Qantas Airways Limited - 2023-2025 Qantas Long Term Incentive Plan

This Ruling sets out the income tax consequences for employees of Qantas Airways Limited (Qantas) and its subsidiaries (collectively, the Qantas Group) who participate in the 2023-2025 Qantas Long Term Incentive Plan (LTIP).

Details of this scheme are set out in paragraphs 15 to 25 of this Ruling.

All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated.

This Ruling applies to you if you are an employee of the Qantas Group who is: • granted a right to be allocated a Qantas share under the LTIP (LTIP Right), and • a resident of Australia within the meaning of subsection 6(1) of the Income Tax Assessment Act 1936.

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 15 to 25 of this Ruling. Note: Division 230 will not apply to individuals unless they have made an election for it to apply.

This Ruling applies from 1 July 2022 to 30 June 2027.

The LTIP is an employee share scheme as defined in subsection 83A-10(2).

The right to be granted a Qantas share under the LTIP (the LTIP Right) is an ESS interest as defined in paragraph 83A-10(1)(b).

Subdivision 83A-C will apply to the LTIP Right granted to you.

The ESS deferred taxing point for your LTIP Right will (subject to the 30-day period in subsection 83A-120(3)) be the earliest of: • when the disposal restrictions for the LTIP Shares end (subsection 83A-120(7)), and • 15 years from when you acquired the LTIP Right (subsection 83A-120(6)).

Your assessable income for the income year in which the ESS deferred taxing point occurs (as determined in section 83A-120) includes the market value of the Qantas share at that time (subsection 83A-110(1)).

No amount will be included in your assessable income from forfeiting a LTIP Right, or a Qantas share acquired upon vesting of a LTIP Right, where the forfeiture occurs before the deferred taxing point (subsection 83A-110(1), section 104-25 and section 130-80).

If you dispose of your Qantas share on or before the ESS deferred taxing point (including where the ESS deferred taxing point is extended under the 30-day rule in subsection 83A-120(3)), any capital gain or capital loss is disregarded (subsection 130-80(1)).

Where you dispose of a Qantas share after the ESS deferred taxing point: • the first element of the cost base and reduced cost base of the Qantas share is its market value immediately after the ESS deferred taxing point (section 83A-125, section 112-15, subsection 110-25(2) and subsection 110-55(2)) • the disposal will result in CGT event A1 happening (section 104-10) • a capital gain will be made if the capital proceeds from the disposal are more than the share's cost base and a capital loss is made if those capital proceeds are less than the share's reduced cost base (subsection 104-10(4)), and • if you make a capital gain from CGT event A1 happening to your Qantas share you may be entitled to treat the gain as a discount capital gain in respect of the share if it has been held for at least 12 months from the date the ESS deferred taxing point occurred, provided the other requirements of Subdivision 115-A are satisfied (section 115-25 and section 83A-125).

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.

The LTIP provides a means for the delivery of equity ownership to Qantas Group executives in order to, among other benefits, improve alignment between an executive's interest and those of Qantas' shareholders.

An invitation letter was provided to you to participate in the LTIP. This specified the relevant terms and conditions for the LTIP Rights.

No consideration is payable by you upon the grant or vesting of your LTIP Rights.

Your LTIP Rights may vest in whole or in part as they are subject to Qantas and your individual performance conditions being met during the period 1 July 2022 to 30 June 2025 (Performance Measures).

When your LTIP Right vests, the Qantas shares are held on your behalf by the Qantas Employee Share Plan Trust (the Trust).

The Qantas shares are subject to a trading restriction for a period of 12 months following the vesting date (Holding Lock Period), and if you elected, an additional variable period (together Restriction Period).

Where you cease employment during the Restriction Period, your Qantas shares will be released from the Trust and you will be free to deal in them once the Holding Lock Period has ended.

At the end of the Restriction Period, you will be free to deal with your Qantas shares (subject to applicable laws and the Qantas employee share trading policy contained in the Qantas Code of Conduct and Ethics).

Immediately after the acquisition of the LTIP Right under the LTIP, no participant in the LTIP will hold more than 10% of the shares in Qantas or be 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 Qantas.

The predominant business of Qantas is not the acquisition, sale or holding of shares, securities or other investments, whether directly or indirectly through one or more companies, partnerships or trusts.

An ESS interest in a company is a beneficial interest in a share in the company or a right to acquire a beneficial interest in a share in the company (subsection 83A-10(1)).

The LTIP is an 'employee share scheme' as defined in subsection 83A-10(2), as it is a scheme under which ESS interests in a company are provided to employees, or associates of employees, of the company, or a subsidiary of the company, in relation to the employee's employment (subsection 83A-10(2)).

The LTIP provides that the LTIP Right is issued for no consideration. This means the LTIP Right was issued at a discount pursuant to subsection 83A-20(1). Subdivision 83A-B will apply to the LTIP Right acquired by you under the LTIP, unless Subdivision 83A-C applies.

Subdivision 83A-C allows the discount in relation to the ESS interest to be included in assessable income at a later time if the following conditions are satisfied: • Subdivision 83A-B would, apart from section 83A-105, apply to the interest • paragraph 83A-105(1)(aa) results in a participant continuing to receive a discount in relation to the interest • subsections 83A-45(1) to (3) and (6) apply to the interest, and • pursuant to subsection 83A-105(3), there is a real risk that you will forfeit the right.

In relation to the first condition listed in paragraph 29 of this Ruling, Subdivision 83A-B would, apart from subsection 83A-105(1), apply to the LTIP Right because it is: • a beneficial interest in a right to acquire beneficial interest in a share of Qantas, and • provided to you as an employee of Qantas Group in relation to your employment and will be provided for nil consideration (that is, at a discount).

In relation to the second condition listed in paragraph 29 of this Ruling, paragraph 83A-105(1)(aa) requires that after applying section 83A-315 (which refers to the regulations for calculating the market value of an ESS interest where it is an unlisted right), there is still a discount given in relation to the interest.

Section 83A-315.03 of the Income Tax Assessment (1997 Act) Regulations 2021 states: If the lowest amount that must be paid to exercise the right to acquire the beneficial interest in a share is nil or cannot be determined, the value of the right on a particular day is the same as the market value of the share on that day.

As the LTIP Right is provided for nil consideration, that is a discount to the market value of an ordinary share in Qantas. As such, you will receive a discount in relation to the LTIP Right.

In relation to the third condition listed at paragraph 29 of this Ruling, subsections 83A-45(1) to (3) and (6) apply to the LTIP Right granted because: • when the Right is acquired, you were employed by the Qantas Group (subsection 83A-45(1)) • all of the ESS interests available for acquisition under the LTIP relate to ordinary shares of Qantas (subsection 83A-45(2)) • the predominant business of Qantas is not the acquisition, sale or holding of shares, securities or other investments (subsection 83A-45(3)), and • immediately after the acquisition of the LTIP Right, you will not hold a beneficial interest in more than 10% of the shares in Qantas nor be 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 Qantas (subsection 83A-45(6)).

In relation to the fourth condition listed in paragraph 29 of this Ruling, Subdivision 83A-C applies if the: • interest is a beneficial interest in a right (paragraph 83A-105(3)(b)), and • Performance Measures must be met otherwise you will lose your ESS interests (subparagraph 83A-105(3)(b)(i)).

As a result, Subdivision 83A-C applies to the LTIP Right, and Subdivision 83A-B does not apply. The taxation of the LTIP Right received under the LTIP will be deferred until an ESS deferred taxing point occurs.

Section 83A-120 provides the rules for determining when the ESS deferred taxing point occurs for a right to acquire a share as the earliest of: • when the right has not been exercised, there is no real risk of forfeiting the right, and the scheme no longer genuinely restricts immediate disposal of the right (subsection 83A-120(4)) • 15 years after you acquired the right (subsection 83A-120(6)), or • after the right is exercised, when there is no real risk of forfeiting or losing the share and the scheme no longer genuinely restricts disposal of the share (subsection 83A-120(7)).

However, if you dispose of the vested right or the Qantas share within 30 days of the earliest of the times listed in paragraph 37 of this Ruling, the ESS deferred taxing point will instead be the time of disposal (paragraph 83A-120(3)(b)).

For the purposes of Division 83A, the concept of 'exercising a right' does not necessarily require an action or activity by the beneficial owner of the right. It is enough that they become the beneficial owner of the share that is the subject of the right (this can happen automatically or at the instigation of the participant, the employer or another party). Therefore, you are taken to have exercised the LTIP Right when a Qantas share is allocated upon vesting of the LTIP Right.

As determined in section 83A-120, where your LTIP Right vests, the ESS deferred taxing point will (subject to the 30-day rule) be the earliest of: • 15 years from when you acquired the LTIP Right (subsection 83A-120(6)), and • the end of the period during which you are prohibited from dealing with your Qantas share (subsection 83A-120(7)).

However, if you dispose of your Qantas share acquired from vesting of the LTIP Right within 30 days of the earliest time listed in paragraph 40 of this Ruling, the ESS deferred taxing point will be the date of disposal (subsection 83A-120(3)).

In accordance with section 83A-110, the amount to be included as 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).

Where the ESS interest is a right to acquire a beneficial interest in a share, the market value of the right at the ESS deferred taxing point is the market value of the share at that time (section 83A-315.03 of the Income Tax Assessment (1997 Act) Regulations 2021).

Therefore, the amount included in your assessable income at the ESS deferred taxing point is the market value of the Qantas share acquired upon vesting of a LTIP Right at the ESS deferred taxing point, less the cost base of the LTIP Right. As the LTIP Right is granted for nil consideration and no amount is paid to exercise the LTIP Right, the first element of the cost base of the LTIP Right is nil (subsections 83A-110(1) and 110-25(2)).