Private ruling: Employee share scheme - changing roles
Date of advice: 12 April 2022
Published: July 2022
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will there be a deferred taxing point in respect of the taxpayer's employee share scheme (ESS) interests when the taxpayer ceases their current role (Role A) and becomes a Role B? | A1: No . | Q2: Will there be a deferred taxing point in respect of the taxpayer's ESS interests when the taxpayer ceases to be Role B and becomes a Role C? | A2: No. This private ruling applies for the following periods: Year ending 30 June 20XX Year ending 30 June 20XX Year ending 30 June 20XX

Relevant facts and circumstances: This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were appointed in Role A of the company in 20XX. Your position in the company will be changing in three stages on or from DMMYYYY as follows: 1. You will continue in Role A 2. You will commence in Role B on or from DDMMYYYY to DDMMYYYY 3. You will commence in Role C from DDMMYYYY You will not be eligible for any additional Awards (A and B) while engaged in Role's B and C; however, you will continue to hold your rights under existing unvested awards until the time that it falls for vesting whether or not the conditions (service or performance) are satisfied. As at DDMMYYYY, you had XXX,XXX unvested rights to acquire shares under the company incentive plan, known as the Incentive Rights. The following table describes your current unvested ESS interests: Award Type Unvested rights Earliest possible vesting date Expiry date FYXX Award A Performance rights XXX,XXX DDMMYYYY DDMMYYYY FYYY Award A Performance rights XXX,XXX DDMMYYYY DDMMYYYY FYXX Award A Performance rights XXX,XXX DDMMYYYY DDMMYYYY FYYY ward B Service rights XXX,XXX DDMMYYYY DDMMYYYY XXX,XXX

Relevant legislative provisions: Income Tax Assessment Act 1997 section 83A-10 | Income Tax Assessment Act 1997 section 83A-25 | Income Tax Assessment Act 1997 section 83A-115 | Income Tax Assessment Act 1997 section 83A-120

Reasons for decision: Summary: The employee share scheme (ESS) provisions are contained in Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997). An ESS is defined in subsection 83A-10(2) of the ITAA 1997 as a scheme under which ESS interests in a company are provided to employees, or associates of employees, of the company, or subsidiaries of the company, in relation to the employees' employment. In summary, the ESS provisions recognise the dual nature of grants of shares and rights to acquire shares, defined as ESS interests, as both remuneration and investments. To this end, the ESS provisions provide a mechanism for recognising an appropriate value for remuneration purposes and an adjustment to the purchase price for investment purposes to reflect the amount treated as remuneration. Division 83A of the ITAA 1997 achieves this outcome by: • Determining when a taxpayer needs to include any discount received in relation to a share or right to acquire the share in their assessable income • Calculating the amount of this discount using the market value of the share or right to acquire the share at this date ignoring any selling restrictions or forfeiture conditions, and • Using this date and the market value of the share or right as the acquisition date and amount paid for it for all other income tax purposes. Under Subdivision 83A-B the employee is generally assessed on the discount in the year that an ESS interest is acquired. Subdivision 83A-C of the ITAA 1997 provides that when certain conditions are satisfied, the discount in relation to an ESS interest is not included in the employee's assessable income in the income year they acquire the ESS interest, but will be included when the deferred taxing point (DTP) occurs. The DTP for an ESS interest that is a beneficial interest in a right to acquire a share that was granted on or after 1 July 2015 will be the earliest of the times provided in subsections 83A-120(4) to (7) of the ITAA 1997, summarised as follows: • When the ESS interest has not been exercised, there is no real risk of forfeiting the ESS interest, and the scheme no longer genuinely restricts disposal of the ESS interest (subsection 83A-120(4) of the ITAA 1997) • The end of the 15-year period starting when the employee acquired the ESS interest (subsection 83A-120(6) of the ITAA 1997) • When the ESS interest is exercised and there is no real risk of forfeiting the share and the scheme no longer genuinely restricts disposal of the share (subsection 83A-120(7) of the ITAA 1997). In your case, in 20XX you had a number of unvested rights to acquire shares under a tax-deferred ESS by the company who granted the ESS interests. On or from DDMMYYYY your role at the company is changing. However, on or from DDMMYYYY, you will continue to hold your unvested rights under the existing awards, until the time that they fall for vesting, whether or not the conditions are satisfied, in your new roles at the company. Your role changes on or from DDMMYYYY will not satisfy any conditions under subsections 83A-120 and the DTP on your ESS interests will not arise on this basis. Any ESS discount that arises in relation to your ESS should be reported in the income year in which they meet the conditions provided in section 83A-120.