Class Ruling CR 2014/70
Date of effect: 1 July 2013

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 subsequent legislative references in this Ruling are to the ITAA 1997 unless otherwise stated. Class of entities 3. The class of entities to which this Ruling applies is individuals 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 8 to 27 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

Class of entities or scheme: 3. The class of entities to which this Ruling applies is individuals 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 8 to 27 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 Ruling applies from 1 July 2013 to 30 June 2020. 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). 8. The following description of the scheme is based on information provided by the Applicant. The following documents, or relevant parts of them, form part of and are to be read with the description: Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. 9. The Westfield Group was formed in July 2004 by the stapling of the Australian Securities Exchange (ASX) listed securities of WHL, a public company, to Westfield Trust (WT) and Westfield America Trust (WAT), both public unit trusts, and collectively WHL, WT and WAT are referred to as the WDC Group. The stapled securities were quoted and traded together on the ASX under the code 'WDC' (WDC Securities). 10. The Westfield Retail Trust (WRT) was established in December 2010. WRT is an ASX listed stapled property trust. WRT comprises two public unit trusts, WRT1 and WRT2. The securities of WRT1 and WRT2 were quoted and traded together on the ASX under the code 'WRT' (WRT Securities). 11. WHL has issued rights (for nil consideration) to acquire WDC Securities to Participants which are exercisable for nil consideration under the PRPs. These rights were issued before 1 January 2012 and are not cash settlable (Performance Rights). There are no performance hurdles applying to the Performance Rights. 12. WHL has also issued rights on or after 1 January 2012 (for nil consideration) that were able to be settled through the transfer or issue of WDC Securities or the payment of cash under the Indeterminate PRP (Indeterminate Performance Rights). 13. Broadly, the PRPs and the Indeterminate PRP provide for the issue of rights with a 3 to 5 year vesting period. During the vesting period, a Participant's entitlement to the rights lapses if the Participant ceases employment with the WDC Group, and additionally for Indeterminate Performance Rights, if performance hurdles are not met. 14. The EDAP is a cash bonus plan administered by WHL. The quantum of the cash award was determined by reference to the market value of WDC Securities on the relevant payment date. 15. The PIPs are cash bonus plans administered by WHL. The quantum of the cash award was determined by reference to the market value of WDC Securities on the relevant payment date. 16. The EDAP and PIPs are cash based plans with similar vesting and forfeiture provisions. | Proposal: 17. On 4 December 2013, the WDC Group and WRT jointly announced a proposal to restructure the WDC Group and merge the group's Australian and New Zealand assets with WRT to create two separate ASX listed stapled groups: This restructure is hereinafter referred to as the Proposal. 18. The Proposal was approved by WDC Group Securityholders on 29 May 2014 and WRT Securityholders on 20 June 2014 and involved three main steps: 19. Just after the implementation of the Proposal WDC Securityholders will own 1 stapled security in WC and 1.246 stapled securities in SG for every 1 WDC Group stapled security they owned just before the Implementation Date. | Impact of the Proposal on Performance Rights: 20. Before the implementation of the Proposal the terms of the PRPs were varied so that on vesting the Performance Rights are settled with WC Securities (PRP Amendments). The Applicant has advised that: Following implementation of the Proposal the obligation to provide WC Securities on exercise of a Participant's Performance Rights was novated from WHL to WCL (the PRP Novation). | Impact of the Proposal on Indeterminate Performance Rights: 21. Before the implementation of the Proposal the terms of the Indeterminate PRP were varied so that on vesting the Indeterminate Performance Rights are settled with WC Securities or satisfied with a cash payment determined by reference to the market value of WC Securities (Indeterminate PRP Amendments). The Applicant has advised that: Following implementation of the Proposal the obligation to provide WC Securities or the payment of cash on exercise of a Participant's Indeterminate Performance Rights was novated from WHL to WCL (the Indeterminate PRP Novation). | Impact of the Proposal on the Cash Awards: 22. Before the implementation of the Proposal the terms of the Cash Awards Plans were varied so that on vesting of a Cash Award, the cash amount will be determined by reference to the market value of WC Securities (Cash Awards Amendments). The Applicant has advised that: Following implementation of the Proposal the obligation to provide the Cash Awards was novated from WHL to WCL (the Cash Awards Novation). | Other: 23. The Applicant has advised that prior to and subsequent to the PRP Amendments and implementation of the Proposal, each Performance Right: 24. The Applicant has advised that prior to and subsequent to the Indeterminate PRP Amendments and implementation of the Proposal, each Indeterminate Performance Right: 25. On the Implementation Date each Participant had their employment transferred to WCL (or a wholly owned subsidiary of WCL), and the PRP Novation, Indeterminate PRP Novation and Cash Awards Novation occurred. 26. In this Ruling a reference to Restructure refers to the implementation of the Proposal and the PRP Amendments, Indeterminate PRP Amendments, or the Cash Award Amendments as applicable. 27. The Applicant has advised that at the time of the Restructure Participants acquired their replacement ESS interests in WC, no Participant held a beneficial interest in more than 5% of the securities in WC and were not in a position to cast or control the casting of more than 5% of the maximum number of votes that might be cast at a general meeting of WC. | Performance Rights: 28. The Restructure and the PRP Novation did not give rise to an ESS deferred taxing point for the purposes of section 83A-120. 29. The Restructure and the PRP Novation did not result in a capital gain or capital loss arising for Participants in respect of their Performance Rights. 30. If a subsequent ESS deferred taxing point occurs to a Performance Right, the market value of the Performance Right (as determined by reference to WC Securities) (less any cost base) is included in the assessable income of a Participant at that time (section 83A-110). | Indeterminate Performance Rights: 31. The Restructure and the Indeterminate PRP Novation did not give rise to an ESS deferred taxing point for the purposes of section 83A-120 in respect of Indeterminate Performance Rights that are subsequently settled with WC Securities. 32. The Restructure and the Indeterminate PRP Novation did not result in a capital gain or capital loss arising for Participants who hold Indeterminate Performance Rights that are subsequently settled with WC Securities or satisfied in cash. 33. If a subsequent ESS deferred taxing point occurs to an Indeterminate Performance Right that is settled with WC Securities, the market value of the Indeterminate Performance Right (as determined by reference to WC Securities) (less any cost base) is included in the assessable income of a Participant at that time (section 83A-110). 34. Where an Indeterminate Performance Right is satisfied solely in cash, the cash payment will be included in the assessable income of a Participant as salary and wages in the year in which it is received under section 6-5. The Restructure and the Indeterminate PRP Novation did not result in these Participants deriving assessable income pursuant to section 6-5 at the time of the Restructure. | Cash Awards: 35. The Restructure and the Cash Awards Novation did not result in Participants deriving ordinary income that is assessable under section 6-5 or the realisation of a capital gain or loss in respect of their Cash Awards. 36. The amount of the cash payment received on vesting of the Cash Awards will be included in the Participant's assessable income as salary and wages in the income year in which it is received under section 6-5. | Reportable fringe benefits amount: 37. A 'reportable fringe benefits amount' (as defined in subsection 995-1(1)) did not arise for a Participant as a result of the Restructure and the PRP Novation, the Indeterminate PRP Novation and the Cash Awards Novation as applicable. Commissioner of Taxation 3 September 2014 | Performance Rights: 38. A stapled security is treated in the same way as a share for the purposes of Division 83A under section 83A-335, provided that at least one of the elements in the stapled security is a share in a company. Rights to acquire such stapled securities are treated as rights to acquire shares. | No ESS deferred taxing point - Restructure: 39. Under subsection 83A-110(1), an amount will be included in the assessable income of a Participant in respect of their ESS interest in the income year in which the ESS deferred taxing point occurs. 40. The ESS deferred taxing point for a right is worked out under section 83A-120. 41. Section 83A-120 provides that the ESS deferred taxing point for the Performance Rights will occur at the earliest of the following times: 42. However, if the Participant disposes of the Performance Rights (or the securities acquired on exercise of the Performance Rights) within 30 days of the time which would otherwise be the ESS deferred taxing point, the ESS deferred taxing point will instead be the time of disposal (subsection 83A-120(3)). 43. Subject to section 83A-130, a deferred taxing point will occur as a result of the Restructure and the PRP Novation as there is a disposal of the Performance Rights and a cessation of the Participant's employment. 44. Section 83A-130 relevantly provides that where as a result of a restructure (including the structure of the ownership) of a company (the old company): 45. The Commissioner accepts that the Restructure and the PRP Novation is a restructure for the purposes of Division 83A and that as a result of the restructure a Participant: 46. Accordingly, as Participants are employed by WCL after the Restructure and no Participant will have a beneficial interest in more than 5% of the shares in the new company or be in a position to cast or control the casting of more than 5% of the maximum number of votes that might be cast at a general meeting of the new company: there is no ESS deferred taxing point under section 83A-120. | CGT: 47. Subsection 130-80(1) will apply to disregard any capital gain or capital loss arising as a result of the Restructure and the PRP Novation as each of the requirements in the provision are satisfied. Specifically: 48. Therefore, no capital gain or capital loss will arise for Participants as a result of the Restructure and the PRP Novation. | Subsequent ESS deferred taxing point: 49. The Performance Rights, following implementation of the Proposal, will wholly relate to WC Securities. As such, the market value of a Performance Right as determined by reference to the WC Securities at the time of the ESS deferred taxing point (reduced by any cost base) will be included in the Participant's assessable income under section 83A-110. | No ESS deferred taxing point for Indeterminate Rights settled with WC Securities: 50. For similar reasons as outlined in paragraphs 39 to 46 of this Ruling, the Restructure and the Indeterminate PRP Novation will not give rise to a deferred taxing point for Participants where the Indeterminate Rights are settled with WC Securities as the Restructure and the Indeterminate PRP Novation satisfies the conditions in section 83A-130. | Assessable Income: 51. The Restructure and the Indeterminate PRP Novation does not result in a Participant whose Indeterminate Performance Rights are settled wholly or partially with cash deriving assessable income pursuant to section 6-5 at the time of the Restructure. | CGT: 52. For similar reasons as outlined in paragraphs 47 to 48 of this Ruling, no capital gain or capital loss will arise as a result of the Restructure and the Indeterminate PRP Novation for Indeterminate Performance Rights to the extent that they are settled with WC Securities. | Subsequent ESS deferred taxing point: 53. If a subsequent ESS deferred taxing point arises for the Indeterminate Performance Right, then under section 83A-110, the market value of the Indeterminate Performance Right (as determined by reference to the WC Securities) at the time of the ESS deferred taxing point (reduced by any cost base) will be included in the Participant's assessable income. | Indeterminate Performance Rights satisfied wholly or partially with cash: 54. Where a Participant's Indeterminate Performance Rights are satisfied wholly or partially by a cash payment with no WC Securities provided, Division 83A will have no application (section 83A-340) and the payment will be included in a Participant's assessable income under section 6-5. | CGT: 55. To the extent that an Indeterminate Performance Right is settled by a cash payment it is merely a right to future payment of remuneration. Any cash payment will be included in assessable income in the income year in which it is received in accordance with section 6-5. Accordingly, no capital gain or capital loss arises for a Participant as a result of the Restructure and the Indeterminate PRP Novation for Indeterminate Performance Rights to the extent settled with cash. | Cash Awards: 56. The Restructure and the Cash Awards Novation did not result in Participants realising a capital gain or capital loss in respect of their Cash Awards for similar reasons as those outlined in paragraph 55 of this Ruling. Furthermore, the Restructure and the Cash Awards Novation did not result in Participants deriving assessable income pursuant to section 6-5. 57. The quantum of the cash payment received on vesting of the Cash Awards will be included in the Participant's assessable income in the income year in which it is received pursuant to section 6-5. | Reportable fringe benefits amount: 58. For Performance Rights and Indeterminate Performance Rights that are settled with WC Securities no reportable fringe benefit amount arises for Participants because paragraph (h) of the definition of 'fringe benefit' in section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that an ESS interest to which Subdivision 83A-C applies is not a fringe benefit. 59. Paragraph (f) of the definition of 'fringe benefit' in section 136 of the FBTAA excludes a payment of salary and wages. Accordingly, for Indeterminate Performance Rights that are wholly satisfied in cash, and for the Cash Awards, the payment of cash is exempt from FBT as it is a payment of salary or wages. 60. Therefore, the Restructure and the PRP Novation, the Indeterminate PRP Novation and the Cash Awards Novation as applicable did not result in a 'reportable fringe benefit amount' (as defined in subsection 995-1(1)) arising for a Participant. 61. The following is a detailed contents list for this Ruling: © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft

Ruling: Performance Rights: 28. The Restructure and the PRP Novation did not give rise to an ESS deferred taxing point for the purposes of section 83A-120. 29. The Restructure and the PRP Novation did not result in a capital gain or capital loss arising for Participants in respect of their Performance Rights. 30. If a subsequent ESS deferred taxing point occurs to a Performance Right, the market value of the Performance Right (as determined by reference to WC Securities) (less any cost base) is included in the assessable income of a Participant at that time (section 83A-110). | Indeterminate Performance Rights: 31. The Restructure and the Indeterminate PRP Novation did not give rise to an ESS deferred taxing point for the purposes of section 83A-120 in respect of Indeterminate Performance Rights that are subsequently settled with WC Securities. 32. The Restructure and the Indeterminate PRP Novation did not result in a capital gain or capital loss arising for Participants who hold Indeterminate Performance Rights that are subsequently settled with WC Securities or satisfied in cash. 33. If a subsequent ESS deferred taxing point occurs to an Indeterminate Performance Right that is settled with WC Securities, the market value of the Indeterminate Performance Right (as determined by reference to WC Securities) (less any cost base) is included in the assessable income of a Participant at that time (section 83A-110). 34. Where an Indeterminate Performance Right is satisfied solely in cash, the cash payment will be included in the assessable income of a Participant as salary and wages in the year in which it is received under section 6-5. The Restructure and the Indeterminate PRP Novation did not result in these Participants deriving assessable income pursuant to section 6-5 at the time of the Restructure. | Cash Awards: 35. The Restructure and the Cash Awards Novation did not result in Participants deriving ordinary income that is assessable under section 6-5 or the realisation of a capital gain or loss in respect of their Cash Awards. 36. The amount of the cash payment received on vesting of the Cash Awards will be included in the Participant's assessable income as salary and wages in the income year in which it is received under section 6-5. | Reportable fringe benefits amount: 37. A 'reportable fringe benefits amount' (as defined in subsection 995-1(1)) did not arise for a Participant as a result of the Restructure and the PRP Novation, the Indeterminate PRP Novation and the Cash Awards Novation as applicable. Commissioner of Taxation 3 September 2014


Appendix: Performance Rights: 38. A stapled security is treated in the same way as a share for the purposes of Division 83A under section 83A-335, provided that at least one of the elements in the stapled security is a share in a company. Rights to acquire such stapled securities are treated as rights to acquire shares. | No ESS deferred taxing point - Restructure: 39. Under subsection 83A-110(1), an amount will be included in the assessable income of a Participant in respect of their ESS interest in the income year in which the ESS deferred taxing point occurs. 40. The ESS deferred taxing point for a right is worked out under section 83A-120. 41. Section 83A-120 provides that the ESS deferred taxing point for the Performance Rights will occur at the earliest of the following times: 42. However, if the Participant disposes of the Performance Rights (or the securities acquired on exercise of the Performance Rights) within 30 days of the time which would otherwise be the ESS deferred taxing point, the ESS deferred taxing point will instead be the time of disposal (subsection 83A-120(3)). 43. Subject to section 83A-130, a deferred taxing point will occur as a result of the Restructure and the PRP Novation as there is a disposal of the Performance Rights and a cessation of the Participant's employment. 44. Section 83A-130 relevantly provides that where as a result of a restructure (including the structure of the ownership) of a company (the old company): 45. The Commissioner accepts that the Restructure and the PRP Novation is a restructure for the purposes of Division 83A and that as a result of the restructure a Participant: 46. Accordingly, as Participants are employed by WCL after the Restructure and no Participant will have a beneficial interest in more than 5% of the shares in the new company or be in a position to cast or control the casting of more than 5% of the maximum number of votes that might be cast at a general meeting of the new company: there is no ESS deferred taxing point under section 83A-120. | CGT: 47. Subsection 130-80(1) will apply to disregard any capital gain or capital loss arising as a result of the Restructure and the PRP Novation as each of the requirements in the provision are satisfied. Specifically: 48. Therefore, no capital gain or capital loss will arise for Participants as a result of the Restructure and the PRP Novation. | Subsequent ESS deferred taxing point: 49. The Performance Rights, following implementation of the Proposal, will wholly relate to WC Securities. As such, the market value of a Performance Right as determined by reference to the WC Securities at the time of the ESS deferred taxing point (reduced by any cost base) will be included in the Participant's assessable income under section 83A-110. | No ESS deferred taxing point for Indeterminate Rights settled with WC Securities: 50. For similar reasons as outlined in paragraphs 39 to 46 of this Ruling, the Restructure and the Indeterminate PRP Novation will not give rise to a deferred taxing point for Participants where the Indeterminate Rights are settled with WC Securities as the Restructure and the Indeterminate PRP Novation satisfies the conditions in section 83A-130. | Assessable Income: 51. The Restructure and the Indeterminate PRP Novation does not result in a Participant whose Indeterminate Performance Rights are settled wholly or partially with cash deriving assessable income pursuant to section 6-5 at the time of the Restructure. | CGT: 52. For similar reasons as outlined in paragraphs 47 to 48 of this Ruling, no capital gain or capital loss will arise as a result of the Restructure and the Indeterminate PRP Novation for Indeterminate Performance Rights to the extent that they are settled with WC Securities. | Subsequent ESS deferred taxing point: 53. If a subsequent ESS deferred taxing point arises for the Indeterminate Performance Right, then under section 83A-110, the market value of the Indeterminate Performance Right (as determined by reference to the WC Securities) at the time of the ESS deferred taxing point (reduced by any cost base) will be included in the Participant's assessable income. | Indeterminate Performance Rights satisfied wholly or partially with cash: 54. Where a Participant's Indeterminate Performance Rights are satisfied wholly or partially by a cash payment with no WC Securities provided, Division 83A will have no application (section 83A-340) and the payment will be included in a Participant's assessable income under section 6-5. | CGT: 55. To the extent that an Indeterminate Performance Right is settled by a cash payment it is merely a right to future payment of remuneration. Any cash payment will be included in assessable income in the income year in which it is received in accordance with section 6-5. Accordingly, no capital gain or capital loss arises for a Participant as a result of the Restructure and the Indeterminate PRP Novation for Indeterminate Performance Rights to the extent settled with cash. | Cash Awards: 56. The Restructure and the Cash Awards Novation did not result in Participants realising a capital gain or capital loss in respect of their Cash Awards for similar reasons as those outlined in paragraph 55 of this Ruling. Furthermore, the Restructure and the Cash Awards Novation did not result in Participants deriving assessable income pursuant to section 6-5. 57. The quantum of the cash payment received on vesting of the Cash Awards will be included in the Participant's assessable income in the income year in which it is received pursuant to section 6-5. | Reportable fringe benefits amount: 58. For Performance Rights and Indeterminate Performance Rights that are settled with WC Securities no reportable fringe benefit amount arises for Participants because paragraph (h) of the definition of 'fringe benefit' in section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that an ESS interest to which Subdivision 83A-C applies is not a fringe benefit. 59. Paragraph (f) of the definition of 'fringe benefit' in section 136 of the FBTAA excludes a payment of salary and wages. Accordingly, for Indeterminate Performance Rights that are wholly satisfied in cash, and for the Cash Awards, the payment of cash is exempt from FBT as it is a payment of salary or wages. 60. Therefore, the Restructure and the PRP Novation, the Indeterminate PRP Novation and the Cash Awards Novation as applicable did not result in a 'reportable fringe benefit amount' (as defined in subsection 995-1(1)) arising for a Participant.


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 6(1) ITAA 1997 6-5 ITAA 1997 Div 83A ITAA 1997 Subdiv 83A-C ITAA 1997 83A-105 ITAA 1997 83A-110 ITAA 1997 83A-110(1) ITAA 1997 83A-120 ITAA 1997 83A-120(3) ITAA 1997 83A-120(4) ITAA 1997 83A-120(5) ITAA 1997 83A-120(6) ITAA 1997 83A-120(7) ITAA 1997 83A-130 ITAA 1997 83A-330 ITAA 1997 83A-335 ITAA 1997 83A-340 ITAA 1997 130-80 ITAA 1997 130-80(1) ITAA 1997 Div 230 ITAA 1997 995-1(1) TAA 1953 FBTAA 1986 136
Subject references: capital gains tax CGT asset capital receipts employee share schemes ESS interest ESS deferred taxing point fringe benefits tax income