Private ruling: Employee share trust
Date of advice: 5 July 2022
Published: October 2022

Ruling: Q1: Will irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or acquisition on-market of, Shares in respect of the Plan be assessable income of the Trust pursuant to sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) or Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No. | Q2: Will a capital gain or capital loss that arises for the Trustee at the time when capital gain tax (CGT) event E5 happens in relation to Shares held by the Trustee be disregarded under section 130-90 of the ITAA 1997 if the Participants acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? | A2: Yes. | Q3: Will dividends received and distributed by the Trustee, on Shares which have been allocated to a Participant, be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936? | A3: Yes. | Q4: Will dividends and other income received by the Trustee on Unallocated Shares be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936? | A4: Yes. | Q5: Will net income of the Trust under section 95 of the ITAA 1936 be assessed to the Trustee under section 99A of the ITAA 1936? | A5: Yes, in respect of Unallocated Shares. | Q6: Will the Trustee be entitled to a tax offset for the franking credits attached to the franked dividend on the Unallocated Shares under Subdivision 207-B of the ITAA 1997? | A6: Yes, provided the Trustee holds the Unallocated Shares at risk for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45 th day after the Unallocated Shares become ex-dividend.

Relevant facts and circumstances: Company A is a public company listed on the Australian Securities Exchange. Company A is the head company of the Company A tax consolidated group (Company A TCG). The Plan Company A established the Plan which allows Company A to grant the following Incentives to Participants: • Rights: an entitlement to receive Shares, or a cash payment in certain circumstances, subject to the satisfaction of applicable conditions (including any Vesting Condition) and compliance with any applicable exercise procedure • Options: an entitlement to receive Shares, or a cash payment in certain circumstances, subject to the satisfaction of applicable conditions (including any Vesting Condition) and company with any applicable exercise procedure • Restricted Shares: Share allocated in accordance with the Plan Rules that is subject to restrictions on Dealing, Vesting Conditions and/or other restrictions or conditions. Although Units may also be granted under the Plan, they are not in the scope of this ruling as they are cash settled and the Trust will not be used to facilitate the cash payment to employees. Offer Company A may make an Offer to Eligible Employees to participate in a grant of Incentives. Each Eligible Employee should be advised of the information required under the Plan Rules in connection with an Offer. 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. The Board may refuse to allow the participation of an Eligible Employee that ceases to be an Eligible Employee or ceases to satisfy any other conditions imposed by the Board before the grant is made. Rights Where an Eligible Employee has accepted an Offer to participate in a grant of Rights, the Board will, subject to its discretion to refuse to allow participation, grant Rights to the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of a Right. In the of a Right that is exercisable, the Board will notify a Participant that a Right is exercisable and the exercise will be effected in the form and manner determined by the Board and notified to the Participant. Where the Right has not been exercised by the expiry date, it will automatically be exercised on the expiry date. Subject to any express rule to the contrary, a Right will only Vest (and if applicable, become exercisable) where each Vesting Condition, all other relevant conditions advised to the Participant by the Board, have been satisfied or otherwise waived by the Board. Vesting occurs upon notification from Company A to the Participant that a Right has Vested. The Vesting will be satisfied by Company A allocating Shares to the Participant. As soon as practicable following Vesting (and if applicable, exercise) of a Right, the Board must issue to, procure the transfer to, or procure the setting aside for the Participant the number of Shares in respect of which Rights have Vested (or exercised). The Board may determine that the Vesting (and if applicable, exercise) of a Right will be satisfied by Company A making a cash payment in lieu of an allocation of Shares. Options Where an Eligible Employee has accepted an Offer to participate in a grant of Options, the Board will, subject to its discretion to refuse to refuse to allow participation, grant Options to the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of an Option. Subject to any express rule to the contrary, an Option will only Vest and become exercisable where each Vesting Condition, and all other relevant conditions advised to the Participant, have been satisfied or otherwise waived by the Board. Vesting occurs upon notification from Company A to the Participant that an Option has Vested. The exercise of an Option will be effected in the form and manner determined by the Board and notified to the Participant, and must be accompanied by the payment of the relevant Exercise Price. The exercise of an Option will be satisfied by Company A allocating Shares to the Participant. As soon as practicable following the exercise of an Option, the Board must issue to, procure the transfer to, or procure the setting aside for the Participant the number of Shares in respect of which Options have been exercised. The Board may determine that the exercise of an Option will be satisfied by Company A making a cash payment in lieu of an allocation of Shares. Restricted Shares After an Eligible Employee has accepted an Offer to participate in a grant of Restricted Shares, the Board must, subject to its discretion to refuse to refuse to allow participation, allocated the Restricted Shares in accordance with any timeframe specified in the Offer by issuing, procuring the transfer of or procuring the setting aside of the Restricted Shares for the Eligible Employee. Unless the Board determines otherwise, no payment is required for the grant of a Restricted Share (other than a Restricted Share purchased by salary sacrifice). Restricted Shares purchased by salary sacrifice are in return for a reduction of the Participant's pre-tax remuneration by not more than $X,000 per annum (which would not happen if not for the Offer). Vesting occurs where both: • the Vesting Period and each other relevant condition (including all Vesting Conditions) advised to the Participant by the Board have been satisfied or otherwise waived by the Board • Company A notifies the Participant that the restrictions in respect of the Restricted Shares have ceased or no longer apply. Unless provided otherwise in the terms of an Offer, when a Share held by the Trustee on behalf of a Participant ceases to be a Restricted Share, the Trustee will continue to hold the Share on trust on behalf of the Participant until such time as the Participant, or Company A on behalf of the Participant, directs the Trustee to either: • transfer the Share into the Participant's name or another account • sell the Share and pay the proceeds of the sale to the Participant. Lapse of Incentives Rights and Options will lapse upon the earliest to occur of: • XX years after the date on which the Rights (other than a Vested but unexercised Right which will be automatically exercised on the expiry date) or Options (unless the Board determines that the Options will be exercised on the expiry date by way of a cashless exercise arrangement) were allocated to the Participant or any other date nominated as the expiry date in the Offer • the lapsing in accordance with the Plan Rules (including in accordance with a term of an Offer) • the failure to meet a Vesting Condition or any other condition applicable within the Vesting Period • the receipt by Company A of a notice in writing from a Participant to the effect that the Participant has elected to surrender the Right or Option. A Restricted Share will be forfeited upon the earliest to occur of: • the Restricted Share being forfeited in accordance with a provision of the Plan Rules (including in accordance with a term of an Offer) • the failure to meet a Vesting Condition or any other condition applicable to the Restricted Share within the Vesting Period • the receipt by Company A of a notice in writing from a Participant to the effect that the Participant has elected to surrender the Restricted Share. Non-Australian residents The Board may adopt additional rules of the Plan that will apply to a grant made to an Eligible Employee who is a resident in a jurisdiction other than Australia. However, this ruling is restricted to Australian resident employees. Company A does not currently have any foreign resident employees. Trust Company A established the Trust under a deed entered into between Company A and the Trustee. The Trustee of the Trust is an independent third party. The recitals of the Trust Deed state that Company A established the Trust for the purpose of holding Shares for the benefit of Participants of the Plan. The Trustee will acquire, hold and transfer Shares in relation to the Plan. In the Trust Deed, the activities of the Trustee include: 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 section 130-85(4) of the ITAA 1997. Company A or any Group company is not a beneficiary of the Trust. Acquisition of Shares The Trustee must, if directed by Company A, acquire Shares in the ordinary course of trading or by way of an off-market transaction, or subscribe for new Shares issued by Company as soon as practicable after receipt of a notice from Company A for the purpose of enabling Company A to satisfy its obligations to allocate Shares under the Plan. In this notice, Company A must offer to provide funds to the Trustee for the purpose of acquiring Shares and/or request the Trustee to apply some of the capital of the Trust for the purposes of acquiring Shares. The Trustee is not required to acquire or subscribe for Shares if it does not receive sufficient payment from Company A or if it does not have sufficient funds to do so out of the capital of the Trust. Transfer of Shares Following receipt of a written direction by Company A or the relevant Participant to do so, the Trustee must transfer to the relevant Participant the specified number of allocated Shares (provided the number does not exceed the maximum number of Shares allocated to that Participant) on the specified date. Funding Company A may contribute money to the Trustee to fund the acquisition or subscription of Shares for the purposes of the Plan, with the contributions being irretrievable by Company A or any other Group company. Company A must provide the Trustee with any funds required to comply with its obligations regarding the acquisition of Shares (after application of any available capital of the Trust by the Trustee). All funds received by the Trustee from Company A: Where an amount paid by Company A to the Trustee is in excess of the amount required by the Trustee to subscribe for, acquire, allocate or deliver those Shares, Company A may require the Trustee to: Company A must pay all reasonable expenses, outgoings, costs and charged incurred in establishing and operating the Plan, including: Unallocated Shares The Trustee will hold Unallocated Shares on trust for the benefit of Participants generally from time to time in accordance with the terms and conditions of the Trust Deed. In relation to Unallocated Shares, the Trustee: Rights in respect of Allocated Shares Subject to terms of the Trust Deed and the Plan, each Participant is absolutely entitled to: Subject to the Trust Deed and except where the Trustee would be required to incur a cost, expense or liability for which it is not fully indemnified, the Trustee will only deal with allocated Shares: It is the intention of the Trust Deed to give each of the Participants substantially the same rights in respect of their allocated Shares as if the allocated Shares were registered directly in the name of the relevant Participant.


Reasons for decision: Detailed Reasoning - Detailed reasoning: The total assessable income of a trust estate is calculated as if the trustee were a resident taxpayer in respect of that income (subsection 95(1)). The assessable income of a taxpayer includes income under ordinary concepts (section 6-5) or statutory income (section 6-10). Section 10-5 contains a summary list of the provisions for statutory income. None of the provisions listed in section 10-5 are relevant in the present circumstances. Therefore, non-refundable contributions made by Company A to the Trustee for the Trust will not be assessable income under section 6-10. They will only be included in the calculation of the net income of the Trust under section 95 if they are assessable as income according to ordinary concepts under section 6-5. Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business. In ATO Interpretative Decision ATO ID 2002/965 Income Tax - Trustee not assessable on employer contributions made to it under the employer's employee share scheme , the Commissioner expresses the view that funds provided to the trustee of an employee share scheme (ESS) for the sole purpose of providing shares under an ESS will constitute capital receipts to the trustee, and are not assessable under sections 6-5 or 6-10. An ESS is a scheme under which ESS interests in a company are provided to employees of a company, or their associates, in relation to their employment (subsection 83A-10(2)). An ESS interest is a beneficial interest in a share in a company or a right to acquire a beneficial interest in a share in a company (subsection 83A-10(1)). Under the Plan, each Participant will acquire an Option, Performance Right or Restricted Share (as the case may be), these rights each being a right to acquire a beneficial interest in a Share (that is an ESS interest). The irretrievable cash contributions made by Company A to the Trustee under the terms of the Plan and the Trust Deed are to be used for the sole purpose of acquiring, holding and transferring Shares for the benefit of Participants. Accordingly, the irretrievable cash contributions constitute capital receipts to the Trustee and will not be assessable income of the Trustee pursuant to sections 6-5 or 6-10. Given that the irretrievable cash contributions made by Company A to the Trustee are neither ordinary nor statutory income, they will not be included in the net income of the Trust, and hence cannot be assessed to the Trustee pursuant to section 95 in Division 6. | Detailed Reasoning - CGT event E5: Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust (except a unit trust or a trust to which Division 128 applies) as against the trustee. The time of the event is when a beneficiary becomes absolutely entitled to the asset according to subsection 104-75(2). If CGT event E5 happens, the trustee may make a capital gain or loss if the market value of the asset, at the time of the event, is more than its cost base or less than the asset's reduced cost base respectively (subsection 104-75(3)). In the present case, the Trust is neither a unit trust nor a deceased estate to which Division 128 applies. Draft Taxation Ruling TR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 explains the principles set out in the leading English trust law case of Saunders v Vautier (1841) 49 ER 282 in relation to 'absolutely entitled' as follows: ... if a sole beneficiary's interest in the trust property is vested and indefeasible and they are of age then they can put an end to the trust by directing the trustees to transfer the trust property to them or at their direction, even though the trust deed contains a contrary intention. The basis of the principle is that a beneficiary is entitled now to that which will be theirs eventually anyway. A Participant will become absolutely entitled to the Rights, Options or Restricted Shares (as the case may be) in accordance with the Plan when those rights have vested, been exercised (if applicable) and the restrictions in respect of the Shares have ceased or no longer apply. Subject to the Board's discretion to make a cash payment in lieu of allocating Shares and upon the cessation of all the restrictions, the Participant has the right to request the Trustee to transfer the Shares into their name and deal with the Shares in their own will. At this point, the Participant will become absolutely entitled to the Shares as against the Trustee, and CGT event E5 happens pursuant to subsection 104-75(1). However, any capital gain or loss that a Trustee makes from CGT event E5 is disregarded if section 130-90 applies. | Detailed Reasoning - Shares held to satisfy the future exercise of rights: subsection 130-90(1): Subsection 130-90(1) applies to disregard any capital gain or loss made by an employee share trust if all of the following apply: | Detailed Reasoning - Employee share trust: In examining whether the requirements of an employee share trust in 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: Clause 4.12 of the Trust Deed provides: Without limiting the generality of clause 4.3, the Company and the Plan Trustee agree that the Trust will be managed and administered so that it satisfies the definition of "employee share trust" for the purposes of section 130-85(4) of the ITAA 1997. Paragraph 130-85(4)(a) is satisfied because the purpose of the Trust is to acquire, hold and transfer shares in a company, namely Company A (Recital A of the Trust Deed). Paragraph 130-85(4)(b) is satisfied because: In respect of paragraph 130-85(4)(c), the phrase 'merely incidental' takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. 'Merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). The Macquarie Dictionary defines 'merely' to mean 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'. The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13 Income tax: what is an 'employee share trust'? Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered to be merely incidental. In the present case, the objects of the Trust are for the sole purpose of undertaking activities that are in line with the definition of an employee share trust under section 130-85(4), including paragraph 130-85(4)(c) as the other activities undertaken by the Trustee are merely incidental to managing the Plan. | Detailed Reasoning - Paragraph 130-90(1)(a): CGT event E5 will apply under the terms of the Plan when the Participant becomes absolutely entitled to the Shares as against the Trustee. Therefore, paragraph 130-90(1)(a) will be satisfied. | Detailed Reasoning - Paragraph 130-90(1)(b): Subsection 995-1(1) defines a share to mean a share in the capital of a company. A Share held by the Trustee and to which a Participant is entitled upon the vesting (or exercise if applicable) of a Right, Option or Restricted Share is a share in the capital of a company. Accordingly, paragraph 130-90(1)(b) is satisfied as CGT event E5 happens in relation to a share. | Detailed Reasoning - Paragraph 130-90(1)(c): Paragraph 130-90(1)(c) is satisfied as a Participant will have acquired a beneficial interest in a Share by either: | Detailed Reasoning - Paragraph 130-90(1)(d): 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. The Right, Option or Restricted Share in the Plan is an 'ESS interest' under paragraph 83A-10(1)(b) because it is a beneficial interest in a right to acquire a share in Company A. Subsection 83A-10(2) defines an ESS as being a scheme under which ESS interests in a company are provided to employees, or associates of employees (including past or prospective employees) in relation to the employees' employment. The Plan is an ESS within the meaning of subsection 83A-10(2) because it is a scheme under which Rights, Options or Restricted Shares to acquire beneficial interests in shares in Company A are provided to employees in relation to the employee's employment. Each Right, Option or Restricted Share (other than a Restricted Share purchased by salary sacrifice) is acquired for no cost. As the Participant acquires the Right, Option or Restricted Share (other than a Restricted Share purchased by salary sacrifice) for no cost, the ESS interest is acquired by the Participant at a discount. Restricted Shares purchased by salary sacrifice are acquired at a discount as they are part of a salary sacrificing arrangement in return for a reduction in salary that would not have otherwise happened (paragraph 83A-105(4)(a)) Therefore, Subdivision 83A-B or 83A-C applies to the Rights, Options or Restricted Shares granted under the Plans. Accordingly, all the conditions in subsection 130-90(1) have been satisfied. | Detailed Reasoning - Subsection 130-90(2): Subsection 130-90(1) does not apply if the beneficiary acquired the beneficial interest in the shares for more than its cost base in the hands of the employee share trust at the time the CGT event happens (subsection 130-90(2)). Provided a Participant does not acquire the beneficial interest in the Share for more than its cost base in the hands of the Trust at the time that CGT event E5 happens, subsection 130-90(1) will apply to disregard any capital gain or loss that arises for the Trustee as a result of CGT event E5 happening. | Detailed Reasoning - Detailed reasoning: Subsection 95(1) defines 'net income', in relation to a trust estate, to mean the total assessable income of the trust estate calculated under the ITAA 1936 as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions. Pursuant to subsection 44(1), the assessable income of a resident shareholder includes dividends that are paid to the shareholder by the company out of profits derived by it from any source. Therefore, dividends and other income received by the Trustee on Shares allocated to a Participant are required to be included in calculating the net income of the Trust as defined under subsection 95(1). | Detailed Reasoning - Detailed reasoning: As outlined above in Question 3, section 95 provides that the net income in relation to a trust estate means the total assessable income of the trust estate. Therefore, dividends and other income received by the Trustee on Unallocated Shares are required to be included in calculating the net income of the Trust as defined under subsection 95(1). | Detailed Reasoning - Detailed reasoning: Subsection 97(1) determines the assessable, exempt and non-assessable non-exempt income of a beneficiary who is not under a legal disability and who is presently entitled to a share of the income of the trust estate. When no beneficiary is presently entitled to the income of a trust estate, the net income of the estate will be taxed in the hands of the trustee under either section 99 or 99A. Section 99A will apply unless excluded in accordance with subsection 99A(2). Where no part of the net income of a resident trust estate is included in the assessable income of a beneficiary of the estate, the trustee is assessed and liable to pay tax on the net income (as defined in subsection 95(1) and pursuant to subsection 99A(4)). Accordingly, the Trustee will be assessed under section 99A on that part of the net income of the trust estate which relates to Unallocated Shares to the extent the net income is not included in the assessable income of a Participant. | Detailed Reasoning - Detailed reasoning: Division 207 deals with the effect of receiving franked distributions. Subsection 207-5(3) provides that if a franked distribution is made to a member that is a trustee of a trust, an amount equal to the franking credit on the distribution is included in the member's assessable income. Subsection 207-5(4) provides that a tax offset in relation to an above distribution is only available to an entity if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution. Subdivision 207-B deals with the effect of receiving a franked distribution through certain partnerships and trusts. Section 207-25 provides that Subdivision 207-B deals with an entity that receives a benefit of a franked distribution where the distribution is made to a partnership or the trustee of a trust, and the benefit is received either directly or through interposed partnerships or trusts. The distribution is regarded as flowing indirectly to the entity under this Subdivision. On the basis of a notional amount of the entity's share of the distributions, the entity may be entitled to have an amount included in its assessable income and/or a tax offset under this Subdivision. Under subsection 207-35(1), the assessable income of the trust for an income year includes the amount of the franking credit on a distribution if the following conditions are met: Subsection 207-50(4) relevantly provides that a franked distribution will be taken to flow indirectly to the trustee of a trust if all the following apply: Consequently, where the Trustee receives a franked distribution in respect of an Unallocated Share, an amount equal to the franking credit attached to the distribution will be included in the assessable income of the Trustee. | Detailed Reasoning - Tax offset: Section 207-45 relevantly states that an entity to whom a distribution flows indirectly in an income year is entitled to a tax offset for that income year that is equal to its share of the franking credit on the distribution if it is the trustee of a trust that is liable to be assessed on a share of, or all or a part of, the trust's net income under section 99A for that income year. The Trustee will be liable to be assessed under section 99A in relation to dividends on Unallocated Shares. However, where a franked dividend is paid to an entity, subsection 207-145(1) denies a gross-up and tax offset where that entity is not a qualified person for the purposes of Division 1A of the former Part IIIAA. | Detailed Reasoning - Qualified person: Former section 160APHO relevantly states: (1) A taxpayer who has held shares or an interest in shares on which a dividend has been paid is a qualified person in relation to the dividend if: (a) where neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the primary qualification period in relation to the dividend; or (b) where the taxpayer or an associate of a taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the secondary qualification period in relation to the dividend. (2) A taxpayer who has held shares or an interest in shares on which a dividend has been paid satisfies this subsection in relation to a qualification period in relation to the shares or interest if, during the period: (a) where the taxpayer held the shares - the taxpayer held the shares for a continuous period (not counting the day on which the taxpayer acquired the shares or, if the taxpayer has disposed of the shares, the day on which the disposal occurred) of not less than: (i) if the shares are not preference shares - 45 days ... (b) where the taxpayer held the interest in the shares-the taxpayer held the interest for a continuous period (not counting the day on which the taxpayer acquired the interest or, if the taxpayer has disposed of the interest, the day on which the disposal occurred) of not less than: (i) if the shares are not preference shares - 45 days ... Former section 160APHD defines: primary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means the period beginning on the day after the day on which the taxpayer acquired the shares or interest and ending: (a) if the shares are not preference shares - on the 45th day after the day on which the shares or interest became ex dividend ... secondary qualification period , in relation to a taxpayer in relation to shares or an interest in shares, means: (a) if the shares are not preference shares - the period beginning on the 45th day before, and ending on the 45th day after, the day on which the shares or interest became ex dividend... The term 'related payment' is defined in former section 160APHN to relevantly mean: (2) The taxpayer or associate is taken, for the purposes of this Division, to have made, to be under an obligation to make, or to be likely to make, a related payment in respect of the dividend or distribution if, under an arrangement, the taxpayer or associate has done, is under an obligation to do, or may reasonably be expected to do, as the case may be, anything having the effect of passing the benefit of the dividend or distribution to one or more other persons. Where the Trustee does not make a related payment in respect of the dividend paid on the Shares, the Trustee will be a qualified person in respect of the dividend if the Trustee held the Shares at risk for a continuous period of not less than 45 days (excluding the day the Shares were acquired and if the Shares have been disposed of, the day the disposal occurred) during the period beginning on the day after the day on which the Trustee acquired the Shares and ending on the 45 th day after the day on which the Shares became ex dividend (primary qualified period). However, where the Trustee makes a related payment in respect of the dividend on the Shares, the Trustee will be a qualified person in respect of the dividend if the Trustee held the Shares at risk for a continuous period of not less than 45 days (excluding the day the Shares were acquired and if the Shares have been disposed of, the day the disposal occurred) during the period beginning on the 45 th day before and ending on the 45 th day after the day on which the Shares became ex dividend (secondary qualified period). A share, in respect of which a dividend is paid, becomes ex dividend on the day after the last day on which the acquisition by a person of the share will entitle that person to receive the dividend. | Detailed Reasoning - Refundable tax offsets: Subsection 67-25(1) states: Tax offsets available under Division 207 (which sets out the effects of receiving a franked distribution) or Subdivision 210-H (which sets out the effects of receiving a distribution franked with a venture capital credit) are subject to the refundable tax offset rules, unless otherwise stated in this section. Subsection 67-25(1B) provides that the tax offset is only subject to the refundable tax offset rules if the trustee entitled to the tax offset is not liable to be assessed under section 98 or 99A. As franked distributions flow indirectly to the Trustee of the Trust, the Trustee is entitled to a franking tax offset under section 207-45. However, the Trustee is assessed on the distributions received in respect of Unallocated Shares under section 99A. Therefore, the tax offsets available to the Trustee are limited to the amount of tax payable and any excess franking tax offset is not refundable. | Detailed Reasoning - Conclusion: Where a franked distribution is paid in respect of Unallocated Shares, the Trustee will include an amount equal to the franking credit on the distribution in its assessable income under section 207- 35. In this case, provided that the Trustee does not make a related payment in relation to the dividend paid on Unallocated Shares and holds the Unallocated Shares for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45 th day after the Unallocated Shares become ex dividend , then the Trustee will be a qualified person in respect of the distribution and be entitled to the benefit of the franking credits attached to franked distributions on Unallocated Shares to the extent of tax payable. Any excess franking tax offset is not refundable pursuant to section 67-25.

entering into and executing agreements | acquiring and disposing of Shares on the terms of the Trust Deed | receiving and applying distributions in relation to Shares on the terms of the Trust Deed | selling Shares and applying the proceeds on the terms of the Trust Deed | opening and operating bank accounts to retain, on current or deposit account at any bank, any money it considers proper | taking and acting on the advice or opinion of any legal practitioner or other professional person | transferring Shares or paying the proceeds of sale of Shares to Participants | with the consent of Company A, transferring all or part of any Trust Property to a new or existing trust that exists for the benefit or Participants | paying taxes and undertaking activities that involve record-keeping and administrative actions necessary to operate the Trust | receiving dividends in respect of Unallocated Shares and interest from bank accounts and using those funds to acquire additional Shares for the Plan or pay necessary and incidental costs of administering the Trust | generally doing all acts the Trustee deems necessary or expedient to carry out the powers and discretions on the terms of the Trust Deed. | will constitute Accretions to the corpus of the Trust and will not be repaid to Company A (subject to below) | 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, or a third party where the Trustee acquires Shares in the ordinary course of trading or by way of an off-market transaction | must not be paid to any Participant, unless expressly provided for by the Trust Deed or the Plan Rules. | apply such amount to subscribe for, acquire, allocate or deliver Shares in accordance with the Trust Deed or the Plan Rules | deposit the funds into any account opened and operated by the Trustee in accordance with and to be used for the purposes set out in the Trust Deed. | any amount of income or other Tax payable by Company A and/or the Trustee in relation to a Plan | any costs related to an audit of the Trust | any costs directly related to selling and transferring Shares or exercising Share Rights (if any) incurred by the Trustee. | may exercise voting rights but only where the Trustee determines that voting in those circumstances is 'merely incidental' to obtaining, holding and providing Shares to Participants | in respect of any Dividend declared which provides an option to shareholders to elect the form of Dividend received, only has discretion to elect to receive the Dividend it will receive in respect of the Unallocated Share as either cash, shares or options | may apply any capital receipts, Cash Dividends or other distributions received to purchase further Shares as Trust Property | must not participate in any Entitlement Offer | must hold and Bonus Shares issued as Trust Property | any and all allocated Shares held by the Trustee on their behalf | all other benefits, rights and privileges attached to, or resulting from holding, those allocated Shares. | subject to the applicable Plan Terms | in accordance with a valid direction of Company A or relevant Participant | subject to any holding lock on, or other restriction on transfer of, the Shares having been lifted. | the CGT event is CGT event E5 or E7 (paragraph 130-90(1)(a)) | the CGT event happens in relation to a share (paragraph 130-90(1)(b)) | the beneficiary had acquired a beneficial interest in the share by exercising a right (paragraph 130-90(1)(c)) | the beneficiary's beneficial interest in the right was an ESS interest to which Subdivision 83A-B or 83A-C (about employee share schemes) applied (paragraph 130-90(1)(d)). | 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) | other activities that are merely incidental to the activities mentioned in paragraphs 130-85(4)(a) and (b) (paragraph 130-85(c)). | Rights acquired by Participants under the Plan which subsequently vest and, if applicable, exercised (with each Right constituting an ESS interest as defined in subsection 83A-10(1)) | Options acquired by Participants under the Plan which subsequently vest and, if applicable, exercised (with each Option constituting an ESS interest as defined in subsection 83A-10(1)) | Restricted Shares acquired by Participants under the Plan which subsequently vest (with each Restricted Share constituting an ESS interest as defined in subsection 83A-10(1)). | the Plan is an ESS within the meaning of subsection 83A-10(2) as it is a scheme under which rights to acquire Shares are provided to employees, or associates of employees in relation to the employees' employment. | the vesting of and, if applicable, exercising an Option or Performance Right granted under the Plan | the vesting of a Restricted Share granted under the Plan. | a franked distribution is made in an income year to an entity that is a trustee of a trust (paragraph 207-35(1)(a)) | the entity is not a corporate tax entity (paragraph 207-35(1)(b)) | in the case of a trustee of a trust, the trust is not a complying superannuation entity (paragraph 207-35(1)(c)). | the distribution is made to the trustee | the trustee is liable to be assessed on all or part of the trust's net income for that year under section 99A (subparagraph 207-50(4)(b)(ii)) | the trustee's share of the distribution under section 207-55 is a positive amount, whether or not the trustee actually receives any of that share.