EV 1052252742266 — Employee share scheme

1 Will Company A as head company of the Company A multiple entry consolidated (MEC) group obtain an income tax deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of irretrievable cash contributions made by Company A to Third Party Pty Ltd as trustee (Trustee) for the Company A Employee Share Trust (Australian Trust) to fund the subscription for, or on market acquisition of shares, by the Trust in the common stock of Parent Entity (Shares) under the C Plan?

1 Yes Question 2 Will Company A obtain an income tax deduction, under section 8-1 of the ITAA 1997, in respect of costs incurred by Company A in relation to the on-going administration of the Australian Trust? Answer 2 Yes Question 3 Will Company A obtain a deduction under section 40-880 of the ITAA 1997 for expenditure it incurs in relation to implementation and establishment of the Australian Trust and the Company A Employee Share Plan (New Plan)? Answer 3 Yes Question 4 Will irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares, by the Trust under the C Plan, be deductible to Company A at a time determined by section 83A-210 of the ITAA 1997 where the contributions are made before the acquisition of the relevant ESS interests (as defined in subsection 83A-10(1) of the ITAA 1997)? Answer 4 Yes Question 5 Will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936

(ITAA 1936) applies to deny, in part or in full, any deduction claimed by Company A for the irretrievable cash contributions made by Company A (or a subsidiary member of the Company A MEC Group) to the Trustee of the Australian Trust to fund the subscription for, or on market acquisition of Shares, by the Trustee, pursuant to the C Plan? Answer 5 No Question 6 Will the provision of Employee Shares or Matching Rights under the C Plan to employees of Company A constitute a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA 1986)? Answer 6 No Question 7 Will the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares, by the Trustee under the C Plan, be a fringe benefit within the meaning of subsection 136(1) of the FBTAA 1986? Answer 7 No Question 8

1. This private ruling is based on the facts and circumstances set out below including the following documents, or relevant parts of them, which are to be read with the description: • 20XX Omnibus Plan of Parent Entity (Omnibus Plan), • Company A Australian Employee Share Trust Deed (Trust Deed), • Company A Australian Employee Share Plan (New Plan or New Plan Rules). If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Unless otherwise specified, all defined terms referred to hereinafter take their meaning from the above documents as applicable. 2. Company A is an Australian resident company, a subsidiary of Parent Entity and the head company of the Company A MEC group. 3. Parent Entity is an overseas based company, listed on the Overseas Stock Exchange.

4. Company A's employee share acquisition arrangements have been governed under the Australian Sub-Plan of the Parent Entity Overseas Plan (Former Plan) and administered under the Parent Entity Overseas Trust, an overseas domiciled trust that was established in 19XX (Overseas Trust). 5. On 16 May 20XX, Parent Entity established the 20XX Omnibus Plan which authorises the adoption of sub-plans for the purpose of awarding Shares to persons outside of the Parent Entity country. 6. Company A intends to transfer the subsisting rights of participants (Existing Participants) to the Former Plan (with respect to Employee Stock and Vested Stock previously allocated to them under that plan) to a new plan, which is to be governed by a set of standalone Australian rules and administered by an Australian resident Trust (Australian Trust). It is also intended that Eligible Employees under the Former Plan will also be recognised as Eligible Employees of the New Plan. Company employee share plan (new plan)

7. On X November 20XX the New Plan was adopted as an employee incentive plan that aims to provide employees of Company A with a means of acquiring shares in the common stock of Parent Entity, thereby increasing their involvement with Parent Entity, and sharing in its future. 8. Participation in the New Plan will be available to full time or part time Australian resident employees of Company A who: a) receive an invitation from Company A to participate in the New Plan, or b) is an Eligible Employee under the Former Plan and is transferred from the Former Plan to the New Plan. (collectively, Eligible Employees ) 9. The New Plan operates according to the New Plan Rules and is administered by the Trustee in accordance with the terms of the Trust Deed. 10. The New Plan comprises the C Plan and the S Plan, which are authorised and approved as a sub-plan of the 20XX Omnibus Plan. 11. Participants to the New Plan are: a) those Eligible Employees who hold Shares or Matching Rights under the New Plan, or

b) b) a participant of the Former Plan that will be transferred to the New Plan in accordance with Rule X. (collectively, Participants ) C plan 12. The C Plan operates under the New Plan Rules and the relevant offer documents. 13. Eligible Employees will be invited to participate in the C Plan by: • purchasing Shares via a salary sacrifice arrangement (Employee Shares), • receiving Matching Rights, which, upon vesting will entitle a Participant to receive an equal number of Matching Shares. Employee shares 14. Company A will determine the amount of contribution to be made (Employee Contributions) to enable an Eligible Employee under the New Plan to acquire Shares to be held as Employee Shares.

15. Upon receiving an offer to participate in the C Plan (Offer), an Eligible Employee may request, in accordance with a valid eligible salary sacrifice arrangement, that Company A deduct an amount up to $X equal to the Salary Sacrifice Contribution from the Eligible Employee's pre-tax salary or Cash Bonus Award (to which the Eligible Employee may have otherwise become entitled) for a financial year to acquire Shares. Company A will pay the Salary Sacrifice Contribution amount to the Trustee as trustee of the Australian Trust. In the same month, the Trustee will acquire via the subscription for, or on-market acquisition of Shares, on behalf of the Participant and allocate those Employee Shares to the relevant Participant (and will hold those Employee Shares on trust for that Participant). 16. Employee Shares are non-transferable and will not be subject to any forfeiture conditions.

17. Employee Shares will be held by the Trustee for the Participant in accordance with the terms of the Trust Deed and will be subject to a Disposal Restriction for the duration of the Restriction Period (being a period of three years, unless the Participant elects at the time of acceptance of the Offer for the Disposal Restriction to only apply for 12 months). 18. Although Company A has a general discretion to waive the Disposal Restriction, this discretion will not be exercised on a routine basis and will only be exercised in exceptional circumstances. 19. During the Restriction Period, a Participant will be entitled to: • receive all Cash Distributions paid in respect of the Employee Shares that the Trustee holds on behalf of that Participant, • direct the Trustee on how to exercise their voting rights in respect of those Employee Shares.

20. Employee Stock transferred from the Former Plan to the New Plan will be recognised as Employee Shares which are subject to the terms of the Trust Deed and Parts X and Y of the New Plan Rules, and will continue to be subject to restrictions on disposal in accordance with the terms of the Overseas Trust Deed and Rules for the Former Plan. Matching rights 21. In the same financial year, Participants will also receive Matching Rights. Company A will determine the ratio of Matching Rights to Employee Contributions to be granted to Participants under the New Plan. The Offer must specify the number of Matching Rights to be granted under the Offer. 22. The Matching Rights will be subject to Vesting Conditions determined by Company A and set out in the Offer. The Vesting Conditions relating to a Matching Right will require a Participant to be employed by Company A for a period of time (X years commencing 1 July of the income year in which the Matching Rights are allocated), before that Participant will be entitled to a Matching Share.

23. Although Company A has a general discretion to waive the Vesting Restriction, this discretion will not be exercised on a routine basis and will only be exercised in exceptional circumstances. 24. Further, a Participant will forfeit any right or interest in Matching Rights that have not vested if either: • the Participant ceases to be an Employee other than as a consequence of: o that Participant's retirement, death, or redundancy (as determined by Company A in its discretion), o that Participant becoming subject to total and permanent disablement, or o a Corporate Control event. • Company A determines that: o the Participant is to be dismissed with cause, o the Participant has committed any act of fraud or defalcation or gross misconduct in relation to the affairs or Company A or a Subsidiary, or o any matter or circumstance of a type specified in the Offer made to the Participant happens or does not happen as so specified.

25. Matching Rights and Employee Shares acquired by or granted to Participants under the C Plan (which, for avoidance of doubt, does not include S Plan Shares), are intended to satisfy the conditions to permit the application of Subdivision 83A-C of the ITAA 1997 to Participants who are tax resident in Australia. 26. Allocated Stock which had been allocated under the Former Plan will continue to be recognised as Allocated Stock by the Trustee on transfer to the New Plan, and will continue to be subject to forfeiture conditions in accordance with the Former Plan The Original Vesting Date for the transferred Allocated Stock is maintained and once the Original Vesting Date is reached, the Allocated Stock will become Matching Shares of the Participants. Matching shares 27. Upon satisfaction of the Vesting Conditions relating to a Matching Right, the Participant will be entitled to a Matching Share, upon which no exercise price will be payable. 28. Company A will make irretrievable cash contributions to the Trustee, to acquire the required number of Matching Shares to be allocated to Participants under the C Plan.

29. In calculating the number of Matching Shares that need to be acquired, the Trustee will reduce the number of Shares to be acquired by the number of Unallocated Shares that the Trustee already holds at the time. 30. In respect of the Matching Shares that the Trustee holds on behalf of that Participant, a Participant will be entitled to: • receive all Cash Distributions paid in respect of those Matching Shares, • direct the Trustee on how to exercise their voting rights in respect of those Matching Shares. 31. A Matching Share will not be subject to any forfeiture conditions. 32. The Trustee will continue to hold the Employee Shares and Matching Shares (collectively, Shares) on trust on behalf of the Participant, until directed to sell or transfer them into the Participant's name. 33. The Matching Shares granted under the C Plan will be provided under paragraph 83A-105(3)(b) of the ITAA 1997. 34. Vested Stock transferred from the Former Plan to the New Plan will be recognised as Matching Shares subject to the terms of the Trust Deed and the New Plan Rules.

35. Plan Stock (being Shares previously held by the trustee of the Overseas Trust which is not allocated to any particular Eligible Employee) transferred from the Former Plan to the New Plan will be recognised as Unallocated Shares. S plan 36. The S Plan operates under Part C of the New Plan Rules and the relevant offer documents. An Eligible Employee will be invited to participate in the S Plan by purchasing shares by applying Post-tax Contributions (S Employee Shares). Invitation to participate in the new plan 37. Eligible Employees will be invited to participate in the New Plan by way of a written Offer. 38. Each Offer will be made in accordance with the New Plan Rules, the Trust Deed and any terms or conditions as stipulated within the invitation subject to the discretion of Company A. 39. Broadly, an Offer will include the key features of the offer including, as applicable, the number and value of Employee Shares, S Plan Shares, Matching Rights and Matching Shares (collectively referred to as Awards) subject to the offer as well as any disposal and/or vesting conditions.

40. An Offer extended to an Eligible Employee to apply for Awards under the terms of the New Plan, will only be accepted where an Application Form is duly completed and returned to Company A before the Closing Date set out in the Offer. Company employee share trust 41. On 29 November 20XX Company A established the Australian Trust under the Trust Deed for the purpose of holding Shares for the benefit of Participants who are, or become, entitled to acquire Shares pursuant to the New Plan. 42. The Trustee is an unrelated third-party company. 43. Company A and the Trustee agree the Australian Trust is, and will be, managed and administered so that it will at all times be, an 'employee share trust' as defined in subsection 130-85(4) of the ITAA 1997. 44. The Trustee's general powers include (but are not limited to) the ability to: • enter into and execute all agreements, deeds and documents, enter into and give undertakings and delegate powers and duties to any person or persons

• subscribe for, purchase or otherwise acquire and to sell or otherwise dispose of property or rights which the Trustee is authorised to acquire or dispose of on terms and conditions it thinks fit • open bank accounts, retain on current or deposit account at any bank any money which it considers proper and make rules and policies for the operation of those bank accounts including the signing and endorsing of cheques • undertake activities that involve bookkeeping, preparing financial, tax and regulatory statements, and other record-keeping and administrative actions necessary to operate the Australian Trust and undertake the activities described in paragraphs 130-85(4)(a), (b) and (c) of the Tax Act • acquiring and dealing with Authorised Investments (Shares in Parent Entity and any right, interest or option in respect of any such Shares) in accordance with the terms of the Trust Deed and the New Plan • receive dividends in respect of Unallocated Shares and interest from bank accounts and use those funds to: o acquire additional Shares for the purposes of an Employee Incentive Plan

o pay necessary and incidental costs of administering the Australian Trust and undertaking the activities described in paragraphs 130-85(4)(a), (b) and (c) of the Tax Act, including without limitation paying costs relating to the audit of the Australian Trust and fees for professional services provided to the Trustee in relation to the Australian Trust, or o pay interest on loans provided to the Australian Trust for the acquisition of Shares, where the interest payable does not exceed arm's length commercial rates • vote on securities held as part of the Trust Fund on behalf of Participants in accordance with the New Plan and the Trust Deed • borrow money for the purpose of acquiring Shares or rights in Company A, where no security is provided over the assets of the Australian Trust and the interest payable on such a loan is not more than arm's length commercial rates • do all acts, matters or things which it may deem necessary or expedient for the purpose of giving effect to, and carrying out, the trusts, powers and discretions conferred on the Trustee by the Trust Deed or the law.

45. Limitations on the Trustee include: • the Trustee is not permitted to carry out activities in its capacity as trustee of the Australian Trust that are not matters or things which are necessary or expedient to administer and maintain the Australian Trust or for the purpose of giving effect to, and carrying out, the trusts, authorities, powers and discretions conferred on the Trustee by the Trust Deed or the law, and • in its capacity as trustee of the Australian Trust, the Trustee may only carry out activities that constitute the management of the New Plan. 46. The Trust Deed sets out how the Australian Trust will operate. These include: • Company A may make irretrievable cash contributions to the Trustee of any amount of money determined by Company A to fund the acquisition of Shares to be held by the Trustee as part of the Australian Trust in accordance with the terms and conditions of the Trust Deed.

• No Participant has any legal or beneficial interest in any particular Unallocated Shares or other assets (or parts of assets) of the Trust, other than the beneficial interest of a Participant in respect of the Shares held on his or her behalf in accordance with the Trust Deed. • The Trustee will, at the election of Company A: o acquire the requisite number of Shares on-market, or, from Participants where any Restriction Period in respect of the Shares has expired or from the trustee or administrators of any other Employee Incentive Plan operated by Company A; o apply for the issue of the requisite number of Shares, or o effect a combination of paragraphs (i) and (ii) above. • If the Trustee holds Shares on a Participant's behalf, the Participant is entitled to receive all Cash Distributions paid in respect of those Shares and the Trustee must pay all Cash Distributions received in respect of those Shares to the Participant. These Cash Distributions must not be appropriated in or towards the repayment of any outstanding Participant loans from Company A or amounts owed to the Trustee.

• The Trustee may apply Cash Distributions in respect of Unallocated Shares towards: o the acquisition of further Shares for the purpose of satisfying Awards under the New Plan o the payment of Trust Expenses to the extent the Trust Expenses relate to Participants who are employed by Company A, or o expenses that are necessary and incidental costs of administering the Australian Trust and undertaking the activities described in paragraphs 130-85(4)(a), (b) and (c) of the Tax Act. • The balance of the Income for an Accounting Period to which no Participant is entitled will be accumulated by the Trustee as an Accretion to the Trust Fund. • Neither the Trust Fund nor Income, any of the powers, authorities and discretions conferred by the deed are to be used in favour of or in such a way as to confer a benefit on the Trustee.

• The Trustee must not pay any residual capital and income of the Australian Trust to Parent Entity, Company A or a Subsidiary. The balance of the capital of 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 beneficiaries only: o an employee or share option trust established and maintained for the benefit of all or any employees of Company A, Subsidiary or any other sub-plan of the Omnibus Plan, or o any charity nominated by Company A as a beneficiary of the Australian Trust. Funding 47. Company A must provide the Trustee, or cause the provision to the Trustee, of any funds required by the Trustee to comply with its obligations under the Trust Deed. 48. All funds provided to the Trustee under the Trust Deed will: • constitute Accretions to the corpus of the Australian Trust and will not be repayable by the Trustee, and • may be paid to Parent Entity as consideration for the subscription for Shares provided such Shares are held under the terms of the Trust Deed.

49. Nothing in the Trust Deed confers or is intended to confer on Company A any charge, lien or any other proprietary right or proprietary or beneficial interest in the Trust Assets. Other 50. In the event of any inconsistency between the Trust Deed and the New Plan, the Trust Deed will prevail. 51. Company A will incur implementation and establishment costs of the Australian Trust including: • legal fees incurred in relation to the establishment of the Australian Trust (including for legal advice in relation to the Australian Trust's implementation and drafting trust and plan documents), and • a set up / commencement fee of $X, to be charged by the Trustee. 52. Company A will incur ongoing administration costs associated with the services provided by the Trustee including but not limited to: • New Plan record keeping, in accordance with the requirements set out in the Trust Deed, • production and dispatch of annual statements to employees pursuant to the Trust Deed [,

• costs incurred in the acquisition of Shares, such as brokerage costs and the allocation of such Shares to Participants, and • other Trustee expenses such as the annual audit of the accounts kept in respect of the Australian Trust.

ITAA 1997 8-1 ITAA 1997 8-1(1) ITAA 1997 8-1(2) ITAA 1997 8-1(2)(a) ITAA 1997 40-880 ITAA 1997 40-880(3) ITAA 1997 40-880(4) ITAA 1997 40-880(5) ITAA 1997 40-880(6) ITAA 1997 40-880(7) ITAA 1997 40-880(8) ITAA 1997 40-880(9) ITAA 1997 83A-10(1) ITAA 1997 83A-10(2) ITAA 1997 83A-105(3)(b) ITAA 1997 83A-210 ITAA 1997 130-85(4) ITAA 1997 130-85(4)(a) ITAA 1997 130-85(4)(b) ITAA 1997h 130-85(4)(c) ITAA 1997 701-1 ITAA 1936 Pt IVA ITAA 1936 177D(2) ITAA 1936 177F FBTAA 1986 66 FBTAA 1986 67 FBTAA 1986 67(1) FBTAA 1986 136(1) FBTAA 1986 136(1)(ha) 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

Question 1 Will Company A as head company of the Company A multiple entry consolidated (MEC) group obtain an income tax deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of irretrievable cash contributions made by Company A to Third Party Pty Ltd as trustee (Trustee) for the Company A Employee Share Trust (Australian Trust) to fund the subscription for, or on market acquisition of shares, by the Trust in the common stock of Parent Entity (Shares) under the C Plan? Summary Company A will, as provisional head company of the Company A MEC Group, obtain an income tax deduction, under section 8-1 in respect of the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or on market acquisition of, Shares by the Australian Trust to satisfy the issue of Shares by the Trustee to Participants under the C Plan, to the extent those contributions are made to satisfy Awards granted under the C Plan to Participants who are employees of Company A. Detailed reasoning

1. Subsection 8-1(1) allows 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, under 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. 2. Company A operates the New Plan as part of its remuneration strategy. 3. Under the C Plan, Company A will grant Employee Shares and Matching Rights (being ESS interests that are a beneficial interest in a share or a beneficial interest in a right to acquire a beneficial interest in a share) to Participants and make irretrievable cash contributions to the Trustee which the Trustee will use to acquire Shares for allocation to Participants (in accordance with the New Plan and the Trust Deed). Incurred in gaining or producing assessable income or in carrying on a business 4. Under the New Plan, Company A will grant Employee Shares and Matching Rights to Eligible Employees as part of Company A's employee remuneration program.

5. The cash contributions made by Company A to the Trustee are irretrievable and non-refundable as: • all funds received by the Trustee will constitute Accretions to the corpus of the Australian Trust and will not be repaid, other than as consideration for Shares under the terms of the Trust Deed, the New Plan, or relevant Terms of Participation, and • nothing in the Trust Deed confers, or is intended to confer, on Company A any security interest, proprietary right or proprietary interest in the Shares acquired by the Trustee. 6. The costs incurred by Company A to facilitate the Trustee's acquisition of Shares to satisfy grants of Awards under the C Plan, which arise as part of Company A's employee remuneration arrangements, and contributions to the Australian Trust, are part of an ongoing series of payments in the nature of remuneration.

7. The Commissioner accepts that the granting of Awards to employees of Company A under the C Plan is to incentivise its employees and in turn, is likely to result in the gaining or production of the assessable income of Company A as a result of the employee's increased performance and productivity. 8. The Commissioner accepts there is sufficient nexus between: • the irretrievable cash contributions made by Company A to the Trustee to satisfy the granting of Awards under the C Plan to its own employees, and • its own income earning activities. Therefore, subsection 8-1(1) is satisfied. 9. The deduction for the irretrievable cash contribution, will arise in the same income year as that in which the Shares were acquired. Not capital or of a capital nature

10. The costs will be an outgoing incurred for periodic funding of an employee share scheme for employees of Company A. Costs incurred are likely to be in relation to more than one grant of Employee Shares and Matching Rights, and Company A intends to satisfy outstanding Awards using the Shares acquired by the Australian Trust. This indicates that the irretrievable cash contributions made by Company A to the Trustee are ongoing in nature and are part of the broader remuneration expenditure of Company A. 11. While the irretrievable cash contributions may secure an enduring or lasting benefit for the employer that is independent of the year-to-year benefits that the employer derives from a loyal and contented workforce, that enduring benefit is considered to be comparatively small. Therefore, the payments are not capital, or of a capital nature, and paragraph 8-1(2)(a) is not satisfied. 12. Accordingly, Company A will be entitled to deduct an amount under section 8-1 for irretrievable cash contributions it makes to the Trustee to acquire Shares to satisfy Awards granted to its employees under the C Plan. Question 2

Will Company A obtain an income tax deduction, under section 8-1 of the ITAA 1997, in respect of costs incurred by Company A in relation to the on-going administration of the Australian Trust? Summary 13. Company A will be entitled to deduct an amount under section 8-1 in respect of the costs incurred in relation to the on-going administration of the Australian Trust to the extent these costs relate to Company A employees. Detailed reasoning 14. As discussed at Question 1, subsection 8-1(1) allows you to deduct from your assessable income any loss or outgoing to the extent it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, under 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. 15. Company A incurs on-going administration costs in operating the Australian Trust and has appointed the Trustee to administer the Australian Trust.

16. The costs are regular and recurrent which are deductible under section 8-1 as they are costs necessarily incurred by Company A in administering the employee share scheme while carrying on its business for the purpose of gaining or producing its assessable income. That is, there is a sufficient nexus. 17. These costs are not capital or of a capital nature as the loss or outgoing are regular, recurrent and part of the ordinary employee remuneration costs of Company A as confirmed in Taxation Determination TD 2022/ 8 Income tax: deductibility of expenses incurred in establishing and administering an 'employee share scheme' (TD 2022/8). Question 3 Will Company A obtain a deduction under section 40-880 of the ITAA 1997 for expenditure it incurs in relation to implementation and establishment of the Australian Trust and the Company A Employee Share Plan (New Plan)? Summary 18. Company A will be entitled to deduct an amount under section 40-880 for costs incurred in relation to the establishment or amendment of the Australian Trust, to the extent these costs relate to Company A employees. Detailed reasoning

19. Taxation Determination TD 2022/8 sets out the Commissioner's views on the deductibility of expenses in establishing and administering an employee share scheme. 20. Establishment expenses are outgoings associated with the creation of an employee share scheme and include fees and start-up costs incurred to establish or implement the employee share trust and the employee share scheme plan rules. 21. Section 40-880 allows deductions for certain business capital expenditure that fall outside the scope of the deduction provisions of the income tax law. It requires the expenditure to be capital and in relation to the business. As this expenditure relates to remuneration of employees of the employer company who work within that business, the expenditure must be incurred in relation to that business.

22. Section 40-880 contains limitations and exceptions in subsections 40-880(3) to (9) which may prevent a deduction being allowed. Subsection 40-880(3) indicates that the expenditure is only deductible to the extent that the business is carried on for a taxable purpose. The other limitations and exceptions in subsections 40-880(4) to (9) do not prevent the expenses from being deductible under section 40-880. 23. Therefore, establishment and amendment expenses incurred in relation to the New Plan or the Australian Trust, where they relate to Company A's employees, are deductible in equal proportions over five years under section 40-880 to the extent the business carried on is for a taxable purpose. Question 4 Will irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares, by the Trust under the C Plan, be deductible to Company A at a time determined by section 83A-210 of the ITAA 1997 where the contributions are made before the acquisition of the relevant ESS interests (as defined in subsection 83A-10(1) of the ITAA 1997)? Summary

24. Irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares by the Trustee in respect of grants of Employee Shares and under the New Plan, in respect of Participants directly employed by Company A, will be deductible to Company A under section 8-1 at a time determined by section 83A-210 if the contributions are made before the acquisition of the relevant ESS interests. Detailed reasoning 25. It is often the case that an outgoing will be both incurred and paid in the same year of income, and as such, the amount is deductible in that income year for the purposes of section 8-1. 26. However, section 83A-210 modifies this rule in circumstances where the employer provides the trust with an amount of money for a year of income to purchase shares under an employee share scheme that is in excess of the amount necessary to acquire sufficient shares to satisfy its obligations arising from options which have already been granted.

27. The effect of section 83A-210 is to deem the timing an employer incurs the outgoing to be the time when the relevant employee share scheme interest is acquired by the ultimate beneficiary, rather than the time when the employer makes the contribution to the trust. Further information is available in ATO Interpretive Decision ATO ID 2010/103 Income Tax - Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust (ATO ID 2010/103). 28. The New Plan is an employee share scheme for the purpose of subsection 83A-10(2) as: • the Awards granted under the C Plan are ESS interests under subsection 83A-10(1), being a beneficial interest in a share in a company, and a beneficial interest in a right to acquire a beneficial interest in a share in a company, and • these ESS interests are provided to employees in relation to their employment or engagement with Company A.

29. The New Plan contains a number of interrelated components which include the provision of irretrievable cash contributions by Company A to the Trustee. These irretrievable cash contributions enable the Trustee to acquire Shares for the purpose of enabling each employee, indirectly as part of the New Plan, to acquire ESS interests. 30. The deduction for the irretrievable cash contributions, to the extent they relate to employees of Company A, can only be deducted from the assessable income of Company A in the income year when the relevant beneficial interest in a Share, or beneficial interest in a right to a beneficial interest in a Share, is acquired by the Participant under the New Plan.

31. Section 83A-210 will not apply to modify the timing of a deduction for irretrievable cash contributions provided by Company A to the Trustee where the contributions are made at or after the time the ultimate beneficiaries acquire the beneficial interest in the share. In these circumstances, the contributions are deductible by Company A under section 8-1, in the income year in which they are made to the Trustee. This is consistent with the ATO view expressed in ATO ID 2010/103. Question 5 Will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies to deny, in part or in full, any deduction claimed by Company A for the irretrievable cash contributions made by Company A (or a subsidiary member of the Company A MEC Group) to the Trustee of the Australian Trust to fund the subscription for, or on market acquisition of Shares, by the Trustee, pursuant to the C Plan? Summary

32. Part IVA will not apply to deny, in part or in full, any deduction claimed by Company A in respect of the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for or acquisition of Shares by the Australian Trust pursuant to the C Plan. Detailed reasoning 33. Part IVA is a general anti-avoidance provision which gives the Commissioner the power to cancel a 'tax benefit' that has been obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. 34. The Commissioner generally accepts that a deduction may be available where an employer provides money or other property to an employee share trust where the conditions of Division 83A are met. 35. In this case, the scheme does not contain the elements of artificiality or unnecessary complexity and the commercial drivers sufficiently explain the entry into the use of the employee share trust arrangement.

36. Therefore, having regard to the eight factors set out in subsection 177D(2), the Commissioner has concluded that the scheme is not being entered into or carried out for the dominant purpose of enabling Company A to obtain a tax benefit. Question 6 Will the provision of Employee Shares or Matching Rights under the C Plan to employees of Company A constitute a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA 1986)? Summary 37. The provision of Employee Shares or Matching Rights under the C Plan to employees of Company A will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA. Detailed reasoning 38. An employer's liability to fringe benefits tax (FBT) arises under section 66 of the FBTAA which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax.

39. In general terms, a 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee. However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs (f) to (s) of the 'fringe benefit' definition. 40. In particular, paragraph (h) of the 'fringe benefit' definition excludes a benefit constituted by the acquisition of an employee share scheme interest under an employee share scheme (within the meaning of the ITAA 1997) to which Subdivision 83A-B or 83A-C applies. 41. As indicated in the response to Question 4, the Employee Shares and Matching Rights provided to Participants under the C Plan are ESS interests as defined in subsection 83A-10(1) and the New Plan constitutes an employee share scheme under subsection 83A-10(2). Question 7 Will the irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares, by the Trustee under the C Plan, be a fringe benefit within the meaning of subsection 136(1) of the FBTAA 1986? Summary

42. The irretrievable cash contributions made by Company A to the Trustee pursuant to the Trust Deed, to fund the subscription for or acquisition of Shares by the Trustee under the C Plan will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA. Detailed reasoning 43. An employer's liability to FBT arises under section 66 of the FBTAA, which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax. 44. In general terms, a 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee. However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs (f) to (s) of the definition. 45. Paragraph 136(1)(ha) of the FBTAA excludes from the definition of 'fringe benefit': (ha) a benefit constituted by the acquisition of money or property by an employee share trust (within the meaning of the Income Tax Assessment Act 1997)

46. Therefore, for the irretrievable cash contributions to be excluded from the definition of 'fringe benefit', the Australian Trust must be an 'employee share trust' as defined in subsection 130-85(4). 47. 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 are 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 employee share scheme 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 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(c)). 48. In the present case, paragraphs 130-85(4)(a) and (b) are satisfied because: • the Trustee acquires shares in Parent Entity to be held by the Trust

• as stated above in response to Question 4, the Commissioner accepts that the C Plan is an employee share scheme under which employee share scheme interests are provided to Participants, and • the Trustee ensures that employee share scheme interests (as defined in subsection 83A-10(1)) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating Shares to Participants in accordance with the Trust Deed and the C Plan. 49. 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 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'.

50. 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'? (TD 2019/13). 51. Activities that involve 'investing in assets other than shares or rights to shares in the employer company' or that result in employees being provided additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered to be merely incidental. 52. In the present case, the objects of the Australian Trust 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 New Plan. 53. Therefore, paragraph 136(1)(ha) of the FBTAA applies to exclude the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or acquisition on market of Shares by the Australian Trust under the C Plan from being a fringe benefit. Question 8

Will the Commissioner seek to make a determination that section 67 of the FBTAA 1986 applies to increase the fringe benefits taxable amount to Company A, by the amount of tax benefit gained from irretrievable cash contributions made by Company A to the Trustee, to fund the subscription for, or on market acquisition of Shares, by the Trustee under the C Plan? Summary 54. The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to Company A by the amount of tax benefit gained from the irretrievable cash contributions made by Company A to the Australian Trust pursuant to the C Plan. Detailed reasoning 55. Section 67 of the FBTAA is a general anti-avoidance provision of the FBTAA. Subsection 67(1) of the FBTAA is satisfied where a person, or one of the persons who entered into or carried out an arrangement or part of an arrangement under which a benefit is or was provided to a person, did so for the sole or dominant purpose of enabling an eligible employer, or the eligible employer and another employer, to obtain a tax benefit.

56. The Commissioner will only make a determination under section 67 of the FBTAA if the arrangement resulted in the payment of less FBT than would be payable but for entering into the arrangement. 57. As stated above in response to Question 7, without the provision of a fringe benefit, no amount will be subject to FBT. The irretrievable cash contributions made by Company A to the Trustee (pursuant to the Trust Deed) will not be a fringe benefit within the meaning of subsection 136(1) of the FBTAA for the reasons outlined in response to Question 7. As these benefits have been excluded from the definition of a fringe benefit, the FBT liability is not any less than it would have been but for the arrangement. 58. The Commissioner will not seek to make a determination that section 67 of the FBTAA applies to increase the aggregate fringe benefits amount by the amount of the tax benefit gained from the irretrievable cash contributions made by Company A to the Trustee to fund the subscription for, or acquisition of Shares to satisfy Awards granted to Participants under the C Plan. >