Class Ruling CR 2012/107
Date of effect: 1 July 2012

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provision(s) 2. The relevant provision(s) dealt with in this Ruling are: All legislative references in this Ruling are to the ITAA 1936 unless otherwise indicated. Class of entities 3. The class of entities to which this Ruling applies are the security holders of Lend Lease Group (LLG) that hold shares in Lend Lease Corporation Limited (LLC) and also units in Lend Lease Trust (LLT) which are stapled to the shares of LLC. These security holders are those that: Qualifications 4. The Commissioner of Taxation makes this Ruling based on the precise arrangement identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 20 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to:

Class of entities or scheme: 3. The class of entities to which this Ruling applies are the security holders of Lend Lease Group (LLG) that hold shares in Lend Lease Corporation Limited (LLC) and also units in Lend Lease Trust (LLT) which are stapled to the shares of LLC. These security holders are those that: | Qualifications: 4. The Commissioner of Taxation makes this Ruling based on the precise arrangement identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 20 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 8. This Ruling applies from 1 July 2012 to 30 June 2013. The Ruling continues to apply after 30 June 2013 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 9. The following description of the scheme is based on and incorporates the Class Ruling request dated 31 August 2012 and other information and documents provided by Greenwoods & Freehills. 10. LLC is an Australian listed public company which was listed on the Australian Securities Exchange (ASX) in June 1962. 11. Following shareholder approval on 12 November 2009, units in LLT were distributed to shareholders as an 'in specie' dividend of $0.001 per LLC share. Each ordinary share of LLC was then stapled to a unit in LLT and trades as one stapled security on the ASX. 12. On 26 November 2012, LLG made a return of capital payment of $0.871 per LLC share, totalling $500.3 million. A condition precedent to the return of capital was that LLG security holders would vote to have the return of capital compulsorily subscribed as additional contributions on the LLT units. The compulsory contribution on LLT units was made on the same day. Security holders approved the return of capital and the compulsory contribution at the Annual General Meeting on 15 November 2012. 13. The total amount of the capital returned was debited to the untainted share capital account of LLC. 14. As at 30 June 2012, the balance sheet of LLC disclosed that shareholders equity comprised of $2,077.6 million share capital and $2,058 million of retained profits. 15. LLC had previously undertaken a number of significant capital raisings ($302.5 million by way of institutional placement on 4 February 2009 and $806 million raised by way of a retail entitlement offer in March 2010) designed to fund investments in targeted development projects. 16. Since 2004, LLC has consistently paid franked, partially franked or unfranked dividends in excess of 30 cents per LLC share in each income year. With effect from the interim dividend in 2010, the distribution policy was adjusted from a payout ratio of 60-80% of Net Operating Profit after Tax to 40-60% of Net Operating Profit after Tax as a consequence of the global financial crisis. In its Results for Announcement to the Market dated 30 August 2012, LLC announced an unfranked dividend of 22 cents per share which was paid on 28 September 2012 and which was sourced from LLC's conduit foreign income account. 17. Approximately 28% of LLG securities are held by non-residents and no non-resident shareholder holds 10% or more of shares alone or together with associates. 18. LLC's franking account balance is approximately $25.4 million as disclosed in the Annual Report for the year ended 30 June 2012. 19. The arrangement enabled the release of share capital by LLC in order to facilitate the capitalisation of LLT. This was designed to enable LLT to invest in Passive Investments that are considered to be more appropriately held by LLT than LLC. The arrangement is consistent with methods of enlivening LLT as set out in the Explanatory Statement for the stapling proposal dated 12 October 2009 which was circulated to LLC shareholders. 20. This Ruling does not consider the taxation consequences for a security holder that owned securities at the Record Date 23 November 2012 but had ceased to own it by the Payment Date 26 November 2012. | The application of sections 45B and 45C: 21. The Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the whole or any part of the return of capital. Commissioner of Taxation 28 November 2012 | Section 45B - schemes to provide capital benefits in substitution for dividends: 22. Section 45B applies where certain capital payments are paid to shareholders in substitution for dividends. It allows the Commissioner to make a determination that section 45C applies to a capital benefit. The effect of such a determination is that all or part of the distribution of capital received by the shareholder under the return of capital is treated as an unfranked dividend. 23. In broad terms, section 45B applies where: 24. Under the scheme, the return of capital would constitute the provision of a capital benefit as the return constitutes a distribution of share capital to security holders in accordance with paragraph 45B(5)(b). 25. Pursuant to subsection 45B(9), it is likely that each LLG security holder, to which this ruling applies obtained a tax benefit. The relevant tax benefit was attributable to the return of capital being assessed under the capital gains tax (CGT) regime, rather than being assessed as a dividend under subsection 44(1). 26. Paragraph 45B(2)(c) requires the Commissioner to consider whether any part of the scheme was entered into for a purpose, other than an incidental purpose, of enabling the security holders (the relevant taxpayers) to obtain a tax benefit. The conclusion as to purpose is to be obtained with regard to the 'relevant circumstances' of a scheme which includes the factors set out in subsection 45B(8). 27. Having regard to the relevant circumstances of the scheme pursuant to subsection 45B(8), it cannot be concluded that either LLG or the LLG security holders entered into or carried out the scheme for a more than incidental purpose of enabling the security holders to obtain a tax benefit. While the matter is not free from doubt, on balance it cannot be said that the return of capital was attributable to the profits of LLC. The pattern of distributions does not indicate that the return of capital was made in substitution for dividends. Similarly, the manner in which the proposed scheme was carried out, and the form and substance of the proposed scheme, do not indicate that the proposed capital return was made in substitution for dividends. 28. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to treat the whole, or any part of the return of capital as an unfranked dividend for the purposes of the ITAA 1936 or of the ITAA 1997. 29. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: The application of sections 45B and 45C: 21. The Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the whole or any part of the return of capital. Commissioner of Taxation 28 November 2012


Appendix: Section 45B - schemes to provide capital benefits in substitution for dividends: 22. Section 45B applies where certain capital payments are paid to shareholders in substitution for dividends. It allows the Commissioner to make a determination that section 45C applies to a capital benefit. The effect of such a determination is that all or part of the distribution of capital received by the shareholder under the return of capital is treated as an unfranked dividend. 23. In broad terms, section 45B applies where: 24. Under the scheme, the return of capital would constitute the provision of a capital benefit as the return constitutes a distribution of share capital to security holders in accordance with paragraph 45B(5)(b). 25. Pursuant to subsection 45B(9), it is likely that each LLG security holder, to which this ruling applies obtained a tax benefit. The relevant tax benefit was attributable to the return of capital being assessed under the capital gains tax (CGT) regime, rather than being assessed as a dividend under subsection 44(1). 26. Paragraph 45B(2)(c) requires the Commissioner to consider whether any part of the scheme was entered into for a purpose, other than an incidental purpose, of enabling the security holders (the relevant taxpayers) to obtain a tax benefit. The conclusion as to purpose is to be obtained with regard to the 'relevant circumstances' of a scheme which includes the factors set out in subsection 45B(8). 27. Having regard to the relevant circumstances of the scheme pursuant to subsection 45B(8), it cannot be concluded that either LLG or the LLG security holders entered into or carried out the scheme for a more than incidental purpose of enabling the security holders to obtain a tax benefit. While the matter is not free from doubt, on balance it cannot be said that the return of capital was attributable to the profits of LLC. The pattern of distributions does not indicate that the return of capital was made in substitution for dividends. Similarly, the manner in which the proposed scheme was carried out, and the form and substance of the proposed scheme, do not indicate that the proposed capital return was made in substitution for dividends. 28. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to treat the whole, or any part of the return of capital as an unfranked dividend for the purposes of the ITAA 1936 or of the ITAA 1997.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1936 45(B) ITAA 1936 45(B)(2)(a) ITAA 1936 45(B)(2)(b) ITAA 1936 45(B)(2)(c) ITAA 1936 45(B)(3) ITAA 1936 45(B)(5) ITAA 1936 45(B)(5)(b) ITAA 1936 45(B)(8) ITAA 1936 45(B)(8)(a) ITAA 1936 45(B)(8)(b) ITAA 1936 45(B)(8)(c) ITAA 1936 45(B)(8)(d) ITAA 1936 45(B)(8)(e) ITAA 1936 45(B)(8)(f) ITAA 1936 45(B)(8)(h) ITAA 1936 45(B)(8)(i) ITAA 1936 45(B)(8)(j) ITAA 1936 45(B)(8)(k) ITAA 1936 45(B)(9) ITAA 1936 45C ITAA 1936 128B ITAA 1936 177A(1) ITAA 1936 177D(b)(i) ITAA 1936 177D(b)(ii) ITAA 1936 177D(b)(iii) ITAA 1936 177D(b)(iv) ITAA 1936 177D(b)(v) ITAA 1936 177D(b)(vi) ITAA 1936 177D(b)(vii) ITAA 1936 177D(b)(viii) ITAA 1997 Div 230 ITAA 1997 995-1(1) TAA 1953 Copyright Act 1968
Subject references: capital benefit dividend income shareholder payments stapled companies stapled structure return on capital of shares