Class Ruling CR 2025/43

What this ruling is about: 1. This Ruling sets out the income tax consequences of the distribution of A$0.008 per share (Distribution) to shareholders of Otto Energy Limited (Otto) on 16 June 2025 (Payment Date), which comprised a return of capital of A$0.00657 per share (Capital Return) and a dividend of A$0.00143 per share (Dividend). 2. Details of this scheme are set out in paragraphs 21 to 44 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 , unless otherwise indicated. Who this Ruling applies to 4. This Ruling applies to you if you: 5. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 21 to 44 of this Ruling. Note: Division 230 will not apply to individuals unless they have made an election for it to apply. When this Ruling applies 6. This Ruling applies from 1 July 2024 to 30 June 2025. Dividends 7. The Dividend is a 'dividend' as defined in subsection 6(1). 8. If you are a 'resident of Australia' (as defined in subsection 6(1)), you include the Dividend in your assessable income (subparagraph 44(1)(a)(i)). 9. If you are a non-resident, the Dividend is non-assessable non-exempt income and not included in your assessable income (paragraph 802-15(1)(a)). You are also not liable to pay withholding tax in respect of the Dividend (paragraph 802-15(1)(b)). Return of capital is not a dividend 10. The Capital Return that you received from Otto on the Payment Date is not a 'dividend' as defined in subsection 6(1). 11. As the Capital Return is not a dividend, it is not required to be included in your assessable income under subsection 44(1). Sections 45A and 45B do not apply to the return of capital 12. We will not make a determination under either subsections 45A(2) or 45B(3) that section 45C applies to any part of the Capital Return you received from Otto on the Payment Date. Capital gains tax consequences CGT event G1 13. CGT event G1 happened on the Payment Date when you received the Capital Return for each Otto share you owned at the Record Date and continued to own at the Payment Date (section 104-135). 14. You made a capital gain from CGT event G1 happening if the Capital Return per Otto share was more than the share's cost base (subsection 104-135(3)). The capital gain is the difference and you reduce both the cost base and reduced cost base of your Otto share to nil. 15. If the Capital Return per Otto share was not more than the share's cost base, you reduce the cost base and reduced cost base of the share (but not below nil) by the amount of the Capital Return (subsection 104-135(4)). 16. You cannot make a capital loss from CGT event G1 (Note 1 to subsection 104-135(3)). CGT event C2 17. CGT event C2 happened on the Payment Date when you received the Capital Return for each Otto share you owned at the Record Date but ceased to own before the Payment Date (section 104-25). 18. You made a capital gain from CGT event C2 of A$0.00657 per Otto share that you owned on the Record Date but ceased to own before the Payment Date, as the Capital Return constitutes the capital proceeds you received when your right to receive the Capital Return ended on the Payment Date (subsections 104-25(3) and 116-20(1)). Discount capital gain 19. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Otto shares at least 12 months before the Payment Date (subsection 115-25(1)), and the other conditions in Subdivision 115-A are satisfied. Foreign resident shareholders 20. If you were a foreign resident or the trustee of a foreign trust for CGT purposes (as defined in subsection 995-1(1)) immediately before the Payment Date, you disregard any capital gain made from CGT event G1 or any capital gain or capital loss made from CGT event C2 under subsection 855-10(1), provided that: 21. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. Otto Energy Limited 22. Otto is a company incorporated in Australia and has been a tax resident of Australia since it was incorporated on 7 January 2004. Otto's shares were listed on the Australian Securities Exchange on 22 December 2004. 23. Otto is an oil and gas exploration and production company focused on the Gulf Coast of the United States of America. Otto has producing assets within the Gulf Coast and holds an overriding royalty in an Alaskan oil and gas project. Otto does not own any Australian land assets and does not have any Australian projects. 24. Otto has a functional currency of United States dollars for financial reporting and income tax purposes. Capital structure and policy 25. Otto has a single class share capital structure consisting of ordinary shares. 26. On and immediately before the Payment Date, Otto had: 27. The only prior dividend distribution by Otto was made on 26 June 2015. Capital management and corporate activity 28. Otto raised capital of A$8.5 million in 2017 which, together with the cash balance as at 30 September 2017, funded a number of projects including exploration in Alaska. 29. Otto also raised capital in 2018, 2019 and 2020, which was used to fund ongoing exploration of its Green Canyon 21 project in the Gulf of Mexico and working capital. 30. In 2015, Otto acquired Borealis Petroleum Pty. Ltd. (Borealis) for A$1.2 million, which was paid for by the issue of 17,518,250 Otto shares. 31. On 18 January 2021, Otto transferred Borealis Alaska LLC (a subsidiary of Borealis) to Pantheon Resources Plc (Pantheon) in exchange for 14,272,592 shares issued by Pantheon. 32. In October 2021, Otto sold 11 million Pantheon shares for US$10.5 million. 33. In November and December 2023, Otto sold the remaining 3,272,592 Pantheon shares for US$1,050,000. 34. Otto incurred costs in relation to the sale of the Pantheon shares of A$373,000. 35. The total equity of Otto at 30 June 2022 was US$55,452,000. 36. The total equity of Otto at 30 June 2024 was US$46,757,000. Distribution 37. On 30 November 2023, at Otto's annual general meeting, it was resolved that Otto would make a return of capital of up to A$40 million, or A$0.008 per share, to its shareholders in proportion to their shareholding. 38. On the Payment Date, Otto made the Distribution of a total amount of A$38,360,078, which equated to A$0.008 per Otto share, comprising the: 39. The Dividend was unfranked and was declared by Otto in the distribution statement issued to be 'conduit foreign income' (as defined in Subdivision 802-A). 40. The Distribution was sourced from Otto's existing surplus cash reserves in the balance sheet. 41. The Capital Return was debited against Otto's share capital account. 42. The Dividend was not debited against Otto's share capital account. Other matters 43. Otto's 'share capital account' (as defined in section 975-300) was not 'tainted' (within the meaning of Division 197) as at the Payment Date. 44. On and immediately before the Payment Date, the sum of the market values of Otto's assets that were 'taxable Australian real property' (as defined in section 855-20) did not exceed the sum of the market values of its other assets for the purposes of section 855-30. Commissioner of Taxation 2 July 2025 45. This paragraph sets out the details of the provisions of the Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997 ruled upon or referenced in 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).

Class of entities or scheme: 21. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. | Otto Energy Limited: 22. Otto is a company incorporated in Australia and has been a tax resident of Australia since it was incorporated on 7 January 2004. Otto's shares were listed on the Australian Securities Exchange on 22 December 2004. 23. Otto is an oil and gas exploration and production company focused on the Gulf Coast of the United States of America. Otto has producing assets within the Gulf Coast and holds an overriding royalty in an Alaskan oil and gas project. Otto does not own any Australian land assets and does not have any Australian projects. 24. Otto has a functional currency of United States dollars for financial reporting and income tax purposes. | Capital structure and policy: 25. Otto has a single class share capital structure consisting of ordinary shares. 26. On and immediately before the Payment Date, Otto had: 27. The only prior dividend distribution by Otto was made on 26 June 2015. | Capital management and corporate activity: 28. Otto raised capital of A$8.5 million in 2017 which, together with the cash balance as at 30 September 2017, funded a number of projects including exploration in Alaska. 29. Otto also raised capital in 2018, 2019 and 2020, which was used to fund ongoing exploration of its Green Canyon 21 project in the Gulf of Mexico and working capital. 30. In 2015, Otto acquired Borealis Petroleum Pty. Ltd. (Borealis) for A$1.2 million, which was paid for by the issue of 17,518,250 Otto shares. 31. On 18 January 2021, Otto transferred Borealis Alaska LLC (a subsidiary of Borealis) to Pantheon Resources Plc (Pantheon) in exchange for 14,272,592 shares issued by Pantheon. 32. In October 2021, Otto sold 11 million Pantheon shares for US$10.5 million. 33. In November and December 2023, Otto sold the remaining 3,272,592 Pantheon shares for US$1,050,000. 34. Otto incurred costs in relation to the sale of the Pantheon shares of A$373,000. 35. The total equity of Otto at 30 June 2022 was US$55,452,000. 36. The total equity of Otto at 30 June 2024 was US$46,757,000. | Distribution: 37. On 30 November 2023, at Otto's annual general meeting, it was resolved that Otto would make a return of capital of up to A$40 million, or A$0.008 per share, to its shareholders in proportion to their shareholding. 38. On the Payment Date, Otto made the Distribution of a total amount of A$38,360,078, which equated to A$0.008 per Otto share, comprising the: 39. The Dividend was unfranked and was declared by Otto in the distribution statement issued to be 'conduit foreign income' (as defined in Subdivision 802-A). 40. The Distribution was sourced from Otto's existing surplus cash reserves in the balance sheet. 41. The Capital Return was debited against Otto's share capital account. 42. The Dividend was not debited against Otto's share capital account. | Other matters: 43. Otto's 'share capital account' (as defined in section 975-300) was not 'tainted' (within the meaning of Division 197) as at the Payment Date. 44. On and immediately before the Payment Date, the sum of the market values of Otto's assets that were 'taxable Australian real property' (as defined in section 855-20) did not exceed the sum of the market values of its other assets for the purposes of section 855-30. Commissioner of Taxation 2 July 2025

Ruling: 1. This Ruling sets out the income tax consequences of the distribution of A$0.008 per share (Distribution) to shareholders of Otto Energy Limited (Otto) on 16 June 2025 (Payment Date), which comprised a return of capital of A$0.00657 per share (Capital Return) and a dividend of A$0.00143 per share (Dividend). 2. Details of this scheme are set out in paragraphs 21 to 44 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 , unless otherwise indicated. | Who this Ruling applies to: 4. This Ruling applies to you if you: 5. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 21 to 44 of this Ruling. Note: Division 230 will not apply to individuals unless they have made an election for it to apply. | When this Ruling applies: 6. This Ruling applies from 1 July 2024 to 30 June 2025. | Dividends: 7. The Dividend is a 'dividend' as defined in subsection 6(1). 8. If you are a 'resident of Australia' (as defined in subsection 6(1)), you include the Dividend in your assessable income (subparagraph 44(1)(a)(i)). 9. If you are a non-resident, the Dividend is non-assessable non-exempt income and not included in your assessable income (paragraph 802-15(1)(a)). You are also not liable to pay withholding tax in respect of the Dividend (paragraph 802-15(1)(b)). | Return of capital is not a dividend: 10. The Capital Return that you received from Otto on the Payment Date is not a 'dividend' as defined in subsection 6(1). 11. As the Capital Return is not a dividend, it is not required to be included in your assessable income under subsection 44(1). | Sections 45A and 45B do not apply to the return of capital: 12. We will not make a determination under either subsections 45A(2) or 45B(3) that section 45C applies to any part of the Capital Return you received from Otto on the Payment Date. | CGT event G1: 13. CGT event G1 happened on the Payment Date when you received the Capital Return for each Otto share you owned at the Record Date and continued to own at the Payment Date (section 104-135). 14. You made a capital gain from CGT event G1 happening if the Capital Return per Otto share was more than the share's cost base (subsection 104-135(3)). The capital gain is the difference and you reduce both the cost base and reduced cost base of your Otto share to nil. 15. If the Capital Return per Otto share was not more than the share's cost base, you reduce the cost base and reduced cost base of the share (but not below nil) by the amount of the Capital Return (subsection 104-135(4)). 16. You cannot make a capital loss from CGT event G1 (Note 1 to subsection 104-135(3)). | CGT event C2: 17. CGT event C2 happened on the Payment Date when you received the Capital Return for each Otto share you owned at the Record Date but ceased to own before the Payment Date (section 104-25). 18. You made a capital gain from CGT event C2 of A$0.00657 per Otto share that you owned on the Record Date but ceased to own before the Payment Date, as the Capital Return constitutes the capital proceeds you received when your right to receive the Capital Return ended on the Payment Date (subsections 104-25(3) and 116-20(1)). | Discount capital gain: 19. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Otto shares at least 12 months before the Payment Date (subsection 115-25(1)), and the other conditions in Subdivision 115-A are satisfied. | Foreign resident shareholders: 20. If you were a foreign resident or the trustee of a foreign trust for CGT purposes (as defined in subsection 995-1(1)) immediately before the Payment Date, you disregard any capital gain made from CGT event G1 or any capital gain or capital loss made from CGT event C2 under subsection 855-10(1), provided that: 21. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. | Otto Energy Limited: 22. Otto is a company incorporated in Australia and has been a tax resident of Australia since it was incorporated on 7 January 2004. Otto's shares were listed on the Australian Securities Exchange on 22 December 2004. 23. Otto is an oil and gas exploration and production company focused on the Gulf Coast of the United States of America. Otto has producing assets within the Gulf Coast and holds an overriding royalty in an Alaskan oil and gas project. Otto does not own any Australian land assets and does not have any Australian projects. 24. Otto has a functional currency of United States dollars for financial reporting and income tax purposes. | Capital structure and policy: 25. Otto has a single class share capital structure consisting of ordinary shares. 26. On and immediately before the Payment Date, Otto had: 27. The only prior dividend distribution by Otto was made on 26 June 2015. | Capital management and corporate activity: 28. Otto raised capital of A$8.5 million in 2017 which, together with the cash balance as at 30 September 2017, funded a number of projects including exploration in Alaska. 29. Otto also raised capital in 2018, 2019 and 2020, which was used to fund ongoing exploration of its Green Canyon 21 project in the Gulf of Mexico and working capital. 30. In 2015, Otto acquired Borealis Petroleum Pty. Ltd. (Borealis) for A$1.2 million, which was paid for by the issue of 17,518,250 Otto shares. 31. On 18 January 2021, Otto transferred Borealis Alaska LLC (a subsidiary of Borealis) to Pantheon Resources Plc (Pantheon) in exchange for 14,272,592 shares issued by Pantheon. 32. In October 2021, Otto sold 11 million Pantheon shares for US$10.5 million. 33. In November and December 2023, Otto sold the remaining 3,272,592 Pantheon shares for US$1,050,000. 34. Otto incurred costs in relation to the sale of the Pantheon shares of A$373,000. 35. The total equity of Otto at 30 June 2022 was US$55,452,000. 36. The total equity of Otto at 30 June 2024 was US$46,757,000. | Distribution: 37. On 30 November 2023, at Otto's annual general meeting, it was resolved that Otto would make a return of capital of up to A$40 million, or A$0.008 per share, to its shareholders in proportion to their shareholding. 38. On the Payment Date, Otto made the Distribution of a total amount of A$38,360,078, which equated to A$0.008 per Otto share, comprising the: 39. The Dividend was unfranked and was declared by Otto in the distribution statement issued to be 'conduit foreign income' (as defined in Subdivision 802-A). 40. The Distribution was sourced from Otto's existing surplus cash reserves in the balance sheet. 41. The Capital Return was debited against Otto's share capital account. 42. The Dividend was not debited against Otto's share capital account. | Other matters: 43. Otto's 'share capital account' (as defined in section 975-300) was not 'tainted' (within the meaning of Division 197) as at the Payment Date. 44. On and immediately before the Payment Date, the sum of the market values of Otto's assets that were 'taxable Australian real property' (as defined in section 855-20) did not exceed the sum of the market values of its other assets for the purposes of section 855-30. Commissioner of Taxation 2 July 2025 45. This paragraph sets out the details of the provisions of the Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997 ruled upon or referenced in 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).




What this Ruling is about | Appendix  Legislative provisions | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling.