Private ruling: Employee Share Scheme
Date of advice: 6 June 2025
Published: 11 August 2025
Ruling period: Income year ended 30 June 20XX to 30 June 20XX | This ruling applies for the following periods for questions 4 and 5: | Fringe Benefits Tax year ended 31 March 20XX to 31 March 20XX
Date scheme commenced: XX July 20XX

Ruling: Q1: Will Company A be entitled to deduct an amount under section 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for irretrievable cash contributions made by Company A to the Trustee of the Trust to fund the subscription for, or acquisition on-market (or off market) of fully paid ordinary shares in Company A (Shares), to satisfy Rights issued pursuant to the Plan (Plan)? | A1: Yes. Question 2a Will the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares by the Trustee to satisfy Rights issued pursuant to the Plan, be deductible to Company A under section 8-1 of the ITAA 1997 at the time determined by section 83A-210 of the ITAA 1997, if the contributions are made before the acquisition of the Rights by Participants under the Plan? Answer 2a Yes. Question 2b Will the irretrievable contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares by the Trustee to satisfy Rights issued pursuant to the Plan, be deductible to the Taxpayer under section 8-1 of the ITAA 1997 in the income year when the contributions are made, if the contributions are made in the same income year or in a year that is afterthe acquisition of the relevant Rights by Participants under the Plan? Answer 2b Yes. | Q2: Will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) applies to deny, in part or in full, any deduction claimed by Company A in respect of irretrievable cash contributions made by Company A to fund the subscription for, or acquisition on-market (or off market) of Shares by the Trust, pursuant to the Plan? | A2: No. | Q3: Will the provision of Rights to Participants under the Plan constitute a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA)? | A3: No. | Q4: Will the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares pursuant to the Plan, constitute a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | A4: No.

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. This ruling is based on the facts stated in the description of the scheme that is set out below, including the following documents provided to the Commissioner or relevant parts of them which are to be read with the description: • The rules of the Plan (Plan) • Trust Deed between Company A and Trustee, including the Amended Trust Deed Unless otherwise specified, all defined terms referred to hereinafter take their meaning from the above documents as applicable. If your circumstances are materially different from these facts, this ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background Company A and the Group Company A is an Australian company and head company of an income tax consolidated group (Company A TCG). Company A is listed on the Australian Securities Exchange, reporting to a financial year ending 30 June. Company A has operations in Australia and Country B. The employee share acquisition arrangement of Company A is governed under the Plan (Plan) and administered under the Trust (Trust), with Company B as the trustee (the Trustee) of the Trust. Company A makes irretrievable cash contributions to the Trust in respect of employees of the Company A TCG who participate in the Plan. Company A's wholly owned Country B incorporated subsidiaries employ Country B tax resident employees who are granted awards under a separate employee share acquisition arrangement governed by the X Plan Rules. For the purposes of this Ruling: • Participants to the Plan are Australian tax resident employees of the Company A TCG • there are no Options and Restricted Shares granted under the Plan • Shares granted under the X Plan to selected employees (X Plan Participants) are not within the scope of this Ruling. Company A Plan (Plan) As part of its strategy to attract and retain key talent, Company A established the Plan in XXX 20XX to allow the grant of Rights, Options and Restricted Shares to Eligible Employees. Offer of Incentives Company A may offer Eligible Employees: • Options (Options) which is an entitlement to receive a Share (or, in certain circumstances, to a cash payment in lieu of a Share) subject to satisfaction of applicable conditions (including any vesting condition) and compliance with the applicable exercise procedure (including payment of any applicable exercise price) • Rights (Rights) which is an entitlement to a Share (or, in certain circumstances, to a cash payment in lieu of a Share) subject to satisfaction of applicable conditions (including any vesting condition) • Restricted Share (Restricted Share) which is a Share allocated in accordance the Plan that is subject to restrictions on dealing, vesting conditions and/or other restrictions or conditions (collectively, Incentives). Offers are made to Eligible Employees to participate in a grant of Incentives at the Board's absolute discretion on the terms set out in the rules of the Plan and/or on any additional or alternative terms as the Board determines, as specified in the terms of an Offer. The terms and conditions of Incentives offered or granted under the Plan will be set out in the invitation letter which will state the following: • the type and number of Incentives being offered, or the method by which the number will be calculated • the amount (if any) that will be payable for the grant of Incentives • any vesting conditions or other conditions that apply, including any vesting period • where the Board has made a determination pursuant to the Plan, the vesting of Rights will only be satisfied through an allocation of Shares • the circumstances in which Rights will lapse, Shares (including Restricted Shares) allocated under the rules of the Plan may be forfeited or a Participant's entitlement to Incentives may be reduced or extinguished • how Incentives may be treated in the event that the Eligible Employee ceases employment with a Group Company, and any discretions retained by the Board under the Plan and • any restrictions (including the period of restriction) on dealing in relation to a Restricted Share or Share allocated to the Eligible Employee under the rules of the Plan. The acceptance of an Offer must be made by the Eligible Employee in accordance with the instructions that accompany the Offer, or in any other way the Board determines. To the extent of any inconsistency, the terms and conditions advised to an Eligible Employee by the Board in an Offer will prevail over any other rules of the Plan. The Board may determine that the vesting of a Right will be satisfied by Company A: • making a cash payment in lieu of an allocation of Shares or • some or all of a Participant's Rights will be settled in this way. Long Term incentives Eligible Employees who accept an offer to apply for a Long-Term incentive award are granted Rights. Each Right granted entitles the Participant to acquire one Share allocated for nil consideration, subject to the satisfaction of performance conditions. Rights may vest following the end of the performance period if the performance conditions are met. Rights are not transferrable and are solely allocated to the Eligible Employee. The Participant may also elect to complete a Dealing Restriction Election Form to elect a specified restriction period (between one year, three years, five years or eight years) applied on any Shares they may receive on vesting and exercise of Rights, Options or Restricted Shares. Once the Dealing Restriction Election Form is submitted, the Dealing restriction period cannot be changed. In the event retesting occurs one year after the original vesting date, each of these four dates will be one year later. Rights granted under the Long-Term incentive Offer are subject to three performance conditions: • Aggregate Earnings Per Share • Relative Total Shareholder Return • and Average Return on Invested Capital. Each performance condition will be separately assessed over a X-year performance period. Any Rights that vest will be automatically exercised and the Participant will be allocated one Share for each Right that vests. Any unvested Rights will lapse. Rights do not carry any dividend or voting rights prior to vesting. Short-Term incentives Company A may offer Eligible Employees Short Term incentive awards in the form of the allocation of Rights subject to the satisfaction of any service-based vesting condition. Under the terms of a Short-Term incentive Offer, XX% of the awards are allocated in the form of a grant of Rights to receive Shares in Company A. The residual XX% is provided in a cash payment to the Eligible Employee. Once the service-based vesting conditions attached to the Plan are satisfied, Rights will vest to the Participant. Vested Rights are automatically exercised. Rights are not transferrable and are solely allocated to the Eligible Employee. Employee Share Trust (the Trust) Establishment of the Trust Company A established the Trust for the purpose of administering and holding Shares for the benefit of employees as a component of remuneration. The Trust was established by way of a Trust Deed executed on X April 20XX and was amended and restated on X January 20XX. A further Amended Trust Deed was provided to the Commissioner on X 20XX. The Amended Trust Deed amends the following clauses of the Trust Deed: • removes the definition of 'Other Property' • removes clause 4(d) • amends clauses 4(i) and 4(p) • amends clauses 3.1(b) • amends clause 5.2(a) For the period 1 July 20XX through to X May 20XX the Trustee did not exercise its powers in the Trust Deed (as amended on 10 January 20XX) as contained in clauses 4(d) and 4(i), and in relation to clause 4(p), the Trustee did not transfer anything to Beneficiaries other than Shares and dividends related to those Shares pursuant to the Plan. 'Beneficiaries' is defined to mean all Participants, all other Employees and any other employee share trust within the meaning of section 130-85(4) of the ITAA 1997 whose beneficiaries are Eligible Employees. Company A (or any member of the Group) cannot be a beneficiary of the Trust and has no: • entitlement to any Shares or other trust property forming part of the Trust Fund or • entitlement to any return of contributions made to the Trust. Trustee's obligations and powers The Trustee agrees that its sole activities will comply with section 130-85(4) of the ITAA 1997 and are limited to managing the employee share schemes of Company A and the Group. Under the Trust Deed, the Trustee agrees to: • hold the Trust Fund on Trust for all Beneficiaries (General Trust Property) in accordance with the Trust Deed, and • at the request of the Board, set aside and hold for the benefit of identified Participants (each an Allocated Trust Property Beneficiary) identified parts of the Trust Fund (Allocated Trust Property) upon such terms and subject to such conditions by the rules of the Plan. Subject to the Trustee's sole purpose of exercising its powers and discharging its obligations under the Trust Deed and the relevant Rules (and for no other purpose), the Trustee's general powers include (but are not limited): • to enter into and execute all contracts or other documents and do all things which it, in its discretion, considers necessary to give effect to and carry out the rights, powers and discretions conferred on the Trustee under the Trust Deed • to make and give receipts, releases and other discharges for money payable to the Trust • to sell any rights that accrue to a Share and apply the proceeds of sale in accordance with the Trust Deed and the rules of the Plan • subject to the rules of the Plan, to reinvest dividends and participate in, or decline to participate in, Share entitlements • to open and operate any bank and other accounts for the Trust as the Trustee thinks fit • with the consent of Company A, to raise and borrow money in any manner from Company A or any Group Company provided no security, mortgage or charge is given over all or any part of the Trust Fund, and to pay any interest on money borrowed at an interest rate determined at arm's length basis on prevailing commercial rates • to determine what amounts shall be treated as income of the Trust Fund and what amounts shall be treated as capital of the Trust Fund • to separately identify amounts as income of the Trust Fund or as capital of the Trust Fund, and to do all things necessary to separately identify and administer such amounts • to determine the character of all receipts and payments by the Trust Fund • to accumulate, or permit the accumulation of, income • to transfer cash, Shares, or assets that the Trustee receives in its capacity as a shareholder of the Company to any Beneficiary either for no consideration or for an amount agreed by the Beneficiary (which, in the case of Shares, need not be market value) pursuant to the rules of the Plan • to exercise the voting rights in respect of Shares held in the Trust Fund in accordance with the rules of the Plan and the deed. If Shares, cash, or assets are held as part of the General Trust Property, the Trustee may apply it for the Beneficiaries subject to the following matters. The Trustee: • may, with the consent of the Board, apply any dividends or other distributions received on those Shares or apply the cash or assets the Trustee receives in its capacity as a shareholder of the Company in repaying any loans from a Group Company, subscribing for or purchasing Shares for the benefit of Beneficiaries nominated by Company A or Beneficiaries generally, defraying the costs and expenses of administering the Trust Deed or hold those amounts on Trust for Beneficiaries • must hold any bonus issues or other benefits received on those Shares on Trust for the Beneficiaries • must not, at its own discretion, exercise any voting rights in respect of those Shares unless it is exercised consistently with the Trustee's fiduciary duties (if the Trustee is an associate of Company A) • may vote or refrain from voting as the Trustee in its absolute and unfettered discretion sees fit as if it were the legal and beneficial owner of those Shares (if the Trustee is not an associate of Company A) • may participate in any other corporate action of Company A (e.g. a rights or bonus issue) in its absolute discretion. In relation to the Allocated Trust Property, the Trustee must act at all times in accordance with the rules of the Plan and: • must not deal with any part of the Allocated Trust Property, except as required or permitted by the rules of the Plan • must comply with the rules of the Plan, including any requests of the Board so far as is reasonable • is not bound to observe instructions from an Allocated Trust Property Beneficiary except as required by the rules of the Plan • subject to the terms and conditions imposed by the Board under clauses 3.2(a) and 3.2(b) and the rules of the Plan, must, at the request of an Allocated Trust Property Beneficiary on whose behalf an identified part of the Allocated Trust Property is held, transfer that part of the Allocated Trust Property to the Allocated Trust Property Beneficiary. Subject to the Plan rules, if Shares are held on Trust for an Allocated Trust Property Beneficiary: • the Allocated Trust Property Beneficiary is presently entitled to receive all dividends and other distributions, bonus issues and other benefits payable or provided to the Trustee in respect of those Shares • the Trustee may direct Company A to pay dividends and other distributions or benefits directly to the Allocated Trust Property Beneficiary • if requested by an Allocated Trust Property Beneficiary, any dividends payable in respect of a Share may be reinvested in Shares under Company A's dividend reinvestment plan (if any) as in force from time to time, and any Shares issued or transferred under a dividend reinvestment plan will be issued or transferred to the Trustee and held for the relevant Allocated Trust Property Beneficiary on the same terms and conditions as the underlying Shares in respect of which they were issued or transferred and will be transferred to the Allocated Trust Property Beneficiary for no further consideration when those underlying Shares are transferred • the Allocated Trust Property Beneficiary may, subject to any applicable voting restrictions, direct the Trustee in writing how to exercise the voting rights attaching to those Shares, either generally or in respect of a particular resolution • where the Trustee is not an associate of Company A, and in the absence of any direction under clause 5.1(a)(4) of the Plan and subject to any applicable voting restrictions, the Trustee may vote or refrain from voting as the Trustee in its absolute and unfettered discretion sees fit as if it were the legal and beneficial owner of the Shares • where the Trustee is an associate of the Company, the Trustee must not, at its own discretion, exercise any voting rights in respect of those Shares unless it is exercised: in accordance with the instructions of the Allocated Trust Property Beneficiary under clause 5.1(a)(4) of the Plan or consistently with the Trustee's fiduciary duties • any bonus Shares that are issued in respect of those Shares will be issued to the Trustee and held for the Allocated Trust Property Beneficiary on the same terms and conditions as the underlying Shares and • the Trustee may sell the Shares held for that Allocated Trust Property Beneficiary and: ­ subject to clause 5.1(a)(8)(B) of the Trust Deed, pay the proceeds to that Allocated Trust Property Beneficiary (net of any applicable brokerage, commission, stamp duty or other transaction costs) and ­ is entitled to deduct or withhold a sufficient portion of the proceeds to satisfy any withholding liability and remit that amount to the relevant taxation authority. Subject to clause 5.2, the Trustee may apply any part of the General Trust Property for the benefit of the beneficiaries pursuant to the Plan, including transferring cash, Shares or assets that the Trustee receives in its capacity as shareholder of the Company to, transferring Shares to, conferring legal title of Shares upon, or granting a beneficial interest in Shares to, a beneficiary, or disposing of Shares and applying the proceeds for the benefit of a Participant presently entitled to the Shares at the direction of the Participant. In the event that the Trust is terminated, the Trustee must wind up the Trust and transfer the Trust Fund or the proceeds on sale of the Trust Fund (as appropriate): • in relation to Allocated Trust Property, to the appropriate Allocated Trust Property Beneficiary in Shares or cash, subject to the rules of the Plan • in relation to General Trust Property in whole or in part for one or more of the following beneficiaries as the Trustee thinks fit, to: ­ any relevant Group Company in repayment of any outstanding loan from that Group Company ­ any other trust established for the purposes of a Plan ­ any trust established for the benefit of Employees or Participants. Acquisition of Shares The Trust will facilitate the acquisition of Shares, either on-market, off-market or by the new issue of Shares by Company A. Shares may be acquired off-market by: • acquiring Shares at market value from a participating employee who wants to sell • acquiring, off-market, forfeited Shares from a Loan Plan Participant if those Shares do not vest but the Trust will not hold Shares whilst allocated to Loan Plan Participants. The Shares will be acquired for the lesser of market value or a value equal to the outstanding loan balance within a reasonable period after the date the Shares have been forfeited. Funding Company A generally makes irretrievable contributions to the Trust to fund the acquisition of Shares once Rights have been granted. Company A must provide the Trustee, or cause the provision to the Trustee, of any funds required by the Trustee to comply with its obligations under the Trust Deed. All funds provided to the Trustee under the Trust Deed will: • constitute accretions to the corpus of the Trust and will not be repayable by the Trustee, and • may be paid to Company A as consideration for the subscription for Shares provided such Shares are held under the terms of the Trust Deed. The Trustee is not obliged to act in accordance with a request or direction made by the Board if: • it would be required to incur a cost, expense or liability in doing so for which it is not fully indemnified or • a Group Company or a Participant has not provided it with sufficient funds to comply with the request or direction. A request or direction from the Board to the Trustee to acquire Shares is only effective if the Trustee has been provided with sufficient funds to acquire the relevant Shares by a Group Company or a Participant. In the event the Board decides to settle vested Incentives in cash (in lieu of Shares), Company A will make the cash payments directly to the Participants via Company A's payroll. Where Vesting Conditions attached to Rights granted are not met, the Right lapses and the Trust may hold the Shares to be 'recycled' to satisfy other grants of Incentives. Other Where there is any inconsistency between the Trust Deed and the rules of the Plan, the terms of the Trust Deed prevail to the extent of the inconsistency.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 66 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Income Tax Assessment Act 1936 Part IVA | Income Tax Assessment Act 1936 subsection 170(10AA) | Income Tax Assessment Act 1936 paragraph 177D(2) | Income Tax Assessment Act 1936 section 177F | Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 subsection 8-1(1) | Income Tax Assessment Act 1997 subsection 8-1(2) | Income Tax Assessment Act 1997 division 83A | Income Tax Assessment Act 1997 section 83A-10 | Income Tax Assessment Act 1997 subsection 83A-10(1) | Income Tax Assessment Act 1997 subsection 83A-10(2) | Income Tax Assessment Act 1997 Subdivision 83A-B | Income Tax Assessment Act 1997 subsection 83A-20(1) | Income Tax Assessment Act 1997 Subdivision 83A-C | Income Tax Assessment Act 1997 section 83A-210 | Income Tax Assessment Act 1997 paragraph 83A-210(a) | Income Tax Assessment Act 1997 section 83A-340 | Income Tax Assessment Act 1997 section 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 701-1

Reasons for decision: Detailed Reasoning - Question 1: Is Company A entitled to claim deductions under section 8-1 of the ITAA 1997 for irretrievable cash contributions made by Company A to the Trustee to acquire shares to satisfy Rights granted under the Plan? | Summary: Yes, the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or acquisition on-market (or off market) of Shares for the purposes of the Plan, will be deductible under section 8­1. | 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, under 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. Company A is an Australian company which generates assessable income. Company A operates an employee share scheme (ESS) as part of its remuneration strategy to attract and retain key talent. | Detailed Reasoning - 'Incurred' in gaining or producing assessable income or in carrying on a business: Company A must provide the Trustee with the funds required to enable the Trustee to subscribe for, or acquire, Shares. The cash contributions made by Company A to the Trustee are irretrievable and non-refundable in accordance with the Trust Deed as: • all funds received by the Trustee from Company A will constitute accretions to the corpus of the Trust and will not be repayable to Company A, other than as consideration for Shares subscribed for by the Trustee in accordance with the Trust Deed and the Plan or relevant terms of participation • nothing in the Trust Deed confers, or is intended to confer, on Company A any charge, lien or any other proprietary right, or proprietary or beneficial interest in Shares. The Commissioner accepts that the granting of awards by Company A to its employees under the Plan is productive of Company A's assessable income and is incidental and relevant to the income earning activity of the Company A TCG as: • they arise as part of the remuneration arrangements for employees of the Company A TCG, and • the irretrievable cash contributions to the Trust are part of an ongoing series of payments in the nature of the remuneration of those employees. That is, there is sufficient nexus between: • the irretrievable cash contributions made by Company A to the Trustee to satisfy the granting of Rights under the Plan to Participants who are employees of the Company A TCG, and • its own income earning activities, where those employees engage in activities that derive income assessable in Australia. Therefore, paragraph 8-1(1)(a) is satisfied. | Detailed Reasoning - Not capital or of a capital nature: The costs incurred by Company A will be an outgoing for the periodic funding of an employee share acquisition plan for the employees of the Company A TCG. Costs incurred are likely to be in relation to more than one grant of ESS interest, and Company A intends to continue satisfying the ESS interests 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 Company A. While the irretrievable cash contributions may be viewed to secure and enduring or lasting benefit for Company A that is independent of the year-to-year benefits that it derives from a loyal and contented workforce, that enduring benefit is not considered to have a lasting quality as the irretrievable cash contributions which form the Trust's funds is permanently dissipated within a relatively short period of the irretrievable cash contributions being made. Therefore, the payments are not capital, or of a capital nature, and paragraph 8-1(2)(a) is not satisfied. | Detailed Reasoning - Conclusion: Company A will be entitled to deduct an amount under section 8-1 for irretrievable cash contributions it makes to the Trustee to acquire Shares to satisfy Rights granted under the Plan, where those irretrievable cash contributions are made for the benefit of the Participants to the Plan who are employees of the Company A TCG. | Detailed Reasoning - Question 2a: Will irretrievable cash contributions made by Company A to the Trustee to fund the acquisition of Shares on-market (or off-market) to satisfy Rights issued pursuant to the Plan, be deductible under section 8-1 of the ITAA 1997 at a time determined by section 83A-210 of the ITAA 1997, if the contributions are made before the acquisition of the Rights by Participants under the Plan? | Summary: Yes. Irretrievable cash contributions made by Company A to the Trustee to fund the acquisition of Rights issued pursuant to the Plan, which are made at a time before the Eligible Employee acquires the relevant Rights, will be deductible to Company A at a time determined by section 83A-210. The effect is that Company A cannot deduct the irretrievable cash contributions until such time the Participant acquires the relevant Rights. | Detailed Reasoning - Detailed reasoning: It is often the case that an outgoing will be both incurred and paid in the same year of income, and as such, the amount is deductible in that income year for the purposes of section 8-1 (paragraph 15 of Taxation Ruling TR 97/7 Income tax: section 8-1 - meaning of 'incurred' - timing of deductions (TR 97/7)). However, section 83A-210 modifies this rule in certain circumstances in respect of contributions provided by an employer to a trust to purchase shares under an employee share scheme. The effect of section 83A-210 is to deem the time an employer incurs the outgoing to be the time the relevant ESS interest is acquired by a beneficiary, rather than the time the employer makes the irretrievable cash contribution to the trust, if the irretrievable cash contribution is made before the relevant ESS interests are acquired. 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 . Section 83A-210 will only apply if there is a relevant connection between the money provided to the trustee and the acquisition of ESS interests (directly or indirectly) by the employee under an employee share scheme in relation to the employee's employment. An ESS interest in a company is defined in subsection 83A-10(1) as either a beneficial interest in a share in a company or a beneficial interest in a right to acquire a beneficial interest in a share in the company. A Right granted to a Participant under the Plan will be an ESS interest. The Plan comprises an employee share scheme under subsection 83A-10(2) as it is a scheme under which ESS interests are provided to the Participants in relation to their employment with the Company A TCG. The employee share scheme contains a number of interrelated components which include the provision of irretrievable cash contributions by Company A to the Trustee of the Trust. These irretrievable cash contributions enable the Participants (each an 'ultimate beneficiary' as defined in paragraph 83A-210(a)) to acquire, directly or indirectly, an ESS interest under the employee share scheme (the Plan) in relation to their employment. If the irretrievable cash contributions are made by Company A to the Trustee before the time the Participants acquire the relevant ESS interests (i.e. where the Participants are granted the Rights but vesting conditions attaching to those Rights (where applicable) have not yet been satisfied), the deduction for the irretrievable cash contributions, is allowable to Company A in the income year when the relevant ESS interest is acquired by the Participant under the Plan. For completeness, section 83A-210 will not apply: • to a deduction for irretrievable cash contributions provided by Company A to the Trustee, if those contributions are made at or after the time the ultimate beneficiaries acquire the beneficial interest in the Share. In these circumstances, the irretrievable cash contributions are deductible by Company A under section 8-1, in the income year in which they are made to the Trustee. This is consistent with the ATO view expressed in ATO ID 2010/103 . | Detailed Reasoning - Indeterminate rights - Rights granted under the Plan: The Commissioner accepts that Rights granted under the Plan are indeterminate rights for the purposes of section 83A-340. That is because the Rights can be settled by either Shares or by making a payment of a cash equivalent amount in lieu of a Share, to be determined at a future time at the discretion of the employer. Accordingly, an award of Rights under the Plan are not rights to acquire a beneficial interest in Shares unless, and until the time it is determined by the Board that they will be satisfied by the provision of Shares. Although the indeterminate right is not an ESS interest within the meaning of subsection 83A-10(1) at the time it is granted, where it is ultimately satisfied with shares instead of cash (or when the number of shares the employee is entitled to receive is determined), the indeterminate right will, under section 83A-340, be treated as if it had always been an ESS interest. Section 83A-210 applies equally to contributions made in respect of ESS interests and indeterminate rights. Therefore, an irretrievable cash contribution in respect of an indeterminate right is taken to have been paid at the acquisition time of the ESS interest. If an indeterminate right becomes an ESS interest, deductible contributions made in respect of those rights can be claimed in the income year when the ESS interest is deemed to have been acquired under section 83A-340 (this will be the year in which the indeterminate right was granted to an employee). Once this has been established, such contributions can be matched to ESS interests issued to the employee, and where necessary, the relevant earlier income year assessments can be amended to allow the deduction (Item 28 of subsection 170(10AA) of ITAA 1936). It is important to note that an indeterminate right which is satisfied by the provision of cash never becomes an ESS interest and the contribution to the Trust in respect of the provision of that right is permanently deferred. However, where that ESS interest is subsequently issued to another participating employee, that employee becomes the 'ultimate beneficiary' and the deduction is available in the income year that participating employee acquired that ESS interest. Once it is determined that they will be satisfied by provision of Shares, section 83A-340 operates to treat these rights as though they had always been rights to acquire beneficial interests in shares (therefore, an ESS interest) for the purposes of section 83A-210. If irretrievable cash contributions are provided to the Trustee before these rights are acquired (and they do subsequently become ESS interests by virtue of section 83A-340), section 83A-210 will apply (retrospectively) to modify the timing of the deduction claimed under section 8-1 to be the income year in which Participants originally acquired the Rights under the Plan. | Detailed Reasoning - Question 2b: Will the irretrievable contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares by the Trustee to satisfy Rights issued pursuant to the Plan, be deductible to the Taxpayer under section 8-1 of the ITAA 1997 in the income year when the contributions are made, if the contributions are made in the same income year or in a year that is afterthe acquisition of the relevant Rights by Participants under the Plan? | Summary: Yes. The irretrievable cash contributions made by Company A to the Trustee, to fund the acquisition of Rights issued pursuant to the Plan, made at a time on or after the Participant acquires the Rights, will be deductible to Company A in the income year in which the contribution is made by Company A under section 8-1. | Detailed Reasoning - Detailed reasoning: Consistent with the analysis in Question 2(a) above, where the contribution is made on or after the acquisition of the Rights, irretrievable cash contributions made by Company A to the Trustee to fund the acquisition of Rights issued under the Plan, will be deductible in the income year in which the contribution is made under section 8-1. This is because section 83A-210 does not apply to such contributions to modify the timing of the deduction. | Detailed Reasoning - Question 3: Will the Commissioner seek to make a determination that Part IVA of ITAA 1936 applies to deny, in part or in full, any deduction claimed by Company A in respect ofirretrievable cash contributions made by Company A to fund the subscription for, or acquisition on-market (or off market) of Shares by the Trust, pursuant to the Plan? | Summary: No. The Commissioner will not make a determination that Part IVA of the ITAA 1936 applies to deny, in any part or in full, any deduction claimed by Company A in respect of irretrievable cash contributions made by Company A to fund the subscription for, or acquisition on-market (or off-market) of Shares by the Trustee. | 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 of the ITAA 1936, 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 of the ITAA 1997 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 Employee Share Trust (EST) arrangement. Therefore, having regard to the eight factors set out in paragraph 177D(2) of the ITAA 1936, the Commissioner has concluded that the scheme is not being entered into or carried out for the dominant purpose of enabling Company A to obtain a tax benefit. | Detailed Reasoning - Question 4: Will the provision of Rights to Participants under the Plan constitute a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | Summary: No. The provision of Rights to Participants under the Plan will not constitute 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 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. Paragraph (h) of the 'fringe benefit' definition in subsection 136(1) of the FBTAA excludes a benefit constituted by the acquisition of an ESS interest under an employee share scheme (within the meaning of the ITAA 1997) to which Subdivision 83A-B or 83A-C applies. The Commissioner accepts that the Plan is an employee share scheme under subsection 83A-10(2) as: • the Rights granted under the Plan are ESS interests under subsection 83A-10(1), being a beneficial interest in a right to acquire a beneficial interest a share in a company, and • these Rights are provided to employees of the Company A TCG in relation to their employment. As Participants may acquire Rights under the Plan at a discount or for nil consideration, they are ESS interests to which Subdivision 83A-B will apply (unless Subdivision 83A-C applies instead). | Detailed Reasoning - Indeterminate Rights - Rights granted under the Plan: As discussed above, at paragraph 23, a Right granted under the Plan that may be satisfied in cash instead of Shares are indeterminate rights. At the time Rights are granted under the Plan, it is unclear if paragraph (h) of the definition of fringe benefit in subsection 136(1) of the FBTAA applies because those Rights may be satisfied in cash instead of Shares. Hence, they may not be ESS interests within the meaning of subsection 83A-10(1). Where the Rights are ultimately satisfied with Shares instead of cash, section 83A-340 will operate to treat those Rights to have always been ESS interests within the meaning of subsection 83A-10(1). In these circumstances, the Plan will constitute an ESS within the meaning of subsection 83A-10(2) because it is a scheme under which ESS interests are provided to employees of Company A in relation to their employment. Subsection 83A-20(1) is the key condition that an ESS interest must meet for Subdivision 83A-B or 83A-C to apply. Subsection 83A-20(1) states: This Subdivision applies to an ESS interest if you acquire the interest under an employee share scheme at a discount. As Participants may acquire Rights under the Plan for nil consideration (i.e. at a discount), Subdivision 83A-B will apply to those Rights (unless Subdivision 83A-C applies instead). Accordingly, the provision of Rights under the Plan will not be subject to fringe benefits tax on the basis 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 a fringe benefit in subsection 136(1) of the FBTAA. When Rights granted under the Plan are exercised, it will not give rise to a fringe benefit as any benefit received would be in respect of the exercise of the Rights and not in respect of employment (refer ATO Interpretative Decision ATO ID 2010/219 Fringe Benefits Tax Fringe benefit: shares provided to employees upon the exercise of rights granted under an employee share scheme ). For completeness, where the Rights granted under the Plan are ultimately satisfied with cash instead of Shares, the granting of the Rights under the Plan will be viewed as a series of steps in the payment of salary or wages, and not a separate benefit to the payment of salary or wages which are excluded from the definition of a fringe benefit by paragraph 136(1)(f) of the FBTAA. This outcome is consistent with ATO Interpretative Decision ATO ID 2010/142 Fringe Benefits Tax Employee share scheme: indeterminate rights not fringe benefits . Question 5 Will the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares pursuant to the Plan, constitute a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | Summary: No. The irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for or acquisition on-market (or off-market) of Shares pursuant to the Plan, will not constitute a 'fringe benefit' within the meaning of subsection 136(1) of the FBTAA. | Detailed Reasoning - Detailed reasoning: An employer's liability to fringe benefit taxes 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 definition. One benefit excluded from being a fringe benefit pursuant to paragraph (ha) of the 'fringe benefit' definition in subsection 136(1) of the FBTAA is: (ha) 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) Therefore, for the irretrievable cash contributions to be excluded from the definition of 'fringe benefit', the Trust must be an employee share trust as defined in subsection 130-85(4). 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 are relevant. To qualify as an employee share trust, a trustee's activities must be limited to: • obtaining shares or rights in a company (paragraph 130-85(4)(a)) • ensuring that ESS interest in the company that are beneficial interests in those shares or rights are provided under an ESS to employees, or associates of employees, of the company or a subsidiary of the company (paragraph 130-85(4)(b)) • other activities that are merely incidental to the activities mentioned in paragraphs 130-85(4)(a) and (b) (paragraph 130-85(a)(c)). In the present case, paragraphs 130-85(4)(a) and (b) are satisfied because: • the Trust acquires Shares in Company A • as stated above in response to Question 4, it is accepted that the Plan comprises an employee share scheme under which ESS interests are provided to Participants • the Trustee ensures that ESS interests (as defined in subsection 83A-10(1)) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating Shares to Participants in accordance with the Trust Deed and the rules of 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(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'. Our 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). Activities that involve 'investing in assets other than shares or rights to shares, in the employer company' or result in employees being provided with additional benefits (such as the provision in 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 paragraphs 130-85(4)(a) and (b). Therefore, the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or acquisition on-market (or off-market) of Shares under the Plan, will not constitute a 'fringe benefit' by virtue of paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA.

Does Part IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to an associated or wider arrangement of which the current arrangement is part. | If you want us to rule on whether Part IVA applies to a wider associated arrangement of which the current arrangement is part, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select 'Part IVA: the general anti-avoidancerule for income tax'. | 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