Private ruling: Employee share scheme
Date of advice: 13 August 2020
Published: September 2020

Ruling: Q1: Will irretrievable cash contributions made by the Company to the Trustee in accordance with the Plan andthe Trustto fund the subscription for, or acquisition on-market of, Company Shares be assessable income of the Trust pursuant to sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) or Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No | Q2: a) Will the Trustee make a capital gain or loss from CGT event E5 (in section 104-75 of the ITAA 1997) happening when a participant satisfies the Vesting Conditions for the Awards, and the Trustee allocates a Share to the Participant? b) Will the Trustee make a capital gain or loss from CGT event E7 (in section 104-85 of the ITAA 97) or CGT event A1 (in section 104-10 of the ITAA 97) happening when the Trustee transfers legal ownership of the Shares to the Participant following allocation? | A2: No | Q3: Will the Trustee be entitled to a tax offset for any franking credits under Subdivision 207- B of the ITAA 1997 attached to franked distributions on Unallocated Shares? | A3: Yes The rulings apply for the following periods: Income tax year ended 30 June 20XX Income tax year ended 30 June 20XX Income tax year ended 30 June 20XX Income tax year ended 30 June 20XX Income tax year ended 30 June 20XX Income tax year ended 30 June 20XX

Relevant facts and circumstances: The Company incurs on-ongoing administration costs for operating the ESS such as: · accounting · tax compliance · legal compliance, and · share transaction costs. This Ruling only applies to Participants who are Australian residents for tax purposes. The Trust will only be used to facilitate the requirements of any equity-based Awards granted under the Plan. The Trust will not be used to settle any cash-based remuneration arrangements under the Plan. Plan Rules The purpose of the Plan is to provide Eligible Employees with an opportunity to share in the growth in value of the Shares and to encourage them to improve the performance of the Company and its return to Shareholders. Issue of Rights and Options The Board may from time to time determine that the Company will offer Awards to an Eligible Employee. The issue of Rights, Options and Shares be subject to the deferred taxation regime in Division 83A of the ITAA 1997. For each invitation to each Eligible Employee to participate under the Plan, the Board must give that Eligible Employee an Offer Document to complete, sign and return to the Company, which includes the following information: · the number of Rights or Options to which the invitation relates, or · the basis on which the number of Rights or Options to which the invitation relates is to be determined · the Vesting Date and the Last Exercise Date, or · the basis on which the Vesting Date and the Last Exercise Date are to be determined · in the case of Options only: - the Exercise Price, or - the basis on which the Exercise Price is to be determined · the Performance Conditions attaching to the Rights or Options (if any) · whether a Holding Lock will apply to the Shares issued on exercise of the Rights or Options and, if so, the period not exceeding 2 years from the First Exercise Date for which that Holding Lock will apply · any other terms and conditions relating to the grant of the Rights or Options or the delivery of any Shares on exercise of the Rights or Options which, in the opinion of the Board, are fair and reasonable but not inconsistent with the Plan · a summary or a copy of the Plan, and · any other information or documents that the Applicable Laws require the Company to give to the Eligible Employee. On the issue of an Award, the Eligible Employee becomes a Participant. An Award will be issued for consideration comprising the services that are expected to be provided by an Eligible Employee, but no further monetary or other consideration will be payable in respect of the issue of the Award. Each Option confers the entitlement, upon exercise of the Option, to subscribe for and be issued one Share at the Exercise Price, and each Right confers the entitlement, upon exercise of the Right to be issued one Share. A Participant has no interest in a Share until the Share is issued to that Participant under the Plan. Vesting of Rights and Options Vesting of an Award held by a Participant is subject to the following conditions being satisfied: · the Participant must have been an employee of a company within the Group between the Date of Grant and the Vesting Date · the Performance Conditions relating to the Award, and · any other conditions included in the Specific Terms. Exercise of Rights and Options Subject to the Plan, and terms of issue, an Award maybe exercised at any time during the Exercise Period for that Award. Subject to the Plan, an Award may be exercised before the Exercise Period if a resolution for a members voluntary winding up is proposed. An Award which has not lapsed may be exercised by the Participant giving to the Company: Once the Notice of Exercise becomes effective, the Company must transfer or issue the number of Shares specified in the Notice of Exercise to the Participant, cancel the Certificate for the Awards being exercised and if applicable, issue a new Certificate for any remaining Awards. Shares allocated on exercise of Awards rank pari passu in all respects with Shares previously issued, in particular, entitlement to dividends declared after the date of allotment, and all issues of securities made or offered pro rata to holders of Shares. Lapse of Rights and Options An Award which has vested with the Participant lapses on the earlier of the Last Exercise Date or the date determined by the Board after the date of termination of employment of the Participant. If a Participant is a Bad Leaver, then on the date of cessation of employment of that Participant all Awards held by the Participant will be automatically forfeited and will lapse. All rights, title and interests in all Awards held will be automatically forfeited. If a Participant fails for any reason to exercise all the Awards registered in the Participant's name before the occurrence of a circumstance those Awards that the Participant would have been entitled to exercise and may have had an entitlement to have vested in lapses and all rights of a Participant under the Plan in respect of those Awards ceases. Dealings with Rights and Options Except as permitted by the Plan, an Award is personal to the Participant and may not be exercised by another person, nor Dispose of or otherwise deal with. Any purported Disposal or dealing is not recognised in any manner. Dealings with Shares Participants must comply with the Share Trading Policy at all times. A Holding Lock will be applied to Shares issued on exercise of Awards. If a Holding Lock applies, the Shares will not be transferable, and Participants may not encumber the Shares (unless an exception applies). Administration of the Plan The Plan is administered by the Board. The Board has power to determine appropriate procedures and make regulations for the administration of the Plan, as well terminate or suspend the operation any time, provided that the termination or suspension does not adversely affect or prejudice the rights of Participants holding Awards at that time. Subject to the clauses in the Plan, the Company must pay all expenses, costs and charges incurred in the administration of the Plan in the amounts and proportions as they shall agree. The Trust Deed Establishment of the Trust The Trust has been established for the purpose of acquiring and holding Plan Shares and holding any other Trust Property for the benefit of Participants in accordance with the Deed. The Company must pay all Trust Expenses. Plan Trustee Subject to the Trust Deed, the Trustee has all of the powers in respect of the Trust that it is legally possible for a trustee to have as though it were the absolute owner of the Trust Property and acting in its personal capacity. The Trustee is not entitled to receive from the Trust any remuneration in respect of its performance of its obligations as trustee of the Trust. The Company must pay the Trustee, from its own resources, such fees and reimburse such expenses incurred by the Trustee as the Company and the Trustee agree in writing. The Trustee is entitled to retain for its own benefit any fee or reimbursement agreed to in writing. The Company and the Trustee agree that the Trust will be managed and administered so that it satisfies the definition of "employee share trust" (EST) for the purposes of section 130-85(4) of the ITAA 1997. Operation of the Trust The Company may contribute money to the Trustee to fund the acquisition or subscription of Shares for the purposes of the Plan. Any such contributions to the Trustee by the Company for the acquisition or subscription of Shares are irretrievable by the Company. The Trustee must, if directed by the Company acquire Shares in the ordinary course of trading, or by way of an off-market transaction, and/or subscribe for new Shares issued by the Company. The Company must provide the Trustee with any funds required by the Trustee in order to comply with its obligations. All funds received by the Trustee from the Company will constitute Accretions to the corpus of the Trust and will not be repaid to the Company and, unless the Trust Deed or the Plan Rules state otherwise, no Participant shall be entitled to receive such funds. Where an amount paid by the Company to the Trustee in respect of the subscription or acquisition of Shares for the benefit of a Participant or Participants is in excess of the amount required by the Trustee to meet its obligations, the Trustee must deposit the amount into any account opened and operated by the Trustee to be used for the Trustee to apply such amounts to subscribe for, acquire, and/or allocate and deliver Shares in accordance with the Deed or the Plan Rules. The Trustee must not sell or otherwise dispose of any Shares other than in accordance with the Deed or under the relevant Plan Rules. Unless and until Shares are allocated to a Participant or transferred to a Participant, the Trustee will hold those Shares on trust for the benefit of Participants generally from time to time in accordance with the terms and conditions of the Deed. Upon Shares being allocated to a Participant, the Participant becomes beneficially entitled to such Shares, subject to the relevant Plan Terms. During any Restrictive Period, the Trustee must not assign, transfer, sell, grant an Encumbrance over or otherwise deal with Allocated Plan shares. The Company may apply arrangements it considers necessary to enforce restrictions including applying a holding lock on Allocated Plan Shares. At any time after a Restrictive Period and subject to securities trading policy and Applicable Law, a Participant may request transfer of legal title to those Allocated Plan Shares. Forfeited Shares A Participant may forfeit any right or interest in their Allocated Plan Shares or Shares in respect of which the Participant is the registered holder, in accordance with the Plan under which those Allocated Plan Shares or Shares were allocated or provided to the Participant. When Shares where a Participant is the registered holder, become Forfeited Shares, the Board may at its discretion, direct the Trustee to purchase and otherwise accept a transfer of those Forfeited Shares. The Trustee must, if directed by the Company, reallocate any Forfeited Shares (or the proceeds of sale of such Forfeited Shares), for the benefit one or more other Participants or for the benefit of, one or more Participants under any Company Plan in respect of which the Trustee is trustee. Unless the Company cancels Forfeited Shares, the Trustee must hold Forfeited Shares (or the proceeds of sale of such Forfeited Shares) for the benefit of Participants as though they were Unallocated Shares unless and until it receives a notice from the Company. Dividends Subject to the Trust Deed, if the Trustee holds Allocated Shares on a Participant's behalf, the Participant is entitled to receive all Dividends and other distributions paid in respect of their Allocated Shares and the Trustee must pay all Cash Dividends received in respect of the Participant's Allocated Shares to the Participant. No Participant may waive any Dividend entitlement due to it. Income and capital distributions A Participant is presently entitled to so much of the Net Income of the Trust for a Year of Income which is attributable to the Allocated Shares held by the Trustee on behalf of the Participant and the proceeds of sale arising from the sale of Share Rights or Shares by the Trustee on behalf of the Participant. The balance of the Net Income of the Trust for a Year of Income to which no Participant is presently entitled in accordance may be applied in payment of any necessary and incidental costs and expenses incurred by the Trustee in the execution of the Trust, or accumulated by the Trustee as an Accretion to the Trust. Termination of the Trust Upon termination of the Trust, if there is any Trust Property remaining in the Trust following the distribution to Participants of any Allocated Shares and any Net Income attributable to Participants and the application of any capital of the Trust, that Trust Property must be applied in whole or in part for the benefit of one or more of Termination Beneficiaries as the Trustee thinks fit. The Trustee must not pay any balance to the Company.


Reasons for decision: Summary: The irretrievable cash contributions made to the Trustee to fund the acquisition of Company Shares under the Plan are neither ordinary income nor statutory income and will not be assessable income of the Trust under sections 6-5, 6-10 or Division 6 of Part III. | Detailed Reasoning - Section 6-5: Under subsection 6-5(1), assessable income includes income according to ordinary concepts, which is called ordinary income. The irretrievable cash contributions made by the Company to the Trustee under the terms of the Plan and the Trust are to be used for the sole purpose of obtaining shares in the Company for the benefit of Participants, they will constitute accretions to the corpus of the. Accordingly, the irretrievable cash contributions constitute capital receipts to the Trustee of the Trust. The irretrievable cash contributions made by the Company to the Trustee will not be included in the Trustee's assessable income under section 6-5 as ordinary income because the contributions are of a capital nature. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. | Detailed Reasoning - Section 6-10: Under subsection 6-10(1), assessable income includes some amounts that are not ordinary income. These are included by provisions about assessable income listed under section 10-5. None of the provisions listed in section 10-5 is relevant in the present circumstances. In ATO Interpretative Decision ATO ID 2002/965, Income Tax - Trustee not assessable on employer contributions made to it under the employee share scheme, the Commissioner has expressed the view that the funds provided to the trustee of an employee share scheme trust constitute capital receipts to the trustee, and are not assessable under sections 6-5 or 6-10. Division 6 of Part III Under Division 6 of Part III, it is generally the beneficiaries of a trust, who are presently entitled to a share of the income of the trust, who include that share of the 'net income' of the trust in their assessable income. The trustee is generally taxed on the balance of the net income which is not included in the assessable income of a beneficiary. Section 95 defines net income in relation to a trust as follows, insofar as it is relevant: net income , in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions .... Given that the irretrievable cash contributions made by the Company to the Trustee are neither ordinary income nor statutory income, they will not be included in the assessable income of the Trust, and hence will not form part of the 'net income' of the Trust (under Division 6 of Part III). | Summary: A capital gain or capital loss that arises for the Trustee at the time when the Participants become absolutely entitled to Company shares (CGT event E5 ), or when the Trustee disposes of the shares to the Participants (CGT event E7) 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. The Trustee will not make a capital gain or capital loss from CGT event A1 under section 104-10 when the Trustee transfers the legal ownership of the Shares to a Participant following allocation. | Detailed Reasoning - Detailed reasoning: Generally, CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee, subject to some exceptions (section 104-75). If CGT event E5 happens, the trustee makes a capital gain or capital 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)). However, any capital gain or capital loss the trustee makes is disregarded for employee share trusts (Note in subsection 104-75(4)). The meaning of an employee share trust is defined in subsection 130-85(4), which examines the activities of the trustee. The present Trust is an employee share trust because: · the Trust acquires shares in a company · the Trust ensures that ESS interests as defined in subsection 83A-10(1) (being Rights and Options in the Plan) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating those Shares to the employees in accordance with the Trust Deed and the Plan, and · the objects of the Trust are for the sole purpose of undertaking activities that are in line with the definition of an employee share trust under subsection 130-85(4).The powers and activities allowed to be undertaken by the Trustee according to the Trust Deed are in line with the types of activities that are merely incidental as set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? Section 130-90 operates to disregard any capital gain or capital loss if the conditions in that section are satisfied, subsection 130-90(1) applies in respect of shares held to satisfy the future exercise of rights acquired under employee share schemes. | Detailed Reasoning - Subsection 130-90(1): Subsection 130-90(1) applies to disregard any capital gain or loss made by an employee share trust if: (a) the CGT event is CGT event E5 or E7 (b) the CGT event happens in relation to a share (c) the beneficiary had acquired a beneficial interest in the share by exercising a right, and (d) 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. | Detailed Reasoning - Paragraph 130-90(1)(a): CGT event E5 is the CGT event that will apply under the terms of the Trust and Plan at the time the Participant becomes absolutely entitled to the Shares as against the Trustee when Exercise Conditions are met and the Right or Option is exercised. | Detailed Reasoning - Paragraph 130-90(1)(b): Subsection 995-1(1) defines a share in a company to mean a share in the capital of a company. A company share held by the Trustee and to which a Participant is entitled upon exercise of a Right or Option is a share in the capital of a company. Accordingly, CGT event E5 happens in relation to a share. | Detailed Reasoning - Paragraph 130-90(1)(c): Paragraph 130-90(1)(c) is satisfied as a Participant will have acquired a beneficial interest in a share by exercising a Right or Option provided under the Plan. | Detailed Reasoning - Paragraph 130-90(1)(d): 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. The Right or Option in the Plan is an 'ESS interest' under paragraph 83A-10(1)(b) because it is a beneficial interest in a right to acquire a Share in the Company. Subsection 83A-10(2) defines an employee share scheme as being 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. The Plan is an employee share scheme within the meaning of subsection 83A-10(2) because it is a scheme under which Rights and Options to acquire beneficial interests in Shares in the Company are provided to employees in relation to the employee's employment. Each Right or Option is acquired for no cost. As the Participant acquires the Right or Option for no cost, the ESS interest is acquired by the Participant at a discount. Therefore, Subdivision 83A-B or 83A-C applies to the Right under the Plan. Accordingly, all the conditions in subsection 130-90(1) have been satisfied. Provided a Participant does not acquire the beneficial interest in the Share for more than its cost base in the hands of the Trust at the time that CGT event E5 happens, subsection 130-90(1) will apply. Any capital gain or capital loss that the Trustee makes from CGT event E5 for the Plan is disregarded. | Detailed Reasoning - CGT Event E7: CGT event E7 happens if the trustee of a trust disposes of a CGT asset of a trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital (section 104-85). CGT event E7 may happen in relation to a Share when the Trustee disposes of the Share in satisfaction of a Participant's beneficial interest in the Share. However, section 106-50 affects the operation of section 104-85 such that CGT event E7 may not happen in these circumstances. Section 106-50 provides: If you are absolutely entitled to a CGT asset as against the trustee of a trust (disregarding any legal disability), this Part and Part 3-3 apply to an act done by the trustee in relation to the asset as if you had done it. A Participant, on allocation of the Shares by the Trustee, becomes absolutely entitled to those Shares. Each Participant is absolutely entitled to any Shares held by the Trustee on their behalf and is entitled to all other benefits and privileges attached to, or resulting from holding, those shares. Once a Participant is absolutely entitled to a Share held on their behalf by the Trust, section 106-50 will deem the disposal of the Share by the Trustee to be done by the Participant. This means there would be no change in the share's ownership. Therefore, section 106-50 will apply such that if the Trustee disposes of the Shares under the Plan the Trustee will not make a capital gain or capital loss under CGT Event E7. | Detailed Reasoning - CGT event A1: Subsection 104-10(1) provides that CGT event A1 happens if you dispose of a CGT asset. Under subsection 104-10(2), you dispose of a CGT asset if a change of ownership occurs from you to another entity. The Participants become absolutely entitled to Company Shares allocated to them pursuant to an Award when the relevant Vesting Conditions are satisfied (causing CGT event E5 to happen). When the Trustee transfers the legal ownership of the Shares to a Participant following allocation, section 106-50 will deem the Shares to already be an asset of the Participant and the transfer of the Shares by the Trustee to have been done by the Participant. On this basis, when the Shares are transferred from the Trustee to the Participant, CGT event A1 will not happen because there is no change of ownership for the purposes of subsection 104-10(2). | Summary: Provided that the Trustee does not make a related payment in relation to the dividend paid on the Unallocated Shares and holds the Unallocated Shares at risk for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45 th day after the Unallocated Shares become ex dividend , then the Trustee will be a qualified person in respect of the distribution and be entitled to the benefit of the franking credits attached to franked distributions to the extent of tax payable. Any excess franking tax offset is not refundable pursuant to section 67-25. | Detailed Reasoning - Detailed reasoning: Division 207 deals with the effect of receiving franked distributions. Subsection 207-5(3) provides that if a franked distribution is made to a member that is a trustee of a trust, an amount equal to the franking credit on the distribution is included in the member's assessable income. Subsection 207-5(4) provides: However, a tax offset in relation to that distribution is only available to an entity (who may be a partner, beneficiary or a trustee) if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution. Subdivision 207-B deals with the effect of receiving a franked distribution through certain partnerships and trusts. Section 207-25 provides: This Subdivision deals with an entity that receives a benefit of a franked distribution where: (a) the distribution is made to a partnership or the trustee of a trust; and (b) the benefit is received either directly or through other interposed partnerships or trusts. The distribution is regarded as flowing indirectly to the entity under this Subdivision. On the basis of a notional amount of the entity's share of the distributions, the entity may be entitled to have an amount included in its assessable income and/or a tax offset under this Subdivision. Subsection 207-35(1) provides that if a franked distribution is made in an income year to an entity that is a trustee of a trust, the assessable income of the trust for the income year includes the amount of the franking credit on the distribution if the following conditions are met at the time the distribution is made: · the entity is not a corporate tax entity; and · in the case of a trustee of a trust, the trust is not a complying superannuation entity. Under subsection 207-50(4), a franked distribution will be taken to flow indirectly to the trustee of a trust relevantly if: · the distribution is made to the trustee, · the trustee is liable to be assessed on all or part of the trust's net income for that year under section 99A (subparagraph 207-50(4)(b)(ii)); and · the trustee's share of the distribution under section 207-55 is a positive amount, whether or not the trustee actually receives any of that share. Consequently, where the Trustee of the EST receives a franked distribution in respect of an unallocated share, an amount equal to the franking credit attached to the distribution will be included in the assessable income of the Trustee. | Detailed Reasoning - Tax offset: Section 207-45 relevantly states: An entity to whom a franked distribution flows indirectly in an income year is entitled to a tax offset for that income year that is equal to its share of the franking credit on the distribution if it is: ... (c) the trustee of a trust that is liable to be assessed on a share of, or all of a part of, the trust's net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 for that income year; The Trustee will be liable to be assessed under section 99A in relation to dividends on unallocated shares. However, where a franked dividend is paid to an entity, subsection 207-145(1) denies a gross-up and tax offset where that entity is not a qualified person for the purposes of Division 1A of the former Part IIIAA. | Detailed Reasoning - Qualified person: Former section 160APHO relevantly states: (1) A taxpayer who has held shares or an interest in shares on which a dividend has been paid is a qualified person in relation to the dividend if: (a) where neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the primary qualification period in relation to the dividend; or (b) where the taxpayer or an associate of a taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the secondary qualification period in relation to the dividend. (2) A taxpayer who has held shares or an interest in shares on which a dividend has been paid satisfies this subsection in relation to a qualification period in relation to the shares or interest if, during the period: (a) where the taxpayer held the shares - the taxpayer held the shares for a continuous period (not counting the day on which the taxpayer acquired the shares or, if the taxpayer has disposed of the shares, the day on which the disposal occurred) of not less than: (i) if the shares are not preference shares - 45 days; or (ii) ... (b) where the taxpayer held the interest in the shares-the taxpayer held the interest for a continuous period (not counting the day on which the taxpayer acquired the interest or, if the taxpayer has disposed of the interest, the day on which the disposal occurred) of not less than: (i) if the shares are not preference shares - 45 days; or (ii) ... Former section 160APHD defines: primary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means the period beginning on the day after the day on which the taxpayer acquired the shares or interest and ending: (a) if the shares are not preference shares - on the 45th day after the day on which the shares or interest became ex dividend ; secondary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means: (a) if the shares are not preference shares - the period beginning on the 45th day before, and ending on the 45th day after, the day on which the shares or interest became ex dividend ; The term 'related payment' is defined in former section 160APHN to relevantly mean: (2) The taxpayer or associate is taken, for the purposes of this Division, to have made, to be under an obligation to make, or to be likely to make, a related payment in respect of the dividend or distribution if, under an arrangement, the taxpayer or associate has done, is under an obligation to do, or may reasonably be expected to do, as the case may be, anything having the effect of passing the benefit of the dividend or distribution to one or more other persons. Where the Trustee does not make a related payment in respect of the dividend paid on the shares, the Trustee will be a qualified person in respect of the dividend if the Trustee held the shares at risk for a continuous period of not less than 45 days (excluding the day the shares were acquired and if the shares have been disposed of, the day the disposal occurred) during the period beginning on the day after the day on which the Trustee acquired the shares and ending on the 45th day after the day on which the shares became ex dividend (primary qualification period). However, where the Trustee makes a related payment in respect of the dividend on the shares, the Trustee will be a qualified person in respect of the dividend if the Trustee held the shares at risk for a continuous period of not less than 45 days (excluding the day shares were acquired and if the shares have been disposed of, the day the disposal occurred) during the period beginning on the 45 th day before and ending on the 45 th day after the day on which the shares become ex dividend (secondary qualification period). A share, in respect of which a dividend is paid, becomes ex dividend on the day after the last day on which the acquisition by a person of the share will entitle that person to receive the dividend. The refundable tax offsets in Division 67 may apply to the tax offset available to the Trustee of the EST under Division 207. | Detailed Reasoning - Refundable tax offset rules: Subsection 67-25(1) states: Tax offsets available under Division 207 (which sets out the effects of receiving a franked distribution) or Subdivision 210-H (which sets out the effects of receiving a distribution franked with a venture capital credit) are subject to the refundable tax offset rules, unless otherwise stated in this section. Subsection 67-25(1B) provides that the tax offset is only subject to the refundable tax offset rules if the trustee entitled to the tax offset is not liable to be assessed under section 98 or 99A. As franked distributions flow indirectly to the Trustee of the EST, the Trustee is entitled to a franking tax offset under section 207-45. However, the Trustee is assessed on the distributions received in respect of unallocated shares under section 99A. Therefore, the tax offsets available to the Trustee are limited to the amount of tax payable and any excess franking tax offset is not refundable.

a Notice of Exercise signed by the Participant | the Certificate for the Option and | in the case of Options only, a cheque or electronic funds transfer payable to the Company for the Exercise Price for the number of Options being exercised. | Reasons for Decision: All legislative references in this Ruling are to provisions of the ITAA 1936, or to provisions of the ITAA 1997, unless otherwise indicated.