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1. For the purposes of the Company satisfying the reporting requirements in Division 392 of the Taxation Administration Act 1953 (TAA): a. Will section 83A-340 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the Performance Rights when rights vest and the number of Shares that the Participant has the right to receive is determined under Rule 7 of the Plan Rules?

Yes. When vested, the Company calculates the number of Shares the Participant is entitled to receive in accordance with Rules 7 & 8 and, under Rule 10, provides notice to the Participant setting out the number of rights vested and a copy of the valuation. b. Will Participants be treated as if the Performance Rights had always been rights to acquire the number of Shares determined under the formula in Rule 7, which includes the Top-up shares, under subsection 83A-340(2) of the ITAA 1997 for the purposes of Division 83A? Answer Yes. The Performance Rights are treated as if they had always been rights to acquire the number of Shares determined using the formula in Rule 7. Question 2. Will the Company have an obligation to provide an 'employee share scheme statement' to the Commissioner and a Participant (ESS Statement) under Division 392 of the TAA, as a result of the Performance Rights vesting because the rights will become ESS interests to which Subdivision 83A-C of the ITAA 1997 applies? Answer Yes. Question 3.

If the answer to Question 2 is Yes, when a Participant does not elect to receive cash, will the obligation of the Company to provide an ESS Statement to the Commissioner arise in the year that the disposal restrictions on the Shares acquired are lifted (including for any Top-up shares) being the ESS deferred taxing point under subsection 83A-120(7) of the ITAA 1997, or when the Shares are disposed of, if that happens within 30 days of the ESS deferred taxing point under subsection 83A-120(3)? Answer Yes. However, the ESS deferred taxing point will be the end of the 15-year period starting when the employee acquired the Performance Rights, if the disposal restrictions do not end before that time. Question 4. If the answer to Question 2 is Yes, and a Participant elects to receive cash, will the obligation of the Company to provide an ESS Statement to the Commissioner arise in the year that the Participant elects to receive cash instead of Shares being the ESS deferred taxing point for the rights under subsection 83A-120(7) of the ITAA 1997? Answer Yes Question 5.

Will the Company be entitled to deduct an amount pursuant section 8-1 of the ITAA 1997 for irretrievable cash contributions made to the Trustee to acquire the Shares for the purposes of the Plan, and/or fund the ongoing administration of the Trust to satisfy the issue of Shares to Australian resident Participants pursuant to the Plan? Answer Yes. Question 6. Will the Company be entitled to deduct an amount, pursuant to section 40-880 of the ITAA 1997, in respect of the costs incurred by the Company in relation to the establishment of the Trust? Answer Yes. Question 7. If the Performance Rights are settled with cash, is the Company required to withhold a Pay As You Go (PAYG) withholding amount from the payment made to the Participants in accordance with section 12-35 of Schedule 1 to the TAA? Answer No. Question 8. Are irrevocable contributions of funds made by the Company to the Trustee to acquire the Shares for the purposes of the Plan, and/or fund the ongoing administration of the Trust, excluded from being a fringe benefit pursuant to paragraph 136(1)(ha) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? Answer Yes. This ruling applies for the following periods :

1 July YYYY to 30 June YYYY The scheme commenced on: 1 July YYYY

1.  A Pty Limited (the Company) owns shares in the following subsidiaries: •                 B Pty Ltd •                 C Pty Ltd •                 ... (collectively, A Group). 2.  The Company aims to encourage the participation of employee ownership in the business and therefore is implementing an employee benefit plan, which includes a performance rights plan. The Company proposes to establish A Group Performance Rights Plan (Plan). 3.  The proposed Plan is intended to provide a long term incentive for key employees and officers of A Group, by way of performance rights (Performance Rights). The Plan is intended to align the interests of key employees with the interests of the shareholders, and to provide a meaningful incentive for employees to remain with the A Group and to contribute to its long term growth. 4.  Participation in the Plan will only be offered to key employees and officers of A Group (Participant). 5.  An employee's participation is by invitation only, via an xxinvitation. An invitee may accept an offer to participate in the Plan, via an xxform. The Participant will not need to pay anything for the Performance Rights.

6.  Participation in the Plan will be governed by the proposed xx (the Plan Rules). 7.  The value of the Performance Rights will be capped up to a specific amount set by the Board of Directors of the Company (the Board), based on the employee's tenure/seniority etc. For example, a senior employee will be invited to participate in the Plan with performance rights valued at $XXk. 8.  The value of the Performance Rights issued to Participants will be greater than nil. 9.  After applying section 83A-315 of the ITAA 1997, there is still a discount given in relation to the Performance Rights. 10.  Immediately after acquiring the Performance Rights, a Participant will: •                 hold no more than 10% of the beneficial interest in the Company's shares; and •                 is not in a position to cast, or control the casting of, more than 10% of the maximum number of votes at a general meeting of the Company. 11.  The Performance Rights will be subject to various vesting conditions, such as meeting various KPI's and targets over the financial year (performance conditions). The performance conditions will be set out in the invitation.

12.  The Participant must also be employed for at least 12 months from grant of the Performance Rights (employment condition). If the employee ceases employment with the Plan Group within that time, the right is forfeited. 13.  Provided the Performance Right vests, a Participant will have the right to receive shares in the Company (Shares), calculated using the following formula, as set out in Rule 7 of the Plan Rules: The number of Shares you will receive will be calculated according to the following formula: Shares = VPR ÷ DSP where: Shares is the number of Shares you will acquire. VPR is the value (in dollars) of your performance rights that have vested. DSP is the discounted share price explained in rule 8 below. Where this formula produces a number that is not a whole number, the number of Shares you will receive will be the nearest number of whole Shares, rounded down. 14.  Rule 8 of the Plan Rules provides: •                 The Company's invitation will show the discount that will be applied when Participant's Performance Rights are converted into Shares (assuming they vest).

•                 Each year, the Company's accountants will undertake a valuation of the Company and its Shares, taking into account the Company's most recent end-of-financial-year accounts. •                 When converting Performance Rights into Shares, the discount shown in the Company's invitation will be applied to the fair market value of a single ordinary Share, as shown in this valuation. This will result in a Participant receiving more Shares than would have been the case, had the discount not been applied. The 'additional' Shares acquired as a result of this discount are referred to as the 'Top-up Shares. •                 .... 15.  The application of the formula in Rule 7 of the Plan Rules means that the number of Shares that will be acquired on exercise of the rights is not ascertainable at grant. 16.  The Performance Right cannot be disposed of or transferred. If a Participant attempts to transfer a Performance Right (or any interest in a Performance Right), the Performance Right will be taken to have been cancelled.

17.  There is a default three (3) year disposal restriction on any of the underlying Shares acquired when the Performance Rights vests, however, at grant of the Performance Rights: •                 the Participant can elect a restriction period from anywhere between 1-15 years for the Balance of Shares. •                 the Participant can also elect a restriction period for Top-up Shares, from anywhere between 3-15 years. 18.  Once the restriction period has been nominated, it is irrevocable. 19.  When Performance Rights have vested (when the employment condition and performance conditions have been met), under Rule x, the Company notifies the Participant of the number of Performance Rights that have vested and provides the Participant with: •                 a copy of the Valuation mentioned in Rule x; and •                 an 'Exercise Notice'. 20.  In the Exercise Notice, the Participant may elect to settle the vested performance rights in cash as opposed to Shares. When the employee elects to receive cash instead of Shares, they do not get the benefit of the discounted Shares and will only receive the face value of the rights as set out in the invitation.

21.  If a Participant ceases to be an employee of the A Group within 3 years of acquiring the Top-up shares the Company may buy-back the Shares for $X regardless of the number of Shares or carry out any other transaction that has the effect of the Top-up shares being forfeited or cancelled for no or nominal consideration. 22.  An employee share trust (EST or Trust) will be established by the proposed Trust Deed - A Group Employee Trust (Trust Deed) to hold shares for the purposes of the Plan and manage the Company's employee share schemes. The Company is excluded as a beneficiary of the Trust. 23.  As soon as possible after receiving the Exercise Notice, the Company will issue or procure the transfer of Shares to the trustee of the EST (Trustee) to be held on the Participants behalf or pay the Participant the cash amount (as the case may be) in satisfaction of entitlements in respect of the vested Performance Rights.

24.  The Company will provide funds to the Trustee in order for the Trustee to acquire Shares to be held for a Participant under the Plan and for the purposes of administering the Trust. Funds received by the Trustee from the Company will constitute accretions to the corpus of the Trust and will not be repaid to the Company. 25.  While the Shares are held by a Trustee for the benefit of the Participant, under the terms of the Trust Deed, the Participant's rights with respect to the Shares are the same as all ordinary shareholders. The Trustee holds on trust for the Participants the Shares acquired by it for their benefit under the Plan and all rights attaching to those Shares (including any dividends and bonus shares). 26.  Pursuant to the Trust Deed, the Trustee will open and maintain a register in respect of the Participants that records: •                 the number of Shares to which each Participant is entitled; •                 the date of acquisition of Shares to which each Participant is entitled; •                 the number of bonus shares (if any) to which each Participant is entitled; and •                 the rights to which each Participant is entitled.

27.  Pursuant to the Trust Deed, a Participant is presently entitled to so much of the Net Income of the Trust for a Measurement Period which is attributable to: •                 the Shares held by the Trustee on behalf of the Participant; and •                 the proceeds of sale arising from the sale of any Rights by the Trustee on behalf of the Participant. 28.  The balance of the Net Income of the Trust for a Measurement Period to which no Participant is presently entitled may be accumulated by the Trustee as an accretion to the Trust. 29.  ... 30.  If the major shareholders decide to sell the entire Company, Participants will be required to participate in that sale. 31.  It is a condition of participation in the Plan, that the Participant is agreeing to be bound by the Shareholders Deed and the Company's constitution. 32.  The Trustee is a company whose sole purpose is to hold shares for employees under the Company's employee share schemes. Under the Trust Deed, the Trustee does not have the power to do anything, and is prohibited from doing anything, that would result in the Trust not being an 'employee share trust' for the purposes of subsection 130-85(4) of the ITAA 1997.

33.  The Trustee's activities will be limited to: •                 receiving and distributing any dividends paid on Shares held on behalf of a Participant to the Participants; •                 exercising any voting rights that attach to Shares in accordance with any instructions provided by the Participant or otherwise in a way that is consistent with the Trustee's fiduciary obligations; •                 the opening and operation of a bank account to facilitate the receipt and payment of money for administering the Trust; •                 the receipt of dividends in respect of unallocated Shares and interest from bank accounts and using those funds to acquire additional Shares for the purposes of employee shares schemes established by the Company or to pay necessary and incidental costs of administering the trust provided permitted under subsection 130-85(4) of the ITAA 1997; •                 dealing with Shares forfeited under an ESS including the sale of forfeited Shares and using the proceeds of sale for activities permitted under subsection 130-85(4) of the ITAA 1997;

•                 selling Shares on behalf of a Participant in accordance with the Annual Sales Program and transferring to the Participant the net proceeds of the sale of those Shares as required under the Plan Rules; •                 receiving, holding and selling any bonus shares that accrue to a Participant on behalf of a Participant. 34. & If the EST is terminated, the Trust Deed provides that the Trustee must (at its own election): a)               use its best efforts to sell any remaining Shares held by it for the benefit of the Participants; or b)               transfer to each Participant in specie any asset comprised in the Trust to which the Participant is beneficially entitled. 35.  The balance of the capital or income of the Trust to which no Participant is entitled may be applied, in whole or in part, for the benefit of one or more of the following as the Trustee thinks fit: a)               a superannuation or retirement fund established and maintained by a Group Company; or b)               any charity nominated by the Trustee. 36.  Clause 29 of the Plan provides that Subdivision 83-C of the ITAA 1997 applies to the Plan, subject to the requirements of that Act.

Income Tax Assessment Act 1997 section 8-1 Income Tax Assessment Act 1997 subsection 8-1(1) Income Tax Assessment Act 1997 subsection 8-1(2) Income Tax Assessment Act 1997 paragraph 8-1(2)(a) Income Tax Assessment Act 1997 section 40-880 Income Tax Assessment Act 1997 section 40-880(3) Income Tax Assessment Act 1997 section 40-880(4) Income Tax Assessment Act 1997 section 40-880(5) Income Tax Assessment Act 1997 section 40-880(6) Income Tax Assessment Act 1997 section 40-880(7) Income Tax Assessment Act 1997 section 40-880(8) Income Tax Assessment Act 1997 section 40-880(9) Income Tax Assessment Act 1997 Subdivision 83A-C Income Tax Assessment Act 1997 subsection 83A-10(1) Income Tax Assessment Act 1997 subsection 83A-10(2) Income Tax Assessment Act 1997 section 83A-20 Income Tax Assessmen

Unless stated otherwise, all references are to Division 83A Employee Share Schemes of the Income Tax Assessment Act 1997 (ITAA 1997). Question 1,2, 3 and 4 Summary Where the Performance Rights vest the Company calculates the number of Shares the Participant is entitled to receive in accordance with Rules x & x and, under Rule x, provides notice to the Participant setting out the number of rights vested and a copy of the valuation undertaken under Rule x. The right has become a right to acquire a beneficial interest in a share under subsection 83A-340(1). The Performance Rights are treated as if it had always been a right to acquire the number of Shares determined using the formula in Rule x. The Company will have an obligation to provide an ESS statement to the Commissioner and a Participant under Division 392 of Schedule 1 of the TAA as a result of the Performance Rights vesting because the rights will be treated as if they had always been ESS interests to which Division 83A applies. Subdivision 83A-C applies to those ESS interests.

If a Participant does not elect to receive cash, the ESS Statement must be provided for the income year in which the restriction on the disposal of the Shares is lifted, or the end of the 15 year period from when the Performance Right was acquired, whichever is earliest. However, if the Shares are disposed of within 30 days of that time, the ESS Statement must be provided for the disposal year. If the Participant chooses to receive cash in the exercise notice, the ESS deferred taxing point will occur. The market value of the ESS interests (the Performance Rights) at that time is equal to the cash payment. Detailed reasoning An ESS interest in a company is defined in subsection 83A-10(1) to mean a beneficial interest in either: a)               a share in the company; or b)               a right to acquire a beneficial interest in a share in the company. Subsection 83A-10(2) defines an 'employee share scheme' as a scheme under which ESS interests in a company are provided to employees, or associates of employees, (including past or prospective employees) of: a)               the company; or b)               subsidiaries of the company; in relation to the employees' employment.

The granting of an indeterminate right may give rise to the application of section 83A-340 if a beneficial interest in a right is acquired and that right later becomes a right to acquire a beneficial interest in a share, Division 83A applies as if the right had always been a right to acquire the beneficial interest in the share (that is, it is treated as having always been an ESS interest). The conditions that need to be satisfied, in order for subsection 83A-340(1) to apply are: [1] (a)               you acquire a right under a contract; (b)               at the time you acquire it, the right is not a right to acquire a beneficial interest in a share; (c)               at a later time, and because a condition in the contract is satisfied, the right 'becomes' a different right; and (d)               at this later time, the right is a right to acquire a beneficial interest in a share (a right to acquire a share). Subsection 83A-340(1) provides two examples: Example 1: You acquire a right to acquire, at a future time: (a)               shares with a specified total value, rather than a specified number of shares; or (b)               an indeterminate number of shares. Example 2:

You acquire a right under which the provider must provide you with either ESS interests or cash, whichever the provider chooses. Once the conditions outlined above are satisfied, pursuant to subsection 83A-340(2), the ESS provisions will apply as if the right had always been a right to acquire the beneficial interest in the share. This is explained in the Explanatory Memorandum for the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009 (EM) at paragraphs 1.367 as follows: At the time of acquisition it may be unclear whether a right to an employment benefit will result in the receipt of an ESS interest, or it may be unascertainable how many ESS interests will be received. In such circumstances, that right will be considered to have been an ESS interest from the time that the original right to an employment benefit was acquired, if and when it becomes clear that the right to the employment benefit will result in the receipt of a definite number of ESS interests.

Where an employee share plan specifies that a participant has a right to be issued and/or transferred a number of shares calculated in accordance with a formula, or the Provider is able to provide some other form of alternative benefit to a beneficial interest in a share in the company or a right to acquire a beneficial interest in a share in the company (such as cash), the right provided under the plan may be an indeterminate right for the purposes of section 83A-340. This is because the number of shares that the participant may receive is not known at the time the right is granted or at the time the right is granted the participant is only entitled to a benefit but the form of that benefit is determined by the employer at a later time. Accordingly, such an award of a right under the plan is not a beneficial interest in a right to acquire a beneficial interest in shares unless, and until the time the number of shares to be issued/ transferred can be determined or it is settled that employee is entitled to acquire shares.

Where the employee can choose for the right to be settled in cash or shares, the right will be an ESS interest because the employee is entitled to acquire shares instead of cash. Although the indeterminate right is not an ESS interest within the meaning of subsection 83A-10(1) at the time it is granted, where it is ultimately satisfied with shares (or when the number of shares the employee is entitled to receive is determined), the indeterminate right will, pursuant to section 83A-340, be treated as if it had always been an ESS interest. At the time the Performance Rights are granted the number of Shares a Participant has the right to acquire is unknown as the number of Shares depends on a calculation to be made at the vesting time pursuant to Rules x and x of the Plan rules.

When the Performance Rights vest, as per Rules x and x, the Performance Rights will give the Participant the right to acquire the number of Shares calculated under the formula. At that time, the right has become a right to acquire shares in the Company and is treated as if it were always a right to acquire shares (ESS interests). The Company is treated as having provided the ESS interest to the Participant at the time the rights were granted. Consequently, the requirement in subparagraph 392-5(1)(b)(i) of the TAA is met. Division 83A will apply to the Performance Rights if they were provided at a discount: subsection 83A-20(1). The Performance Rights will be treated as having been acquired at a discount, because the Participant was not required to pay anything for the Performance Rights and we accept that the value of the rights will be greater than nil [2] . A Participant will include the discount given in relation to the Performance Rights in the acquisition year under Subdivision 83A-B, unless the requirement in Subdivision 83A-C are met. Subdivision 83A-C

Section 83A-105 sets out the conditions that must be satisfied to be able to defer the inclusion in assessable income of any discount received on the acquisition of an ESS interest until the financial year in which the ESS deferred taxing point occurs. For ESS interests that are rights to acquire shares, these conditions are as follows: •                 Subdivision 83A-B would (apart from section 83A-105) apply to the scheme: paragraph 83A-105(1)(a); •                 After applying section 83A-315, there's still a discount given in relation to the interest: paragraph 83A-105(1)(aa); •                 Section 83A-33, about start-ups, doesn't reduce the amount to be included in your assessable income: paragraph 83A-105(1)(ab); •                 Subsections 83A-45(1), (2), (3), and (6) apply to the interest: paragraph 83A-105(1)(b). These conditions are as follows: -       when the ESS interest is acquired, the employee is employed by the company or a subsidiary of the company (subsection 83A-45(1)) -       all the ESS interests under the employee share scheme relate to ordinary shares (subsection 83A-45(2))

-       the predominant business of the company in which the ESS interest is acquired is not the acquisition, sale or holding of shares, securities or other investments or if it is, the employee is not employed by the company and employed by another company that is a subsidiary or holding company of that company, or a subsidiary of the holding company (subsection 83A-45(3)) -       immediately after acquiring the ESS interest, the employee does not hold a beneficial interest in more than 10% of the shares in the company or is not in a position to cast or control the casting of more than 10% of the maximum number of votes that might be cast at a general meeting of the company (subsection 83A-45(6)) [3] ; •                 When you acquire the ESS interest, either: -       there's a real risk that the employee will forfeit the right, or the share acquired on exercise of the right, under the scheme conditions: 83A-105(3); or -       at the time the employee acquired the interest, the scheme genuinely restricted the employee from immediately disposing of the right, and the governing rules expressly state that Subdivision 83A-C applies: 83A-105(6)

When the Performance Rights vest, the conditions in section 83A-105 of the ITAA 1997 would be satisfied as follows: i.          The rights acquired under the scheme are treated as having always been an ESS interest. They are acquired under a scheme under which ESS interests are provided only to employees of the Company, or its subsidiaries, in relation to their employment and the employees are not required to provide any consideration to acquire the Performance Rights and the rights have a value greater than nil. The Performance Rights are acquired at a discount for the purposes of section 83A-20. ii.          The Performance Rights would have a value under 83A-315, so the condition in paragraphs 83A-105(1)(aa) is met. iii.          The condition in paragraph 83A-105(ab) is met because the provision about start-ups in 83A-33 will not apply as nothing is required to be paid to exercise the Performance Rights. iv.          The Participants are employed by the Company or its subsidiaries at the time the Performance Rights are acquired: subsection 83A-45(1).

v.          The Performance Rights of the Participant are to acquire fully paid ordinary shares in the Company: subsection 83A-45(2). vi.          The predominant business of the Company is not the acquisition, sale or holding of shares, securities or other investments: subsection 83A-45(3). vii.          No Participant will hold a beneficial interest in more than 10% of shares immediately after acquiring the Shares, or be in a position to cast or control the casting of more than 10% of the maximum number of votes that may be cast at a general meeting of the Company. viii.          There is a real risk of forfeiting the Performance Rights, for the following reasons. The EM explains the real risk of forfeiture test at paragraph 1.156 as follows: The 'real risk of forfeiture test' does not require employers to provide schemes in which their employee share scheme benefits are at a significant or substantial risk of being lost. However, real is regarded as something more than a mere possibility. Something is not a real risk if a reasonable person would disregard the risk as highly unlikely to occur or as nothing more than a rare eventuality or possibility.

It is further explained at paragraph 1.158 of the EM that the 'real risk of forfeiture test' is intended to provide for deferral of tax when there is a real alignment of interests between the employee and employer, through the employee's benefits being at risk. Paragraph 1.159 of the EM states that real risk can include situations in which the securities will be forfeited if a minimum term of employment is not completed. Example 1.9 is provided in the EM. It states: XX enters an employee share scheme arrangement with their employer, XX Ltd. They will receive X,000 XX shares in 12 months, if they are still employed by XX at that time. Real risk of forfeiture: Yes, XX's rights to receive shares are at risk because they will forfeit them if they leave the company. If they meet the other conditions for deferral, they will defer tax until the 'ESS deferred taxing point.

In order for the 'real risk of forfeiture test' to be satisfied, in relation to an ESS interest acquired by an employee under an employee share scheme, a reasonable person must consider that there is an actual possibility of forfeiture. Furthermore, the risk of forfeiture must be 'real', not nominal, artificial or contrived. There must be more than a mere possibility. [4] In considering whether a condition in a scheme imposes a real risk of forfeiture, the Commissioner will have regard to whether a reasonable person would consider that there is a genuine connection between the forfeiture condition and aligning the interests of the employee and employer. [5]

Under the Plan, the Performance Rights will be subject to various vesting conditions, such as meeting various KPI's and targets over the financial year (performance conditions). The performance conditions will be set out in the Invitation. The Participant must also be employed for at least 12 months from grant of the Performance Rights (employment condition). If the employee ceases employment with the Plan Group within that time, the right is forfeited. Therefore, it is accepted that there is a real risk that Participant will forfeit or lose their Performance Rights. When the ESS deferred taxing point occurs Section 83A-120 contains the rules for determining when the ESS deferred taxing point occurs for rights to acquire shares. Subsection 83A-120(2) states that the ESS deferred taxing point for the ESS interest is the earliest of the times mentioned in subsections (4), (6) and (7). However, subsection 83A-120(3) states: The ESS deferred taxing point for the ESS interest is: a)               the time you dispose of the ESS interest (other than by exercising the right); or b)               if you exercise the right - the time you dispose of the beneficial interest in the share

if that time occurs within 30 days after the time worked out under subsection (2). Subsection 83A-120(4) states: The first possible taxing point is the earliest time when: a)               you have not exercised the right, and b)               there is no real risk that, under the conditions of the employee share scheme, you will forfeit or lose the ESS interest (other than by disposing of it, exercising the right or letting the right lapse); and c)               if, at the time you acquired the ESS interest, the scheme genuinely restricted you immediately disposing of the ESS interest - the scheme no longer so restricts you. Subsection 83A-120(6) states: The 2nd possible taxing point is the end of the 15 year period starting when you acquired the interest. Subsection 83A-120(7) states: The 3rd possible taxing point is the earliest time when: a)               you exercise the right, and b)               (Repealed by No 105 of 2015) c)               there is no real risk that, under the conditions of the scheme, after exercising the right, you will forfeit or lose the beneficial interest in the share (other than by disposing of it), and

d)               if, at the time you acquired the ESS interest, the scheme genuinely restricted you immediately disposing of the beneficial interest in the share if you exercised the right - the scheme no longer so restricts you. If a Participant ceases employment with the Company and the Performance rights have not vested the Performance Rights are taken to have lapsed. Division 83A of the ITAA 1997 has no application. Once the Performance Rights vest, subsection 83A-340(2) will operate to treat the Performance Rights as having always been an ESS interest with the consequence that an ESS deferred taxing point will occur at a time set out in subsection 83A-120. The deferred taxing point for an ESS interest that is a right to acquire a beneficial interest in a share that was granted on or after 1 July 2015 will be the earliest of the times in accordance with subsections 83A-120(4), (6) and (7) summarised as follows: •                 when the ESS interest has not been exercised, there is no real risk of forfeiting the ESS interest, and the scheme no longer genuinely restricts disposal of the ESS interest (subsection 83A-120(4)); or

•                 the end of the 15-year period starting when the employee acquired the ESS interest (subsection 83A-120(6)); or •                 when the ESS interest is exercised and there is no real risk of forfeiting the share and the scheme no longer genuinely restricts disposal of the share (subsection 83A-120(7)). Genuine selling restrictions For the purposes of Division 83A the phrase 'genuinely restricted' is not defined and therefore takes on its ordinary meaning. Taxation Determination 2022/4 Income tax: when are you genuinely restricted from immediately disposing of an interest provided under an employee share scheme? (TD 2022/4) sets out the Commissioner's view for working out when a scheme's restrictions are genuine disposal restrictions and when you would no longer be 'genuinely restricted' for the purposes of determining the deferred taxing point. Paragraph 21 of TD 2022/4 states that for a genuine disposal restriction to occur, the scheme's restriction must control or limit the power or right to (voluntarily or compulsorily) sell, transfer, assign, deal with, make over or part with the ESS interest (whether legally or beneficially).

As explained in paragraph 29 of TD 2022/4, you will no longer be restricted on the first date on which you have an opportunity to dispose of your ESS interest. This will be the first time you can take some action to deal with or realise your ESS interest (for example, by way of sale, transfer or gift). As illustrated in example 4 of TD 2022/4, a disposal restriction period nominated by the employee on entering into the employee share scheme that cannot be amended will be a genuine disposal restriction. It is considered that a Participant will be genuinely restricted from disposal of the ESS interest (i.e. Top-up shares and other Shares) as per the Plan Rules at Items x, x, x and x. Relevantly, the deferred taxing point for a Participant's Performance Rights will be when the Performance Rights vest and there is no real risk of forfeiting the Share acquired in satisfaction of the rights, and the scheme no longer genuinely restricts disposal of the Shares (subsection 83A-120(7)) or the end of the 15-year period starting when the Participant acquired the Performance Right (subsection 83A-120(6)), whichever is earliest.

When the Participant acquires Shares in satisfaction of their Performance Rights and they have nominated a disposal restriction period when they accepted the Invitation to acquire the Performance Rights, the ESS deferred taxing point will occur at the time that the disposal restriction period ends or at the end of the 15-year period starting when the Participant acquired the Performance Right, whichever is earliest. However, the deferred taxing point can change should the Participant dispose of the Shares acquired on exercise of the Performance Rights within 30 days of the deferred taxing point. In this instance the deferred taxing point will instead be the date of that disposal. This is called the 30-day rule (subsection 83A-115(3)). If the Participant elects to receive cash instead of Shares, the ESS deferred taxing point will occur at that time as there is no real risk of forfeiting the Performance Right, and as Shares will no longer be acquired, there are no longer any relevant forfeiture or disposal restrictions. Amount of discount to be reported

In accordance with subsection 83A-110(1), the amount to be included in a Participant's assessable income in the income year in which the ESS deferred taxing point occurs is the market value of the ESS interest at the ESS deferred taxing point, reduced by the cost base of that interest (if any). This amount is the amount that must be reported by the Employer in the ESS Statement with respect to this employee share scheme as the 'Discount from deferral schemes'. For a Performance Right that has been satisfied with the provision of Shares, the market value of the ESS interest (the Shares) at the ESS deferred taxing point, is the market value of the Shares at that time. For a Performance Right that has been satisfied with cash, the market value of the ESS Interest (the Performance Right) at the ESS deferred taxing point is the amount of cash paid to the Participant in satisfaction of the Performance Right. Reporting obligations

Section 392-5 of Schedule 1 to the TAA states that an entity must give a statement to the Commissioner and to an individual for a financial year if the entity provides ESS interests ( to which Subdivisions 83A-B or 83-A-C apply) to the individual during the financial year, or an ESS deferred taxing point for the ESS interests occurs during the financial year and Subdivision 83A-C applies. Paragraph 392-10(1)(b) of Schedule 1 to the TAA states that the provider of an ESS interest must give the omitted information to the individual or the Commissioner if the provider becomes aware of a material omission in any information given to the individual or the Commissioner under this Division. The EM provides an example where indeterminate rights to which section 83A-340 applies give rise to circumstances that would require a provider to comply with paragraph 392-10(1)(b) of Schedule 1 to the TAA; it states:

if an employer becomes aware of an omission or change in any information provided to the Commissioner under the reporting requirements, such as it becomes clear that a right provided to an employee in a previous income year was a right to ESS interest, the employer must inform the Commissioner of any changes or omission as soon as possible. When a Participant's Performance Rights vest, the Participant will be taken to have acquired an ESS interest to which Subdivision 83A-C applies. For the year in which the ESS deferred taxing point occurs paragraph 392-5(1)(b) of Schedule 1 to the TAA requires the Company (the provider) to give a statement to the Commissioner and to the Participant. Question 5. Summary The Company can deduct an amount under section 8-1 in respect of irretrievable cash contributions that it makes to the Trustee of the Trust to fund for acquisition of fully paid ordinary shares in the Company in respect of employees of the Company who are Australian residents, under the Plan. Detailed reasoning

Subsection 8-1(1) will allow you to deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, pursuant to subsection 8-1(2), you cannot deduct a loss or outgoing to the extent that it is a loss or outgoing of capital, or of a capital nature. The Company carries on a business as a proprietary trading firm. The Company provides an ESS as part of its remuneration strategy. The Company employs staff and will make contributions to the Trustee of the Trust in relation to their employees who participate in the Plan. Under the Plan, the Company grants Performance Rights to eligible employees and will make irretrievable contributions to the Trust (in accordance with the Trust Deed) which the Trustee will use to acquire Shares for allocation to Participants to satisfy their awards. Based on the following, the contributions to the Trust are irretrievable and non-refundable: •                 all funds provided to the Trustee will constitute accretions to the corpus of the Trust and are not repayable by the Trustee;

•                 the Company is not a beneficiary of the Trust or has any entitlement to trust property forming part of the trust fund, or any returns of contributions made to the Trust; and •                 nothing in the Trust Deed confers or is intended to confer onto the Company any encumbrance, proprietary right or interest in the Shares acquired by the Trustee. In conclusion, the above terms support the conclusion that the cash contributions made by the Company to the Trustee are irretrievable. The contributions to the Trust will be a loss or outgoing that is incurred at the time it is made in accordance with the Trust Deed and the rules of the Plan. Incurred in carrying on a business For a loss or outgoing to be deductible under subsection 8-1(1), it must be either incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing that assessable income. A relevant connection exists between a loss or outgoing and the derivation of income where there is a sufficient nexus; (see, Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47 at 56).

In this case, the contributions are made by the Company to the Trust to enable the Company to meet its obligations arising from the grant of Performance Rights under the Plan. The Commissioner accepts that granting awards under the Plan is to incentivise, remunerate and retain employees of the Company and in turn, is likely to result in the gaining or production of the assessable income of the Company as a result of the employee's increased performance and productivity. The Commissioner accepts there is sufficient nexus between: a)                 the irretrievable cash contributions made by the Company to the Trustee to satisfy the granting of shares under the Plan to the Participants, and b)                 the Company's own income earning activities. Therefore, subsection 8-1(1) is satisfied. Not capital or of a capital nature Paragraph 8-1(2)(a) of the ITAA 1997 states that a loss or outgoing is not deductible if it is a loss or outgoing of capital, or of a capital nature.

The Company will be making, irretrievable contributions, to the Trustee to acquire Shares to satisfy Performance Rights granted under the Plan (in accordance with the Trust Deed and the rules of the Plan). These contributions are costs incurred by the Company to fund the acquisition of Shares for the purpose of the Plan. Therefore, the costs will be an outgoing incurred for periodic funding of a bona fide employee share scheme for the employees. Costs incurred are likely to be in relation to more than one grant of Performance Rights (rather than being one-off), and the Company intends to continue satisfying Performance Rights using shares acquired by the Trust. This indicates that the irretrievable cash contributions made by the Company to the Trustee are ongoing in nature, recurrent employment expenses, and are part of the broader remuneration expenditure of the Company. This is supported by the decisions in Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) FCAFC 339 ( Pridecraft ) and Federal Commissioner of Taxation v Spotlight Stores Pty Ltd (2004 FCA 650 ( Spotlight

), which held that payments by an employer company to a trust established for the purpose of providing incentive payments to employees were on revenue account and not capital, or of a capital nature. The loss or outgoing cannot be incurred in gaining or producing exempt income or non-assessable non-exempt income. Nothing in the facts suggest that the irretrievable cash contributions made to the Trustee are private or domestic in nature, or are incurred in gaining or producing exempt, non-assessable non-exempt income or are otherwise prevented from being deductible under a specific provision of either the ITAA 1936 or ITAA 1997. Accordingly, subject to the operation of section 83A-210, the Company will be entitled to deduct an amount under section 8-1 for irretrievable cash contributions it makes to the Trustee to acquire Shares in accordance with the Plan. A deduction for the irretrievable cash contributions under section 8-1 would generally be allowable in the income year in which the Company incurred the outgoing. Under certain circumstances, the timing of the deduction is determined under section 83A-210.

The effect of section 83A-210 is to deem the timing of when an employer incurred the outgoing to be the time when the ESS interest is acquired by the ultimate beneficiary, rather than the time when the employer makes the contribution to the trust, where the contribution is made before the ultimate beneficiary receives the ESS interest. The implementation of the Plan (as set out in the rules of the Plan), the establishment of the Trust and the provision of irretrievable cash contributions by the Company to the Trustee of the Trust, constitute an arrangement for the purpose of subparagraph 83A-210(a)(i). The term ESS interest, in a company is defined in subsection 83A-10(1) as being either a beneficial interest in a share in the company or a right to acquire a beneficial interest in a share in the company. The ESS contains a number of interrelated components which include the provision of irretrievable cash contributions by the Company to the Trustee. These irretrievable cash contributions enable the Trustee to acquire Shares for the purpose of enabling each Participant, indirectly as part of the Plan, to acquire ESS interests.

The deduction for the irretrievable cash contributions, to the extent they relate to the Participants, can only be deducted from the assessable income of the Company in the income year when the relevant beneficial interest in a Share, or beneficial interest in an rights to a beneficial interest in a Share, is acquired by the Participant under the Plan. This is consistent with the ATO view expressed in ATO Interpretative Decision ATO ID 2010/103 Income Tax - Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust. If the irretrievable cash contributions are made before acquisition of the relevant ESS interests, the contribution can only be deducted from the assessable income of the Company in the income year when the relevant beneficial interest in a Share is acquired by a Participant under the Plan. Indeterminate Rights under the Plan

As discussed above, upon accepting the offer to participate in the Plan, the employees acquire an indeterminate right as the number of shares granted is uncertain. The right later becomes a right to acquire a beneficial interest in shares when the total number of Shares granted to the employee is confirmed. The number of Shares granted will be determined under Rule x and Rule x of the Plan Rules, once the Performance Rights have vested. Although the indeterminate right is not an ESS interest within the meaning of subsection 83A-10(1) at the time it is granted, when the number of shares the employee is entitled to receive is determined, the indeterminate right will, pursuant to section 83A-340, be treated as if it had always been an ESS interest. The Plan meets the requirement of an ESS for the purpose of subsection 83A-10(2) as it is a scheme under which ESS interests are provided to Participants in relation to their employment or engagement with the Company.

Section 83A-210 applies equally to contributions made in respect of ESS interests and indeterminate rights. Therefore, an irretrievable cash contribution in respect of an indeterminate right is taken to have been paid at the acquisition time of the ESS interest. If an indeterminate right becomes an ESS interest, deductible contributions made in respect of those rights can be claimed in the income year when the ESS interest is deemed to have been acquired under section 83A-340 (being the year in which the indeterminate right was granted to the employee). Question 6 Summary The Company can deduct amounts under section 40-880 for costs it incurred in relation to the establishment costs of the EST. Detailed reasoning As outlined in Taxation Determination TD 2022/8 Income tax: deductibility of expenses incurred in establishing and administering an employee share scheme

, establishment/implementation expenses are one-off in nature and used in setting up the ESS as part of the employer company's remuneration structure. The character of the advantage sought is the enduring benefit of having the ESS in its business structure to deliver ESS interests. Therefore, the establishment expenses for the EST are capital in nature including: •                 legal advice obtained in respect of the implications which may arise for both the Company and the Participants of the Plan in respect of the EST structure and the Plan •                 legal documents required in respect of the EST and the Plan, and •                 professional fees associated with the establishment of the EST including such costs associated with the creating and registration of the EST with various authorities.

As also outlined in TD 2022/8, section 40-880 allows a deduction for certain business-related capital expenditure such as the implementation costs. Limitations and exceptions are in subsections 40-880(3) to (9). Relevantly, the business needs to be carried on for a taxable purpose and as stated above the Company carries on a business developing advanced manufacturing technologies. Therefore, as per paragraphs 4 to 9 of TD 2022/8, these costs are deductible to the Company under section 40-880. Question 7 Summary When the Performance Right vests, subsection 83A-340(2) treats the rights as if they were always an ESS interest under subsection 83A-10(1) and Division 83A of the ITAA 1997. Consequently, the Performance Rights are taxed under Division 83A. Detailed reasoning Where a Performance Right vests the Performance Right is an ESS interest and Division 83A applies. Section 12-35 of Schedule 1 of the TAA requires an entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

Paragraph 22 of TR 2003/15 explains that as salary, wages, commission, bonuses or allowances are not defined terms in PAYG provisions they take their ordinary meaning. At common law, salary or wages denotes money payable to an individual for work or services. The taxation of an employment benefit provided in the form of a right to acquire shares falls under Division 83A and is not considered salary, wages, bonus, commission or allowance under section 12-35 of the TAA. In this case, the Participant has a right to a Share which they can choose to have settled in cash rather than with the provision of shares. The taxation consequences are those set out in Division 83A. However, TFN withholding tax (ESS) will apply if the Participant has not quoted their TFN to the provider of the Performance Rights before the end of the year in which the ESS deferred taxing point occurs: section 14-155 of Schedule 1 to the TAA. Question 8 Summary Irrevocable contributions of funds made by the Company to the Trustee to acquire the Shares for the purposes of the Plan, and/or fund the ongoing administration of the Trust, are excluded from being a fringe benefit pursuant to paragraph 136(1)(ha) of the

Fringe Benefits Tax Assessment Act 1986 (FBTAA). Detailed reasoning Paragraph (ha) of subsection 136(1) of the FBTAA 1986 excludes the acquisition of money or property by an employee share trust within the meaning of the ITAA 1997 from being a 'fringe benefit'. Therefore, for the irretrievable cash contributions to be excluded from the definition of 'fringe benefit', the Trust must be an 'employee share trust' as defined in subsection 130-85(4). In examining whether the requirements of subsection 130-85(4) are met, it is the activities of the trustee in relation to a particular trust that is relevant. To qualify as an employee share trust, a trustee's activities must be limited to: •                 obtaining shares or rights in a company (paragraph 130-85(4)(a)) •                 ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the ESS to employees, or to associates of employees, of the company or a subsidiary of the company (paragraph 130-85(4)(b)), and •                 other activities that are merely incidental to the activities mentioned in paragraphs 130-85(4)(a) and (b) (paragraph 130-85(4)(c)).

Paragraph 130-85(4)(a) and (b) are satisfied because: •                 the Trust acquires shares in the Company •                 the Commissioner accepts that the Plans meet the requirements of an ESS under which ESS interests are provided to employees, and •                 the Trustee ensures that ESS interests (as defined in subsection 83A-10(1)) are provided under an ESS (as defined in subsection 83A-10(2)) by allocating Shares to Participants in accordance with the trust deed and the rules of the Plan. Paragraph 130-85(4)(c) provides that a trustee can engage in activities that are merely incidental to those described in paragraphs 130-85(4)(a) and (b). The phrase 'merely incidental' takes its ordinary meaning, with further guidance drawn from the context and purpose of the legislation in which it appears. 'Merely incidental' is not defined in the legislation and has not been judicially considered in the context of subsection 130-85(4). The Macquarie Dictionary defines 'merely' to mean 'only as specified, and nothing more'. 'Incidental' is defined as 'happening or likely to happen in fortuitous or subordinate conjunction with something else'.

The Commissioner's views on the types of activities that are merely incidental and not merely incidental are set out in Taxation Determination TD 2019/13: Income tax: what is an 'employee share trust'? Activities that involve 'investing in assets other than shares or rights to shares in the employer company' or result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered to be merely incidental. In the present case, the objects of the EST are for the sole purpose of undertaking activities that are in line with the definition of an employee share trust under subsection 130-85(4), including paragraph 130-85(4)(c). The other activities undertaken by the Trustee under the trust deed are merely incidental to managing the Plan. Therefore, paragraph 136(1)(ha) of the FBTAA 1986 applies to exclude the irretrievable cash contributions made by the Company to the Trustee to fund the subscription for, or acquisition of, Shares by the Trust from being a fringe benefit.

It is also noted that the provision of Performance Rights by the Company to employees constitute a provision of ESS interests to which Subdivision 83A-C applies. The provision of ESS interests to which Division 83-A applies is not a fringe benefit under paragraph subsection 136(1)(h) of the FBTAA 1986. > [1] See paragraph 1 of Taxation Determination TD 2016/17 Income Tax: in what circumstances does a contractual right, which is subject to the satisfaction of a condition, become a right to acquire a beneficial interest in a share for the purposes of subsection 83A-340(1) of the Income tax assessment Act 1997?. [2] The market value of the Performance Rights and the value of the rights under the Income Tax Assessment (1997 Act) Regulations 2021 (as relevant) would be greater than nil. [3] Under subsection 83A-45(7), for the purposes of subsection (6), an employee is taken to hold a beneficial interest in any shares, and be in a position to cast votes, for any shares that they can acquire under an ESS interest that is a right to acquire shares. Under subsection 83A-305, the holdings of their associates are also included for the purposes of 83A-45(6) and (7). [4]

ATO Interpretative Decision ATO ID 2010/61 Income Tax Employee share scheme: real risk of forfeiture - minimum term of employment and good leaver provisions. [5] ATO ID 2010/61.