Class Ruling CR 2007/40
Date of effect: 30 June 2007

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) 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 are to the ITAA 1936 unless otherwise stated. Class of entities 3. The class of entities to which this Ruling applies is all Australian resident employees of Vodafone Network Pty Limited and Vodafone Pty Limited who acquired a share, option or performance share under any of the employee share plans listed in paragraph 15 of this Ruling. They are persons who, as at 28 July 2006: In this Ruling, a person belonging to this class of entities is referred to as a participating employee. Qualifications 4. The Commissioner makes this Ruling based on the precise scheme identified in the 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 14 to 20 of this Ruling. 6. It should be noted that while this Ruling gives certainty to participating employees in respect of the issues addressed in the Ruling section, the Commissioner has not been asked to form a view, and has not formed a view, on the other tax issues relating to the return of capital undertaken by Vodafone Group Plc and those schemes integral and ancillary to them. 7. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 8. 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 Australian resident employees of Vodafone Network Pty Limited and Vodafone Pty Limited who acquired a share, option or performance share under any of the employee share plans listed in paragraph 15 of this Ruling. They are persons who, as at 28 July 2006: In this Ruling, a person belonging to this class of entities is referred to as a participating employee. | Qualifications: 4. The Commissioner makes this Ruling based on the precise scheme identified in the 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 14 to 20 of this Ruling. 6. It should be noted that while this Ruling gives certainty to participating employees in respect of the issues addressed in the Ruling section, the Commissioner has not been asked to form a view, and has not formed a view, on the other tax issues relating to the return of capital undertaken by Vodafone Group Plc and those schemes integral and ancillary to them. 7. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 8. 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: 9. This Ruling applies to the income year ended 30 June 2007. 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, subject to there being no change in the scheme. 10. 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: 11. 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)). 12. 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: 13. 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). 14. The scheme that is the subject of the Ruling is described below. This description is based on, and includes reference to, the following documents: Note : certain information has been provided on a commercial-in-confidence basis and will not be discussed or released under the Freedom of Information legislation. 15. Vodafone Group Plc (Vodafone) operates a number of employee share plans. Participants in these plans include persons employed in Australia by Vodafone Network Pty Limited and Vodafone Pty Limited (being wholly owned subsidiaries of Vodafone Australia Limited, which is itself a wholly owned subsidiary of Vodafone Group Plc), who have acquired: under one of the following plans: 16. The applicant has advised that: | Return of capital and share consolidation: 17. On 17 March 2006, Vodafone announced that, subject to shareholder approval, it would effect a return of capital by way of a special distribution to shareholders. 18. The return of capital, to be effected by the creation and issue of redeemable preference shares (B Shares), also involved the simultaneous consolidation of Vodafone's share capital. Both measures received shareholder approval at a meeting held on 25 July 2006. | Shares: 19. As a result of the return of capital and share consolidation, on 31 July 2006 shareholders (including participating employees) held: for every 8 ordinary shares they held on 28 July 2006. | Rights: 20. Prior to the return of capital and share consolidation, every right held by a participating employee entitled the participating employee to receive one ordinary share on the exercise or operation of the right, and after the return of capital and share consolidation, every right held by a participating employee entitled the participating employee to receive one ordinary share on the exercise or operation of the right. | Acquisition of share or right: 21. Where a participating employee acquires a share or right under one of the Plans they acquire a qualifying share or a qualifying right, and the discount given in relation to the share or right is included in their assessable income pursuant to subsection 139B(1). 22. As a participating employee has not made an election under section 139E in relation to the share or right, the discount (calculated under subsection 139CC(3) or 139CC(4)) is included in their assessable income in the year the cessation time happens in relation to the share or right, pursuant to subsection 139B(3). | Return of capital and share consolidation: 23. Under the return of capital and share consolidation: 24. Section 139DQ will not apply to the shares or rights held by a participating employee after the return of capital and share consolidation. Commissioner of Taxation 16 May 2007 | Acquisition of share or right: 25. Where an employee acquires a share or a right that is a qualifying share or a qualifying right within the meaning of section 139CD, the discount given in relation to the share or right is included in the employee's assessable income, pursuant to subsection 139B(1). 26. Where the employee does not make an election under section 139E in relation to the share or right, the discount (calculated under subsection 139CC(3) or 139CC(4)) is included in the employee's assessable income in the year that the cessation time occurs, pursuant to subsection 139B(3). | Cessation time for shares: 27. For the purposes of this Ruling, the Commissioner accepts the statement by the applicant that shares acquired by a participating employee are qualifying shares (within the meaning of section 139CD). As this Ruling applies to participating employees who: the discount in relation to their shares will be included in the participating employee's assessable income in the year the cessation time (determined in accordance with subsection 139CA(2)) occurs. 28. Subsection 139CA(2) provides that the cessation time for a share held by a participating employee will be the earliest of: 29. Immediately after the return of capital and share consolidation, a participating employee holds fewer ordinary shares than they held on 28 July 2006. Thus for the purposes of Division 13A of Part III (Division 13A) they are considered to have disposed of one in every 8 ordinary shares as a result of the return of capital and share consolidation. 30. Subsection 139CC(3) provides that where an employee disposes of a share in an arm's length transaction within 30 days of the cessation time, the discount is the amount or value of any consideration received by the employee for the disposal less the amount or value of any consideration paid or given by the employee for the acquisition of the share. 31. Whilst a participating employee receives B shares as a result of the return of capital and share consolidation, the B shares are not received as consideration for the disposal of ordinary shares. Thus as no consideration is received, and the disposal of one share for every 8 ordinary shares held at 28 July 2006 is accepted as being at arm's length, the discount in respect of the disposal is nil. | Cessation time for rights: 32. For the purposes of this Ruling, the Commissioner accepts the statement by the applicant that rights acquired by a participating employee are qualifying rights (within the meaning of section 139CD). Thus, as this Ruling applies to participating employees who: the discount in relation to their rights will be included in a participating employee's assessable income in the year the cessation time (determined in accordance with subsection 139CB(1)) occurs. 33. Subsection 139CB(1) provides that the cessation time for a right held by an employee will be the earliest of: 34. A right held by a participating employee prior to the return of capital and share consolidation entitles them to acquire an ordinary share in Vodafone. As the number of rights they hold is not affected by the return of capital and share consolidation, and as each right continues to entitle them to acquire an ordinary share in Vodafone, the Commissioner accepts that a participating employee will not dispose of a right within the meaning of Division 13A. Thus a cessation time will not happen in relation to rights held by a participating employee as a consequence of the return of capital and share consolidation. | Takeovers and restructures: 35. Section 139DQ provides that where a taxpayer acquires shares or rights in a company (the new company) that can reasonably be regarded as matching shares or matching rights in another company (the old company) that the taxpayer had acquired under an employee share scheme: the matching shares or matching rights will be treated, for the purposes of Division 13A, as if they were a continuation of the shares or rights in the old company. 36. Under the return of capital and share consolidation a participating employee does not acquire shares or rights in a new company within the meaning of paragraph 139DQ(1)(a), therefore Subdivision DA of Division 13A will not apply. 37. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: Acquisition of share or right: 21. Where a participating employee acquires a share or right under one of the Plans they acquire a qualifying share or a qualifying right, and the discount given in relation to the share or right is included in their assessable income pursuant to subsection 139B(1). 22. As a participating employee has not made an election under section 139E in relation to the share or right, the discount (calculated under subsection 139CC(3) or 139CC(4)) is included in their assessable income in the year the cessation time happens in relation to the share or right, pursuant to subsection 139B(3). | Return of capital and share consolidation: 23. Under the return of capital and share consolidation: 24. Section 139DQ will not apply to the shares or rights held by a participating employee after the return of capital and share consolidation. Commissioner of Taxation 16 May 2007


Appendix: Acquisition of share or right: 25. Where an employee acquires a share or a right that is a qualifying share or a qualifying right within the meaning of section 139CD, the discount given in relation to the share or right is included in the employee's assessable income, pursuant to subsection 139B(1). 26. Where the employee does not make an election under section 139E in relation to the share or right, the discount (calculated under subsection 139CC(3) or 139CC(4)) is included in the employee's assessable income in the year that the cessation time occurs, pursuant to subsection 139B(3). | Cessation time for shares: 27. For the purposes of this Ruling, the Commissioner accepts the statement by the applicant that shares acquired by a participating employee are qualifying shares (within the meaning of section 139CD). As this Ruling applies to participating employees who: the discount in relation to their shares will be included in the participating employee's assessable income in the year the cessation time (determined in accordance with subsection 139CA(2)) occurs. 28. Subsection 139CA(2) provides that the cessation time for a share held by a participating employee will be the earliest of: 29. Immediately after the return of capital and share consolidation, a participating employee holds fewer ordinary shares than they held on 28 July 2006. Thus for the purposes of Division 13A of Part III (Division 13A) they are considered to have disposed of one in every 8 ordinary shares as a result of the return of capital and share consolidation. 30. Subsection 139CC(3) provides that where an employee disposes of a share in an arm's length transaction within 30 days of the cessation time, the discount is the amount or value of any consideration received by the employee for the disposal less the amount or value of any consideration paid or given by the employee for the acquisition of the share. 31. Whilst a participating employee receives B shares as a result of the return of capital and share consolidation, the B shares are not received as consideration for the disposal of ordinary shares. Thus as no consideration is received, and the disposal of one share for every 8 ordinary shares held at 28 July 2006 is accepted as being at arm's length, the discount in respect of the disposal is nil. | Cessation time for rights: 32. For the purposes of this Ruling, the Commissioner accepts the statement by the applicant that rights acquired by a participating employee are qualifying rights (within the meaning of section 139CD). Thus, as this Ruling applies to participating employees who: the discount in relation to their rights will be included in a participating employee's assessable income in the year the cessation time (determined in accordance with subsection 139CB(1)) occurs. 33. Subsection 139CB(1) provides that the cessation time for a right held by an employee will be the earliest of: 34. A right held by a participating employee prior to the return of capital and share consolidation entitles them to acquire an ordinary share in Vodafone. As the number of rights they hold is not affected by the return of capital and share consolidation, and as each right continues to entitle them to acquire an ordinary share in Vodafone, the Commissioner accepts that a participating employee will not dispose of a right within the meaning of Division 13A. Thus a cessation time will not happen in relation to rights held by a participating employee as a consequence of the return of capital and share consolidation. | Takeovers and restructures: 35. Section 139DQ provides that where a taxpayer acquires shares or rights in a company (the new company) that can reasonably be regarded as matching shares or matching rights in another company (the old company) that the taxpayer had acquired under an employee share scheme: the matching shares or matching rights will be treated, for the purposes of Division 13A, as if they were a continuation of the shares or rights in the old company. 36. Under the return of capital and share consolidation a participating employee does not acquire shares or rights in a new company within the meaning of paragraph 139DQ(1)(a), therefore Subdivision DA of Division 13A will not apply.


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 III Div 13A ITAA 1936 Pt III Div 13A SdivDA ITAA 1936 139B ITAA 1936 139B(1) ITAA 1936 139B(3) ITAA 1936 139CA ITAA 1936 139CA(2) ITAA 1936 139CA(3) ITAA 1936 139CA(4) ITAA 1936 139CB ITAA 1936 139CB(1) ITAA 1936 139CB(2) ITAA 1936 139CC ITAA 1936 139CC(3) ITAA 1936 139CC(4) ITAA 1936 139CD ITAA 1936 139DQ ITAA 1936 139DQ(1)(a) ITAA 1936 139DR ITAA 1936 139E TAA 1953 TAA 1953 Sch 1 357-75(1) Copyright Act 1968
Subject references: employee benefits employee share schemes