Private ruling: Employee share scheme
Date of advice: 3 October 2025
Published: 17 November 2025
Date scheme commenced: X July 20XX

Ruling: Q1: Will Company A as head company of the Company A tax consolidated group (Company A TCG) obtain an income tax deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), in respect of the irretrievable cash contributions made by Company A to Company B as trustee for the Company A Employee Share Trust (the Trustee) to fund the subscription for or acquisition on-market or off-market of ordinary shares in Company A (Shares) by the Company A Employee Share Trust (Trust) to satisfy the issue of Shares by the Trustee to Participants under the Company A Performance Rights Plan (Plan)? | A1: Yes. | Q2: Will Company A as head company of the Company A TCG obtain an income tax deduction, pursuant to section 8-1 of the ITAA 1997, in respect of costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the on-going administration of the Trust? | A2: Yes. | Q3: Will Company A as head company of the Company A TCG obtain an income tax deduction, pursuant to section 40-880 of the ITAA 1997, in respect of the costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the amendment of the Trust? | A3: Yes. | Q4: Will 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 Trust pursuant to the Plan be deductible to Company A at a time determined by section 83A-210 of the ITAA 1997 where contributions are made before the acquisition of the relevant 'ESS interests' (as defined in subsection 83A-10(1) of the ITAA 1997)? | A4: Yes. | Q5: If the Trust satisfies its obligation under the Plan by subscribing for new shares in Company A, will the subscription proceeds be included in the assessable income of Company A under section 6-5 or 20-20 of the ITAA 1997 or trigger a CGT event under Division 104 of the ITAA 1997? | A5: No. | Q6: 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 full, any deduction claimed by Company A in respect of 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 Trust pursuant to the Plan? | A6: No. | Q7: Will the provision of rights or shares by Company A to employees or employees of other employer entities within the Company A TCG under the Plan be a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A7: No. | Q8: Will the irretrievable cash contributions made by Company A or other employer entities within the Company A TCG to the Trustee, to fund the subscription for or acquisition on-market or off-market of Shares pursuant to the Plan, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | A8: No. | Q9: Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A or any employer entity within the Company A TCG, by the amount of tax benefit gained from 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? | A9: No. This ruling for Questions 1 to 6 applies for the following period(s) 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 20XX This ruling for Questions 7 to 9 applies for the following periods 1 April 20XX to 31 March 20XX 1 April 20XX to 31 March 20XX 1 April 20XX to 31 March 20XX 1 April 20XX to 31 March 20XX 1 April 20XX to 31 March 20XX The scheme commenced on X July 20XX

Relevant facts and circumstances: This ruling is based on the facts and circumstances set out below, including the following documents provided to the Commissioner, or relevant parts of them which are to be read with the description: • Trust Deed • Amended Trust Deed • Plan Rules. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. Unless otherwise specified, all defined terms referred to hereinafter take their meaning from the above documents as applicable. Background Company A is an Australian registered public company listed on the Australian Securities Exchange. Company A is a X based provider of X services. Company A is the head company of the Company A tax consolidated group (Company A TCG). Company A implemented the Company A Performance Rights Plan (Plan or Rules or Plan Rules) to assist in the reward, retention and motivation of Directors, executives and staff members. Company A established the Company A Employee Share Trust (Trust) to administer the Plan and any future equity plans. Company A is committed to maintaining a remuneration policy that ensures employee reward for performance is competitive and appropriate to the results delivered and aligns the interests of shareholders with Directors and Executives. Remuneration structures are reviewed regularly to ensure that they satisfy the following key criteria for good reward governance practices: • competitiveness and reasonableness • acceptability to shareholders • performance linked • transparency • retention • capital management. The remuneration of key Company A employees is comprised of the following elements: • Fixed remuneration, which includes base pay and other benefits • Performance linked remuneration, which consists of - Short term incentives (participation in a profit share pool, commission and discretionary bonus) - Long term incentives (performance rights). Company A incurs various costs in the on-going administration of the Trust costs associated with the services provided by the Trustee of the Trust, including but not limited to: • employee plan record keeping • production and dispatch of holding statements to employees • costs incurred in the acquisition of shares on market, such as brokerage costs and the allocation of such shares to Participants • other trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust. For the purposes of this Ruling: • Participants to the Plan are Australian tax resident employees of the Company A TCG, • Performance Rights may only be settled in shares, and are not settled by a cash equivalent amount in lieu of shares to be determined at a future time at the discretion of Company A. Plan Rules - Company A Performance Rights Plan The Plan has been designed to allow Company A to issue long term incentive awards to eligible employees (Participants). Long term incentives may be in the form of performance rights (Performance Rights) which represent rights to acquire ordinary shares in Company A (Shares). The Plan defines the following terms as follows: BadLeaver means a Participant who ceases to be an Eligible Employee and any of the following: (a) the Participant's employment is terminated, or the Participant is dismissed from office, due to the Participant's: (i) serious misconduct (including, without limitation, fraud or dishonesty) (ii) material breach of the terms of any contract of employment or office entered into by any member of the Group and that Participant (iii) gross negligence, or (iv) other conduct justifying termination of the Participant's employment or office without notice either under the Participant's contract of employment or office, or at common law. (b) the Participant is ineligible to hold his or her office for the purposes of Part 2D.6 of the Corporations Act, or (c) the Participant commences employment with, becomes a director of, or enters into a consultancy agreement or other similar arrangement with, a Competitor, within six (6) months of ceasing to be an Eligible Employee. Eligible Employee means: (a) a full-time or part-time employee of any member of the Group, or (b) a director of any member of the Group who holds a salaried employment or office with a member of the Group. For the avoidance of doubt, if there is a change in the employing entity of a Participant from one member of the Group to another member of the Group, the Participant will be considered, for the purposes of this Plan, to have continued to be an Eligible Employee at all relevant times. Invitationmeans an invitation to an Eligible Employee to apply for the grant of a Performance Right made in accordance with clause 3.2 of these Rules. Leaver means a Participant who ceases to be an Eligible Employee. Participantmeans an Eligible Employee who has been granted a Performance Right in accordance with clause 4.1. Performance Rightmeans the right of a Participant to be issued and/or transferred: (a) one or more Shares (as specified in an Invitation); or (b) the number of Shares calculated in accordance with a formula specified in an Invitation, (whether directly, or to or by the Trustee to be held for and on behalf of the Participant), subject to any Vesting Conditions and/or Performance Hurdles and/or other conditions being determined by the Board (acting reasonably) to be satisfied, waived by the Board, or deemed to have been satisfied under these Rules. Performance Right Exercise Pricemeans, with respect to a Performance Right, the price to be paid by the Participant when exercising that Performance Right as specified in the relevant Invitation. For the avoidance of doubt: the Performance Right Exercise Price for a Performance Right may be nil. Sharemeans a fully paid ordinary share in the capital of the Company. Trusteemeans the trustee, from time to time, of any employee share trust used by the Company to deliver any Plan Shares arising from the Vesting and Exercise of a Performance Right under these Rules. The Plan broadly operates as follows: • Participants may receive a grant of Performance Rights under the Plan. A Performance Right represents the right to be issued and/or transferred either - one or more Shares (as specified in the Participant's Invitation) - the number of Shares calculated in accordance with a formula specified in an Invitation). • Subject to any Vesting Conditions and/or Performance Hurdles and/or other conditions being determined by the Board (acting reasonably) to be satisfied, waived by the Board, or deemed to have been satisfied under the Plan rules. • Performance Rights are granted for no consideration. • Certain performance, service or other conditions may need to be satisfied (or waived by the Board) before a Performance Right may vest (Vesting Conditions). • A Performance Right may be automatically exercised upon vesting, if it is specified in the Participant's Invitation. Alternatively, where automatic exercise is not specified in a Participant's Invitation, the Performance Right is exercisable by the Participant by providing a completed notice in the form required by the Company, and payment of the exercise price (if any). • As soon as reasonably practicable following the vesting of a Performance Right and the automatic exercise of a Performance Right, or the exercise of a Performance Right, the Company will allot and issue and/or transfer to the Participant, either directly, or through the Trustee, to be held for and on behalf of the Participant, the number of Shares to which the Participant is entitled to, and issue a substitute certificate to the Participant for any remaining Performance Rights held by the Participant. • Where a Participant who holds Performance Rights ceases employment with the Company or a subsidiary of the Company, all unvested Performance Rights will automatically be forfeited by the Participant, unless the Board determines in its discretion to permit some or all of the Performance Rights to vest. • Performance Rights are not transferable and a Participant may not sell, assign, transfer, grant a Security Interest over or otherwise deal with a Performance Right. • Participants will not be entitled to voting rights or rights to receive dividends until the Performance Rights are exercised and the Participant holds Shares. • If a Change of Control Event occurs, or the Board determines that such an event is likely to occur, the Board may determine the manner in which any or all of a Participant's Performance Rights will be dealt with, including, without limitation, in a manner that allows a Participant to participant in and/or benefit from any transaction arising from or in connection with the Change of Control Event and by determining that some or all of the Participant's Performance Rights will vest. Unless the Board determines otherwise, if a Change of Control Event occurs, any unvested Performance Rights will be immediately forfeited. • All Shares issued or transferred to a Participant under the Plan on the vesting and exercise of Performance Rights will rank pari passu in all respects with the shares of the same class from the date of issue. • The Board, at its discretion, may use an employee share trust for the purpose of holding shares, subscribing for or purchasing shares to be held on trust for eligible employee and delivering shares arising from the vest or exercise of Performance Rights. To ensure compliance with the Rules, each Participant grants an irrevocable power of attorney (in the form set out in the Invitation or such other form determined by the Board) to any person nominated from time to time by the Board. Invitation to apply for Performance Rights The Board may determine that an Eligible Employee may participate in the Plan and make an Invitation to that Eligible Employee to apply for a Performance Right. The terms and conditions under which the Invitation may be made are at the discretion of the Board, including as to: • the number of Performance Rights for which an Eligible Employee may apply • the grant date • the number of Shares to be issued and/or transferred to the Participant upon vesting and exercise of each Performance Right or the method of calculating such number • the Vesting Conditions (if any) relating to the Performance Rights • the Vesting Conditions (if any) relating to the Shares issued and/or transferred to Participants on vesting and exercise of each Performance Right • the Performance Hurdles (if any) and/or other conditions (if any) relating to the Performance Rights • the Performance Right exercise price (if applicable) • Performance Hurdles (if any) and/or other conditions (if any) relating to the Shares issued/and or transferred to Participants on vesting and exercise of each Performance Right • disposal restrictions attaching the resulting Shares • any other supplementary terms and conditions. Each Eligible Employee who submits a completed application form is deemed to have agreed to be bound by: • the terms of the Invitation, the application and the application form • the ancillary documentation (if any) • the Plan Rules • the Company's constitution. The Board may accept an application from an Eligible Employee in whole or in part. Following receipt of a duly completed and signed application form, the Company will, subject to the extent that the Board has accepted the application, the Company will grant the Participant the relevant number of Performance Rights, subject to the terms and conditions set out in the Invitation, the Rules and any ancillary documentation. No consideration is payable by a Participant for the grant of a Performance Right. Prior to a Performance Right vesting and being exercised, a Participant does not have any interest (legal, equitable or otherwise) in any Share that is the subject of the Performance Right other than those expressly set out in the Rules. Additionally, a Participant who holds a Performance Right is not entitled to notice of, to vote at or to attend a meeting of Shareholders, and receive any dividends declared by the Company. Unless the Board approves, or the relevant dealing is effected by force of law on death or legal incapacity to the Participant, the Participant may not sell, assign, transfer, grant a security interest over or otherwise deal with a Performance Right that has been granted to them. To the extent of any inconsistency, the Plan Rules will prevail over any other terms and conditions advised to an Eligible Employee by the Board in an Invitation. Forfeiture of Performance Rights Where a Participant who holds Performance Rights becomes a leaver, all unvested Performance Rights will automatically be forfeited by the Participant, unless the Board otherwise determines in its discretion to permit some or all of the Performance Rights to vest. Examples of the circumstances when the Board may decide to exercise its discretion to permit some or all of the Performance Rights to vest include (but are not limited to) where a Participant becomes a leaver due to death, redundancy, permanent disability, mental incapacity or retirement. The Board may determine (on any conditions which it thinks fit) that some or all of the Participant's Performance Rights will not be forfeited at any relevant time, but will be forfeited at the time and subject to the conditions the Board may specify by written notice to the Participant. The Performance Rights will automatically lapse where Performance Rights are forfeited in accordance with the Plan Rules. Compulsory Divestiture of Plan Shares Where a Participant who holds Plan Shares becomes a Leaver, all unvested Plan Shares must be compulsorily divested, unless the Board otherwise determines in its discretion to permit some or all of the unvested Plan Shares to vest. Unless otherwise determined by the Board, if a Participant becomes a Bad Leaver, all of the Participant's vested Plan Shares must be compulsorily divested. The Board may decide that some or all of the Participant's Plan Shares will not be compulsorily divested, but rather, such Plan Shares may be retained by the Participant or compulsorily divested by Company A at a later time and subject to the conditions the Board may specify. Unless the Board determines otherwise, if a Participant compulsorily divests a Plan Share, and that Plan Share is sold, transferred or bought-back by Company A, then Company A will be entitled to all of the proceeds. A share buy-back by Company A under a compulsory divestment, can only occur where the Shares are held legally by the Participant outside of the Trust, requiring Company A to pay consideration to acquire the shares, resulting in the Trust not being involved in this process. Where the Plan Share is held by the Trustee on trust for the benefit of the Participant, the Participant is deemed to have appointed an officer of the Company as their agent to instruct the Trustee to transfer beneficial ownership in the Plan Share from the Participant to another beneficiary or beneficiaries of the employee share trust nominated by the Company, or to transfer legal and beneficial ownership to a person nominated by the Company. Miscellaneous Subdivision 83A of the ITAA 1997 applies to the Plan Rules, subject to the requirements of the ITAA 1997. Employee Share Trust - Company A Employee Share Trust The Company A Employee Share Trust was originally established as the Company A Employee Share Trust as a sole purpose trust for the purpose of holding Shares for the satisfaction of Performance Rights under the rules of the Plan. The Board may do all things necessary for the establishment, administration, operation, and funding of an employee share trust and may, in its absolute discretion, require that a Participant's Shares are held in the employee share trust. The Trust provides capital management flexibility for Company A, in that the Trust can use the contributions made by Company A either to acquire Shares in Company A on-market or off-market, or alternatively to subscribe for new Shares in Company A. Company B, an independent third party, is the trustee of the Trust (Trustee), and will operate the Trust in accordance with the Amended Trust Deed. The Amended Trust Deed defines the following terms as follows: Accretion means any accretion, entitlement, benefit or right of whatever kind whether cash or otherwise which is issued, declared, paid, made, arises or accrues directly or indirectly to, or in respect of, a Share, including any such entitlement relating to a subdivision, consolidation or other reconstruction, any distribution from any reserve of the Company and any reduction of capital. Employee means a former, current or future employee or director of a member of the Group from time to time. ESS Interests has the meaning given to that term in section 83A-10 of the ITAA 1997 and, for the avoidance of doubt, includes Shares. Participantmeans an Employee who is a participant under a Plan and who receives (or will receive) Shares to be held by the Trustee under the terms of this Deed. Sharemeans a fully paid ordinary share in the capital of the Company. Trust Assetsmeans the property, rights and income of the Trust and includes any Accretions, Unallocated Trust Shares, and the Settlement Sum. Trust Share means a Share which is held by the Trustee in accordance with the terms of this Deed and includes any bonus shares and securities issued in respect of the Trust Share under any Bonus Issue made by the Company to shareholders and any shares subscribed for as part of a Rights Issue in respect of a Trust Share. Unallocated Trust Sharesmeans Trust Shares held by the Trustee pursuant to this Deed which are not allocated to a Participant, and for the avoidance of doubt includes any Forfeited Shares held by the Trustee pursuant to the terms of this Deed. The Trust operates as follows: • Company A must provide the Trustee with the funds required for the purchase of or subscription of Shares in accordance with the Plan. • Irretrievable cash contributions are made regularly and progressively to the Trust in accordance with the rules of the Plan and the Amended Trust Deed. • These funds are used by the Trustee to acquire Shares either on-market, off-market or via a subscription for new Shares based on written instructions from Company A. • Where the rules of the Plan and relevant terms of participation (i.e. Invitation) stipulate that the Shares are to be held by the Trustee on behalf of Participants, the Trustee will hold Shares as Shares in respect of a Participant(s) (i.e. on an allocated basis). • Where the rules of the Plan include that the Shares may be held by the Trustee on behalf of Participants or employees, the Trustee will hold Shares as unallocated Shares for Participants generally. • After a disposal restriction period lapses, the Trustee must transfer the relevant number of Shares into the name of the relevant employee or any third party as directed by the relevant employee (i.e. legal title) upon a withdrawal notice being submitted to the Trustee. • The Trustee can sell Shares on behalf of a Participant where permitted to do so by the Participant. In the event the Trustee is directed to purchase Shares off-market, the Shares would be acquired at arm's length and at the prevailing market price (closing price) of the date of transaction. In the event of any inconsistency between the Amended Trust Deed, the Plan Rules or the terms of participation, the Amended Trust Deed will prevail. Contributions to the Trust Company A, will generally wait until the Performance Rights are issued before providing the Trust with the cash necessary to acquire Shares to satisfy the acquisition or subscription of Shares related to those Performance Rights. However, Company A may make cash contributions regularly and progressively to the Trust in accordance with the rules of the Plan and the Amended Trust Deed prior to the Performance Rights being granted, vesting, and where relevant, Performance Rights being exercised by the Participants. Where Company A contributes enough funding to the Trust to enable purchase of Shares in advance of when Performance Rights are likely to be granted, typically both the advanced contribution to fund this purchase and the corresponding grant of the Performance Rights should occur within the same financial year. This allows the Trustee to have enough Shares in the Trust ahead of when they need to be allocated to Participants and avoids delays in times such as blackout trading periods. Trustee's obligations and powers Company A and the Trustee agree that 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. The Trustee agrees to hold the Participant's Allocated Shares, and relevant other rights and entitlements arising from the Participant's Allocated Shares, on trust for the relevant Participant (beneficiary). The Trustee is prevented from charging, and is not entitled to be paid or receive, whether from the Trust Assets or any Participant, any fees, charges, commission or remuneration for the operating or administering of the Trust. The Trustee may recover from the Trust Assets (excluding certain Trust property relating to Participant Shares), all reasonable disbursements actually incurred by the Trustee in performing its duties (for example brokerage incurred to purchase or dispose of Shares). Company A may pay to the Trustee from Company A's own resources any fees, commission or remuneration and reimburse any expense incurred by the Trustee for the administration of the Trust, provided such amounts are not paid directly or indirectly from Trust Assets. Subject to the sole activities test, and limitations, the Trustee has the power to do the following, including(but are not limited to): (a) enter into and execute all contracts, deeds and other documents and do all acts, matters or things it in its discretion considers necessary to give effect to and carry out the trusts, authorities, rights, powers and discretions conferred on the Trustee under this Deed (b) subscribe for, purchase or otherwise acquire Trust Assets, Shares or rights which the Trustee is authorised by this Deed to acquire on such terms and conditions as it thinks fit, and do all things incidental to this activity (c) sell or otherwise dispose of Trust Assets, shares or rights which the Trustee is authorised by this Deed to dispose of on such terms and conditions as directed by the relevant Participant, and do all things incidental to this activity (d) receive dividends or distributions on the Trust Shares and to apply those amounts in accordance with this Deed (e) sell or transfer the Trust Shares and apply the proceeds of sale in accordance with this Deed and the relevant Plan Rules and relevant Terms of Participation (f) sell any rights relating to the Trust Shares and apply the proceeds of sale in accordance with this Deed (g) delegate to any person or company the exercise of all or any of the rights, powers or discretions conferred on the Trustee under this Deed and to execute any power of attorney, other instrument or cheque necessary to effect that delegation (h) employ or engage, and at its discretion, remove or suspend custodians, trustees, managers, employees or other agents, determine the powers and duties to be delegated to them, and pay any remuneration to them as it thinks fit (i) rely on any document provided by a Participant, the form of which has been approved by the Company, whether signed by the Participant or otherwise (j) take and act upon the advice or any opinion of any legal practitioner or other professional adviser (in relation to this Deed, the Plan Rules, the Terms of Participation, on the operation of the Trust or otherwise) and act on that advice in any manner it thinks fit without being liable in respect of any act done or omitted to be done by it in accordance with such advice or opinion (k) open and operate any bank account, retain on current or deposit account at any bank any money which it considers proper, and make regulations for the operation of those bank accounts including the signing and endorsing of cheques with such accounts (l) commence, conduct, defend, compound, settle, abandon or otherwise compromise any legal proceedings relating to the Trust or any Trust Assets and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Trustee in respect of the Trust (m) refer any claim or demand by or against the Trustee in respect of the Trust to arbitration and to observe and perform an award made under arbitration (n) make rules or adopt procedures not inconsistent with the provisions of this Deed, the relevant Plan Rules, and the relevant Terms of Participation in relation to the calculation and rounding off of the contributions, dividends, interest or other amounts, or to the determination of periods of time (o) undertake activities that involve bookkeeping, preparing financial, tax and regulatory statements, and other record-keeping and administrative actions necessary to operate the Trust and undertake the activities described in paragraphs 130-85(4)(a), (b) and (c) of the ITAA 1997 (p) borrow money for the purpose of acquiring Shares or rights in the Company, where no security is provided over the assets of the Trust and the interest payable on such a loan is not more than arm's length commercial rates (q) receive dividends in respect of Unallocated Trust Shares and any interest from bank accounts and using those funds to i. acquire additional Shares for the purposes of a Plan ii. pay necessary and incidental costs of administering the Trust and undertaking the activities described in paragraphs 130-85(4)(a), (b) and (c) of the ITAA 1997, including without limitation paying costs relating to the audit of the Trust and fees for professional services provided to the Trustee in relation to the Trust, provided that such costs are reasonable disbursements incurred by the Trustee iii. pay interest on loans provided to the Trust for the acquisition of Shares or rights in the Company, where the interest payable does not exceed arm's length commercial rates (r) determine who is entitled to sign on the Trustee's behalf receipts, acceptances, endorsements, releases, agreements and documents (s) do anything that the Board or Company directs, instructs or requests the Trustee to do in relation to a Plan as contemplated by this Deed (t) do all acts, matters or things which the Trustee in its discretion considers necessary or expedient to administer and maintain the Trust and the Trust Assets or for the purpose of giving effect to, and carrying out, the trusts, powers and discretions conferred on the Trustee by this Deed or the law. Acquisition of Shares The Board will notify the Trustee when to acquire Shares. The Board must provide a notice in writing to the Trustee to instruct the Trustee to subscribe for, purchase and/or allocate the number of Shares specified in the notice, to be held by the Trustee as Trust Shares in respect of the identified Participant(s). The Board may provide a notice in writing to the Trustee, instructing the Trustee to subscribe for, purchase and/or allocate a number of Shares specified in the notice, to be held by the Trustee as Unallocated Trust Shares. The Board will facilitate the provision of funds to the Trustee, for the purposes of acquiring Trust Shares, by providing funds to the Trustee from Company A or a related body corporate (as defined in the Corporations Act 2001 (Cth) (Corporations Act) (Related Body Corporate), or requesting the Trustee apply some of the capital of the Trust, or a combination of both. The Trustee will acquire Shares, either on-market, off-market or by subscription of newly issued Shares by Company A. In the event the Trustee subscribes for newly issued Shares in Company A, the subscription price must be the market value of the Shares on the date on which the Shares are/were issued to the Trustee. Company A must provide the required funds to the Trustee in order for the Trustee to comply with its obligations under the Amended Trust Deed to acquire Shares for a Participant. Funds received by the Trustee from Company A or a Related Body Corporate will constitute Accretions to the corpus of the Trust and will not be repaid to Company A or a Related Body Corporate. Where Company A pays an amount which is in excess to the amount required to acquire Shares for a Participant(s), the Trustee may, at the direction of the Board, apply the excess to subscribe for, acquire, and/or allocate and deliver Shares in accordance with the Amended Trust Deed, relevant Plan Rules, or relevant Invitation Letter (terms of participation), or deposit the excess funds into any bank account opened and operated by the Trustee in accordance with the Amended Trust Deed. Unallocated Trust Shares Company A may direct the Trustee to allocate Unallocated Trust Shares to a Participant from time to time. Following allocation to a Participant of an Allocated Share, the Trustee must continue to hold those Allocated Shares on behalf of the Participant and on the terms of the Amended Trust Deed. Distributions in Respect of Allocated Trust Shares A Participant has an absolute entitlement to receive from the Trustee, all dividends and distributions paid by Company A on their Allocated Shares to the Trustee, subject to the relevant Plan Rules, Terms of Participation and any deductions or withholding required to be made by the Trustee in accordance with the law. The Trustee, on instruction from the Board and the Participant may enable the participation of any Unallocated Trust Share, or Allocated Share, in any dividend reinvestment plan of Company A. Subject to the Plan Rules and any Terms of Participation (Invitation), a Participant may receive a Rights Issue from the Trustee in respect of the Participant's Allocated Shares. The Participant may request the Trustee, sell a number of rights to subscribe for the balance of the rights to which that Participant is entitled to (where the rights are renounceable), or participate in the Rights Issue by subscribing for the Shares to which that Participant is entitled, by providing sufficient funds to the Trustee. In the event Company A make a Bonus Issue in respect of a Participant's Allocated Shares, the Trustee must hold the bonus Shares issued as Allocated Shares for that Participant. The Trustee must not sell the bonus Shares or transfer them to the Participant unless the Trustee sells or transfers the Allocated Shares which gave rise to the bonus Shares. All Accretions that arise in respect of a Participant's Allocated Shares, other than by way of dividends, distributions, bonus Shares or securities, or Rights Issue, must be transferred by the Trustee to that relevant Participant. Transfer of Trust Shares The Trustee may at the direction of the Participant, sell any of the Participant's Allocated Shares. On the sale of any Allocated Shares, the Trustee must apply the proceeds of the sale, first, in payment of any tax liability incurred by the Trustee resulting from the sale, second, in payment of any brokerage and other costs and expenses incurred by the Trustee in connection with the sale, and third, pay the relevant balance of proceeds from the sale to the Participant. Termination of Trust In the event the Trust is terminated and wound up, any Trust Assets remaining in the Trust (after the Trustee pays relevant debts and liabilities, distributes Allocated Shares and relevant net income (if any) to Participants), will be treated at surplus assets of the Trust and be applied to either establish and maintain an employee share or option trust for the benefit of all or any employees of Company A, or a subsidiary of Company A, or provided to a charity nominated by Company A. The Trustee must not pay any balance of the Trust Assets to Company A, or a Related Body Corporate.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | 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 paragraph 8-1(2)(a) | Income Tax Assessment Act 1997 section 20-20 | Income Tax Assessment Act 1997 subsection 20-20(2) | Income Tax Assessment Act 1997 subsection 20-20(3) | Income Tax Assessment Act 1997 subsection 20-25(1) | Income Tax Assessment Act 1997 section 20-30 | Income Tax Assessment Act 1997 section 25-5 | Income Tax Assessment Act 1997 section 40-880 | Income Tax Assessment Act 1997 Division 83A | Income Tax Assessment Act 1997 section 83A-10 | Income Tax Assessment Act 1997 paragraph 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 subparagraph 83A-105(4)(a)(i) | Income Tax Assessment Act 1997 section 83A-210 | Income Tax Assessment Act 1997 paragraph 83A-210(a) | Income Tax Assessment Act 1997 subparagraph 83A-210(a)(i) | Income Tax Assessment Act 1997 section 83A-340 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 Division 104 | Income Tax Assessment Act 1997 paragraph 104-35(5)(c) | Income Tax Assessment Act 1997 paragraph 104-155(5)(c) | 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 Division 165 | Income Tax Assessment Act 1997 section 701-1 | Income Tax Assessment Act 1997 section 974-75 | Income Tax Assessment Act 1936 Part IVA | Income Tax Assessment Act 1936 section 177A | Income Tax Assessment Act 1936 section 177C | Income Tax Assessment Act 1936 section 177D | Income Tax Assessment Act 1936 section 177F | Fringe Benefits Tax Assessment Act 1986 section 66 | Fringe Benefits Tax Assessment Act 1986 section 67 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Fringe Benefits Tax Assessment Act 1986 paragraph 136(1)(f) Anti-avoidance rules | 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 that 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 wider 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-avoidance rule for income tax'.

Reasons for decision: Summary: All legislative references are to provisions of the Income Tax Assessment Act 1936 (ITAA 1936) and Income Tax Assessment Act 1997 (ITAA 1997), unless otherwise indicated. | Detailed Reasoning - Questions 1 to 6 - application of the single entity rule in section 701-1: The consolidation provisions of the ITAA 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. 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 Company A TCG are treated, for income tax purposes, as having been undertaken by Company A, as the head company of the Company A TCG. | Detailed Reasoning - Questions 7 to 9: The SER in section 701-1 has no application to the FBTAA. The Commissioner has therefore provided a ruling to Company A and each employing company in the Company A TCG in relation to questions 7 to 9. | Detailed Reasoning - Question 1: Will Company A as head company of the Company A TCG obtain an income tax deduction, under section 8-1, in respect of 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 Trust to satisfy the issue of Shares by the Trustee to Participants 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 8-1. | 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. "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 Amended 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 Amended Trust Deed and the Plan or relevant terms of participation • nothing in the Amended 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 • 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 TC • 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. 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 an 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 Performance 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 2: Will Company A as head company of the Company A TCG obtain an income tax deduction, pursuant to section 8-1, in respect of costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the on-going administration of the Trust? | Summary: Yes, the costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the on-going administration of the Trust, will be deductible under section 8-1. | Detailed Reasoning - Detailed Reasoning: See the above analysis in Question 1's detailed reasoning for the application of section 8-1. Company A carries on a business of producing assessable income. Company A operates an employee share scheme as part of its renumeration strategy. Under the Amended Trust Deed, Company A may pay to the Trustee from Company A's own resources any fees, commission or remuneration and reimburse any expense incurred by the Trustee for the administration of the Trust. Company A incurs various costs in the on-going administration of the Trust. For example, Company A incurs costs associated with the services provided by the Trustee of the Trust, including but not limited to: • employee plan record keeping • production and dispatch of holding statements to employees • costs incurred in the acquisition of Shares on market, such as brokerage costs and the allocation of such Shares to Participants • other trustee expenses such as the annual audit of the financial statements and annual income tax return of the Trust. These costs are regular and recurrent expenses and are necessarily incurred by Company A in administering the employee share scheme while carrying on its business for the purpose of gaining or producing its assessable income. Therefore, these costs are not capital in nature. Accordingly, Company A will be entitled to deduct an amount under section 8-1 in respect of the costs incurred in relation to the on-going administration of the Trust, to the extent those costs relate to the Participants who are employees of members of the Company A TCG. This view is consistent with Tax Determination TD 2022/8 Income tax: deductibility of expenses incurred in establishing and administering an 'employee share scheme'. | Detailed Reasoning - Conclusion: The on-going costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the on-going administration of the Trust are deductible to the Company A TCG under section 8-1. | Detailed Reasoning - Question 3: Will Company A as head company of the Company A TCG obtain an income tax deduction, pursuant to section 40-880, in respect of the costs incurred by Company A or any subsidiary member of the Company A TCG in relation to the amendment of the Trust? | Summary: Yes, Company A, as the head company of the Company A TCG, will be entitled to deduct an amount under section 40-880 for costs incurred in relation to the amendment of the Trust. | Detailed Reasoning - Detailed Reasoning: Tax Determination TD 2022/8 Income tax: deductibility of expenses incurred in establishing and administering an 'employee share scheme', sets out the Commissioner's views on the deductibility of expenses in establishing and administering an ESS. Section 40-880 allows deductions for certain business capital expenditure that fall outside the scope of the deduction provisions of the income tax law. It requires the expenditure to be capital and in relation to the business. As this expenditure relates to remuneration of employees of the employer company who work within that business, the expenditure must be incurred in relation to that business. Section 40-880 contains limitations and exceptions in subsections 40-880(3) to (9) which may prevent a deduction being allowed. Subsection 40-880(3) indicates that the expenditure is only deductible to the extent that the business is carried on for a taxable purpose. The other limitations and exceptions in subsections 40-880(4) to (9) do not prevent the expenses from being deductible under section 40-880. | Detailed Reasoning - Conclusion: Therefore, expenses incurred in relation to the Trust, where they relate to Company A's or any subsidiary member of the Company A TCG's employees, are deductible in equal proportions over five years under section 40-880 to the extent the business carried on is for a taxable purpose. | Detailed Reasoning - Question 4: Will 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 Trust pursuant to the Plan be deductible to Company A at a time determined by section 83A-210 where contributions are made before the acquisition of the relevant 'ESS interests' (as defined in subsection 83A-10(1))? | Summary: Yes, 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 Trust, in respect of Participants directly employed by the Company A TCG, will be deductible to Company A under section 8-1 at a time determined by section 83A-210 if the contributions are made before the acquisition of the relevant ESS interests. | 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 ). 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 ESS. The effect of section 83A-210 is to deem the timing an employer incurred the outgoing to be the time when the ESS interest is acquired by the ultimate beneficiary, rather than the time when the employer makes the contribution to the trust. Further information is available in ATO Interpretive Decision ATO ID 2010/103 Income Tax - Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust (ATO ID 2010/103). 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. The Plan is an ESS for the purpose of subsection 83A-10(2) as it is a scheme under which ESS interests, being Performance Rights, are provided to employees in relation to their employment with Company A, or a subsidiary member of the Company A TCG. The ESS contains a number of interrelated components which include the provision of irretrievable cash contributions by Company A to the Trustee. These irretrievable cash contributions enable the Trustee to acquire Shares for the purpose of enabling each Participant, indirectly as part of the Plan, to acquire ESS interests. The deduction for the irretrievable cash contributions, to the extent they relate to the employees of Company A, or a subsidiary member of the Company A TCG, can only be deducted from the assessable income of Company A in the income year when the relevant beneficial interest in a Share, or beneficial interest in a right to a beneficial interest in a Share, is acquired by the Participant under the Plan. The deduction for irretrievable cash contributions, so far as it relates to the acquisition of Shares in excess of the number required to grant the relevant ESS interests, will be allowable in the income year in which beneficial interest in a Performance Right is acquired by a Participant under the Plan. Section 83A-210 will not apply to a deduction for irretrievable cash contributions provided by Company A to the Trustee, where the contribution is made at or after the time the ultimate beneficiaries acquire the beneficial interest in the Performance Right. In these circumstances, the 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. Indeterminate Rights under the Plan Where an Invitation specifies that a Participant has a right to be issued and/or transferred a number of Shares calculated in accordance with a formula, the Performance Right provided under the Plan may be an indeterminate right for the purposes of section 83A-340. This is because the number of Shares that the Participant may receive is not known at the time the Performance Right is grated. Accordingly, such an award of a right under the Plan is not a beneficial interest in a right to acquire a beneficial interest in Shares unless, and until the time the number of shares to be issued/ transferred can be determined. Although the indeterminate right is not an ESS interest within the meaning of subsection 83A-10(1) at the time it is granted, 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 participating employee, and where necessary, the relevant earlier income year assessments can be amended to allow the deduction (Item 28 of subsection 170(10AA)). 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 the number of Shares which the Participant may receive can be determined, 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 contributions are provided to the Trustee before these rights are acquired, when 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 - Conclusion: Where Performance Rights are not indeterminate rights (e.g., in circumstances where the Participant's Invitation specifies the exact number of the Shares that the Participant will receive), if irretrievable cash contributions are made by Company A to the Trustee, before a Participant acquires a beneficial interest in a right to a beneficial interest in a Share, being a Performance Right, section 83A-210 will operate to make such contributions deductible to Company A in the income year that the Performance Right is acquired by the Participant under the Plan. In the case of Performance Rights which are indeterminate rights, if a contribution has been made to the Trust after the date of grant but prior to the income year in which it is determined that Performance Rights are ESS Interests, a tax deduction will be available in the income year of the contribution to the Trust as noted above, but Company A will need to seek an amendment to a prior year income tax return to reflect that deduction once the Performance Rights are determined to be ESS interests. | Detailed Reasoning - Question 5: If the Trust satisfies its obligation under the Plan by subscribing for new shares in Company A, will the subscription proceeds be included in the assessable income of Company A under section 6-5 or 20-20 or trigger a CGT event under Division 104? | Summary: If the Trust satisfies its obligations under the Plan by subscribing for new Shares in Company A, the subscription proceeds will not be included in the assessable income of Company A under section 6-5, section 20-20 or trigger a CGT event under Division 104. | Detailed Reasoning - Detailed Reasoning: Section 6-5 Section 6-5 provides that a taxpayer's assessable income includes income according to ordinary concepts. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In an ESS, 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 subscription proceeds received by Company A from the Trust can be determined by the character of the right or thing disposed of in exchange for the receipt. Where Company A issues the Trust with new Shares in itself, the character of the newly issued share is one of capital. Therefore, the receipt of the subscription proceeds takes the character of share capital and is 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 (ATO ID 2010/155). When Company A receives subscription proceeds from the Trustee where the Trustee has subscribed to new Shares in Company A to satisfy its obligations to Participants in the Plan, those subscription proceeds received are a capital receipt and will not be treated as ordinary income under section 6-5. Section 20-20 Subsection 20-20(2) provides that if you receive an amount as a recoupment of a loss or outgoing, it will be assessable income if you received it by way of insurance or indemnity and that amount can be deducted as a loss or outgoing in the current year or earlier income year. Company A will receive an amount for the subscription of Shares by the Trustee. There is no insurance contract in this case, so the amount is not received by way of insurance. 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. Therefore, the receipt of the subscription proceeds does not constitute an assessable recoupment under subsection 20-20(2). Subsection 20-20(3) provides that an amount received by you as a 'recoupment' of a loss or outgoing, except by way of insurance or indemnity, is an 'assessable recoupment' if you can deduct the loss or outgoing or is deductible in the current or a prior income year because of a provision listed in the table in section 20-30. None of the provisions listed in section 20-30 are relevant to the current circumstances. Therefore, the subscription amount also does not constitute an assessable recoupment under subsection 20-20(3). Division 104 A capital receipt will only be included as an assessable net capital gain if it arises as a result of a CGT event (section 102-20). The only CGT events that may have possible application to the receipt of the subscription proceeds are CGT event D1 (Creating a contractual or other right) and CGT event H2 (Receipt for event relating to a CGT asset) or both. Paragraphs 104-35(5)(c) and 104-155(5)(c) respectively provide that CGT event D1 and CGT event H2 do not apply if a company issues or allots equity interest or non-equity Shares in the company. As the Shares constitute an 'equity interest' (see subsection 974-75(1)), neither CGT event D1 nor CGT event H2 will occur. Since no CGT event occurs, the subscription proceeds will not be assessable as a capital gain to Company A. | Detailed Reasoning - Conclusion: Therefore, the subscription proceeds will not be included in the assessable income of Company A under section 6-5, section 20-20 or trigger a CGT event under Division 104, subject to the Trust satisfying its obligations under the Plan by subscribing for new Shares in Company A. | Detailed Reasoning - Question 6: Will the Commissioner seek to make a determination that Part IVA applies to deny, in part or full, any deduction claimed by Company A in respect of 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 Trust pursuant to the Plan? | Summary: Part IVA will not apply to deny, in part or in full, any deduction claimed by Company A in respect of 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 Trust. | 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 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 employee share trust arrangement. | Detailed Reasoning - Conclusion: 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 Company A to obtain a tax benefit. | Detailed Reasoning - Question 7: Will the provision of rights or shares by Company A to employees or employees of other employer entities within the Company A TCG under the Plan be a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | Summary: The provision of rights under the Plan to employees of Company A or employees of other employer entities within the Company A TCG 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 the 'fringe benefit' definition excludes a benefit constituted by the acquisition of an ESS interest under an ESS (within the meaning of the ITAA 1997) to which Subdivision 83A-B or 83A-C applies. The Plan is an ESS as rights granted under the Plan are an ESS interest under paragraph 83A-10(1)(b), being a beneficial interest in a right to acquire a beneficial interest in a share in a company. Indeterminate rights Performance Rights granted under the Plan may 'indeterminate rights' in circumstances where the Participant's Performance Right Invitation specifies a number of Shares calculated in accordance with a formula, and as such the number of Shares that the Participant may receive is not known at the time the Performance Right is granted. At the time those rights are granted under the Plan, it may be unclear if paragraph (h) of the definition of fringe benefit in subsection 136(1) of the FBTAA applies. When the number of Shares which the Participant may receive can be determined, 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 ESS at a discount. As Participants may acquire Performance Rights under the Plan for less than market value (at a discount) or for nil consideration, Subdivision 83A-B will apply to those Performance Rights (unless Subdivision 83A-C applies instead). Accordingly, the provision of indeterminate 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. Where Performance 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 Performance 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 the exercise of rights granted under an employee share scheme (ATO ID 2010/219)). | Detailed Reasoning - Conclusion: Therefore, the provision of rights under the Plan to employees of Company A, or employees of other employer entities within the Company A TCG, will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA. | Detailed Reasoning - Question 8: Will the irretrievable cash contributions made by Company A or other employer entities within the Company A TCG to the Trustee, to fund the subscription for or acquisition on-market or off-market of Shares pursuant to the Plan, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA? | Summary: The irretrievable cash contributions made by Company A, or other employer entities within the Company A TCG, to the Trustee pursuant to the Amended Trust Deed, to fund the subscription for or acquisition on-market or off-market of Shares 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 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 definition. Paragraph 136(1)(ha) of the FBTAA excludes from the definition of 'fringe benefit': (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 EST, a trustee's activities must be limited to: • obtaining Shares or rights in a company (paragraph 130-85(4)(a)) • ensuring that ESS interests in the company that are beneficial interests in those Shares or rights are provided under the ESS to employees, or to associates of employees, of the company or a subsidiary of the company (paragraph 130-85(4)(b), and • other activities that are merely incidental to the activities mentioned in paragraphs 130-85(4)(a) and (b) (paragraph 130-85(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, the Commissioner accepts that the Plan is an ESS under which ESS interests are provided to Participants, and • the Trustee ensures that ESS interests (as defined in subsection 83A-10(1)) are provided under an ESS (as defined in subsection 83A-10(2)) by allocating Shares to Participants in accordance with the Amended Trust Deed and the Plan. Paragraph 130-85(4)(c) provides that a trustee can engage in activities that are merely incidental to those described in paragraphs 130-85(4)(a) and (b). The phrase takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. 'Merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). The Macquarie Dictionary defines 'merely' to mean 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'. The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? (TD 2019/13). Activities that involve 'investing in assets other than Shares or rights to Shares in the employer company' or that result in employees being provided 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). The other activities undertaken by the Trustee under the Amended Trust Deed are merely incidental to managing the Plan. | Detailed Reasoning - Conclusion: Therefore, paragraph 136(1)(ha) of the FBTAA applies to exclude the irretrievable cash contributions made by Company A, or other employer entities within the Company A TCG, to the Trustee to fund the subscription for, or acquisition on-market or off-market of, Shares by the Trust from being a fringe benefit. | Detailed Reasoning - Question 9: Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A or any employer entity within the Company A TCG, by the amount of tax benefit gained from 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? | Summary: The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A, or any employer entity within the Company A TCG, by the amount of tax benefit gained from the irretrievable cash contributions made by Company A to the Trust. | Detailed Reasoning - Detailed Reasoning: Section 67 of the FBTAA is a general anti-avoidance provision of 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 8, without the provision of a fringe benefit, no amount will be subject to FBT. The irretrievable cash contributions made by Company A to the Trustee (pursuant to the Amended Trust Deed) will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA for the reasons outlined in response to question 8. 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. | Detailed Reasoning - Conclusion: The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount by the amount of the tax benefit gained from the irretrievable cash contributions made by Company A, or any employer entity within the Company A TCG, to the Trustee to fund the subscription for, or acquisition on-market or off-market of Shares.