Private ruling: Issue of Mandatory Redeemable Preference Shares
Published: July 2015
Ruling period: 1 July XXXX to 30 June XXXX
Date scheme commenced: 1 July XXXX

Ruling: Q1: Will the Financial Liability MRPS accounts to be used by SubCo to recognise the financial liability associated with the issue of the MRPS be part of the Share Capital Account (SCA) of SubCo? | A1: Yes | Q2: Will the SCA of SubCo become tainted: a) By the anticipated proforma journal entries to recognise the issue of the MRPS b) By the anticipated proforma journal entries to reflect the amortised cost of the MRPS, or c) By the anticipated proforma journal entries to reflect the cancellation or buyback of the MRPS on the assumption that the redemption is not made out of profit? | A2: No | Q3: Will SubCo be required to withhold an amount under Subdivision 12-F of Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) from any part of the Redemption Amount paid to the MRPS Holder on the redemption or cancellation of the MRPS? | A3: No

Relevant facts and circumstances: Background HeadCo 1. HeadCo is a wholly-owned subsidiary of UltimateHoldCo. 2. UltimateHoldCo is an overseas corporation that is resident in the Country A for the purposes of Country A's tax laws. UltimateHoldCo's common stock is listed on the stock exchange in Country A. 3. All ordinary shares on issue by HeadCo are classified as equity interests for the purposes of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997). The HeadCo Group 4. HeadCo has business interests in Australia and overseas. 5. HeadCo is the holding company of the HeadCo Group and is the head company of an income tax consolidated group for the purposes of Part 3-90 of the ITAA 1997 (the HeadCo Group). SubCo 17. SubCo is a wholly-owned subsidiary of HeadCo (as that term is defined in section 703-30 of the ITAA 1997), is a subsidiary member of the HeadCo Group for income tax purposes and SubCo B 20. SubCo also owns all the issued shares in SubCo B. Residency 22. HeadCo, SubCo and SubCo B are residents of Australia for income tax purposes. The proposed arrangement 28. SubCo is proposing to issue MRPS to one or more wholly-owned subsidiaries of UltimateHoldCo incorporated in Country A to fund the needs of the existing business and new businesses. MRPS Holders 38. Each MRPS Holder will be a wholly-owned subsidiary (directly or indirectly) of UltimateHeadCo incorporated in Country A (and tax resident of that country) 39. An MRPS Holder will not, prior to the issue of the MRPS, be a creditor of HeadCo, SubCo or SubCo B under any debt facility. 40. The MRPS Holder will not be a resident of Australia for income tax purposes nor will it carry on business in Australia through a permanent establishment. MRPS Terms 46. The key features of the MRPS include: • The MRPS will be legal form shares pursuant to Australian Corporations Law; • The MRPS will not be convertible to ordinary shares, ordinary debt or any other type of instrument issued by SubCo or a related party; • The MRPS will be mandatorily redeemable not less than 30 days prior to the 10th anniversary of the Issue Date (Scheduled Redemption Date); • The MRPS Holders will not be entitled to vote at a meeting of the members of SubCo MRPS dividends may be declared at the sole discretion of the board of SubCo, subject to Australian Corporations Law requirements (that is, dividends will be discretionary and non-cumulative); • The MRPS agreement will include restrictions in the case that MRPS Holder has not received a threshold return on the MRPS, includingSubCo must not declare or pay any dividends or distributions on any share in the capital of SubCo (other than the MRPS) over which the MRPS rank equally or in priority for the payment of dividends The Issue Price of the MRPS. 49. The Issue Price of the MRPS will be classified between liability and equity in the financial statements of SubCo and the consolidated financial statements of HeadCo for the purposes of Australian Accounting Standards.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 197 | Income Tax Assessment Act 1997 Subsection 995-1 | Income Tax Assessment Act 1997 Section 975-300 | Income Tax Assessment Act 1936 Section 45A | Income Tax Assessment Act 1936 Section 45B | Income Tax Assessment Act 1936 Division 16K of Part III | Taxation Administration Act 1953 Subdivision 12-F of Part 2-5 of Schedule 1

Reasons for decision: Summary: Will the Financial Liability MRPS accounts to be used by SubCo to recognise the financial liability associated with the issue of the MRPS be part of the Share Capital Account (SCA) of SubCo? | Detailed Reasoning - Reasoning: The Financial Liability MRPS accounts to be used by SubCo to recognise the financial liability associated with the issue of the MRPS will be part of the Share Capital Account (SCA) of SubCo. | Detailed Reasoning - Question 2: Will the SCA of SubCo become tainted; a) By the anticipated proforma journal entries to recognise the issue of the MRPS; b) By the anticipated proforma journal entries to reflect the amortised cost of the MRPS; or c) By the anticipated proforma journal entries to reflect the cancellation or buyback of the MRPS on the assumption that the redemption is not made out of profit? | Detailed Reasoning - Reasoning: The SCA of SubCo will not become tainted; a) By the anticipated proforma journal entries to recognise the issue of the MRPS; b) By the anticipated proforma journal entries to reflect the amortised cost of the MRPS; or c) By the anticipated proforma journal entries to reflect the cancellation or buyback of the MRPS on the assumption that the redemption is not made out of profit. | Detailed Reasoning - Question 3: Will SubCo be required to withhold an amount under Subdivision 12-F of Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) from any part of the Redemption Amount paid to the MRPS holder on the redemption or cancellation of the MRPS? | Detailed Reasoning - Reasoning: The Redemption Amount that will be paid to the MRPS Holder on redemption or cancellation of the MRPS will not be a dividend paid in respect of a non-equity share. Accordingly, SubCo is not liable to withhold an amount under section 12-245 of Subdivision 12-F of Part 2-5 of Schedule 1 to the TAA 1953 from any part of the Redemption Amount paid to the MRPS Holder on the redemption or cancellation of the MRPS.