Private ruling: Ruling Employee Share Scheme
Date of advice: 18 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 July 2016

Ruling: Q1: Will Company A obtain an income tax deduction, pursuant to section 8-1 of the Income Tax Assessment Act 1997 (' ITAA 1997 '), in respect of the irretrievable cash contributions made to The Trustee to fund the subscription for, or acquisition on-market of Company A shares by the Employee Share Trust (' EST ')? | A1: Yes | Q2: Will Company A obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of costs incurred in relation to the on-going administration of the EST? | A2: Yes | Q3: Are irretrievable cash contributions made by Company A to The Trustee, to fund the subscription for, or acquisition on-market of Company A shares by the EST, deductible to Company A at a time determined by section 83A-210 of the ITAA 1997? | A3: Yes | Q4: If the EST satisfies its obligations under the Executive Short Term Incentive Plan (' STIP ') and the Executive Long Term Incentive Plan (' LTIP ') (collectively, ' The Plans ') by subscribing for new shares in Company A: a) Will the subscription proceeds be included in the assessable income of Company A under section 6-5 or 20-20 of the ITAA 1997? b) If the answer to the above is no, will a capital gains tax ('CGT') event under Division 104 of the ITAA 1997 be triggered? | A4: No | Q5: Will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936 (' ITAA 1936 ') applies to deny, in part or in full, any deduction claimed by Company A to The Trustee to fund the subscription for, or acquisition on-market of Company A shares by the EST? | A5: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background Company A is an Australian public company listed on the Australian Stock Exchange. Company A has established two employee share plans, Short Term Incentive Plan (' STIP ') and Long Term Incentive Plan (' LTIP '), collectively the Plans. As part of the remuneration process and strategy of Company A, the Plans aim to recognise both short-term and long-term performance by rewarding eligible participants with Rights to Shares in Company A, allowing them to share in both the value and growth of the business. They are also designed to provide a mechanism for achieving Company A's overarching remuneration objectives of aligning the interests of staff and shareholders, with a view to driving superior outcomes for shareholders. Short Term Incentive Plan Under the STIP, an eligible participant is allowed to earn up to a maximum short term incentive outcome of 100% of their annual fixed remuneration, as calculated under Section A of the relevant STIP agreement. The incentive comprises a 50% cash component and a 50% deferred Rights component. Both of them will be granted within 3 months after the end of the Performance Period. The deferred Right will have a vesting date of 12 months after the end of the Performance Period. Each deferred Right is a right to receive a Share plus an additional number of Shares calculated on the basis of the dividends that would have been paid in respect of the Share during the vesting period being reinvested (or, at the discretion of the Board, the Cash Equivalents Value), in respect of the Rights that vest, subject to the Performance Conditions being satisfied. Following vesting of the Rights, eligible participants will be allocated ordinary shares in Company A. The eligible participant must be continually employed by Company A (or its subsidiaries) throughout the Performance Period and up to the vesting date. Long Term Incentive Plan Under the LTIP, an eligible participant is allowed to earn a maximum long term incentive outcome of 50% or 25% of their annual fixed remuneration. The eligible participants do not need to provide any consideration on granting of the rights, vesting of the rights and allocation of Shares. The LTIP has a duration of 3 years in which the Participant and Company A need to satisfy various performance hurdles, including • Underlying earnings per Share hurdle; • Return on invested capital hurdle; and • Total shareholder return hurdle. Each Right is a right to receive one Share plus an additional number of Shares calculated on the basis of the dividends that would have been paid in respect of the Share during the Performance Period being reinvested in accordance with the Conversion Formula contained in the LTIP. Following vesting of the Rights which occurs approximately 3 months after the Performance Period ends, eligible Participants will be allocated ordinary shares in Company A. The eligible Participant must be continually employed by Company A (or its subsidiaries) throughout the Performance Period, unless employment is ceased for a reason including redundancy, permanent disability or death. Plan Rules The Plan Rules set out the terms and conditions of The Plans, as well as outlining details of the operation of The Plans. The purpose of The Plans is to allow the Board to make grants of Rights to Employees, which provide the opportunity to acquire Shares in Company A, resulting in various benefits to both the Employees and the Company (Rule 1.1.1 of the Plan Rules). As outlined in the Plan Rules, Rights that are granted to eligible Participants are defined as a right to be issued, transferred and/or allocated a Share (including a fraction of a Share), calculated on the basis set out in the Grant Letter (which may include a formula for calculating the relevant number of Shares) or to receive a Cash Equivalent Value, at the discretion of the Board, granted to a Participant under the Plans on the terms and conditions determined by the Board (Rule 12.2 of the Plan Rules); The Board will provide each Employee with a Grant Letter which contains relevant information regarding the Rights at the time of invitation or grant (Rule 2.2.1 of the Plan Rules); An Employee who applies for, or accepts a grant of Rights, is deemed to have agreed to be bound by the Plan Rules and the terms and conditions set out in the Grant Letter, the Constitution in respect of Shares allocated upon exercise of Rights, the Share Trading Policy and any other relevant Company or Group policies (Rule 2.5.1 of the Plan Rules); Unless the Board determines otherwise, a grant of Rights is personal to the Participant and cannot be transferred to other persons or entities (subject to Rule 3.3.1 in the Plan Rules), and further Rights may only be registered in the name of the Participant (Rule 2.6.1 of the Plan Rules). Subject to rule 4.4 of the Plan Rules (which deals with Cash Settlements), each exercised Right entitles the Participant to receive the relevant number of Shares in the Company, as set out in the Grant Letter (Rule 4.3.1 of the Plan Rules); and all Rights granted under these Plan Rules are subject to the Company's Clawback Policy, and any other internal codes of conduct (Rule 9.1.1 of the Plan Rules). Employee Share Trust In order to facilitate the Plans, Company A has established the EST by way of declaration of trust by the Trustee on 1st July 2016. Parties to the Trust Deed are Company A and the Trustee. Company A provides the following reasons for implementing the Plans by way of the EST: • The EST provides greater flexibility to Company A in acquiring shares either on or off-market to satisfy the Plans; as Company A is unable to acquire shares in itself; • The EST provides administrative efficiencies and enables employees of Company A to share in the growth and value of the company through an arms-length mechanism; • As an external / independent trustee acting on behalf of the beneficiaries of the EST in accordance with the Trust Deed, the Trustee assists Company A to satisfy corporate law requirements relating to a company dealing in its own shares; According to the Trust Deed, the EST broadly operates as follows: • The Trust Deed allows Company A and its subsidiaries to make contributions to the EST to allow the Trustee to acquire shares for The Plans, or request that the Trustee apply capital of the Trust for the purpose of acquiring the shares (Clause 4.1 of the Trust Deed); • The Trust Deed provides that the Trustee must within 7 days, or as directed, acquire Shares either on-market or via a subscription where written notice is received from Company A to do so (Clause 4.1 and 4.2 of the Trust Deed); • The Trust Deed provides that the forfeiture of Plan Shares by a Participant will result in the Shares being held by the Trustee on an unallocated basis. The Company by notice can direct the Trustee to reallocate the Shares for the benefit of another Participant, or hold the proceeds of sale in the Fund to meet future obligations under The Plans (Clause 4.6 of the Trust Deed); • The Trustee will be the legal owner on acquisition of Plan Shares, Company A or any of its subsidiaries are not permitted to have any beneficial interest in the Shares (Clause 4.2 of the Trust Deed); • The Trustee will receive direction from Company A as to when it must allocate Shares as Plan Shares to a Participant. The Trustee will notify Company A when it transfers or allocates Shares to a Participant and must notify the company of the relevant details (Clause 4.3 and 4.5 of the Trust Deed); • The Trustee at the direction of the Participant can sell Plan Shares that the Participant is entitled to. The Trustee will apply the proceeds first to brokerage fees and the balance to the Participant (Clause 4.10 of the Trust Deed). Should the EST be terminated the balance of any unallocated capital or income is not able to be paid to Company A or any of its subsidiaries (Clause 15.3 and 9.3 of the Trust Deed). There have been no contributions made to the EST or allocations of Shares to Participants as yet, however, it is contemplated that the period between contributions to the EST and the allocation of Shares will be as follows: • Generally, will not be significant (i.e. proposed to be less than 30 days); • There may be instances where Shares to satisfy future obligations are acquired on-market over a period of time instead of all at once (i.e. up to 6 months).

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 20-20 | Income Tax Assessment Act 1997 Section 83A-10 | Income Tax Assessment Act 1997 Section 83A-35 | Income Tax Assessment Act 1997 Section 83A-205 | Income Tax Assessment Act 1997 Section 83A-210 | Income Tax Assessment Act 1997 Section 102-5 | Income Tax Assessment Act 1997 Section 102-25 | Income Tax Assessment Act 1997 Section 104-35 | Income Tax Assessment Act 1997 Section 104-155 | Income Tax Assessment Act 1997 Subsection 130-85(4) | Income Tax Assessment Act 1997 Section 995-1 | Income Tax Assessment Act 1936 Section 139DB | Income Tax Assessment Act 1936 Section 139E | Income Tax Assessment Act 1936 Section 177A | Income Tax Assessment Act 1936 Section 177C | Income Tax Assessment Act 1936 Section 177D | Income Tax Assessment Act 1936 Section 177F | Income Tax (Transitional Provisions) Act 1997 Section 83A-5 | Income Tax (Transitional Provisions) Act 1997 Section 83A-10 | Fringe Benefits Tax Assessment Act 1986 Section 67 | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Summary: Company A will be entitled to an income tax deduction, pursuant to section 8-1, in respect of the irretrievable cash contributions made to the Trustee to fund the subscription for, or acquisition on-market of Company A shares by the EST. | Detailed Reasoning - Detailed reasoning: An employer is entitled to a deduction under section 8-1 for a contribution paid to the trustee of a Trust that is either incurred in gaining or producing the employer's assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing the employer's assessable income ('positive limbs'). However subsection 8-1(2) prevents such a deduction to the extent that it is a loss or outgoing of capital, or of a capital nature, is a loss or outgoing of a private or a domestic nature, is incurred in gaining or producing exempt income or non-assessable non-exempt income, or is prevented from being deductible under a specific provision of the ITAA 1997 or the ITAA 1936 ('negative limbs'). | Detailed Reasoning - First positive limb - incurred: To qualify for a deduction under section 8-1, a loss or outgoing must be incurred. Although the term 'incurred' is not defined in the legislation, reference can be made to Taxation Ruling TR 97/7 Income tax: section 8-1 - meaning of 'incurred' - timing of deductions (TR 97/7) and Taxation Ruling TR 94/26 Income tax: subsection 51(1) - meaning of incurred - implications of the High Court decision in Coles Myer Finance (TR 94/26). Broadly, a taxpayer incurs an outgoing at the time the taxpayer owes a present money debt that they cannot escape. Otherwise a loss or outgoing is incurred when a taxpayer is definitively committed to the loss or outgoing (refer to FC ofT v James Flood Pty Ltd (1953) 88 CLR 492). It is important to establish that the contributions are irretrievable and not refundable, as they will otherwise not be a permanent loss or outgoing incurred. A contribution made to the trustee of a Trust is incurred only when the ownership of that contribution passes from an employer to the Trustee and there is no circumstance in which the employer can retrieve that contribution - Pridecraft Pty Ltd v Federal Commissioner of Taxation [2004] FCAFC 339; Spotlight Stores Pty Ltd v Commissioner of Taxation [2004] FCAFC 339. In the present case, Company A has established the EST for the purpose of facilitating the acquisition, holding and allocation of shares to meet its obligations under the Plans, by making irretrievable and non-refundable contributions to the EST (Clause 4). The Trustee will then follow instructions or notices from the Board to acquire, deliver and allocate Company A's shares for the benefit of Participants, subject to receiving sufficient contributions (Clause 4.2). On this basis, it is concluded that Company A will incur an outgoing for purposes of subsection 8-1(1) at the time it makes irretrievable contributions to the Trustee. | Detailed Reasoning - Second positive limb - Relevant Nexus: To be deductible under section 8-1, a contribution must have been incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. To satisfy the second positive limb of section 8-1, there must be a sufficient nexus between the outgoing (contributions made by Company A) and the derivation of Company A's assessable income - The Herald and Weekly Times Limited v The Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 2 ATD 169, Amalgamated Zinc (De Bavay's) Limited v The Federal Commissioner of Taxation (1935) 54 CLR 295;(1935) 3 ATD 288, W. Nevill And Company Limited v The Federal Commissioner of Taxation (1937) 56 CLR 290;4 ATD 187;(1937) 1 AITR 67, Charles Moore & Co (W.A.) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344;(1956) 6 AITR 379; (1956) 11 ATD 147. An expense will have the relevant connection to the business when it is 'desirable or appropriate in the pursuit of the business ends of the business - Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation (1949) 78 CLR 47 at 56) and Magna Alloys & Research Pty Ltd v Federal Commissioner of Taxation (1980) 33 ALR 213. Draft Taxation Ruling TR 2014/D1 Income tax: employee remuneration trust arrangements provides the Commissioner's view on a broad scope of taxation consequences for employers, trustees and employees who participate in an employee remuneration trust ('ERT') arrangement. Paragraph 14 of TR 2014/D1 relevantly provides that where an employer: • carries on a business for the purpose of gaining or producing assessable income and engages employees in the ordinary course of carrying on that business; • makes a contribution to the trustee of an ERT [employee remuneration trust]; and • at the time the contribution is made, the primary purpose of the contribution is for it to be applied, within a relatively short period, to the direct provision of remuneration of employees (who are employed in that business), then such a contribution will satisfy the nexus of being necessarily incurred in carrying on that business. Accordingly, it is considered that the irretrievable contributions made by Company A to the Trustee will be an employee remuneration cost incurred in carrying on Company A's business and will satisfy the nexus of being necessarily incurred in carrying on that business for the purpose of gaining or producing assessable income. | Detailed Reasoning - Negative Limb - Revenue vs Capital: Where a contribution satisfies the positive limbs of subsection 8-1(1), it may not be deductible to an employer under subsection 8-1(2) to the extent that such a contribution is a loss or outgoing of capital, or of a capital nature, is a loss or outgoing of a private or a domestic nature, is incurred in gaining or producing exempt income or is prevented from being deductible under a specific provision of the ITAA 1997 or the ITAA 1936. On the facts, nothing has suggested that the contributions are private or domestic in nature, or are related to producing exempt income or non-assessable non-exempt income, or are otherwise prevented from being deductible under a specific provision of the ITAA 1997 or the ITAA 1936. Whether an outgoing is capital or revenue in nature can generally be determined by reference to the test articulated by Dixon J in the leading case on the capital/revenue distinction, Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR 337. In that case Dixon J stated that: There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay… TR 2014/D1 also indicates when a contribution made to the trustee of an employee share trust may be of a capital nature. Relevantly paragraphs 186 and 187 of TR 2014/D1 state: 186. A contribution to the trustee of an ERT is of capital or of a capital nature, when the contribution secures for an employer an asset or advantage of an enduring or lasting nature that is independent of year to year benefits that the employer derives from a loyal and contented workforce. 187. A contribution by an employer to the trustee of an ERT is considered to be capital or of a capital nature, in whole or in part, where the contribution… • is ultimately and in substance, applied by the trustee to acquire a direct interest in the employer (for example shares). In this case, irretrievable contributions are provided by Company A, as an employer to the Trustee. The contributions may ultimately and in substance be applied by the Trustee to subscribe for equity interests in Company A's shares. Thus Company A could be considered as having acquired an asset or advantage of an enduring nature which is capital or of a capital nature, in whole or in part. | Detailed Reasoning - Apportionment: In cases where a contribution is made for the purpose of securing advantages for the employer of both a capital and revenue nature, section 8-1 may require the contribution to be apportioned into deductible and non-deductible components. However, paragraph 198 of TR 2014/D1 provides that where the advantages of a capital nature are only expected to be very small or trifling in comparison, apportionment may not be required. Relevantly, paragraph 202 of TR 2014/D1 states: …where the primary purpose of the employer in making the contribution is to remunerate employees within a relatively short period (as discussed in paragraph 178…) of the contribution being made, it is considered that any amount of the contribution attributable to securing a capital structure advantage will only be very small or trifling where the employer: • intends that any direct interest in the employer acquired by the trustee of the ERT (for example shares) will be transferred to employees within that relatively short period, and • does not anticipate that such shares will be on-sold to third parties at that time or shortly thereafter. Paragraph 178 of TR 2014/D1 makes clear that the Commissioner will generally accept a relatively short period of time for the trustee of an ERT to diminish a contribution for the direct provision of remuneration to employees to be up to five years from the date the contribution was made by an employer to the trustee of a Trust. However, where the contribution has been made to facilitate an employee having an interest in the Trust corresponding to a particular number of shares (or right to acquire shares) in the employer or in its subsidiaries to which Subdivision 83A-C applies, a relatively short period of time for these arrangements will generally be accepted as being up to seven years from the date the contribution is made. Despite no contributions having yet been made to the EST or share allocations to the Participants, Company A submitted that the period between contributions to the EST and the share allocation will not be significant (i.e. proposed to be less than 30 days), and even where shares might be acquired on-market over a period of time instead of all at once the period is likely to be less than six months prior to allocation. As the time between contribution date and allocation date will be less than five years, it will be considered to be a 'relatively short period' as discussed in paragraph 178 of TR 2014/D1. In such cases the Commissioner accepts that any advantages of a capital nature that may arise from the irretrievable contributions made by Company A to the Trustee are expected to be very small or trifling and that apportionment of the deductible amount under section 8-1 is not required. | Detailed Reasoning - Conclusion: Irretrievable contributions made by Company A to the Trustee are deductible under section 8-1. To the extent that any part of the contribution is of capital or of a capital nature, the Commissioner accepts that such amounts will be very small or trifling and that apportionment to account for any capital component of the contribution would not be required. | Summary: Company A will obtain an income tax deduction, pursuant to section 8-1, in respect of costs incurred in relation to the on-going administration of the EST. | Detailed Reasoning - Detailed reasoning: Company A will incur costs associated with the services provided by the Trustee, including but not limited to: • employee share plan record keeping; • production and dispatch of holding statements to employees; • provision of annual income tax return information for employees; • costs incurred in the acquisition of shares on-market (e.g. brokerage costs and the allocation of shares to Participants; • management of employee termination; and • other Trustee expenses such as the annual audit of the financial statements and the annual income tax return of the EST. In addition to services provided by the Trustee, Company A has incurred and will incur various implementation costs, including the services provided by Company A's accounting, tax and legal advisors in drafting the Deed and applying for this private ruling. In accordance with the Trust Deed, the Trustee is not entitled to receive from the EST or Eligible Participants any fees or charges for administering the EST (Clauses 3.7 and 9.2 of the Trust Deed). Company A must pay to the Trustee from Company A's own resources any fees, commission or other remuneration and may reimburse any expenses incurred by the Trustee as agreed upon from time to time. The Trustee is entitled to retain for its own benefit any such remuneration or reimbursement (Clause 3.7 of the Trust Deed). The costs incurred by Company A in relation to the implementation and on-going administration of the EST are deductible under section 8-1 as either: • costs incurred in gaining or producing the assessable income of Company A, or • costs necessarily incurred in carrying on Company A's business for the purpose of gaining or producing the assessable income of Company A. The view that the costs incurred by Company A are deductible under section 8-1 is consistent with ATO ID 2014/42 Employer costs for the purpose of administering its employee share scheme are deductible in which it was decided that such costs are part of the ordinary employee remuneration costs of a taxpayer. Consistent with the analysis above in question 1, the costs are revenue and not capital in nature on the basis that they are regular and recurrent employment expenses and therefore, are not excluded from being deductible under paragraph 8-1(2)(a). Accordingly Company A is entitled to an income tax deduction, pursuant to section 8-1, in respect of costs incurred in relation to the implementation and on-going administration of the EST. | Summary: Irretrievable cash contributions made by Company A to The Trustee, to fund the subscription for or acquisition on-market of Company A shares by the EST, are deductible to Company A at a time determined by section 83A-210. | Detailed Reasoning - Detailed reasoning: Irretrievable contributions that are deductible under section 8-1 would generally be an allowable deduction in the income year in which the outgoing was made. However, under certain circumstances, the timing of the deduction is instead determined under section 83A-210. Section 83A-210 provides that: (a) at a particular time, you provide another entity with money or other property: (i) under an arrangement; and (ii) for the purposes of enabling an individual (the ultimate beneficiary) to acquire, directly or indirectly, an ESS interest under an employee share scheme in relation to the ultimate beneficiary's employment (including past or prospective employment); and (b) that particular time occurs before the time (the acquisition time) the ultimate beneficiary acquires the ESS interest; then for the purposes of determining the income year (if any) in which you can deduct an amount in respect of the provision of the money or other property, you are taken to have provided the money or other property at the acquisition time. Section 83A-210 will only apply if there is a relevant connection between the money provided to the trustee, and the acquisition of ESS interests (directly or indirectly) by Company A under the Plans in relation to the employee's employment. | Detailed Reasoning - Definitions: An ESS interest, in a company, is defined in subsection 83A-10(1) as either a beneficial interest in a share in a company or the right to acquire a beneficial interest in a share in a company. An employee share scheme is defined in subsection 83A-10(2) as a scheme under which the ESS interests in a company (or its subsidiaries) are provided to employees of a company, or their associates, in relation to their employment. Section 83A-210 will only apply if there is a relevant connection between the money provided to the trustee of the EST, and the acquisition of ESS interests (directly or indirectly) by the employee under an employee share scheme. | Detailed Reasoning - Application to this case: The Plans meet the definition of employee share schemes under subsection 83A-10(2) in that they are schemes under which ESS interests (being the rights to shares in Company A) are provided to employees or their associates of Company A in relation to the employee's employment. However rights acquired under the STIP and LTIP are indeterminate rights for the purposes of section 83A-340. This is because these Rights may (at the time of acquisition) be satisfied by either delivery of a share or payment of a cash equivalent and the determination of the payment type is at the discretion of the employer. Such Rights are not considered to be a right to acquire a beneficial interest in a share (i.e. an ESS interest for the purposes of Division 83A) unless and until the time when the proportion of the Rights that will be satisfied by the provision of shares is determined. Once this proportion is determined, section 83A-340 operates to treat these Rights as though they had always been a right to acquire a beneficial interest in a share. If the money is provided to the Trustee before these Rights are acquired (and the Rights do subsequently become an ESS interest), then section 83A-340 operates to deem the Rights to always have been an ESS interest. Where this occurs, section 83A-210 will apply (retrospectively) to modify the timing of the deduction claimed under section 8-1. In such a case a deduction to fund the exercise of the Rights would be available to Company A in the income year in which the Rights were acquired by Participants. | Summary: If the EST satisfies its obligations under the Plans, the subscription proceeds will not be included in the assessable income of Company A under section 6-5 or 20-20, nor will it trigger a CGT event under Division 104. | Detailed Reasoning - Ordinary Income: Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. The term 'income' was defined by Jordan CJ in Scott v Commissioner of Taxation (1935) 35 SR (NSW) 215 at 219; 3 ATD 142 at 144-145 where his Honour said: The word "income" is not a term of art, and what forms of receipts are comprehended within it, and what principles are to be applied to ascertain how much of those receipts ought to be treated as income, must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as the statute states or indicates an intention that receipts which are not income in ordinary parlance are to be treated as income, or that special rules are to be applied for arriving at the taxable amount of such receipts… A leading case on ordinary income is Eisner v Macomber 252 US 189 (1919). It was said in that case that: The fundamental relation of "capital" to "income" has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. …Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being "derived" that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal; …that is income derived from property. Nothing else answers the description. In G.P. International Pipecoaters Proprietary Limited v The Commissioner of Taxation of the Commonwealth of Australia (1990) 170 CLR 124 the High Court of Australia held that whether a receipt is income or capital depends on its objective character in the hands of the recipient. Brennan, Dawson, Toohey, Gaudron and McHugh JJ stated at page 138 that: To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes, the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In accordance with the employee share scheme, the trustee subscribes to the company for an issue of shares, it pays the full subscription price for the shares and the company receives a contribution of share capital from the trustee. The character of the contribution of share capital received by Company A from the Trustee can be determined by the character of the right or thing disposed of in exchange for the receipt. Under this arrangement, Company A is issuing the EST with a new share in itself. The character of the newly issued share is one of capital. Therefore, it can be concluded that the receipt, being the subscription proceeds, takes the character of share capital, and accordingly, is also of a capital nature. This view is supported by the reasoning in ATO ID 2010/155 Income Tax - Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee. As Company A receives subscription proceeds from the Trustee where the EST has subscribed for new shares to satisfy obligations to Participants, that subscription price received by Company A is a capital receipt, is not on revenue account, and not ordinary income under section 6-5. | Detailed Reasoning - Section 20-20: Division 20 deals with amounts included to reverse the effect of past deductions and section 20-20 deals with assessable recoupments, which are described at subsection 20-20(2) as 'an amount you receive by way of insurance, indemnity or other recoupment'. Company A will receive an amount for the subscription of shares by the Trustee. There is no insurance contract in this case, so the amount is not received by way of insurance. Further, the amount is not an indemnity because the receipt does not arise under a statutory or contractual right of indemnity, and the receipt is not in the nature of compensation. In relation to 'other recoupments' subsection 20-20(3) makes assessable a recoupment of a loss or outgoing that is deductible, or has been deductible or deducted in a previous income year, where the deduction was claimed under a provision in section 20-30. Recoupment of a loss or outgoing is defined in subsection 20-25(1) to include any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described and a grant in respect of the loss or outgoing. The Explanatory Memorandum to the Tax Law Improvement Bill 1997 states that the ordinary meaning of recoupment encompasses any type of compensation for a loss or outgoing. So far as a deduction under section 8-1 allowed for bad debts or rates or taxes is concerned, section 20-30 would apply such that if there was a recoupment of that deduction, that amount would be assessable. However, the subscription for new shares in Company A by the Trustee cannot be said to be a recoupment under subsection 20-25(1). In any event, even if it were a recoupment, the receipt by Company A made in return for issuing shares to the Trustee would not be a recoupment of previously deducted expenditure under section 8-1 regarding bad debts or rates and taxes to which section 20-30 could apply. As such, the amount could not be an assessable recoupment under subsection 20-20(3). | Detailed Reasoning - Capital Gains Tax (CGT): Section 102-20 states that a taxpayer can only make a capital gain or loss if, a CGT event happens. It is not possible to make a capital gain or loss if there is no CGT event. No CGT events occur when the Trustee satisfies its obligations under the Plans by subscribing for new shares. The relevant CGT events that may be applicable when the subscription proceeds are received by Company A are CGT events D1 (creating a contractual or other rights) and H2 (receipt for event relating to a CGT asset). However, paragraph 104-35(5)(c) states that CGT event D1 does not happen if a company issues or allots equity interests or non-equity shares in the company. In this case, Company A is issuing shares, being equity interests as defined in section 974-75, to the Trustee and therefore CGT event D1 does not happen. In relation to CGT event H2, paragraph 104-155(5)(c) states that CGT event H2 does not happen if a company issues or allots equity interests or non-equity shares in the company. Therefore, CGT event H2 does not occur. As no CGT event occurs, there is no amount that will be assessable as a capital gain to Company A. Therefore, when the Trustee satisfies its obligations under the Plans by subscribing for new shares, the subscription proceeds will not be included in the assessable income of Company A under section 6-5 or section 20-20, nor trigger a CGT event under Division 104. | Summary: The Commissioner will not seek to make a determination that Part IVA of the ITAA 1936 applies to deny, in part or full, any deduction claimed by Company A to the Trustee to fund the subscription for or acquisition on-market of Company A shares by the EST. | Detailed Reasoning - Detailed reasoning: Law Administration Practice Statement PS LA 2005/24 deals with the application of the general anti-avoidance rules, including Part IVA of the ITAA 1936. Part IVA gives the Commissioner the discretion to cancel a 'tax benefit' that has been obtained, or would, but for section 177F of the ITAA 1936, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. This discretion is found in subsection 177F(1) of the ITAA 1936. Before the Commissioner can exercise his discretion to make a determination in respect of Part IVA under subsection 177F(1) of the ITAA 1936, three requirements must be met. These are: • there must be a scheme within the meaning of section 177A of the ITAA 1936; • a tax benefit must arise based on whether a tax effect would have occurred, or might reasonably be expected to have occurred, if the scheme had not been entered into or carried out, and • having regard to the matters in paragraph 177D(b) of the ITAA 1936, the scheme is one to which Part IVA of the ITAA 1936 applies (dominant purpose) | Detailed Reasoning - The Scheme: Subsection 177A(1) of the ITAA 1936 (subsection 995-1(1)) provides that 'scheme' means: (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct; It is considered that this definition is sufficiently wide to cover the proposed arrangement under the Plans which utilises contributions made by Company A to the Trustee (in accordance with the Trust deed), to fund the acquisition of Company A shares on behalf of participating employees by the trustee. | Detailed Reasoning - Tax Benefit: 'Tax benefit' is defined in paragraph 177C(1)(b) of the ITAA 1936 as including: (b) a deduction being allowable to the taxpayer in relation to a year of income where the whole or a part of that deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to that year of income if the scheme had not been entered into or carried out; or… In order to determine the tax benefit that would be derived by Company A or its subsidiary from this scheme, it is necessary to examine other alternative schemes Company A might reasonably have been expected to enter into to achieve its aims in relation to employee remuneration. For example, • Company A could remunerate employees by way of increased salary, bonuses or deductible superannuation payments. Under these alternatives, identical or similar level of deductible expenses would arise to that which will arise under the proposed arrangement; or • Company A could issue shares directly to employees for no consideration. Having considered the tax advantages of the above alternative remuneration scheme, it suggests that there is no tax benefit for the first alternative. As payments of the additional cash amounts would be deductible to Company A, the same or similar deductible expenses would arise, compared to the current ESS Plan arrangement. If Company A were to issue new shares directly to its employees, it would not be entitled to any deduction for the shares (except the costs incurred when issuing and transferring any shares) unless section 83A-205 was satisfied. This provision requires that: • Company A must have provided an ESS interest to an individual under an employee share scheme; and • Company A did this as the individual's employer (or as the holding company of the employer); and • with the exception of paragraph 83A-35(2)(b), section 83A-35 must have applied to reduce the amount included in that individual's assessable income under subsection 83A-25(1). If the shares did meet these conditions, Company A would be entitled to a deduction equal to the amount of the reduction allowable to the individual under section 83A-35 to a total amount of $1,000. By contrast the use of the EST arrangement permits Company A, subject to the requirements of sections 8-1 and 83A-210, to claim a deduction for the full amount of the contributions it makes to the EST. It is probable that this amount would exceed that which would be allowable under section 83A-205 in the alternative scheme above. Therefore, to the extent of any increased deductions because of the EST arrangement, Company A obtains a tax benefit. While, for the reasons noted above by the applicant, it is unlikely that it would choose any other incentive plan that did not give rise to an allowable deduction (and therefore there would not be the necessary tax benefit), the analysis below proceeds on the assumption that the Commissioner would in fact be able to identify a relevant tax benefit. Section 177D of the ITAA 1936 provides that Part IVA only applies if, after having regard to certain factors specified in subsection 177D(2) of the ITAA 1936, it would be concluded that a person who entered into the scheme did so for the sole or dominant purpose of enabling the tax payer to obtain the tax benefit. | Detailed Reasoning - Subsection 177D(2) of the ITAA 1936: Subsection 177D(2) of the ITAA 1936 sets out the following factors that must be considered in deciding whether a scheme was entered into for the purpose of obtaining a tax benefit: (a) the manner in which the scheme was entered into or carried out; (b) the form and substance of the scheme; (c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out; (d) the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme; (e) any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme; (f) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme; (g) any other consequence for the relevant taxpayer, or for any person referred to in paragraph (f), of the scheme having been entered into or carried out; (h) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in paragraph (f). | Detailed Reasoning - (a) The manner of the scheme: In considering whether Part IVA applies, the necessary comparison to be made in relation to the factors listed in paragraph 177D(b) of the ITAA 1936 is between the scheme as proposed and the relevant alternative. The inclusion of the Trust in the scheme does give rise to a tax benefit, but Company A has provided the following reasons for the operation of the EST: • Administering The Plans through an EST provides for flexibility when meeting The Plan grants, in that Company A can direct the Trustee of the EST to acquire the shares either through share issue or on-market; • The EST provides an arms-length operation through which shares in Company A can be acquired and held on behalf of the relevant employees, which enables Company A to satisfy various corporate law requirements relating to a company dealing in their own shares; and • The EST provides further comfort to employees as the Trustee of the EST is external to Company A acting on behalf of the beneficiaries. It is accepted that the Trust provides benefits to the operation of the scheme that would not be available if the shares were provided directly by Company A. | Detailed Reasoning - (b) The Form and Substance of the scheme: The substance of the scheme is the provision of remuneration in the form of shares to employees who participate in the Plans. It takes the form of payments by Company A to the trustee which acquires the shares and transfers them to employees. While existence of the Trust may confer a tax benefit, it cannot be concluded that it is the only benefit provided, as outlined above. The applicant has argued that the form of the arrangement with the Trust provides the scheme with non-tax benefits and this is accepted. | Detailed Reasoning - (c) The timing of the scheme: The irretrievable cash contributions made by Company A to the trustee enable the trustee to acquire shares in Company A in satisfaction of employee rights and to use market conditions advantageously to meet potential employee share requirements in advance. The application of section 83A-210 to cash contributions made before the employee receives the right, prevents any timing advantage for the deductibility of those contributions. | Detailed Reasoning - (d) The result of the scheme: The result of the scheme is to provide Company A with allowable deductions for the contributions they make to the Trust. However, it is noted that the contributions are irretrievable and reflect a genuine non-capital outgoing on the part of Company A to achieve a business outcome. It is to be expected that a deduction would normally be allowable in these circumstances. | Detailed Reasoning - (e) Any change in the financial position of Company A: As noted above, Company A makes irretrievable cash contributions to the Trust and those contributions constitute a real expense with the result that Company A's financial position is changed to that extent. While it is arguable that the quantum of the deductions is higher with a trust as part of the scheme, in contrast to Company A providing shares to employees directly, there is nothing artificial, contrived or notional about Company A's expenditure. | Detailed Reasoning - (f) Any change in the financial position of other entities or persons: The contributions by Company A to the trustee will form the corpus of the Trust and must be dealt with by the trustee in accordance with the terms of the Trust deed, that is, for the acquisition of shares to ultimately be provided to Participants in the Plan. Company A is not a beneficiary of the Trust and its contributions cannot be returned to it in any form except where the trustee acquires shares from Company A by subscribing for new shares at market value. Therefore, the contributions made by Company A amount to a real change to the financial position of the trustee. The financial position of employee Participants and their associates in the scheme will also undergo a real change. This will be the case whether the shares are acquired through the Trust or provided directly by Company A. There is nothing artificial, contrived or notional about these changes. | Detailed Reasoning - (g) Any other consequence: There are no other consequences for Company A, their employees and or their associates that would be relevant as evidence of a dominant purpose of obtaining a tax benefit. | Detailed Reasoning - (h) The nature of any connection between Company A and any other persons: The relationship between Company A and the Participants in the Plan is one of employer/employee. The parties are unrelated. The contributions made by Company A to the trustee are commensurate with Company A's aim of providing the Participants with remuneration in a form that aligns their personal financial rewards with the risks and returns of Company A's shareholders. There is nothing to suggest that the parties to the employee share scheme are not acting at arm's length to one another. Accordingly, there is nothing in relation to this factor to indicate a dominant purpose of obtaining a tax benefit. | Detailed Reasoning - Conclusion - the purpose of the scheme: A consideration of all the factors referred to in subsection 177D(2) of the ITAA 1936 leads to the conclusion that the dominant purpose of the scheme is to provide remuneration to Company A Group's employees who participate in the scheme in a form that promotes Company A's business objectives, rather than to obtain a tax benefit. Accordingly, the Commissioner will not make a determination that Part IVA of the ITAA 1936 applies to deny, in part or full, any deduction claimed by the Company A in relation to irretrievable contributions made by the Company A to the Trust to fund the acquisition of employer shares in accordance with the scheme as outlined above. | Summary: The provision of rights or shares to participants under The Plans will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA. | Detailed Reasoning - The provision of indeterminate rights: A fringe benefit will only arise under subsection 136(1) of the FBTAA where benefits are provided to employees or associates of employees. Under the definition of fringe benefit, a benefit must also be provided 'in respect of' the employment of the employee. Paragraph (h) of the definition of fringe benefit in subsection 136(1) of the FBTAA states that a fringe benefit does not include: a benefit constituted by the acquisition of an ESS interest under an employee share scheme (within the meaning of the Income Tax Assessment Act 1997 ) to which Subdivision 83A-B or 83A-C of that Act applies; The Commissioner accepts that the Plan is an employee share scheme for the purposes of Division 83A and that rights are indeterminate rights under section 83A-340. ATO Interpretative Decision ATO ID 2010/142 Fringe Benefits Tax: Employee share scheme: indeterminate rights not fringe benefits states that The grant of indeterminate rights to employees of a company in relation to their employment is excluded from the definition of fringe benefit by paragraph 136(1)(f) or 136(1)(h) of the FBTAA. Subdivision 83A-B or 83A-C applies to those ESS interests. Accordingly, the acquisition of Rights pursuant to the Plan will not be subject to fringe benefits tax on the basis that they are acquired under an employee share scheme (to which Subdivision 83A-B or 83A-C will apply) and are thereby excluded from being a fringe benefit by virtue of paragraph (h) of the definition of fringe benefit in subsection 136(1) of the FBTAA. | Detailed Reasoning - The provision of Company A shares on exercise of Rights: As stated above, in general terms, 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee. The meaning of the phrase 'in respect of' was considered by the Full Federal Court in J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22. Heerey, Merkel and Finkelstein JJ at page 410 stated: Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material , rather than a , causal connection or relationship between the benefit and the employment. The situation is similar to that which existed in Federal Commissioner of Taxation v. McArdle 89 ATC 4051; (1988) 19 ATR 1901 where an employee was granted valuable rights in respect of his employment which he subsequently surrendered in return for a lump sum payment. Davies, Gummow and Lee JJ noted that what had occurred under the surrender agreement was not the granting of a valuable benefit, but the exploitation of rights received from the employer in previous years. When an employee of Company A or its subsidiaries accepts an offer to participate in the Plan, they obtain a right to acquire a beneficial interest in a share in Company A and this Right constitutes an ESS interest. When this Right is subsequently exercised, any benefit received would be in respect of the exercise of the Right, and not in respect of employment (refer ATO Interpretative Decision ATO ID 2010/219 Fringe Benefits Tax Fringe benefit: shares provided to employees upon exercise of rights granted under an employee share scheme). Therefore, the benefit that arises to an employee upon the exercise of a vested Right (being the provision of a share in Right) will not give rise to a fringe benefit as a benefit has not been provided in respect of the employment of the employee. | Summary: The irretrievable cash contributions made by Company A to The Trustee are not treated as a fringe benefit within the meaning of section 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: The term 'fringe benefit' is defined in subsection 136(1) of the FBTAA to mean benefits provided by an employer, an associate of the employer or an arranger with the employer, to employees, in respect of the employment of the employee. Pursuant to subsection 136(1) of the FBTAA, a fringe benefit is defined to exclude: … (h) a benefit constituted by the acquisition of an ESS interest under an employee share scheme (within the meaning of the Income Tax Assessment Act 1997 ) to which Subdivision 83A-B or 83A-C of that Act applies; or (ha) a benefit constituted by the acquisition of money or property by an employee share trust (within the meaning of the Income Tax Assessment Act 1997 )… Subsection 995-1(1) provides that the meaning of 'employee share trust' is defined as having the meaning given by subsection 130-85(4). Subsection 130-85(4) provides that an employee share trust for an 'employee share scheme' (having the meaning given by subsection 83A-10(2) is a trust whose sole activities are: (a) obtaining *shares or rights in a company; and (b) ensuring that *ESS interests in Company A that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to *associates of employees, of: (i) Company A; or (ii) a *subsidiary of Company A; and (c) other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b). The terms 'ESS interest' and 'employee share scheme' which are defined in section 83A-10 of the ITAA 1997, were considered previously in relation to the first issue. It is accepted the Plan is an employee share scheme under which ESS interests being rights are provided to employees, or associates, or employees of Company A. The Trust is an employee share trust as defined in subsection 995-1(1), as the activities of the Trust in acquiring and allocating ESS interests meet the requirements of paragraphs 130-85(4)(a) and 130(4)(b) and its other activities are merely incidental to those activities in accordance with paragraph 130-85(4)(c). As such paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA excludes the contributions to the Trustee from being a fringe benefit. Therefore, the irretrievable contributions Company A makes to the Trustee, to fund the on market acquisition of, or subscription for Company A's shares are not fringe benefits within the meaning of subsection 136(1) of the FBTAA 1986. | Summary: The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of Company A, by the amount of tax benefit gained from irretrievable cash contributions made by Company A to The Trustee, to fund the subscription for, or acquisition on-market of Company A shares | Detailed Reasoning - Detailed reasoning: As mentioned previously, PS LA 2005/24 has been written to assist those who are contemplating the application of Part IVA or other general anti-avoidance rules to an arrangement, including in a private ruling. It succinctly explains how section 67 of the FBTAA operates. Most notably, paragraphs 145 - 148 provide as follows: 145. Section 67 is the general anti-avoidance provision in the FBTAA 1986. The operation of section 67 is comparable to Part IVA, in that the section requires the identification of an arrangement and a tax benefit, includes a sole or dominant purpose test and is activated by the making of a determination by the Commissioner. The definition of 'arrangement' in subsection 136(1) of the FBTAA 1986 is virtually identical to the definition of 'scheme' in section 177A of Part IVA. 146. Subsection 67(1) of the FBTAA 1986 is satisfied where a person or one of the persons who entered into or carried out an arrangement or part of an arrangement under which a benefit is or was provided to a person, did so for the sole or dominant purpose of enabling an eligible employer or the eligible employer and another employer(s) to obtain a tax benefit. 147. An objective review of the transaction and the surrounding circumstances should be undertaken in determining a person's sole or dominant purpose in carrying out the arrangement or part of the arrangement. Section 67 differs from paragraph 177D(b) in Part IVA in that it does not explicitly list the factors that should be taken into account in determining a person's sole or dominant purpose. 148. Subsection 67(2) of the FBTAA 1986 provides that a tax benefit arises in respect of a year of tax in connection with an arrangement if under the arrangement: (i) a benefit is provided to a person; (ii) an amount is not included in the aggregate fringe benefits amount of the employer; and (iii) that amount would have been included or could reasonably be expected to have been included in the aggregate fringe benefits amount, if the arrangement had not been entered into. Therefore, the Commissioner would only seek to make a determination under section 67 of the FBTAA if the arrangement resulted in the payment of less fringe benefits tax than would be payable but for entering into the arrangement. The point is made effectively in Miscellaneous Taxation Ruling MT 2021 Fringe Benefits Tax-Response to questions by major rural organisation under the heading "Appendix, Question 18" where, on the application of section 67, the Commissioner states: …As mentioned in the explanatory memorandum to the FBT law, section 67 may only apply where there is an arrangement under which a benefit is provided to a person and the fringe benefits taxable amount in respect of that benefit is either nil or less than it would have been but for the arrangement... Further, paragraph 151 of Practice Statement 2005/24 provides: 151. The approach outlined in this practice statement (refer to paragraphs 69 to 113) to the counterfactual and the sole or dominant purpose test in Part IVA is relevant and should be taken into account by Tax officers who are considering the application of section 67 of the FBTAA 1986. In the present case, the benefits provided to the Trustee by way of irretrievable contributions to the EST, and to Participants by way of the provision of Rights (and the Company A shares received on their vesting) under the Plans are excluded from the definition of a fringe benefit for the reasons given in questions 1 and 2 of the Issue 3 above. Therefore, as these benefits have been excluded from the definition of a fringe benefit and as there is also no fringe benefits tax currently payable under the Plan (without the use of an EST) and nor likely would fringe benefits tax be payable under alternative remuneration plans, the fringe benefits tax liability is not any less than it would have been but for the arrangement. Accordingly, the Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of Company A by the amount of the tax benefit gained from the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or acquisition on-market of Company A shares.

Authorisation Number: 1013072651758: All references are to the Income Tax Assessment Act 1997 unless otherwise stated. | Will the provision of rights or shares to Participants under The Plans be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (' FBTAA ')? | Question 2: Will the irretrievable cash contributions made by Company A to The Trustee, to fund the subscription for, or acquisition on-market of Company A shares, be treated as a fringe benefit within the meaning of section 136(1) of the FBTAA? | Question 3: Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of Company A, by the amount of tax benefit gained from irretrievable cash contributions made by Company A to The Trustee, to fund the subscription for, or acquisition on-market of Company A shares