Private ruling: Employee share trust
Date of advice: 11 September 2025
Published: 17 November 2025
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: In a particular income year

Ruling: Q1: Will the irretrievable cash contributions by Company A, or any subsidiary member of the Company A tax consolidated group, to the Trustee of the Company A Employee Share Trust (Trust) to fund the acquisition of Company A shares by the Trust for the purposes of the Plans be assessable income of the Trust under section 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A5: Not applicable

Relevant facts and circumstances: Background 1. Company A is a company carrying on a business in Australia. 2. Company A has a remuneration strategy which offers an incentive program to eligible personnel whereby they receive shares in Company A upon the satisfaction of certain performance conditions. This encompasses an incentive framework that includes a Short-Term Incentives Program (STIP) and Long-Term Incentive Program (LTIP). These programs are implemented through the Plans. 3. Company A employees are all based in Australia and Company A only has operations in Australia. The Plans 4. The Plans comprise a Performance Rights Plan and Share Rights Plan. Essentially, the key terms of conditions of both plans are outlined below: • The Board will determine the commencement date of the Plans and eligibility for the participating in the Plans. • Eligible Employees (referred to as Participants), upon being issued an Offer by the Board, can apply for up to a specified number of Performance or Share Rights which vest according to the Vesting Conditions (which may include performance criteria as determined by the Board in its discretion). • By accepting an Offer, the Participant will be taken to have agreed to become a Participant bound by the Plan Rules, and to have irrevocably offered to acquire the Performance or Share Rights (and the Shares upon the conversion of Performance or Share Rights) the subject of the Offer under (and subject to) the Plan rules and on (and subject to) the terms and conditions of the Offer (Rule X). • A Participant has no right or interest unless and until the Performance or Share Right is converted and the Share is issued. Furthermore, the holder of a Performance or Share Right does not have any rights to dividends, rights to vote or rights to the capital of Company A as a Shareholder as a result of holding a Performance or Share Right (Rule X). • A Share issued on conversion of a Share or Performance Right will rank equally in all respects with Shares already on issue on the date of issue of the Shares, except for entitlements which had a record date before the date of issue of that Share (Rule X). • A Performance or Share Right will lapse on the earlier of: - The Board determining that any Vesting Condition has not been satisfied and is not capable of being satisfied (and the Board does not exercise its discretion to adjust or vary the Vesting Condition); - The day immediately following the last day of the Conversion Period (Rule X); or - The share right lapsing because a Participant is considered a Bad Leaver (defined in Schedule) (Rules X) 1. Performance Right means a conditional right granted to a Participant under the Plan to receive a Share, subject to the terms of the Offer and the PRP Rules (per Dictionary at Schedule of the PRP Rules). 2. Share Right means a conditional right granted to a Participant under the Plan to receive a Share, subject to the terms of the Offer and the SRP rules (per Dictionary at Schedule of the SRP Rules). Employee Share Trust 5. The Trust was established for the sole purpose of obtaining shares for the benefit of employees of Company A. 6. The Trust Deed was executed on DD MM YYYY. The parties to the Trust Deed are Company A and the Trustee. 7. The Trustee is an external trustee acting in an independent capacity on behalf of the beneficiaries of the Trust. 8. Broadly the Trust operates as follows: • The Trust is established for the sole purpose of subscribing for, acquiring, holding and transferring Shares in connection with the Plans for the benefit of the Participants. • The Trust may be funded from time to time by contributions from Company A or a member of the Company A Group (i.e. for the subscription or purchase of shares in accordance with the Plans) as specified in Clause X of the Trust Deed. • All funds provided to the Trustee under clause X will constitute Accretions to the corpus of the Trust and will not be repayable by the Trustee and may be repaid to Company A as consideration for the subscription of Shares provided such Shares are held under the terms of the Deed (Clause X of the Trust Deed). • Company A or a member of the Company A Group contribute funds, by way of capital contributions to the Trust when written notice (Dealing Notice) is provided by the Board to the Trustee. A Dealing Notice can be issued from time to time, however, typically are issued when the incentives vest to the Participant and are subsequently exercised or converted by the Participant into resulting Shares. • These funds will be used by the Trustee of the Trust to acquire the Shares either by on-market purchase or via a subscription for new Shares based on the Dealing Notice provided by Company A (Clause X of the Trust Deed). • Upon being directed by the Board, the Trustee must allocate the specified number of Shares to the specified Participant, on the date as directed by the Board (Clause X of the Trust Deed). The Participant will become the beneficial owner of the allocated shares (Allocated Shares). • The Trustee will hold any and all Allocated Shares held on behalf of the Participant under the terms of the relevant Plan and agrees that the Participant will be the beneficial owner of and absolutely entitled to these shares (Clause X of the Trust Deed). The Trustee also holds on behalf of, and the Participant is entitled to, all other benefits and privileges attached to or resulting from the Allocated Shares (Clause X of the Trust Deed). • Subject to the Trust Deed, the Plan rules and Applicable Law, the Trustee in its reasonable discretion has the power to do all things a trustee is permitted to do by law in respect of the Trust, the Trust Shares and the Trust Assets (Clause X of the Trust Deed). The Trustee's activities as trustee of the Trust will be limited to the Plans (Clause X of the Trust Deed). • The Trustee must deal with each Unallocated Share (including any bonus shares or other Accretions in respect of such Unallocated Share) in the manner set out in a Dealing Notice (Clause X of the Trust Deed). • The Board may from time to time specify that certain Unallocated shares are to be held by the Trustee for a particular Plan or a particular Participant (Specified Unallocated Shares). To avoid doubt, an instruction to hold an Unallocated Share as a Specified Unallocated Share does not, in and of itself, result in that Share becoming an Allocated Share (Clause X of the Trust Deed). • Participants may by written notice (Withdrawal Notice) request that their Allocated Shares be transferred to them (i.e. legal title) or to a third party nominated Participant after any applicable restrictions on dealing with or withdrawal of the Allocated Shares (as set out in the terms of the Plans or the terms of their participation in those Plans) have lifted (Clause X of the Trust Deed). Costs 9. Company A will incur the following costs in relation to the ongoing administration of the Trust: 10. Company A will incur the following costs in relation to the establishment and implementation of the Trust: 11. Company A will also incur various costs relating to tax advice associated with the implementation of the Trust including taxation fees associated with the drafting and lodgement of the private ruling application with the ATO.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 subsection 6-10(1) | Income Tax Assessment Act 1997 subsection 6-10(2) | Income Tax Assessment Act 1997 section 10-5 | Income Tax Assessment Act 1997 Subdivision 83A-B | Income Tax Assessment Act 1997 Subdivision 83A-C | Income Tax Assessment Act 1997 subsection 83A-10(1) | Income Tax Assessment Act 1997 subsection 83A-10(2) | Income Tax Assessment Act 1997 subsection 104-75(1) | Income Tax Assessment Act 1997 subsection 104-75(2) | Income Tax Assessment Act 1997 subsection 104-85(1) | Income Tax Assessment Act 1997 subsection 104-85(2) | Income Tax Assessment Act 1997 subsection 104-85(3) | Income Tax Assessment Act 1997 Division 128 | Income Tax Assessment Act 1997 subsection 130-85(1) | Income Tax Assessment Act 1997 paragraph 130-85(1)(c) | Income Tax Assessment Act 1997 subsection 130-85(2) | Income Tax Assessment Act 1997 subsection 130-85(4) | Income Tax Assessment Act 1997 paragraph 130-85(4)(a) | Income Tax Assessment Act 1997 paragraph 130-85(4)(b) | Income Tax Assessment Act 1997 paragraph 130-85(4)(c) | Income Tax Assessment Act 1997 section 130-90

Reasons for decision: Summary: The irretrievable cash contributions by Company A, or any subsidiary member of the Company A tax consolidated group, to the Trustee to fund the acquisition of Company A shares by the Trust for the purposes of the Plans will not be assessable income of the Trust under section 6-5 or 6-10. | Detailed Reasoning - Detailed reasoning: Assessable income includes both ordinary income and statutory income according to sections 6-5 and 6-10 respectively. Ordinary income Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called 'ordinary income'. As a general rule, amounts received as a result of carrying on a business should represent ordinary income. However, receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In GP International Pipecoaters v. Federal Commissioner of Taxation [1990] HCA 25 ( Pipecoaters ), the High Court of Australia found that: To determine whether a receipt is of an income or of a capital character, various factors may be relevant. Sometimes, the character of receipt 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. The contributions received by the Trustee to fund the acquisition of Company A shares issued pursuant to the Plans are for the sole purpose of acquiring Company A shares for the benefit of Participants in accordance with the Plans and as such, the contributions will form part of the corpus of the Trust. The cash contributions received by the Trustee are therefore of a capital nature and therefore not assessable to the Trust under section 6-5. Statutory income Subsection 6-10(1) provides that your assessable income also includes some amounts that are not ordinary income which are called 'statutory income' (subsection 6-10(2)). Section 10-5 provides a list of provisions of assessable income for section 6-10 purposes. None of the provisions apply to a cash contribution made by an employer to a trust established under an employee share scheme (ESS). Therefore, the irretrievable cash contributions made by Company A to the Trustee of the Trust to fund acquisition of Company A shares are also not assessable income of the Trust pursuant to section 6-10 (see also, ATO ID 2002/965 Income Tax - Trustee not assessable on employer contributions made to it under the employer's employee share scheme ). | Summary: CGT event E5 will happen at the time when the Participants become absolutely entitled to Company A shares held by the Trustee of the Trust. | Detailed Reasoning - Detailed reasoning: CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee (subsection 104-75(1)). The time of the event is when the beneficiary becomes absolutely entitled to the asset (subsection 104-75(2)). Subsection 130-85(2) treats a beneficiary as absolutely entitled to the relevant share from the time of acquisition of the ESS interest until they no longer have the ESS interest in the share. Subsection 130-85(2) only applies if the following requirements under subsection 130-85(1) are satisfied: (a) the beneficiary acquires an ESS interest under an employee share scheme (b) Subdivision 83A-B or 83A-C applies to the ESS interest, and (c) the ESS interest is, or arises because of, an interest the beneficiary holds in an employee share trust. Participants acquire ESS interests under an employee share scheme Company A shares that are purchased by the Trustee to satisfy its obligation under the Plans, and subsequently allocated to Participants pursuant to the Plans, are ESS interests for the purposes of subsection 83A-10(1). The Plans are an employee share scheme as defined in subsection 83A-10(2), as it is a scheme under which ESS interests in Company A are provided to employees in relation to their employment. Subdivision 83A-B or 83A-C applies to the Rights Subdivision 83A-B or 83A-C will apply to the Performance or Share Rights as they are acquired for nil consideration (i.e. at a discount). The Rights arose because of an interest the Participants hold in an employee share trust The Performance or Share Rights granted to Participants under the Plans provide Participants with an interest in the Company A shares held in the Trust. Subsection 130-85(4) defines an employee share trust as a trust whose sole activities are: (a) obtaining shares or rights in a company; and (b) ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to associates of employees, of: i. the company; or ii. a subsidiary of the company; and (c) other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b). Paragraphs 130-85(4)(a) and (b) of the definition of an employee share trust are satisfied because the Trustee acquires Company A shares; and the Trustee ensures that ESS interests are provided under an ESS by allocating those Company A shares to the employees in accordance with the Trust Deed and the Plan. Paragraph 130-85(4)(c) provides that a trustee can engage in activities that are merely incidental to those described in paragraphs 130-85(4)(a) and (b). The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? (TD 2019/13). The Commissioner considers the Trust to be an employee share trust based on the terms of the Trust Deed and paragraph 130-85(1)(c) is satisfied. As all the conditions in subsection 130-85(1) are satisfied, the Participants are taken to be absolutely entitled to the Company A shares held by the Trustee from the time they were granted the Performance or Share Rights under the Plans pursuant to subsection 130-85(2), and CGT event E5 will happen at that time. | Summary: If CGT event E5 does happen, a capital gain or capital loss made by the Trustee as a result of CGT event E5 happening will be disregarded under section 130-90 if the Participants acquire the Company A shares for the same or less than the cost base of the Company A shares in the hands of the Trustee. | Detailed Reasoning - Detailed reasoning: If CGT event E5 happens, any capital gain or loss that the Trustee makes is disregarded if section 130-90 applies. Section 130-90 provides as follows: (1A) Disregard any *capital gain or *capital loss made by an *employee share trust to the extent that it results from a *CGT event, if: (a) immediately before the event happens, an *ESS interest is a *CGT asset of the trust; and (b) either of the following subparagraphs applies: (i) the event is CGT event E5, and the event happens because a beneficiary of the trust becomes absolutely entitled to the ESS interest as against the trustee; (ii) the event is CGT event E7, and the event happens because the trustee *disposes of the ESS interest to a beneficiary of the trust; and (c) Subdivision 83A-B or 83A-C (about employee share schemes) applies to the ESS interest. (1) Disregard any *capital gain or *capital loss made by an *employee share trust, or a beneficiary of the trust, to the extent that it results from a *CGT event, if: (a) the CGT event is CGT event E5 or E7; and (b) the CGT event happens in relation to a *share; and (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. (2) Subsection (1A) or (1) does not apply if the beneficiary acquired the beneficial interest in the *share for more than its *cost base in the hands of the *employee share trust at the time the *CGT event happens. To qualify for the exemption in section 130-90, there must be an 'employee share trust' and an 'ESS interest'. As outlined in Question 2A, section 130-90 is satisfied because: • the Trust is an employee share trust as defined in subsection 130-85(4) • at the time the Participant becomes absolutely entitled to the Company A shares as against the Trustee, CGT event E5 happens • CGT event E5 happens in relation to the Company A shares • the Participant acquires the Company A shares by exercising a Performance or Share Right granted under the Plans and • Subdivision 83A-B or 83A-C will apply as the Participant acquired the Performance or Share Rights at a discount. As such, a capital gain or capital loss under CGT Event E5 that arises for the Trustee at the time when Participants become absolutely entitled to Company A shares will be disregarded under section 130-90, if the employees acquire Company A shares for the same or less than the cost base of Company A shares in the hands of the Trustee. | Summary: CGT event E7 will not happen in respect of the Company A shares held by the Trustee, because the specified scheme does not include any facts that give rise to CGT event E7 happening. | Detailed Reasoning - Detailed reasoning: Under subsection 104-85(1), CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital. The timing of the event is when the disposal occurs (subsection 104-85(2)). According to subsection 104-85(3), if CGT event E7 happens, the trustee may make a capital gain if the market value of the asset, at the time of the disposal, is more than its cost base. The trustee makes a capital loss if that market value is less than the asset's reduced cost base. However, in relation to the scheme as set out in the 'Relevant facts and circumstances' section above, CGT event E7 does not occur. This is because the scheme does not include any facts that gives rise to CGT event E7 happening. | Summary: This question is not applicable, because CGT event E7 does not happen under the specified scheme. | Detailed Reasoning - Detailed reasoning: As per the answer in Question 2C above, CGT event E7 does not arise. Therefore, it is not necessary to consider whether a capital gain or capital loss made by the Trustee as a result of CGT event E7 happening be disregarded under section 130-90 if the Participants acquire the Company A shares at a price that is the same as, or less than, the cost base of the Company A shares in the hands of the Trustee.

Will CGT event E5 happen at the time when the Participants become absolutely entitled to Company A shares held by the Trustee of the Trust? | Question 2B: If CGT event E5 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E5 happening be disregarded under section 130-90 of the ITAA 1997 if the Participants acquire the Company A shares for the same or less than the cost base of the Company A shares in the hands of the Trustee? | Will CGT event E7 happen in respect of the Company A shares held by the Trustee of the Trust? | No - the specified scheme does not include any facts that gives rise to CGT event E7 happening | Question 2D: If CGT event E7 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E7 happening be disregarded under section 130-90 of the ITAA 1997 if the Participants acquire the Company A shares for the same or less than the cost base of the Company A shares in the hands of the Trustee? | Employee 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 such shares to Participants); | Management of employee termination; and | Other trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust. | Legal advice obtained in respect of the implications which may arise for both Company A and the Participants of the Plans in respect of the Trust structure; | Legal documents required in respect of the Trust and the Plans; | Legal advice obtained in respect of the drafting of changes required to the existing Plans in order to accommodate the Trust structure; and | Professional fees associated with the establishment of the Trust including such costs associated with the creating and registration of the Trust with various authorities. | Reasons for decision: All legislative references in these reasons are to the Income Tax Assessment Act 1997 unless otherwise specified.