Private ruling: Employee share scheme
Date of advice: 16 June 2021
Published: August 2021
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | This ruling applies for questions 6 - 8 inclusive each for the following periods: | Year ending 31 March 20XX | Year ending 31 March 20XX | Year ending 31 March 20XX | Year ending 31 March 20XX | Year ending 31 March 20XX

Ruling: Q1: Will the Company as head entity of the Company income tax consolidated group (TCG), 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 by the Company to the Trustee (the Trustee) as the trustee of the Company Employee Share Trust (the Trust) to fund the subscription for, or acquisition on-market of, ordinary shares in the Company (Shares) to satisfy employee share scheme (ESS) interests issued pursuant to the Company Performance Rights Plan (the Plan)? | A1: Yes | Q2: Will the Company obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of costs incurred by the Company in relation to the on-going administration of the Trust? | A2: Yes | Q3: Will the irretrievable cash contributions made by the Company to the Trustee, to fund the subscription for or acquisition on-market of Shares by the Trust to satisfy ESS interests issued pursuant to the Plan, be deductible to the Company at a time determined by section 83A-210 of the ITAA 1997? | A3: Yes. | Q4: If the Trust satisfies its obligation under the Plan by subscribing for Shares in the Company, will the subscription proceeds be included in the assessable income of the Company under section 6-5 or 20-20 of the ITAA 1997 or trigger a capital gains tax (CGT) event under Division 104 of the ITAA 1997? | 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 the Company in respect of the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or acquisition on-market of Shares by the Trustee, pursuant to the Plan? | A5: No | Q6: Will the provision of Performance Rights by the Company to its employees under the Plan be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA)? | A6: No | Q7: Will the irretrievable cash contribution made by the Company to the Trustee of the Trust, to fund the subscription for, or acquisition on-market of Shares, be treated as a fringe benefit within the meaning of section 136(1) of the FBTAA? | A7: No | Q8: Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to the Company by the amount of tax benefit gained from irretrievable cash contributions made by the Company to the Trustee, to fund the subscription for or acquisition on-market of the Company shares? | A8: No

Relevant facts and circumstances: The Company is the parent entity of wholly owned subsidiaries based in Australia. The Company is listed on the Australian Securities Exchange. The Company is the head company of an income tax consolidated group (the Company Group) The Company established the Plan to provide employees with an incentive plan which recognises their ongoing contribution to the achievement by the Company of long-term strategic goals. The Plan enables eligible senior employees (Participants) to share in the growth of the Company through a grant of Performance Rights. The Performance Rights are capable of being exercised into one ordinary share in the Company following the satisfaction of certain Vesting Conditions over a period of XX years. Performance Rights will be subject to time-based Vesting Conditions and performance-based conditions or requirements (Performance Hurdles). The Plan The Plan broadly operates as follows: • it is at the absolute discretion of the Board to extend an invitation to grant Performance Rights to Eligible Employees • subject to the terms attaching to the Performance Rights as determined by the Board and specified in an Invitation Letter, each Performance Right entitles the Participant to one fully paid ordinary share in the capital of the Company. • to participate in the Plan, the Eligible Employee must deliver an Application to the Company in response to the Invitation Letter. • if the Application is accepted, then the Eligible Employee becomes a Participant. No amount is payable by the Participant to participate in the Plan • once all conditions on the Performance Rights as determined by the Board and specified in the Invitation Letter have been satisfied, the Performance Rights vest and the Company issues a Vesting Notification to the Participants, upon which the Performance Rights are automatically exercised. A Performance Right has a nil exercise price • a Performance Right will be automatically forfeited if a Participant becomes a Bad Leaver, and • Performance Rights may not be assigned, transferred, encumbered with a security interest in or over them or otherwise disposed by the Participant without the consent of the Board. The Trust The Trust was established under the Trust Deed for the sole purpose of acquiring ordinary shares for the benefit of eligible employees under the Plan as part of the Company's remuneration programmes. The Trustee is an independent third party and will operate the Trust in accordance with the Trust Deed. The Trustee is not permitted to carry out activities that are not matters or things which are necessary or expedient to administer and maintain the Trust. The Trustee is not permitted to carry out activities which result in the Participants being provided with additional benefits other than the benefits that arise from the Trust Deed, the Plan Rules and the Terms of Participation. The Trustee is not entitled to receive from the Trust any fees, commission or remuneration for operating or administering the Trust. The Company must pay the Trustee from its own resources such fees, commission or other remuneration and may reimburse expenses incurred by the Trustee as the Company and the Trustee agree from time to time. The Trustee is entitled to retain for its own benefit any such remuneration or reimbursement. The Trust will be managed and administered so that it satisfies the definition of 'employee share trust' in subsection 130-85(4). The Trust will operate as follows: • the Trust will be funded by contributions from the Company for the purchase of Shares in accordance with the Plan. There will be no funding by way of a loan to the Trustee • these contributions will be used by the Trustee to acquire Shares either on-market or via a subscription, based on written instructions from the Company • Shares acquired by the Trustee will be allocated to the Participant following exercise of the Performance Rights. The Participant will become absolutely entitled to such Shares from that point in time • the Trustee can sell Shares on behalf of a Participant where permitted to do so by the Participant • the Trustee will, in accordance with instructions received pursuant to the Plan Rules, subscribe for, purchase or allocate Shares for the benefit of Participants provided that the Trustee receives sufficient funds from the Company to subscribe for or purchase such Shares and/or has sufficient unallocated Trust Shares available • the Trustee must establish and maintain a separate Trust Share Account or record in respect of each Participant • while Shares are held in trust, the Participant will be entitled to dividend and voting rights, and • all funds provided to the Trustee from the Company will constitute accretions to the corpus of the trust and will not be repayable by the Trustee. The contributions will not be repaid to the Company unless they are used to subscribe for Shares. Contributions made by the Company to the Trust WSA will make irretrievable cash contributions to the Trust to fund the acquisition of Shares to satisfy Rights which have been exercised by Participants. The Trust has and will use the cash contributions exclusively to purchase Shares for Participants under the Plan and, pending such an acquisition, form part of the Trust's Assets. The Trust has and will use the cash contributions exclusively to purchase Shares for Participants under the Plan and, pending such an acquisition, form part of the Trust's Assets. Shortly after vesting, the Trustee will then allocate Shares to the relevant Participants, having subscribed for or acquired on-market sufficient Shares to fulfil the obligation as necessary. Use of the Trust to facilitate the Plan The reasons for continuing to use a Trust include: • the Trust facilitates the acquisition of Shares by the trustee of the Trust either on market or by a new issue of Shares by the Company • an arm's length vehicle for acquiring and holding Shares in the Company, either by way of new issue or acquiring on market • the Trust is an efficient structure for giving effect to disposal restrictions/vesting conditions (if applicable). As the Trustee is the legal owner, employees have no ability to deal in the Shares prior to the time of allocation • contributing to the Trust can enable the Company to hedge against share price growth • the Trust provides the flexibility to acquire and hold shares that will be allocated to employees under the Plan and facilitate the forfeiture of Rights when performance hurdles are not met. The Trust can hold Shares for reallocation. This enables easy 'recycling' of Shares held on trust • the Trust will provide one single vehicle for the administration of the Plan, and • the Trust establishes independent records and accounts for participating employees. Costs incurred by the Company to administer the Trust The Company will incur various costs in relation to the on-going administration of the Trust. For example, the Company will incur costs associated with the services provided by the Trustee of the EST, including but not limited to: • 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 Shares to Participants • management of employee termination • other Trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust, and • ad-hoc tax and legal advice in respect of the ongoing administration of the Trust


Reasons for decision: Summary: The Company as head entity of the TCG will be entitled to an obtain an income tax deduction, pursuant to section 8-1 in respect of the irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the subscription for, or acquisition on-market of, Shares to satisfy ESS interests issued pursuant to the Plan. | Detailed Reasoning - Detailed reasoning: Subsection 8-1(1) allows you to deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, pursuant to subsection 8-1(2), you cannot deduct a loss or outgoing to the extent that it is a loss or outgoing of capital, or of a capital nature. Under the Plan, the Company grants Performance Rights to Participants and makes irretrievable cash contributions to the Trust, in accordance with the Plan and the Trust Deed. The Trustee acquires Shares (either on-market or by subscription), for allocation to Participants. Incurred in carrying on a business The Company must provide the Trustee with all the funds required to enable the Trustee to subscribe for or acquire on-market those Shares. The cash contributions made by the Company are irretrievable and non-refundable to the Company or any subsidiary of the TCG in accordance with the Trust Deed as: • On termination of the Trust, neither the Company nor any member of the TCG has any entitlement to any part of the Trust Assets, and • Neither the Company nor any member of the TCG will have any interest in the Capital (or corpus) or be entitled to any Income of the Trust. The Company has granted (and will in the future grant) ESS interests as part of its remuneration and employee incentive program for Participants. The costs incurred by the Company for the acquisition of shares to satisfy ESS interest arise as part of these remuneration arrangements, and irretrievable cash contributions to the Trust are part of an on-going series of payments in the nature of remuneration of its employees. Not capital or of a capital nature The costs will be an outgoing incurred for periodic funding of an ESS for employees of the TCG. Costs incurred will be in relation to more than one grant of Performance Rights, and the Company will continue satisfying outstanding Performance Rights using shares acquired by the Trust. This indicates that the irretrievable cash contributions to the Trust are ongoing in nature and are part of the broader remuneration expenditure of the Company. While the irretrievable cash contributions may secure an enduring or lasting benefit for the employer that is independent of the year-to-year benefits that the employer derives from a loyal and contented workforce, that enduring benefit is considered to be comparatively small. Therefore, the payments are not capital, or of a capital nature. Therefore, paragraph 8-1(2)(a) is not satisfied. Accordingly, the Company will be entitled to deduct an amount under section 8-1 for its irretrievable cash contributions to the Trustee of the Trust, to acquire shares in the Company to satisfy ESS interests issued pursuant to the Plan. | Summary: The Company, is entitled to an income tax deduction, pursuant to section 8-1 in respect of costs incurred in on-going administration of the Trust | Detailed Reasoning - Detailed reasoning: As discussed in response to Question 1 above, section 8-1 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, incurred in producing exempt or non-assessable non-exempt income or where a provision of the tax law prevents the deduction. The Company carries on a business which produces assessable income and operates an ESS as part of its remuneration strategy. The Company will incur various costs in relation to the on-going administration of the Trust. For example, the Company will incur costs associated with the services provided by the Trustee of the Trust, including but not limited to: • 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 Shares to Participants • other Trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust, and • ad-hoc tax and legal advice in respect of the ongoing administration of the Trust. These costs outlined above are revenue in nature on the basis that they are part of the ordinary cost of remunerating employees and costs necessarily incurred in running the Plans while carrying on its business for the purpose of gaining or producing its assessable income. Relevantly, these costs are not capital or of a capital nature as the loss or outgoings are regular and recurrent and are part of the ordinary employee remuneration costs of the company (ATO ID 2014/42 Employer costs for the purpose of administering its employee share scheme are deductible). | Summary: The deduction for the irretrievable cash contributions can only be deducted from the assessable income of the Company in the income year when the relevant beneficial interest in a share in the Company, or beneficial interest in a Performance Right to a beneficial interest in a share in the Company, is acquired by a Participant under the Plan. | Detailed Reasoning - Detailed reasoning: Section 83A-210 applies to determine the timing of the deduction, but only in respect of the contribution provided to the trust to purchase Shares in excess of the number required to grant the relevant ESS interests to the employees arising in the year of income under an ESS. Further information is available in ATO Interpretative Decision ATO ID 2010/103 Income Tax- Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust . The Plan is employee share scheme for the purposes of subsection 83A-10(2) as it is a schemes under which ESS interests (i.e. a beneficial interest in a share or a beneficial interest in a right to acquire a beneficial interest in a share) are provided to employees (i.e., Participants) in relation to their employment with the Company (or the TCG). The Plan contains a number of interrelated components which include the provision of irretrievable cash contributions by the Company to the Trustee of the Trust. These contributions enable the Trustee to acquire the Company shares for the purpose of enabling each Participant, indirectly as part of the Plans, to acquire ESS interests. The deduction for the irretrievable cash contribution can only be deducted from the assessable income of the Company in the income year when the relevant beneficial interest in a share in the Company, or beneficial interest in a right to a beneficial interest in a share in the Company, is acquired by a Participant under the Plan. | Summary: If the Trust satisfies its obligation under the Plan by subscribing for new shares in the Company, the subscription proceeds will not be included in the assessable income of the Company under section 6-5 or 20-20 or trigger a CGT event under Division 104. | Detailed Reasoning - Detailed reasoning: Section 6-5 Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In an employee share scheme, where the trustee subscribes to the company for an issue of Shares and pays the full subscription price for the Shares, the company receives a contribution of share capital from the trustee. The character of the contribution of share capital received by the Company from the Trustee can be determined by the character of the right or thing disposed of in exchange for the receipt. Under this arrangement, as the Company issues shares in itself to the Trustee, in exchange for the subscriptions proceeds, the character of the newly issued share is one of capital. Therefore, 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 Interpretative Decision ATO ID 2010/155 Income Tax - Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee. Accordingly, when the Company receives subscription proceeds from the Trustee of the Trust where the Trustee has subscribed for new Shares in the Company to satisfy obligations to Participants, that subscription price received by the Company is a capital receipt. That is, it will not be on revenue account and it will not be ordinary income under section 6-5. Section 20-20 Subsection 20-20(2) provides that if you receive an amount as a recoupment of a loss or outgoing, it will be assessable income if you received it by way of insurance or indemnity and that amount can be deducted as a loss or outgoing in the current year or earlier income year. The Company will receive an amount for the subscription of Shares by the Trustee of the Trust. 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. Subsection 20-20(3) makes assessable a recoupment of a loss or outgoing that is deductible in the current income year or has been deductible or deducted in a previous income year, where the deduction was claimed under a provision in section 20-30. Subsection 20-25(1) defines a recoupment as including 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. To the extent that section 8-1 allows a deduction for bad debts or rates or taxes, section 20-30 will apply such that if there was a recoupment of that deduction, that amount would be assessable. The receipt by the Company is in return for issuing Shares to the Trustee of the Trust, not as a recoupment of previously deducted expenditure under section 8-1 regarding bad debts or rates and taxes that could be subject to section 20-30. The subscription proceeds will therefore not be an assessable recoupment under section 20-20. CGT Section 102-20 provides that you make a capital gain or loss if, and only if, a CGT event happens. Where the receipt of subscription proceeds does not relate to a CGT event, a capital gain will not arise. The relevant CGT events that may be applicable when the subscription proceeds are received by the Company are CGT event D1 (creating a contractual or other rights) and CGT event 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. Also, 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. In this instance, as the Company is issuing shares, being equity interests, as defined in section 974-75, to the Trustee of the Trust, CGT events D1 and H2 do not happen. As no CGT event happens, there is no amount assessable as a capital gain to the Company. Conclusion When the Trustee of the Trust satisfies its obligations under the Trust Deed by subscribing for new Shares in the Company, the subscription proceeds will not be included in the assessable income of the Company under section 6-5 or section 20-20 and will also not trigger a CGT event under Division 104. | Summary: The Commissioner will not seek to make a determination that Part IVA applies to deny, in part or in full, any deduction claimed by the Company in respect of the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or acquisition on-market of Shares by the Trustee, pursuant to the Plan. | Detailed Reasoning - Detailed reasoning: Part IVA is a general anti-avoidance provision which gives the Commissioner the power to cancel a 'tax benefit' that has been obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. The Commissioner generally accepts that a general deduction may be available where an employer provides money or other property to an employee share trust where the conditions of Division 83A are met. In this case, the scheme does not contain the elements of artificiality or unnecessary complexity and the commercial drivers sufficiently explain the entry into the use of the EST arrangement. Therefore, having regard to the eight factors set out in subsection 177D(2), the Commissioner has concluded that the scheme is not being entered into or carried out for the dominant purpose of enabling the Company to obtain a tax benefit. | Summary: The provision of Rights and the Company Shares under the Plan will not be subject to FBT on the basis that they are acquired by Participants under an ESS (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 - Detailed reasoning: An employer's liability to FBT arises under section 66 of the FBTAA, which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax. In general terms, a '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. However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs (f) to (s) of the 'fringe benefit' definition. In particular, paragraph (h) of subsection 136(1) of the FBTAA excludes the following from being a 'fringe benefit': (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; The Commissioner accepts that the Plans comprise an employee share scheme for the purposes of Division 83A, the Rights provided under the Plan are ESS interests, and that Subdivision 83A-B or 83A-C applies to those ESS interests. The Shares acquired by the Trustee under the Plan to satisfy Rights are also provided to employees under that same employee share scheme. Accordingly, the provision of ESS interests under the Plan will not be subject to FBT on the basis that they are acquired by Participants under an ESS (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. In addition, when a Performance Right is later exercised, it will not give rise to a fringe benefit as 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 ). | Summary: The irretrievable cash contributions made by the Company to the Trustee of the Trust, to fund the subscription for, or acquisition on-market of Shares, will not be treated as a fringe benefit within the meaning of section 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: As stated above in response to Question 6, an employer's liability to FBT arises under section 66 of the FBTAA, which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax. One benefit excluded from being a 'fringe benefit', pursuant to paragraph (ha) of subsection 136(1) of the FBTAA, is 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 . In examining whether the requirements of subsection 130-85(4) are met, it is the activities of the trustee in relation to a particular trust that is relevant. To qualify as an employee share trust, a trustee's activities must be limited to those described in paragraphs 130-85(4)(a), (b) and (c). Paragraph 130-85(4)(a) and (b) are satisfied because: • The Trust acquires shares in a company, namely the Company, and • The Trust ensures that ESS interests as defined in subsection 83A-10(1) are provided under an ESS (as defined in subsection 83A-10(2)) by allocating those ESS interests to the Participants 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 phrase 'merely incidental' takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. 'Merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). The Macquarie Dictionary defines 'merely' to mean 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'. The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered to be merely incidental. In the present case, the 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 section 130-85(4) (Clause 4.9 of the Trust Deed) including paragraph 130-85(4)(c) as the other activities undertaken by the Trustee are merely incidental to managing the Plans. Therefore, the irretrievable cash contribution made by the Company to fund the subscription for or acquisition on-market of the Company shares by the Trust will not be a fringe benefit. | Summary: The Commissioner will not make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of the Company by the amount of tax benefit gained from irretrievable contributions made by the Company to the Trustee of the Trust, to fund the subscription for or acquisition on-market of the Company Shares. | Detailed Reasoning - Detailed reasoning: Section 67 of the FBTAA is a general anti-avoidance provision in the FBTAA. Subsection 67(1) of the FBTAA 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, to obtain a tax benefit. The Commissioner will only make a determination under section 67 of the FBTAA if the arrangement resulted in the payment of less FBT than would be payable but for entering into the arrangement. As stated above in response to Question 7, without the provision of a 'fringe benefit', no amount will be subject to FBT. The benefits provided to the Trustee by way of irretrievable cash contributions to the Trust and to Participants by way of the provision of Rights or Shares under the Plans are excluded from the definition of a fringe benefit for the reasons provided in response to questions 6 and 7 above. As these benefits have been excluded from the definition of a fringe benefit, the FBT liability is not any less than it would have been but for the arrangement. The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount of the Company by the amount of tax benefit gained from the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or acquisition on-market of the Company Shares.

Reasons for decision: Legislative references in this Ruling are to provisions of the ITAA 1936, or to provisions of the ITAA 1997, unless otherwise indicated. | Questions 1 to 5 - application of the single entity rule in section 701-1 | The consolidation provisions of the Income Tax Assessment Act 1997 allow certain groups of entities to be treated as a single entity for income tax purposes. Under the single entity rule (SER) in section 701-1 the subsidiary members of an income tax consolidated group are taken to be parts of the head company. As a consequence, the subsidiary members cease to be recognised as separate entities during the period that they are members of the income tax consolidated group with the head company of the group being the only entity recognised for income tax purposes. | The meaning and application of the SER is explained in Taxation Ruling TR 2004/11 Income tax: consolidation: the meaning and application of the single entity rule in Part 3-90 of the Income Tax Assessment Act 1997. | As a consequence of the SER, the actions and transactions of the subsidiary members of the TCG are treated, for income tax purposes, as having been undertaken by the Company as the head company of the TCG. | The SER in section 701-1 has no application to the Fringe Benefits Tax Assessment Act 1986 (FBTAA). The Commissioner has therefore provided a ruling to the Company, and the subsidiaries of the TCG in relation to questions 6 to 8.