Class Ruling CR 2008/13
Date of effect: 30 June 2008

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 provisions 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 is all persons who: In this Ruling, a person belonging to this class of entities is referred to as a participant. Qualifications 4. The Commissioner makes this Ruling based on the precise scheme 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 13 to 21 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 is all persons who: In this Ruling, a person belonging to this class of entities is referred to as a participant. | Qualifications: 4. The Commissioner makes this Ruling based on the precise scheme 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 13 to 21 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 to the income year ended 30 June 2008. However, the Ruling continues to apply after this date to all entities within the specified class who entered into the specified scheme during the term of the Ruling. 9. The Ruling does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling. Furthermore, the Ruling only applies to the extent that: 10. If this Ruling is inconsistent with a later public or private ruling, the relevant class of entities may rely on either ruling which applies to them (item 1 of subsection 357-75(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA)). 11. If this Ruling is inconsistent with an earlier private ruling, the private ruling is taken not to have been made if, when the Ruling is made, the following two conditions are met: 12. If the above two conditions do not apply, the relevant class of entities may rely on either ruling which applies to them (item 3 of subsection 357-75(1) of Schedule 1 to the TAA). 13. The scheme that is the subject of this Ruling is described below. This description is based on the following documents. These documents, or relevant parts of them, as the case may be, form part of and are to be read with this description. The relevant documents or parts of documents incorporated into this description of the scheme are: Note: certain information received from Ernst & Young has been provided on a commercial-in-confidence basis and will not be disclosed or released under the Freedom of Information legislation. 14. The Plan was established in November 2001. Shares are offered to participants under the Plan in July each year, with the first offer being made in July 2002. 15. Full time employees of Panbio with at least 12 months service (excluding specified leave) may be offered shares to the value of $1,000 for nil consideration. The directors of Panbio also have the discretion to offer shares to participants under the Plan where the 12 month service period is not satisfied. 16. Shares issued under the Plan are fully paid ordinary shares in Panbio. 17. The Plan rules contain no forfeiture provisions. 18. The applicant has advised that: | Proposed takeover of Panbio by Inverness: 19. On 8 October 2007, Panbio and Inverness Medical Innovations Inc (Inverness) jointly announced a proposed takeover of Panbio by Inverness, whereby Inverness will acquire 100% of the issued share capital in Panbio. 20. The announcement followed the execution of the Scheme Implementation Agreement, which proposes a scheme of arrangement under Part 5.1 of the Corporations Act 2001 . 21. Under the scheme of arrangement, each participant will be compulsorily required to dispose of all of their shares to Inverness for $0.65 per share. 22. Where a participant is compulsorily required to dispose of shares on implementation of the scheme of arrangement: Commissioner of Taxation 20 February 2008 23. Where a taxpayer acquires qualifying shares under an employee share scheme, the discount in relation to the shares is included in their assessable income in accordance with Subdivision B of Division 13A. | Where election made under section 139E: 24. Where the taxpayer makes an election under section 139E in relation to the shares, the amount of the discount (subject to subsection 139BA) is: 25. In accordance with section 139BA: the total amount of discount otherwise included in the taxpayer's assessable income for a year of income in respect of those shares is only included to the extent that it is greater than $1,000. 26. The references to 'the scheme' in section 139CE are considered to be effectively a reference to the mechanism by which an employee acquires a qualifying share. Hence, the exemption conditions must initially be satisfied at least at the time that an offer under an employee share scheme is made to employees. 27. However, the purpose of subsection 139CE(3) is to ensure that qualifying shares are held for the required period, a condition that clearly extends beyond the time of the original offer or acquisition date. Therefore, the Plan needs to continue to be operated in a manner that satisfies the exemption conditions to ensure the continued exclusion of the discount (received for shares) from a participant's assessable income. | The exemption conditions: 28. The exemption conditions contained in section 139CE that must be satisfied require that the employee share scheme: 29. Thus, for the first $1,000 of a discount to continue to be excluded from an employee's assessable income, the employee share scheme needs to continue to be operated in a manner that satisfies these exemption conditions. | Forfeiture: 30. The Plan rules do not specifically provide for the forfeiture of shares. Further, the compulsory acquisition of a participant's shares under the scheme of arrangement for valuable consideration is not considered to constitute forfeiture. 31. Therefore, as the Plan rules do not provide for forfeiture and because the compulsory acquisition of shares under the scheme of arrangement will not result in a forfeiture of shares, the Commissioner accepts that the first condition will continue to be satisfied. | Disposal restrictions: 32. The applicant has advised that the Plan has been operated so that no participant has been permitted to dispose of shares prior to the end of the period of 3 years after the time they acquired them, other than in circumstances which have involved a cessation of employment within the meaning of subsection 139CE(5)). Therefore, it is accepted that the Plan will be operated up to the time of the implementation of the scheme of arrangement, in a manner that will continue to satisfy the exemption condition in subsection 139CE(3). 33. Where shares are then disposed of pursuant to the implementation of the scheme of arrangement, the Commissioner accepts that such a disposal is not a breach of subsection 139CE(3), as the compulsory acquisition of the shares is considered to have no connection with the actual operation of the Plan. | Non-discriminatory basis: 34. As the applicant has advised that the Plan was operated on a non-discriminatory basis for the purposes of subsection 139CE(4), which primarily relates to the offers made under the Plan, the Commissioner accepts that the third condition is satisfied. | Continuing exclusion of discount from assessable income: 35. In summary, from the time that shares were acquired under the Plan up to the time the scheme of arrangement is implemented, the various exemption conditions in section 139CE were satisfied and will continue to be satisfied, for the purposes of the continuing application of section 139BA. 36. Therefore, the discount previously excluded from a participant's assessable income in relation to shares acquired under the Plan will continue to be excluded from their assessable income, pursuant to section 139BA. 37. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: 22. Where a participant is compulsorily required to dispose of shares on implementation of the scheme of arrangement: Commissioner of Taxation 20 February 2008


Appendix: 23. Where a taxpayer acquires qualifying shares under an employee share scheme, the discount in relation to the shares is included in their assessable income in accordance with Subdivision B of Division 13A. | Where election made under section 139E: 24. Where the taxpayer makes an election under section 139E in relation to the shares, the amount of the discount (subject to subsection 139BA) is: 25. In accordance with section 139BA: the total amount of discount otherwise included in the taxpayer's assessable income for a year of income in respect of those shares is only included to the extent that it is greater than $1,000. 26. The references to 'the scheme' in section 139CE are considered to be effectively a reference to the mechanism by which an employee acquires a qualifying share. Hence, the exemption conditions must initially be satisfied at least at the time that an offer under an employee share scheme is made to employees. 27. However, the purpose of subsection 139CE(3) is to ensure that qualifying shares are held for the required period, a condition that clearly extends beyond the time of the original offer or acquisition date. Therefore, the Plan needs to continue to be operated in a manner that satisfies the exemption conditions to ensure the continued exclusion of the discount (received for shares) from a participant's assessable income. | The exemption conditions: 28. The exemption conditions contained in section 139CE that must be satisfied require that the employee share scheme: 29. Thus, for the first $1,000 of a discount to continue to be excluded from an employee's assessable income, the employee share scheme needs to continue to be operated in a manner that satisfies these exemption conditions. | Forfeiture: 30. The Plan rules do not specifically provide for the forfeiture of shares. Further, the compulsory acquisition of a participant's shares under the scheme of arrangement for valuable consideration is not considered to constitute forfeiture. 31. Therefore, as the Plan rules do not provide for forfeiture and because the compulsory acquisition of shares under the scheme of arrangement will not result in a forfeiture of shares, the Commissioner accepts that the first condition will continue to be satisfied. | Disposal restrictions: 32. The applicant has advised that the Plan has been operated so that no participant has been permitted to dispose of shares prior to the end of the period of 3 years after the time they acquired them, other than in circumstances which have involved a cessation of employment within the meaning of subsection 139CE(5)). Therefore, it is accepted that the Plan will be operated up to the time of the implementation of the scheme of arrangement, in a manner that will continue to satisfy the exemption condition in subsection 139CE(3). 33. Where shares are then disposed of pursuant to the implementation of the scheme of arrangement, the Commissioner accepts that such a disposal is not a breach of subsection 139CE(3), as the compulsory acquisition of the shares is considered to have no connection with the actual operation of the Plan. | Non-discriminatory basis: 34. As the applicant has advised that the Plan was operated on a non-discriminatory basis for the purposes of subsection 139CE(4), which primarily relates to the offers made under the Plan, the Commissioner accepts that the third condition is satisfied. | Continuing exclusion of discount from assessable income: 35. In summary, from the time that shares were acquired under the Plan up to the time the scheme of arrangement is implemented, the various exemption conditions in section 139CE were satisfied and will continue to be satisfied, for the purposes of the continuing application of section 139BA. 36. Therefore, the discount previously excluded from a participant's assessable income in relation to shares acquired under the Plan will continue to be excluded from their assessable income, pursuant to section 139BA.


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, we must apply the law to you in the way set out in the ruling (or in a way that is more favourable for you if we are satisfied that the ruling is incorrect and disadvantages you, and we are 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


Legislative references: ITAA 1936 Pt lll Div 13A ITAA 1936 Pt lll Div 13A Subdiv B ITAA 1936 139BA ITAA 1936 139BA(2) ITAA 1936 139CC(2) ITAA 1936 139CE ITAA 1936 139CE(3) ITAA 1936 139CE(4) ITAA 1936 139CE(5) ITAA 1936 139E ITAA 1936 Pt III Div 13A Subdiv F ITAA 1936 139GF TAA 1953 TAA 1953 Sch 1 357-75(1) Copyright Act 1968 Corporations Act 2001 Pt 5.1
Subject references: election employee share scheme exemption conditions takeover