Employee Share Schemes

1 Will the irretrievable cash contributions by Company A, or any subsidiary member of the Company A tax consolidated group (TCG), to the Trustee of the Employee Share Trust (Trustee) to fund the acquisition of Company A shares by the Trust for the purposes of the Performance Rights Plan (PRP) be assessable income of the Employee Share Trust (Trust) under section 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Question 2 Will a capital gain or capital loss that arises for the Trustee at the time when the Participants become absolutely entitled to Company A shares (capital gains tax (CGT) event E5) be disregarded under section 130-90 of 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. This ruling applies for the following periods : Income tax year ending 30 June 20YY Income tax year ending 30 June 20YY Income tax year ending 30 June 20YY Income tax year ending 30 June 20YY Income tax year ending 30 June 20YY

This private ruling is based on the facts and circumstances in the description of the scheme that is set out below, including the following documents, or relevant parts of them, which are to be read with the description: 1.            PRP Rules provided to the Commissioner on DDMMYYYY, and. 2.            Employee Incentive Trust Deed (Trust Deed) provided to the Commissioner on DDMMYYYY. If your facts and circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background Company B, is an Australian resident company that was listed. Company A was incorporated as an Australian public limited company. Company B announced a redomicile of the Company B group which would be achieved through a restructuring by way of a scheme of arrangement (the Scheme). Upon implementation of the Scheme: •                     Company B's listing was transferred to Company A; •                     Company A became the new holding company of the Company B group;

•                     Company A choose that the Tax Consolidated Group will continue with Company A as the head company (the Company A TCG); and •                     Company B performance rights holders would have their performance rights cancelled and replaced with newly issued performance rights (issued under the PRP) on a 1 for 1 basis. The Company A group is a provider of services. New Performance Rights Plan The objectives of the PRP are: •                     to align the interest of the PRP participants (the Participants) with the long-term interests of the shareholders of Company A; •                     to retain key employees whose contributions are essential to Company A's long-term growth and profitability; •                     to instil loyalty to, and a stronger identification by Participants with the long-term prosperity of, Company A; •                     to attract potential employees with relevant skills to contribute to the Group to create value for Company A's shareholders; and •                     to deliver compensation in a manner that drives the long-term performance of Company A. Broadly, the key terms of the PRP are outlined below:

Grant of Performance Rights •                     Performance Rights are provided for no consideration upon grant, vesting or exercise. •                     Company A directors who are duly authorised and appointed by the Company A board of directors (the Board) will administer the PRP (referred to as the Committee). The Committee may grant Performance Rights to Key Senior Executives, as the Committee may select, on an annual basis, typically following the Annual General Meeting, or at any time during the period when the PRP is in force. •                     The Committee decides on details such as the number, conditions and vesting of performance rights and may amend or waive conditions if deemed fairer. •                     Participants, will receive an Award Letter from the Committee detailing the performance rights. •                     Participants are not required to pay for the grant of Performance Rights. •                     Performance Rights are subject to restrictions such as: o        non-transferable; and o        not entitled to vote or receive dividends. •                     Granting of performance rights must comply with legal and disclosure requirements.

Vesting, Exercising and Major Events •                     Performance Rights lapse if the Participant leaves due to bankruptcy, misconduct, or breach of Rules. •                     The Committee, in its discretion, may determine that a Performance Right may vest in cases of retirement, ill health, or redundancy. •                     The Committee may amend or waive vesting conditions during major corporate events. •                     Upon vesting, Company A Shares will be promptly allotted or transferred. •                     The Committee reviews performance conditions, which may be adjusted if necessary, and determines how rights are exercised. •                     Company A Shares issued to a Participant rank equally with existing Company A Shares. Administration and Compliance •                     The Committee may use a Trust to administer the Plan. •                     The Committee administers the Plan, establishes Trusts, resolves disputes, and their decisions are final. Modifications and Reporting •                     The Plan may be modified by the Committee with required approvals, and Participants will be informed of changes.

•                     Participation in the Plan does not affect employment terms or compensation calculations. •                     The Plan is effective for up to 10 years, with possible extensions subject to shareholder approval. The Committee may terminate the Plan at any time without affecting existing performance rights. •                     Participants are responsible for taxes on performance rights; the Plan is a tax-deferred scheme for Australian tax purposes. Employee Share Trust Trustee A is the trustee of the Employee Share Trust which will be used to acquire shares to satisfy awards under the PRP. The Trust has been set up for the sole purpose of obtaining shares (either on market or directly from Company A) for the benefit of employees of Company A. Trustee A (the Trustee) is an external trustee acting in an independent capacity on behalf of the beneficiaries of the Trust. The key operating terms of the draft Trust Deed are outlined below (noting "The Company" is defined as Company A):

•                     Allocated shares acquired by the Trustee must be allocated to the relevant employees and held on trust for them, and on their behalf by the Trustee under the terms of the Trust Deed and the relevant Plan rules. •                     The Trust was established for the sole purpose of subscribing for, acquiring, holding and transferring Shares in connection with equity incentive plans established by the Company for the benefit of participants in those plans. •                     The Trustee may only carry out activities that constitute the management of ESS Plans. •                     The Company and the Trustee agree that the Trust will be managed and administered so that it satisfies the definition of "employee share trust" for the purposes of subsection 130-85(4) of the ITAA 1997. •                     A Dealing Notice can be issued from time to time. However, these are likely to be issued when the Performance Rights vest to the Participant and are subsequently exercised by the Participant into ordinary shares.

•                     The Trust will be funded by contributions from Company A or a member of the Company A Group (for the subscription or purchase of shares in accordance with the Plans). •                     These funds will be used by the Trustee of the Trust to acquire shares in Company A either by on market purchase or via a subscription for new shares in Company A based on the Dealing Notice provided by Company A. •                     Company A or members of the Company A Group are likely to contribute funds, by way of capital contribution to the Trust when written notice (a Dealing Notice) is provided by the Board to the Trustee. •                     The structure of the Trust and the PRP are such that after the Restriction Period, shares allocated to a Participant can be transferred into the name of the Participant (i.e. legal title) (or to any third party nominated by the Participant) upon a Withdrawal Notice being lodged with and approved by the Board. •                     No amounts can be repaid to the Company or any Group member.

Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 6-10 Income Tax Assessment Act 1997 section 102-20 Income Tax Assessment Act 1997 section 104-75 Income Tax Assessment Act 1997 section 130-90 Income Tax Assessment Act 1997 subsection 130-85(4) Income Tax Assessment Act 1997 section 83A-10 Income Tax Assessment Act 1997 section 104-85 Does IVA apply to this private ruling? Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise

These reasons for decision accompany the Notice of private ruling for The Trustee. Legislative references in the following are to provisions of the Income Tax Assessment Act 1997 (ITAA 1997), unless otherwise indicated. Question 1 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 A or its subsidiaries to the Trustee of the Trust will therefore not be included in the assessable income of the Trustee under section 6-10.

The contributions made by Company A or its subsidiaries within the Company ATCG 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 PRP for the sole purpose of the employee share schemes. Therefore, the contributions constitute capital receipts to the Trustee, and are not assessable under sections 6-5 or 6-10 (see also 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 Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee. A beneficiary becomes absolutely entitled to a CGT asset of a trust if they can call for the asset (for which they have a vested and indefeasible interest in) to be transferred to them or at their direction. The shares held on trust for the purposes of the PRP are CGT assets of the Trust as defined in subsection 108-5(1).

Once any applicable relevant conditions/restrictions have been met (if any), the Trustee must transfer the relevant shares to the Participant and the Company will register the Participant as the holder of those shares. CGT event E5 will happen at that time as the Participant thereby becomes absolutely entitled to those shares. Any capital gain or capital loss that the Trustee makes, if CGT event E5 happens, is disregarded if section 130-90 applies. To qualify for this exemption, the Trust must be an 'employee share trust' (EST). Employee Share Trust To determine whether the Trust is an 'employee share trust' for the purposes of subsection 130-85(4) an analysis of what the Trustee actually does and its powers and duties that are prescribed in the Trust Deed is required. However, as indicated in the facts the Trustee will exercise its powers and obligations as set out in the Trust Deed. Therefore, it meets the definition of 130-85(4) as: •                     the Trust acquires shares in a company, namely Company A

•                     the sole purpose being the acquisition, holding, and ongoing administration of holding Company A Shares under the Plans for the benefit of the Participants •                     the Trustee may only carry out activities that constitute the management of the Plans established by Company A •                     the Commissioner accepts that the other activities undertaken by the Trustee will be merely incidental to this purpose 130-85(4)(c) •                     the Trust ensures that ESS interests as defined in subsection 83A-10(1) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating those shares to the employees in accordance with the Trust Deed and the PRP •                     the Trust Deed indicates that Company A and the Trustee agree the Trust will be managed and administered so that it satisfies the definition of 'employee share trust' for the purpose of subsection 130-85(4). Additionally, the other criteria for the exemption in section 130-90 to apply are met because:

•                     at the time the Participant becomes absolutely entitled to the Company A shares as against the Trustee, CGT event E5 happens (paragraph 130-90(1)(a)) •                     CGT event E5 happens in relation to Company A shares (paragraph 130-90(1)(b)) •                     the Participant acquires the Company A share by exercising a Performance Right granted under the PRP (paragraph 130-90(1)(c)); and •                     the Participant acquired the Performance Right under the PRP for nil consideration (i.e. at a discount) and therefore Subdivision 83A-B/Subdivision 83A-C will apply to those Performance Rights (paragraph 130-90(1)(d)). 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 if the Company A shares are acquired by the employee for the same or less than the cost base of the shares in the hands of the Trust.