Employee share scheme

1 Will the irretrievable cash contributions made to the Trustee of the Company P Employee Share Trust (Trust) to fund the subscription for, or acquisition on-market of shares in Company P (Shares) by the Trust be assessable income of the Trust pursuant to section 6-5 or 6 -10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Question 2 Will CGT event E5 in section 104-75 of the ITAA 1997 happen at the time when the employees become absolutely entitled to Shares held by the Trustee of the Trust? Answer Yes. Question 3 If CGT event E5 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E5 happening be disregarded under section 130-90 of the ITAA 1997 if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? Answer Yes. Question 4 Will CGT event E7 in section 104-85 of the ITAA 1997 happen in respect of Shares held by the Trustee of the Trust? Answer No - the scheme does not include any facts that result in CGT event E7 happening. Question 5 If CGT event E7 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E7 happening be disregarded under section 130-90 of the ITAA 1997 if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? Answer Not necessary to rule. Question 6 Will dividends and other income received by the Trustee in respect of Unallocated Shares held by the Trustee:

6.1 be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936; and 6.2 be assessed to the Trustee under section 99A of the ITAA 1936? Answer 6.1 Yes. 6.2 Yes. Question 7 Will the Trustee be entitled to a tax offset under Subdivision 207-B of the ITAA 1997 in relation to franked distributions received in respect of Unallocated Shares? Answer Yes. Provided the Trusteeis a qualified person in relation to the distributions for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936 . This ruling applies for the following periods : The scheme commences on:

All legislative references are to provisions of the ITAA 1997 unless otherwise indicated. Background Company P is an Australian listed company. Company P aims to maintain a remuneration policy where employee reward is aligned with the achievement of the company's overall strategic objectives, outcomes and creation of value for shareholders. Company P rewards key employees with a mix of remuneration commensurate with their position and responsibilities. Remuneration structures are reviewed regularly to ensure that: •         remuneration is competitive by market standards •         rewards are linked to strategic goals and performance, and •         accountabilities and deliverables are clearly defined to minimise potential conflicts of interest and promote effective decision-making. Remuneration of employees is evaluated against comparative positions in similar companies and industries. The remuneration of key employees comprises the following elements: •         Fixed remuneration, which includes base pay and other benefits •         Performance linked remuneration, which consists of performance rights or options, and

•         Employee share ownership, through the grant of ordinary Shares subject to dealing restrictions granted under a salary sacrifice, tax exempt or tax deferred arrangement. Company P Employee Incentive Plan (Plans) The Plans are employee incentive plans operated by Company P for employees. The objective of the Plans is to: •         align the interest of Eligible Employees with those of shareholders; •         provide incentives to attract, retain and motivate Eligible Employees for the long term benefit of Company P; and •         provide Eligible Employees with the opportunity to acquire Options, Share Rights, and ultimately Shares, in accordance with the Plans' rules. The purpose of the Plans is to provide Key Employees with Options in the Company (Options), and general Employees with Performance Rights in the Company (Performance Rights) which will convert into Shares in the Company upon satisfying various vesting conditions (Shares). An Eligible Employee becomes a participant of the Plan (Participant) on issue of an Option or Performances Right and is taken to have accepted the offer to acquire and hold the Options and Share Rights by completing an acceptance form.

Option Plan The Board may invite a Key Employee the Board determines to be eligible to participate in the Plan ( Key Employee ) by making an Offer ( Invitation ). The Eligible Employee will need to complete an application form and return it to the Company if they would like to participate in the Plan; The Company will grant Options to the Key Employee with a pre-determined exercise price per Option. No amount is payable in respect of the grant of the Options. The options will typically vest in three tranches over a period of at least three years. The Plan Rules specify that Subdivision 83A-C applies to the Options. Performance Rights Plan The general Employee will be provided with an Offer Letter, and will need to complete an application form and return it to the Company if they would like to participate in the Plan. The general Employee's participation in the Plan is subject to approval by the Board. Each Performance Right entitles the Employee to receive one fully paid ordinary share in the Company. No amount is payable in respect of the grant of the Performance Rights. No amount is payable on the vesting of the Performance Rights, nor the subsequent issue of the Shares.

Performance Rights will automatically be exercised and vest if both the Performance Condition and Service Condition are satisfied. The Plan Rules specify that Subdivision 83A applies to the Performance Rights. Company P Employee Share Trust (the Trust ) The Trust was established to facilitate the acquisition, holding of and allocation of Shares to Participants in accordance with employee equity plans, including the Plans. The Trustee of the Trust is not a related entity of Company P. Company P's reasons for using an employee share trust arrangement for the existing and any future equity based incentive plans include: •         a company is unable to hold its own shares. The Trust is a vehicle which will enable Company P to effectively acquire and hold its own Shares for the purpose of fulfilling its obligations resulting from new and existing grants under the Plans; •         the Trust will facilitate the acquisition of Shares either on-market or by new issue of Shares by Company P;

•         the Trust provides an arm's length vehicle for acquiring and holding Shares in Company P, either by way of new issue or acquiring on-market, i.e. providing flexibility relating to capital management; •         the Trust will be an efficient structure for giving effect to vesting conditions. As the Trustee is the legal owner; employees have no ability to deal in the Shares; Company P states the Trust broadly operates as follows: •         The sole activities of the Trustee will be acquiring Shares for the purpose of providing them to Participants on vesting of their Option or Performance Rights under the Plans and the administration of the Trust. The Trustee will acquire Shares at market value and will either acquire them on-market, by way of off-market transaction or subscribe for new.

•         The Trustee acknowledges and agrees that each Participant is absolutely entitled to any and all of the allocated Plan Shares held by the Trustee on his or her behalf, and all other benefits and privileges attached to the Plan Shares. The Participant have substantially the same rights in respect of allocated Plan Shares as if the allocated Plan Shares were registered in the name of the relevant Participant. •         The Trustee's activity in its capacity as a trustee of the Trust will be limited to the Plans. •         The Trustee authorises the Company to register the Trustee as the legal owner of the Shares when the Company receives a completed application form from the Participant. •         The Trustee will be managed and administered so that it satisfies the sole activities test for the purposes of subsection 130-85(4) of the ITAA97. Contributions to the Trust Company P may contribute money to the Trustee to fund the acquisition of Shares for the purpose of the Plans.

Company P will instruct the Trustee to acquire Shares on the market, by way of an off-market transaction or new shares issued by the Company, for the purpose of enabling Company P to satisfy its obligation to allocate Shares under the Plans, provided that the Trustee receives sufficient payment from Company P to subscribe for or purchase Shares. All funds received by the Trustee from Company P in the form of irretrievable contributions will constitute accretions to the corpus of the Trust and will not be repaid to Company P, and no Participant shall be entitled to receive such fund. Company P is not a beneficiary under the Trust Deed and any funds it contributes to the Trust other than specifically in the form of a loan, cannot be refunded, repaid or returned to Company P other than by way of the Trustee paying the issue price where it subscribes for new Shares. Allocation of Shares

Unless and until Shares are allocated to a Participant, the Plan Trustee will hold those Plan Shares on trust for the benefit of Participants. The Trustee may apply any capital receipts, dividends or other distribution received in respect of the unallocated Shares to purchase further Shares to be held on trust. On receipt of a direction by the Board to do so, the Trustee must allocate or transfer to any Participant nominated by the Board the number of Plan Shares specified by the Board. If the Shares are transferred, the Company will register the participant as the holder of those Shares, and the Participant will be absolutely legally and beneficially entitled to them. If the Trustee holds allocated Shares on a Participant's behalf, the Participant is entitled to receive all dividends paid in respect of their allocated plan Shares. The balance of net income of the trust to which no Participant is presently entitled to may be accumulated by the Trustee as accretion to the Trust.

All legislative references are to provisions of the ITAA 1997 unless otherwise indicated. Question 1 Will the irretrievable cash contributions made by Company P to the Trustee of the Trust to fund the subscription for, or acquisition on-market of Shares by the Trust be assessable income of the Trust pursuant to section 6-5 or 6 -10? Summary No. The irretrievable cash contributions made by Company P to the Trustee in accordance with the Plan Rules and the Trust Deed to fund the subscription for, or acquisition on-market of, Shares will not be assessable income of the Trust pursuant to sections 6-5 or 6-10. Detailed reasoning The total assessable income of a trust estate is calculated as if the trustee were a resident taxpayer in respect of that income (subsection 95(1) of the Income Tax Assessment Act 1936 (ITAA 1936)) . The assessable income of a taxpayer includes income under ordinary concepts (section 6-5) or statutory income (section 6-10).

None of the provisions listed in section 10-5 (list of provisions about assessable income that is not ordinary income) are relevant in the present circumstances. The irretrievable cash contributions made by Company P to the Trustee will therefore not be included in the assessable income of the Trustee under section 6-10. The contributions made by Company P are irretrievable and non-refundable to it in accordance with the Trust Deed. The funds provided to the Trustee are used in accordance with the Trust Deed and the Plan Rules for the sole purpose of the employee share scheme. Therefore, the contributions constitute capital receipts to the Trustee, and are not assessable under sections 6-5 or 6-10. (ATO Interpretative Decision ATO ID 2002/965 Income Tax -Trustee not assessable on employer contributions made to it under the employer's employee share scheme ). Question 2 Will CGT event E5 in section 104-75 happen at the time when the employees become absolutely entitled to Shares held by the Trustee of the Trust? Answer Yes. Summary CGT event E5 happens at the time when the employees become absolutely entitled to Shares held by the Trustee of the Trust under the Company Plans.

Detailed Reasoning Pursuant to section 102-20, an entity can make a capital gain or loss if, and only if, a CGT event happens. Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust (except a unit trust or a trust to which Division 128 applies) as against the trustee. In the present case, the Trust is neither a unit trust nor a deceased estate to which Division 128 applies. If CGT event E5 happens, the trustee may make a capital gain if the market value of the asset, at the time of the event, is more than its cost base. The trustee makes a capital loss if that market value is less than the asset's reduced cost base. [1] Paragraph 41 of Draft Taxation Ruling TR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 explains the principles set out in the leading English trust law case of Saunders v. Vautier (1841) 49 ER 282 in relation to 'absolutely entitled' as follows:

... if a sole beneficiary's interest in the trust property is vested and indefeasible and they are of age then they can put an end to the trust by directing the trustees to transfer the trust property to them or at their direction, even though the trust deed contains a contrary intention. The basis of the principle is that a beneficiary is entitled now to that which will be theirs eventually anyway. Pursuant to the Trust Deed, a Participant is the beneficial owner of and absolutely entitled to their Shares, being Shares allocated to them in accordance with the Trust Deed and the Plan Rules. Once allocated, the Participant (i.e. the beneficiary) will become absolutely entitled to the Allocated Plan Shares (i.e. a CGT asset of the Trust) as against the Trustee, and thus, pursuant to subsection 104-75(1), CGT event E5 happens to the Trustee. Question 3 If CGT event E5 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E5 happening be disregarded under section 130-90 if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? Answer Yes Summary

A capital gain or capital loss made by the Trustee as a result of CGT event E5 happening will be disregarded under section 130-90 if the employees acquire the Shares at a price that is the same as, or less than, the cost base of the Shares in the hands of the Trustee at the time that CGT event E5 happens. Detailed Reasoning CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against a trustee (subsection 104-75(1)). Subsection 130-85(2) treats a beneficiary as absolutely entitled to the relevant share from the time of acquisition of the ESS interest until they no longer have the ESS interest in the share. Subsection 130-85(2) only applies if the following requirements under subsection 130-85(1) are satisfied: (a)  the beneficiary acquires an ESS interest under an employee share scheme (b)  Subdivision 83A-B or 83A-C applies to the ESS interest, and (c)   the ESS interest is, or arises because of, an interest the beneficiary holds in an employee share trust. Participants acquire ESS interests under an employee share scheme

An 'employee share scheme' is defined in subsection 83A-10(2) as a scheme under which 'ESS interests' in a company are provided to employees of the company, or a subsidiary of the company, in relation to the employees' employment. Subsection 83A-10(1) defines an 'ESS interest' in a company as a beneficial interest in either a share in the company or a right to acquire a beneficial interest in a share in the company. Paragraph 130-85(1)(a) is satisfied as the rights that Participants are granted under the Plans constitute the acquisition of an ESS interest under an employee share scheme. Subdivision 83A-B or 83A-C applies to the rights Paragraph 130-85(1)(b) is satisfied as Subdivision 83A-B (or Subdivision 83A-C) will apply to those rights because Participants acquire rights under the Plans for nil consideration (i.e. at a discount). The rights arose because of an interest the Participants hold in an employee share trust The rights granted to Participants under the Plans provide the Participants with an interest in the Shares held in the Trust. Subsection 130-85(4) defines an 'employee share trust', for an employee share scheme, as a trust whose sole activities are:

(a)  obtaining shares or rights in a company (b)  ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to associates of employees, of: (i)  the company; or (ii) a subsidiary of the company; and (c)   other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b). Paragraphs 130-85(4)(a) and (b) of the definition of an employee share trust are satisfied because: •         the Trust acquires Shares in Company P, and •         the Trust ensures that rights (which are ESS interests) are provided to Participants under an employee share scheme by allocating Shares to them in accordance with the governing documents of the scheme. Taxation Determination TD 2019/13 Income tax: what is an 'employee share trust'? sets out the Commissioner's view on the type of activities that are and are not considered merely incidental for the purposes of paragraph 130-85(4)(c).

Whether the Trust is an employee share trust for the purposes of subsection 130-85(4) requires an analysis of what the Trustee actually does, not only the powers and duties that are prescribed in the Trust deed. After considering the facts and circumstances, the Commissioner considers that paragraph 130-85(1)(c) is satisfied. Pursuant to subsection 130-85(2), as all the conditions in subsection 130-85(1) are satisfied, the Participants are taken to be absolutely entitled to the Shares held by the Trustee from the time they were granted the rights under the Plans. As a result CGT event E5 will happen to the Trustee at that time. Exemption under section 130-90 However, any capital gain or capital loss that the Trustee makes under CGT event E5 is disregarded if section 130-90 applies. The exemption in section 130-90 will apply because: •         the Trust is an employee share trust as defined in subsection 130-85(4) (subsection 130-90(1)) •         at the time the Participant becomes absolutely entitled to the Shares as against the Trustee, CGT event E5 happens (paragraph 130-90(1)(a)) •         CGT event E5 happens in relation to a share (paragraph 130-90(1)(b))

•         the Participant acquires the share by exercising a Right granted under the Plans (paragraph 130-90(1)(c)); and •         the Participant acquired the rights under the Plans for nil consideration (i.e. at a discount) and therefore Subdivision 83A-B will apply to those rights (unless Subdivision 83A-C applies instead) (paragraph 130-90(1)(d)). Conclusion As all the conditions in section 130-90 are satisfied, any capital gain or capital loss that arises for the Trust at the time when CGT event E5 happens will be disregarded provided the Shares are acquired by the employee for the same or less than the cost base of the Shares in the hands of the Trustee (subsection 130-90(2)). Question 4 Will CGT event E7 in section 104-85 of the happen in respect of Shares held by the Trustee of the Trust? Answer No - the scheme does not include any facts that result in CGT event E7 happening. Summary CGT event E7 does not happen in respect of Shares held by the Trustee, because the specified scheme does not include any facts that result in CGT event E7 happening. Detailed Reasoning

Under section 104-85, CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital. The timing of the event is when the disposal occurs. [2] If CGT event E7 happens, the trustee may make a capital gain if the market value of the asset, at the time of the disposal, is more than its cost base. The trustee makes a capital loss if that market value is less than the asset's reduced cost base. [3] However, in relation to the scheme as set out in the Relevant facts and circumstances section above, CGT event E7 does not occur. This is because the scheme does not include any facts that result in CGT event E7 happening. Question 5 If CGT event E7 does happen, will a capital gain or capital loss made by the Trustee as a result of CGT event E7 happening be disregarded under section 130-90 if the employees acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? Answer Not necessary to rule Detailed Reasoning As per the answer in Question 4

above, CGT event E7 does not happen. Therefore, it is not necessary to consider whether a capital gain or capital loss made by the Trustee as a result of CGT event E7 happening be disregarded under section 130-90. Question 6 Will dividends and other income received by the Trustee in respect of Unallocated Shares held by the Trustee: 6.1 be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936; and 6.2 be assessed to the Trustee under section 99A of the ITAA 1936? Answer 6.1 Yes. 6.2 Yes. Summary 6.1 Dividends and other income received by the Trustee in respect of Unallocated Shares will be included in the calculation of the net income of the Trust under subsection 95(1) of the ITAA 1936. 6.2 The Trustee will be assessed and liable to pay tax under section 99A of the ITAA 1936 on the part of the net income of the Trust: a)    that is not included in the assessable income of a beneficiary of the Trust under section 97 of the ITAA 1936, b)    in respect of which the Trustee is not assessed and is not liable to pay tax under section 98 of the ITAA 1936, and

c)    that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia. Detailed reasoning 6.1 The Trust Deed defines 'Unallocated Shares' to mean: Unallocated Shares means Shares that have been acquired by the Plan Trustee for the purposes of a Company Plan but have not been allocated to a Participant. The Trustee holds the legal title to, and is the registered shareholder of, Shares which have not yet been allocated to a Participant (Unallocated Shares) under the Trust Deed. 6.5 Unallocated Shares (a) Unless and until Plan Shares are allocated to a Participant in accordance with clause 6.6 or transferred to a Participant in accordance with clause 6.7, the Plan Trustee will hold those Plan Shares on trust for the benefit of Participants generally from time to time in accordance with the terms and conditions of this deed. Subsection 95(1) of the ITAA 1936 defines 'net income', in relation to a trust estate, to mean:

the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions, except... Pursuant to subsection 44(1) of the ITAA 1936, the assessable income of a resident shareholder in a company includes dividends that are paid to the shareholder by the company out of profits derived by it from any source. Therefore, dividends received by the Trustee as the registered shareholder of Unallocated Shares, as well as other income received by the Trustee in respect of Unallocated Shares, will be included in the calculation of the net income of the Trust under subsection 95(1) of the ITAA 1936. 6.2Under section 99A of the ITAA 1936, the trustee of a trust estate is assessed and liable to pay tax on the net income of the trust estate at the rate declared by the Parliament [4] on the part of the net income of the trust estate: •         that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97 of the ITAA 1936 (paragraphs 99A(4)(a) and 99A(4A)(a) of the ITAA 1936)

•         in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98 of the ITAA 1936 (paragraphs 99A(4)(b) and 99A(4A)(b) of the ITAA 1936); and •         that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia (paragraphs 99A(4)(c) and 99A(4A)(c) of the ITAA 1936). The critical requirement for the application of sections 97 and 98 of the ITAA 1936 is that a beneficiary is presently entitled to a share of the income of a trust estate. In the present case, as the Participants are not presently entitled to dividend or other income received in respect of Unallocated Shares, the Trustee will be assessed and liable to pay tax under section 99A of the ITAA 1936 on the dividends received by the Trustee in respect of Unallocated Shares. Question 7 Will the Trustee be entitled to a tax offset under Subdivision 207-B in relation to franked distributions received in respect of Unallocated Shares? Answer Yes. Summary

Yes, provided the Trustee is a qualified person in relation to the distributions for the purposes of Division 1A of former Part IIIAA of the ITAA 1936. Detailed Reasoning Division 207 deals with the effect of receiving a franked distribution. Amounts to be included in assessable income Subsection 207-5(3) provides that if a franked distribution is made to a member that is a trustee of a trust, an amount equal to the franking credit on the distribution is included in the member's assessable income. However, subsection 207-5(4) provides that a tax offset in relation to that distribution is only available to an entity (who may be a trustee) if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution. Subdivision 207-B deals with the effect of receiving a franked distribution through certain partnerships and trusts. Section 207-25 explains, relevantly, that: This Subdivision deals with an entity that receives a benefit of a franked distribution where: (a) the distribution is made to a ... trustee of a trust; and

(b) the benefit is received either directly or through other interposed partnerships or trusts. The distribution is regarded as flowing indirectly to the entity under this Subdivision. Subsection 207-35(1) provides that if a franked distribution is made in an income year to an entity that is a trustee of a trust and the entity is not a corporate tax entity nor the trustee of a complying superannuation entity, then the assessable income of the trust for that income year includes the amount of the franking credit on the distribution. Pursuant to subsection 207-50(4), a franked distribution will be taken to flow indirectly to the trustee of a trust relevantly if: •             the distribution is made to the trustee, and •             the trustee is liable to be assessed on all or part of the trust's net income for that year under section 99A of the ITAA 1936 (subparagraph 207-50(4)(b)(ii)); and •             the trustee's share of the distribution under section 207-55 is a positive amount, whether or not the trustee actually receives any of that share. Tax offset

Section 207-45 provides an entity that is the ultimate recipient of a franked distribution to whom a distribution flows indirectly is entitled to a tax offset for that income year equal to its share of franking credit attached to the distribution. The ultimate recipients of a franked distribution are the recipients that can use the tax offset and includes trustees that are liable to be assessed under section 99A of the ITAA 1936. The Trustee will therefore be entitled to a tax offset in relation to dividends on Unallocated Shares as the Trustee is liable to be assessed on those dividends under section 99A of the ITAA 1936. However, where a franked dividend is paid to a person, subsection 207-145(1) denies a gross-up and tax offset where the person is not a qualified person for the purposes of Division 1A of the former Part IIIAA of the ITAA 1936. Qualified person Broadly, a person will be taken to be a qualified person in respect of a dividend paid on shares if the shares are held at risk for a period of 45 days and the person or an associate does not make a related payment in respect of the dividend (former section 160APHO of the ITAA 1936).

It is accepted that no related payment will be made by the Trustee. Therefore, the Trustee will be a qualified person if it has held the Unallocated Shares for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45th day after the Unallocated Shares become ex-dividend. Limit of tax offset Subsection 67-25(1) provides that tax offsets available under Division 207 are subject to the refundable tax offset rules unless otherwise stated in the section. Subsection 67-25(1B) provides that a tax offset will not be refundable if the entity entitled to the offset under Subdivision 207-B for an income year is the trustee of a trust and that trustee is liable to be assessed under section 98 or 99A of the ITAA 1936 on a share of, or all or part of, the trust's net income for that income year.

As franked distributions flow indirectly to the Trustee, the Trustee is entitled to a franking tax offset under section 207-45. However, the Trustee is assessed on the distributions under section 99A of the ITAA 1936. Therefore the tax offsets available to the Trustee are limited to the amount of its tax payable and any excess franking tax offset is not refundable. > [1] Subsection 104-75(3). [2] Subsection 104-85(2). [3] Subsection 104-85(3). [4] Subsection 12(9) of the Income Tax Rates Act 1986.