Private ruling: Employee share scheme
Date of advice: 8 April 2021
Published: June 2021

Ruling: Q1: Will the Company as head company of the Company income tax consolidated group (CCG) obtain a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the irretrievable cash contributions made by the Company, to the trustee (the Trustee) of the Company Employee Security Plans Trust (the Trust) to fund the subscription for, or acquisition on-market of the Company shares in respect of Company's Employee Share Plans (the Plans)? | A1: Yes. | Q2: Will the Company obtain an income tax deduction under section 8-1 of the ITAA 1997 in respect of costs incurred in relation to the on-going administration of the Trust, including expenses relating to preparation of tax returns for the Trust? | A2: Yes. | Q3: Are irretrievable cash contributions made by the Company to the Trustee, to fund the subscription for, or acquisition on-market of the Company shares by the Trust deductible to the Company under section 8-1 of the ITAA 1997 at a time determined by section 83A-210 of the ITAA 1997, where the contributions are made before the acquisition of the relevant Employee Share Scheme (ESS) interests? | A3: Yes. | Q4: If the Trust satisfies its obligation under the Plans by subscribing for Company Shares, 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 will they trigger a capital gains tax (CGT) event for the Company 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, a deduction claimed by the Company for irretrievable cash contributions made to the Trustee to fund the subscription for, or acquisition on-market of the Company Shares by the Trust? | A5: No. | Q6: Would the provision of Rights or Shares to participants under the Plans by the Company be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A6: No. | Q7: Are the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for or acquisition on-market of, the Company Shares in respect of Plans, be treated as fringe benefits within the meaning of subsection 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 aggregate fringe benefits 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. The rulings for questions 1 - 5 inclusive apply for the following periods: 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 The rulings for questions 6 - 8 inclusive apply 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

Relevant facts and circumstances: Background The Company is an Australian ASX listed company and head of the CCG. The Company employs the Australian directors and certain senior executives of the CCG. The Company's subsidiary (Subsidiary) employs all other Australian employees. The remuneration of CCG employees includes the following elements: (a) Fixed remuneration; and (b) Variable remuneration, which includes: • Long term incentive plan (LTIP), and • Short term incentive plan (STIP) The variable remuneration paid under the arrangements above to employees (Participants) are collectively referred to as being paid under the Plans. The Plans are administered in accordance with the Plan Rules and in accordance with the Company Employee Plans Trust Deed (the Trust Deed). The Company incurs on-ongoing administration costs for operating the Plans such as: • employee plan record keeping • brokerage costs for acquisition of shares on market • preparing the annual audit of the financial statements • preparing the tax returns or obtaining tax advice for the Trust, and • Trustee fees. LTIP The LTIP is a plan to which Subdivision 83A-C of ITAA 1997 applies. The LTIP must be operated in accordance with the LTIP Rules. The purpose of the LTIP is to provide Eligible Employees with the opportunity to acquire Rights to receive Shares and to share in the growth in values of the Company and to encourage them to improve the longer-term performance of the Company and its returns to shareholders. LTIP is also intended to assist the Company to attract and retain experienced senior employees and provide them with an incentive to have a greater involvement and focus on the longer-term goals of the Company. Broadly, the LTIP operates as follows: a) Participants are invited to apply for and participate in the LTIP through the issue of offer letter (LTIP Letter), which outlines the following: • the number of Rights offered and the consideration (if any) for the grant of Rights • the exercise price (if any) of the Rights or the method of determining such Exercise Price • any Vesting Conditions (including any applicable Performance Hurdles) • expiry date of right(s), and • restrictions on disposal of the shares once granted b) Once the Participant has received the Offer Letter, the Participant may apply to be issued with Rights by completing and returning the Application Form within the specified acceptance period c) Unless otherwise determined by the Board, no payment is required for the grant of Rights under the LTIP The Company has advised that the Rights issued under the PRP to date have no acquisition price and no exercise price d) The Rights are subject to the following Vesting Conditions: • Performance-related Vesting Conditions (Performance Hurdle), and • Time-related Vesting Conditions (Time Hurdle). These Vesting Conditions must be satisfied before the Rights vest and can be exercised by the Participants e) Participants may choose to exercise vested Rights at any time prior to their expiry date, subject to the Company Share Trading Policy f) Subject to the PRP Rules, a right lapses or expires at the earliest of the times specified under the following rules: • End of exercise period • Good leaver • Bad leaver, or • End of period otherwise determined by the Board g) Participants can choose to exercise their vested rights by notifying the Company and by paying any relevant exercise price to the Company The Company has advised that the Rights issued under the PRP to date have no acquisition price and no exercise price h) Following exercise of a Right, the Company must instruct the Trustee to subscribe for, acquire, allocate Participant Shares in respect of which the Right has been exercised i) Shares that are issued on the exercise of a Right will rank equally with other ordinary shares in the Company from the date of issue. Participants will be entitled to dividends from the date of allocation to the Participant j) The Board may in its absolute discretion determine that any or all Shares to be issued, allotted or allocated following the exercise of a Right will be held in a Trust on behalf of Participants, for transfer to future Participants or otherwise for the purposes of the LTIP, and k) The Company will provide funds to the Trustee of the Trust in order to allow the Trustee to subscribe for, and/or acquire the Company Shares to be held on behalf of the Participants under the LTIP. STIP The STIP is a plan to which Subdivision 83A-B of ITAA 1997 applies. The STIP must be operated in accordance with STIP Rules. The purpose of STIP is to provide Eligible Employees (Participants) with an opportunity to be issued or acquire Shares. The STIP is also intended to assist the Company to attract and retain skilled and experienced employees. The intended operation of the STIP is to satisfy the provisions of section 83A-35 of the ITAA 1997 so as to provide Participants with an assessable income reduction of up to $1,000 in relation to Shares issued under the STIP. The STIP Rules broadly operate to provide eligible Participants with the opportunity to receive fully paid ordinary shares in the Company at no consideration. In order to receive shares, the Participant must satisfy all relevant criteria in accordance with the STIP Rules. The Board may in its absolute discretion from time to time invite Participants to apply for shares under the STIP on the terms set out in the STIP Rules and any other terms the Board considers appropriate. The Board may nominate the Trust for the purposes of the STIP. Any shares acquired by the Trust for this purpose will be held under the Trust on behalf of the Participant subject to conditions as specified in the STIP Rules. Once those conditions are satisfied, the Participant can withdraw the shares from the Trust. Broadly, the STIP operates as follows: a) Participants are invited to apply and participate in the STIP through the issue of an Application Form together with an Offer, which outlines the following: • the date of the invitation • the date of issue of the Shares • the number of Shares to be issued, using the determined formula to calculate number of shares that will be received on date of grant • the specified $AUD value of shares offered • the market price of each Share • expiry date of the offer, and • restrictions on disposal of the shares once granted under the Holding Lock period, which is the period from the Issue Date until the earlier of: • the date that is three years after the issue date • the date the Participant ceases to be an employee of the Company or one of its subsidiaries, or • such other date as determined by the Board in its absolute discretion. b) By completing and returning the Application Form within the Acceptance Period, a Participant applies for Shares under the STIP on the terms of the STIP Letter and agrees to be bound by the terms of the Application Form, the STIP Letter, the STIP Rules c) Subject to the satisfaction of any terms and conditions set out in the STIP Letter and the Application Form the Company will as soon as practicable after the Acceptance Period, allot or issue to the Participant the number of Shares applied for by the Participant d) Unless otherwise determined by the Board, no payment is required for the issue of Shares under the STIP e) The STIP will be managed by the Board which will have power to delegate to any one or more persons (for such period and on such conditions as it may determine) the exercise of any of its powers or discretions arising under the STIP f) Subject to the satisfaction of any terms or conditions set out in the Offer Letter and Application Form, following receipt of a completed and signed Application Form and the acceptance by the Board of the Application Form, the Company will, or direct the Trustee (if one is nominated) as soon as practicable after the end of the Acceptance Period, acquire, allot or issue to the Participant, on the terms of the Offer Letter, the number of Shares applied for by the Participant in the Application Form; and complete a register of Shares in accordance with the Applicable Law g) Unless determined by the Board, no payment is required for the issue of Shares under the STIP h) A Holding Lock will be applied to all Shares granted to a Participant under the STIP for the duration of the Holding Lock Period (from the issue date to the earlier of (a) the date that is three years after the Acquisition Date of the Shares; (b) the day after the date of the Eligible Employee's cessation of employment or office or contract (including as a result of Permanent Incapacity or Retirement); or (c) such other date as determined by the Board subject to satisfying the requirements of section 83A-45(4) and 83A-45(5) applicable to the relevant Shares i) All ordinary shares that are allocated to Participants will rank equally with other ordinary shares in the Company from the date of issue. Participants will be entitled to dividends from the date of allocation. In the past, the invitation to participate in the STIP has been made by way of a physical Offer Letter (STIP Letter). In future, the equivalent information will be communicated to Participants electronically. The Trust The Trust was established under the Trust Deed between the Company and the Trustee. The purpose of the Trust is to hold Plan Securities on behalf of Participants and their Associates who acquire Plan Securities under Plans from time to time. The Trust must be managed and administered so that it satisfies the Sole Activities Test at all times. Without limiting the foregoing, any contribution the Trust receives from the Group from time to time must be applied by the Trustee in accordance with the Plans to acquire Shares for allocation and transfer to Participants under the Plans as applicable. Broadly the Trust operates as follows: a) The Trust is to be funded by irretrievable cash contributions from the Company or a member of the CCG. The Trustee is not required to acquire Shares if it does not receive sufficient payment from the CCG or if it does not have sufficient funds to do so b) The funds are to be used by the Trustee to acquire shares in the Company either on-market, off-market, or via a subscription for new shares in the Company, based upon written instructions from the Company c) Shares acquired by the Trustee must be allocated to the relevant Participant and held on their behalf. Each Participant is the beneficial owner of the shares held by the Trustee on their behalf and is absolutely entitled to all other benefits and privileges (dividends, voting rights, bonus shares) attached to those shares d) The Trustee must transfer Plan Shares to Participants as directed by the Company. When Participants exercise their Rights, the Board may direct the Trustee to transfer all or some of those Shares to which Participants are entitled upon exercise of their Rights e) the Company or any member of the CCG does not have any charge, lien or other proprietary right or interest in the shares acquired by the Trustee according to the Trust Deed. No member of the CCG or the Trustee are entitled to obtain any beneficial interest in the Trust Assets. f) Upon termination of the Trust, the Trustee must not pay any Trust Assets to the Company or any member of the CCG g) Neither the Company nor any of its subsidiaries is a beneficiary of the Trust h) The Trust will be managed and administered so that it satisfies the definition of 'employee share trust' for the purposes of subsection 130-85(4) of the ITAA 1997, and i) The Trust may acquire shares that are not allocated to Participants (unallocated shares) to satisfy future obligations under the Plans to the extent that there are rights granted to Participants that have not yet vested, or vested rights that have not yet been exercised. Contributions to the Trust Whilst the Company intends to wait until the Rights have vested and exercised, before providing the Trust with the cash necessary to acquire Shares, the Company may make irretrievable cash contributions to the Trust prior to the Rights being exercised by the Participants to allow the Trustee to have enough Shares in the Trust ahead of the time they need to be allocated to Participants, and avoid delays in times such as blackout trading periods and to take advantage of any reductions in the Company Share price from time to time.


Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. All legislative references are to provisions of the ITAA1997 or ITAA1936, unless otherwise indicated. | Detailed Reasoning - 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 CCG are treated, for income tax purposes, as having been undertaken by the Company as the head company of the CCG. | Detailed Reasoning - Questions 6 to 8: 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 a subsidiary of the CCG in relation to questions 6 to 8. | Summary: The Company will be entitled to an income tax deduction pursuant to section 8-1in respect of the irretrievable cash contributions made to the Trustee of the Trust to fund the subscription for, or acquisition on-market of the Company shares in respect of employees based in Australia (Participants). | 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. The Company carries on a business which produces assessable income. The Company operates a number of employee share schemes as part of its remuneration strategy including the Plans. Under the Plans, the Company grants Rights or Shares to employees and makes irretrievable cash contributions to the Trust (in accordance with the relevant Plan Rules and the Trust Deed which the Trustee will use to acquire shares (either on-market or by subscription) for allocation to Participants. | Detailed Reasoning - 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 Company shares. The cash contributions made by the Company are irretrievable and non-refundable to the Company or any subsidiary of the CCG in accordance with the Trust Deed as: • On termination of the Trust, neither the Company or any member of the CCG has any entitlement to any part of the Trust Assets, including any shares that form part of the Trust Fund, at any time, and • Neither the Company nor any member of the CCG 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) Employee Share Scheme (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. | Detailed Reasoning - Not capital or of a capital nature: Upon weighing up the fact and circumstances of this case the irretrievable cash contributions by the Company to the Trustee are for the purpose of acquiring the Company Shares to meet commitments under the Plans. They are primarily outgoings incurred in the ordinary course of carrying on its business. The contributions will be an outgoing incurred for periodic funding of a bona fide ESS for employees. It is not expected to be made on a 'once and for all bases', but rather will be made on a recurring basis from time to time as part of the ongoing process of remunerating employees, with the Trust expected to acquire Shares regularly. 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 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 sufficiently small. Therefore, the payments are not capital, or of a capital nature. | Summary: The Company will be entitled to an income tax deduction pursuant to section 8-1in respect of the 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. The Company operates the Plans as part of its remuneration strategy. The Company incurs on-ongoing administration costs for operating the Plans such as: • employee plan record keeping • brokerage costs for the acquisition of shares • preparing the annual audit of the financial statements • preparing the tax returns or obtaining tax advice for the Trust, and • Trustee fees. 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 irretrievable cash contributions made by the Company, to the Trustee of the Trust, to fund the subscription for, or acquisition on-market of, the Company Shares by the Trust to satisfy ESS interests issued pursuant to the Plans, will be deductible to the Company under section 8-1 at the time determined by section 83A-210 if the contributions are made before the acquisition of the relevant ESS interests. | 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 Plans are employee share schemes for the purposes of subsection 83A-10(2) as they are 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 CCG). The Plans contain 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 Plans. | Summary: If the Trust satisfies its obligation under the Plans 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 capital gains tax (CGT) event for the Company under Division 104. | Detailed Reasoning - Detailed reasoning: 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. | Detailed Reasoning - 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. | Detailed Reasoning - Capital Gains Tax (CGT): Section 102-20 states that you make a capital gain or loss if, and only if, a CGT event happens. 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. In relation to CGT event H2, paragraph 104-155(5)(c) also states that CGT event H2 does not happen if a company issues or allots equity interests or non-equity shares in the company. As the Company is issuing Shares, being equity interests as defined in section 974-75, to the Trustee of the Trust neither CGT event D1 nor CGT event H2 will happen. 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 make a determination under subsection 177F(1) as a result of section 177D, to deny, in part or in full, a deduction claimed by the Company for the irretrievable cash contributionsmade to the Trustee to fund the subscription for, or acquisition on-market of the Company Shares by the Trustee, pursuant to the Plans. | 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 or Shares by the Company to Participants under the Plan will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: An employer's liability to fringe benefits tax (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 Plan is an ESS, the Rights and Shares provided under the Plan are ESS interests and that Subdivision 83A-B or 83A-C applies to those ESS interests. 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 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 on-market acquisition, of the Company Shares by the Trust, 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, and • The Trust ensures that ESS interests as defined in subsection 83A-10(1) (being Rights or Shares in the Company) 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 Plans. 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 Draft 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) 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 cash 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: These reasons for decision accompany the Notice of private ruling for the Company and others.