for nil consideration. Plan B Company A established Plan B as part of its long-term strategy to reward and incentivise employees to share in the ownership of Company A. Plan B was first adopted by the Board on [date] and updated on [date] Offer The Board may in its discretion invite Eligible Employees to participate in a grant of Incentive Securities (Offer), which may comprise any one or more of: Each Eligible Employee should be advised of certain matters in connection with an Offer, including: Acceptance of an Offer must be made by the Eligible Employee in accordance with the instructions that accompany the Offer, or in any other way the Board determines. Following acceptance of an Offer, the Board may refuse to allow the participation of an Eligible Employee that ceased to be an Eligible Employee or ceased to satisfy any other conditions imposed by the Board before the grant of Incentive Securities is made. Rights Where an Eligible Employee has accepted an Offer to participate in a grant of Rights, the Board will, subject to its discretion to refuse to allow participation, grant Rights to the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of the Right, and a Right may only be registered in the name of the Eligible Employee who accepted the Offer. In the case of a Right that has vested, the Board will notify a Participant that a Right has vested. A Right will only Vest and become exercisable where each Vesting Condition, and all other relevant conditions which apply under the terms of the Offer have been satisfied or otherwise waived by the Board. If Vesting of a Right would arise in a period where Dealings by a Participant would be prohibited, the Board may determine that Vesting will be delayed until such time as Dealings are permitted. The Vesting of a Right will be satisfied by Company A allocating Shares to the Participant pursuant to rule B.3. As soon as practicable following Vesting of a Right, the Board must procure the transfer to, or procure the setting aside for, the Participant the number of Shares in respect of which Rights have Vested. The Board may exercise its discretion to make a cash payment to a Participant in lieu of an allocation of Shares. Where this occurs, Company A must pay to the Participant Australian dollar equivalent amount of the value of the Rights that have Vested. Certain awards only produce value when, at the time of Vesting and exercise, the Current Market Price exceeds a notional price determined by the Board which is specified in the Offer of those awards. Where the Value of such awards at the time of exercise is zero or negative, the award will have no value and the Participant will have no entitlement to cash or Shares on exercise of the award. Where the Value of such awards at the time of exercise is positive, each award will have a value and the Participant will be entitled to realise that value via the payment of cash, the issue of Shares, or a combination thereof in accordance with Plan B. An award will lapse upon the earliest to occur of: Options Where an Eligible Employee has accepted an Offer to participate in a grant of Options, the Board will, subject to its discretion to refuse to allow participation, grant Options to the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of an Option, and Options may not be registered in any name other than that of the Eligible Employee. An Option will only Vest and become exercisable where each Vesting Condition, and all other relevant conditions advised to the Participant by the Board, have been satisfied or otherwise waived by the Board. Vesting occurs upon notification from Company A to the Participant that an Option has been Vested pursuant to rule Y.2. The exercise of an Option will be affected in the form and manner determined by the Board and must be accompanied by the payment of the relevant Exercise Price. The exercise of an Option will be satisfied by Company A allocating Shares to the Participant pursuant to rule Y.3. Following the exercise of an Option, the Board must issue, or procure the transfer to, or the setting aside for, the Participant the number of Shares in respect of which Options have been exercised. The Board may determine that the exercise of an Option will be satisfied by Company A making a cash payment in lieu of an allocation of Shares. Options will lapse upon the earliest to occur of: Restricted Shares After an Eligible Employee has accepted an Offer to participate in a grant of Restricted Shares, the Board must, subject to its discretion to refuse to allow the participation of an Eligible Employee allocate Restricted Shares by either issuing, procuring the transfer or the setting aside of the Restricted Shares for the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of a Restricted Shares. Restricted Shares may only be registered in the name of the Eligible Employee or the Trustee. Vesting occurs (that is, a Share ceases to be a Restricted Share) where both: If Vesting of a Restricted Share arises in a period where Dealings by a Participant would be prohibited, the Board may determine that Vesting will be delayed until such time Dealings are permitted. Unless provided otherwise in terms of an Offer, when a Share that is held by the Trustee on behalf of a Participant ceases to be a Restricted Share, the Trustee will continue to hold the Share on trust on behalf of the Participant until such time the Participant, or Company A on behalf of the Participant, directs the Trustee to either: • transfer the Share into the Participant's name or another account • sell the Share and pay the proceeds of the sale of the Participant. A Restricted Share will be forfeited upon the earliest to occur of: Trust The Trust was established under the terms of the Trust Deed, amended as at [date], for the purpose of acquiring, holding and transferring Shares in connection with equity incentive plans established by Company A for the benefit of participants to those plans. The Trustee is an independent third party. The powers of the Trustee are limited to the sole purpose of exercising its powers and discharging its obligations under the Trust Deed and the relevant Rules and include: • to do all things which the Trustee in its discretion considers necessary to administer and maintain the Trust and the Trust Fund in accordance with the Trust Deed. The Trust will be managed and managed and administered so that it satisfies the definition of an "employee share trust" for the purposes of section 130-85(4) of the ITAA 1997. Neither Company A nor any member of the Company A group of companies are a Beneficiary of the Trust and have no entitlement to any Shares, or any part of the Trust Fund. Acquisition of Shares Subject to being placed in sufficient funds by Company A, the Trustee must comply with a request or direction from the Board which specifies whether to subscribe for Shares or purchase Shares on-market or pursuant to an off-market transfer. Allocated Shares A Participant is presently entitled to receive all dividends and other distribution bonus issues or other benefits payable to the Trustee in respect of Shares that form part of the Trust Fund that are Allocated Trust Property. General Trust Property General Trust Property is held by the Trustee on trust for all Beneficiaries in the manner required by the Rules. Forfeited rights or interests Any Participant may forfeit any right of interest in some or all of the Allocated Trust Property that is held on their behalf (including allocated Shares, dividends in respect of allocated Shares, or cash) in accordance with the relevant Rules. Notice of the forfeiture will be given to the Trustee by the Board and/or the Participant. When any Allocated Trust Property is forfeited, it will be held as General Trust Property . Funding The Company will keep the Trustee in funds necessary to do any act requested by the Board. The Trustee will pay all costs and expenses in administering the provisions or incurred in connection with the acquisition, registration, disposal of or other dealing with Shares and otherwise incurred by the Trustee in properly and diligently administering the Trust and carrying out its duties and the Trustee may, subject to any written agreement between the Company and the Trustee, request the Company contribute in full or in part to any cost or expense. The ongoing administration expenses of the Trust include: • brokerage costs • annual trustee fee • bank charges • cost of employee plan record-keeping • cost production and dispatch of holding statements to employees • cost of making new offers to employees under the Taxpayer's existing employee share scheme • fees for the preparation of the annual audit of the financial statements of the Trust • fees for the preparation and lodgement of the annual income tax return of the Trust. Other Any cash settlement of vested awards occurs outside of the Trust.


Reasons for decision: Summary: All legislative references are to provisions of the Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 , unless otherwise indicated. | Summary: The irretrievable cash contributions made by Company A to the Trustee for the Trust to fund the subscription for, or acquisition on or off-market of, Shares in respect of the Plan will not be assessable income of the Trust pursuant to sections 6-5 or 6-10 and therefore will not form part of the net income of the Trustee under subsection 95(1). | 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)). 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, non-refundable contributions made by Company A to the Trustee for the Trust will not be assessable income under section 6-10. They will only be included in the calculation of the net income of the Trust under subsection 95(1) 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. 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 employee share scheme (ESS) will constitute capital receipts to the trustee and are not assessable under sections 6-5 or 6-10. An ESS is a scheme under which ESS interests in a company are provided to employees of a company, or their associates, in relation to their employment (subsection 83A-10(2)). An ESS interest is a beneficial interest in a share in a company or a right to acquire a beneficial interest in a share in a company (subsection 83A-10(1)). Under the Plan, each Participant will acquire a Right, Option or Restricted Share (as the case may be), these rights each being a right to acquire a right to a beneficial interest in a Share of a beneficial interest in a Share (in the case of Restricted Shares) (that is an ESS interest). The irretrievable cash contributions made by Company A to the Trustee under the terms of the Plan and the Trust Deed are to be used for the sole purpose of acquiring, holding and transferring Shares for the benefit of Participants. Accordingly, the irretrievable cash contributions constitute capital receipts to the Trustee and will not be assessable income of the Trustee pursuant to sections 6-5 or 6-10. Given that the irretrievable cash contributions made by Company A to the Trustee are neither ordinary nor statutory income, they will not be included in the calculation of the net income of the Trust under subsection 95(1) of Division 6. | Summary: CGT event E5 will happen to the Trustee in relation to Shares held by the Trustee under the Plans at a time when a Participant becomes absolutely entitled to those Shares under the terms of the Plans. | Detailed Reasoning - Detailed reasoning: Under section 102-20, an entity can make a capital gain or loss if, and only if, a CGT event happens. Participants become absolutely entitled to a Share under the Plans - CGT event E5 Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust (except a unit trust or a trust to which Division 128 applies) as against the trustee. The time of the event is when a beneficiary becomes absolutely entitled to the asset (subsection 104-75(2)). If CGT event E5 happens, the trustee may make a capital gain or loss if the market value of the asset, at the time of the event, is more than its cost base or less than the asset's reduced cost base respectively (subsection 104-75(3)). In the present case, the Trust is neither a unit trust nor a deceased estate to which Division 128 applies. Subsection 130-85(2) treats a beneficiary as absolutely entitled to the relevant share from the time of acquisition of the ESS interest until they no longer have the ESS interest in the share. Subsection 130-85(2) only applies if the following requirements under subsection 130-85(1) are satisfied: Participants acquire ESS interests under the Plans which are employee share schemes (paragraph 130-85(1)(a)) As stated in response to Question 1, Participants are granted Rights, Options and Restricted Shares under the Plans in relation to their employment, which provide them with a beneficial interest in Shares or the right to acquire a beneficial interest in Shares. As such, the Participants will be taken to have acquired ESS interests under an ESS and paragraph 130-85(1)(a) will be satisfied. Subdivision 83A-B or 83A-C applies to the Rights, Options and Restricted Shares (paragraph 130-85(1)(b)) Subsection 83A-20(1) is the key condition that an ESS interest must meet for Subdivision 83A-B or 83A-C to apply. Subsection 83A-20(1) states: This Subdivision applies to an ESS interest if you acquire the interest under an employee share scheme at a discount. Under the Plans, Rights, Options and Restricted Shares may be acquired for no consideration or at a discount. As such, subdivision 83A-B will apply to those Rights, Options and Restricted Shares (unless Subdivision 83A-C applies instead). Therefore, paragraph 130-85(1)(b) is satisfied. The ESS interest arose because of an interest the Participants hold in an EST (paragraph 130-85(1)(c)). The Awards granted to Participants under the Plans provide Participants with an interest in the Shares held in the Trust. Subsection 130-85(4) provides that an EST for an ESS (having the meaning given by subsection 83A-10(2)) is a trust whose sole activities are: a) o btaining shares or rights in a company; and b) ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to associates of employees, of: • the company; or • a subsidiary of the company; and c) other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b). A beneficial interest in a share and the right to acquire a beneficial interest in a share that is acquired on the exercise of a right or option are both ESS interests within the meaning of subsection 83A-10(1). An 'employee share scheme' is defined in subsection 83A-10(2) as a scheme under which ESS interests in a company are provided to employees or associates of employees (including past or prospective employees) in relation to the employees' employment. As stated in response to Question 1, the Plans are an ESS within the meaning of subsection 83A-10(2) because it is a scheme under which rights to acquire beneficial interests in Shares are provided to employees in relation to their employment. Company A has established the Trust to facilitate the Plans by acquiring Shares and allocating those Shares to Participants, in order to satisfy the Rights, Options and Restricted Shares acquired under the ESS. The beneficial interest in the Share is itself provided under the same Plan under which awards to acquire Shares are provided to Participants in relation to the Participants' employment, being an ESS as defined in subsection 83A-10(2). Therefore, paragraph 130-85(4)(a) and (b) of the definition of an EST are satisfied because: • the Trustee acquires Shares • the Trustee ensures that Rights, Options and Restricted Shares, which are ESS interests, are provided under an ESS by allocating those Shares to the Participants in accordance with the Trust Deed and the Plan. Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) will also require that the Trustee undertake incidental activities that are a function of managing the Trust. Paragraph 130-85(4)(c) provides that a trustee can engage in activities that are merely incidental to those described in paragraphs 130-85(4)(a) and (b). The phrase 'merely incidental' takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. 'Merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). The Macquarie Dictionary defines 'merely' to mean: 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'. The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13 Income tax: what is an 'employee share trust'? Whether the Trust is an employee share trust for the purposes of subsection 130-85(4) requires an analysis of what the Trustee actually does, not only the powers and duties that are prescribed in the Trust Deed. Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered to be merely incidental. In the present case, the Trust Deed supports the conclusion that the Trustee may only use cash contributions received from Company A and subsidiary employer entities to acquire Shares for Participants in accordance with the Plans. All other duties and general powers listed in the Trust Deed are considered to be merely incidental to the functions of the Trustee in relation to its dealing with Shares to be acquired for Participants and paragraph 130-85(4)(c) is satisfied. Therefore, the Commissioner considers the Trust to be an EST based on the terms of the Trust Deed and paragraph 130-85(1)(c) is satisfied. As all of the conditions in subsection 130-85(1) are satisfied, CGT event E5 is the CGT event that will apply under the terms of the Plans at the time that Participant becomes absolutely entitled to the Shares as against the Trustee. | Summary: A capital gain or loss that arises to the Trustee at the time when CGT event E5 happens in relation to Shares held by the Trustee under the Plans will be disregarded under section 130-90 if the Participants 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: Exemptions under section 130-90 Any capital gain or capital loss that the Trustee makes, if CGT event E5 happens, is disregarded if section 130-90 applies. Shares held for future acquisition under employee share scheme: subsection 130-90(1A) Subsection 130-90(1A) applies to disregard any capital gain or capital loss made by an EST to the extent that it results from a CGT event if: • immediately before the event happens, an ESS interest is a CGT asset of the trust (paragraph 130-90(1A)(a)) • either of the following subparagraphs applies o the event is CGT event E5, and the event happens because a beneficiary of the trust becomes absolutely entitled to the ESS interest as against the trustee (subparagraph 130 90(1A)(b)(i)) o the event is CGT event E7, and the event happens because the trustee disposes of the ESS interest to a beneficiary of the trust (subparagraph 130-90(1A)(b)(ii)) • Subdivision 83A-B or 83A-C applies to the ESS interest (paragraph 130-90(1A)(c)). • Paragraph 130-90(1A)(a) is satisfied as the shares held by the Trustee are ESS interests (as defined by paragraph 83A-10(1)(a)) which are CGT assets of the Trust. • Subparagraph 130-90(1A)(b)(i) is satisfied. As set out above, CGT event E5 is the CGT event that will apply under the terms of the Plans at the time the participant becomes absolutely entitled to the shares as against the Trustee. • Paragraph 130-90(1A)(c) is satisfied, because as stated above: o the Plans are an ESS for the purpose of Division 83A as it is an arrangement under which an ESS interest is provided to a participant in relation to their employment by Company A o Subdivision 83A-B or 83A-C will apply, as participants may acquire shares under the Plan at a discount. Accordingly, all conditions in subsection 130-90(1A) have been satisfied. Shares held to satisfy the future exercise of rights acquired under employee share schemes: subsection 130-90(1) Subsection 130-90(1) applies to disregard any capital gain or loss made by an employee share trust if all of the following apply: • the CGT event is CGT event E5 or E7 (paragraph 130-90(1)(a)) • the CGT event happens in relation to a share (paragraph 130-90(1)(b)) • the beneficiary had acquired a beneficial interest in the share by exercising a right (paragraph 130-90(1)(c)) • the beneficiary's beneficial interest in the right was an ESS interest to which Subdivision 83A-B or 83A-C (about employee share schemes) applied (paragraph 130-90(1)(d)). As stated above, CGT event E5 will apply under the terms of the Plans when the Participant becomes absolutely entitled to Shares as against the Trustee. Under subsection 130-85(2), Participants are taken to be absolutely entitled to the Shares held by the Trustee from the time they were granted the Right or Options under the terms of the Plans. Therefore, paragraph 130-90(1)(a) will be satisfied. Paragraph 130 90(1)(b) is satisfied as CGT event E5 happens in relation to a share, being a Share in the capital of Company A held by the Trustee to which a Participant becomes absolutely entitled to upon the vesting (or exercise if applicable) of Options and Rights under the Plans. Paragraph 130-90(1)(c) is satisfied as a Participant will have acquired a beneficial interest in a Share on vesting of Options and Rights, and if applicable, by exercising an Award after vesting, in accordance with the Plans. Paragraph 130-90(1)(d) is satisfied because as stated above: • the Plans are an ESS for the purpose of Division 83A as it is an arrangement under which an ESS interest is provided to a Participant in relation to their employment • Subdivision 83A-B or 83A-C will apply, as Participants may acquire Share Appreciation Rights or Performance Rights under the Plan at a discount. Accordingly, all the conditions in subsection 130-90(1) have been satisfied. As all of the conditions in subsection 130-90(1) 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. | Summary: Dividends received and distributed by the Trustee in respect of Shares which have been allocated to a Participant will be included in the calculation of the net income of the Trust under subsection 95(1). | Detailed Reasoning - Detailed reasoning: Subsection 95(1) defines 'net income', in relation to a trust estate, to mean the total assessable income of the trust estate calculated under the ITAA 1936 as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions. Subsection 44(1) includes in the assessable income of a resident shareholder dividends that are paid to the shareholder by the company out of profits derived by it from any source. Therefore, dividends and other income received by the Trustee on Shares allocated to a Participant are required to be included in calculating the net income of the Trust as defined under subsection 95(1). | Summary: Dividends and other income received by the Trustee on General Trust Property will be included in calculating the net income of the Trust as defined under subsection 95(1). | Detailed Reasoning - Detailed reasoning: As outlined above in Question 3, subsection 95(1) provides that the net income in relation to a trust estate means the total assessable income of the trust estate calculated under Division 6 as if the trustee were a taxpayer in respect of that income, less allowable deductions. Therefore, dividends and other income received by the Trustee on General Trust Property are required to be included in calculating the net income of the Trust as defined under subsection 95(1). | Summary: The net income of the Trust as defined under subsection 95(1) will be assessed to the Trustee under section 99A to the extent it relates to income derived from Shares that form part of General Trust Property to which no beneficiary is presently entitled. | Detailed Reasoning - Detailed reasoning: Subsection 97(1) determines the assessable, exempt, and non-assessable non-exempt income of a beneficiary who is not under a legal disability and who is presently entitled to a share of the income of the trust estate. When no beneficiary is presently entitled to the income of a trust estate, the net income of the estate will be taxed in the hands of the trustee under either section 99 or 99A. Section 99A will apply unless excluded in accordance with subsection 99A(2). Where no part of the net income of a resident trust estate is included in the assessable income of a beneficiary of the estate, the trustee is assessed and liable to pay tax on the net income (as defined in subsection 95(1) and pursuant to subsection 99A(4)). Accordingly, the Trustee will be assessed under section 99A on that part of the net income of the trust estate which relates to General Trust Property. | Summary: The Trustee will be entitled to a tax offset for any franking credits attached to the dividend received in respect of a Share held as General Trust Property by the Trust under Subdivision 207-B of the ITAA 1997, provided it has held the Share designated as General Trust Property for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires that Share and ending on the 45 th day after that Share becomes ex-dividend. | Detailed Reasoning - Detailed reasoning: Section 207-45 provides that trustees who are liable to be assessed under section 99A of the ITAA 1936 and to whom a franked distribution flows indirectly, are entitled to a tax offset for that income year equal to its share of the franking credits attached to the distribution. However, subsection 207-150(1) denies a tax offset otherwise available under section 207-45 where the trustee is not a 'qualified person' for the purposes of Division 1A of former Part IIIAA of the ITAA 1936. Qualified person Subsection 207-150(1) sets out the circumstances in which an entity is not entitled to a tax offset under Division 207. One circumstance is where the entity is not a 'qualified person' for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 (paragraph 207-150(1)(a)). Broadly, a person will be taken to be a qualified person in respect of a dividend paid on shares if the shares were held at risk for a period of 45 days and the person or an associate does not make a related payment in respect of the dividend (former section 160APHO). Based on the facts provided, it is accepted that no related payment will be made by the Trustee. Therefore, the Trustee will be a qualified person if it has held the Share designated as General Trust Property for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires that Share and ending on the 45 th day after that Share becomes ex-dividend. Tax offset Under subsection 207-50(4), a franked distribution will be taken to flow indirectly to the trustee of a trust where, relevantly, the trustee is liable to be assessed on all or part of the trust's net income for that year under section 99A of the ITAA 1936. As determined at Question 5 above, the Trustee will be liable to be assessed under section 99A of the ITAA 1936 in relation to dividends received by the Trustee in respect of Shares held as General Trust Property. Therefore, the requirements of section 207-45 are satisfied, and the Trustee will be entitled to a tax offset equal to the franking credits attached to those dividends.

Question 2a: Will capitals gains tax (CGT) event E5 of section 104-75 of the ITAA 1997 happen for the Trustee at the time a Participant becomes absolutely entitled to fully paid ordinary shares in Company A under the Plans? | Question 2b: If CGT event E5 does happen, will any capital gain or loss made by the Trustee be disregarded under section 130-90 of the ITAA 1997 if the Participant acquires the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? | the performance of Company A or an aspect of Company A's operations or the performance of the Participants, or | continued service of the Participants with the Group | any combination of the foregoing determined by the Board for each Tranche. | the type and number of shares being offered, or the method by which the number of shares will be calculated | the amount (if any) that will be payable for the grant of shares | any vesting Conditions or other conditions that apply, including any Vesting Period | the procedure for exercising an awards following Vesting and the period(s) during which it may be exercised | where the Board has made a determination under Plan B that the Vesting and/or exercise of awards (as applicable) will only be satisfied through an allocation of Shares, rather than the making of a cash payment in lieu of an allocation of Shares | the circumstances in which awards will lapse, Shares allocated under Plan B may be forfeited or a Participant's entitlement to Shares may be reduced | how Shares may be treated if the Eligible Employee ceases employment with a Company A, and any discretions retained by the Board under rule X | any restrictions (including the period of restriction) on Dealing in relation to a restricted share or Share Allocated to the eligible Employee Plan B | any circumstances in which a Participant's entitlement to Shares may be reduced or extinguished under Plan B. | the lapsing in accordance with Plan B (including in accordance with a term of an Offer) | the failure to meet a Vesting Condition or any other condition applicable within the Vesting Period | the receipt by the Company A of a notice in writing from a Participant to the effect that the Participant has elected to surrender the Right. | 10 years after the date on which the Options were allocated to the Participant or any other date nominated as the expiry date in the Offer | the Option lapsing in accordance with the Plan B (including in accordance with a term of an Offer) | the receipt by Company A of a notice in writing from a Participant to the effect that the Participant has elected to surrender the Option | the Participant being declared bankrupt, becoming insolvent or making any arrangement or compromised with his or her creditors generally. | the Vesting Period and each other relevant condition (including all Vesting Conditions) advised to the Participant by the Board have been satisfied or otherwise waived by the Board | Company A notifies the Participants that the restrictions in respect of the Restricted Share have ceased or no longer apply. | the Restricted Share being forfeited in accordance with a provision of these Rules (including in accordance with a term of an Offer) | the failure to meet a Vesting Condition or any other condition applicable to the Restricted Share within the Vesting Period | the receipt by the Company A of a notice in writing from a Participant to the effect that the Participant has elected to surrender the Restricted Share | the Participant being declared bankrupt, becoming insolvent or making any arrangement or compromised with her or her creditors generally. | entering and executing all contracts and other documents | subscribing, acquiring, and disposing of Shares for the benefit of the beneficiaries consistent with the purposes of the Trust | selling any rights that accrue to Shares and applying the proceeds of sales in accordance with the Trust Deed and the relevant Rules | opening and operating bank accounts and other accounts for the trust | the beneficiary acquires an ESS interest under an ESS | Subdivision 83A-B or 83A-C applies to the ESS interest, and | the ESS interest is, or arises because of, an interest the beneficiary holds in an employee share trust (EST).