1 Is Company A Employee Share Plan Trust (the Trust) an employee share trust as defined in subsection 130-85(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?
1 Yes. Question 2 Will CGT event E5 of section 104-75 of the ITAA 1997 happen at the time when the employees of Company A (the Company) become absolutely entitled to Shares held by the Trustee of the Trust to satisfy Awards issued under Plan A and Plan B (collectively, the Plans)? Answer 2 Yes. Question 3a If CGT event E5 does happen, will a capital gain or capital loss made by Company B as trustee for Company A Employee Share Plan Trust (Trustee) as a result of CGT event E5 happening be disregarded under section 130-90 of the ITAA 1997 if the employees of Company A acquire the Shares under Plan A for the same or less than the cost base of the Shares in the hands of the Trustee? Answer 3a Yes. Question 3b 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 under Plan B for the same or less than the cost base of the Shares in the hands of the Trustee? Answer 3b No. Question 4
If the Trustee receives a distribution on Allocated Trust Shares held for a Participant by the Trust during an income year, and applies the Trust property representing it for the benefit of the Participant by the end of the income year, will the distribution and any franking credit calculated and included under section 95 of the Income Tax Assessment Act 1936 (ITAA 1936) be assessed under section 99A of the ITAA 1936 in relation to the Trustee? Answer 4 No, provided the relevant share of the distribution and any allowing franking credit is included in the Participant's assessable income. Question 5 If the Trustee receives a distribution on Allocated Trust Shares in the Trust during an income year and applies Trust property representing it for the benefit of the Participant by the end of the income year, will the Trustee be entitled to a tax offset for any franking credits attaching to the distribution under Sub-division 207-B of the ITAA 1997? Answer 5 No, on the basis that Participants will be entitled to the relevant tax offset for any franking credits attaching to the distribution, provided that they hold their interest at-risk for the required qualification period.
This ruling applies for the following periods: 1 July 2025 to 30 June 20XX 1 July 2026 to 30 June 20XX 1 July 2027 to 30 June 20XX 1 July 2028 to 30 June 20XX 1 July 2029 to 30 June 20XX The scheme commenced on: 1 July 20XX
This ruling is based on the facts and circumstances set out below, including the following documents provided to the Commissioner on XX XXX 20XX or relevant parts of them which are to be read with the description: • Trust Deed for Company A Employee Share Trust (Trust Deed) • Plan A Rules • Plan B 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. Unless otherwise specified, all defined terms referred to hereinafter take their meaning from the above documents as applicable. Company A Company A is a private company with one class of shares on issue, being ordinary shares. Company A is the parent company of the Company A Group (the Group) of companies and has not elected to form a consolidated group for income tax purposes. There are no foreign subsidiaries within the Group. Company A has established two employee share ownership schemes: • Plan A • Plan B. By way of the Trust Deed, Company A established Company A Employee Share Trust.
The Trust will be used to acquire, hold and provide the shares needed to satisfy the provision of Awards or Shares under the Plans. The Trust has been established for the sole purpose of obtaining Shares for the benefit of Participants under the Plans, and for any future equity incentive plans the Company may adopt. Company B is the trustee of the Trust and will operate the Trust in accordance with the Trust Deed. Plan A The purpose of Plan A is to: • attract, motivate and retain Eligible Persons • provide arrangements for Eligible Persons to participate in the future growth of the Company and Group • upon becoming Shareholders in the Company, to allow Eligible Persons to participate in the profit and development of the Group. It is stated that Plan A is a plan to which Subdivision 83A-C of the ITAA 1997 applies. Participant is defined in Plan A as an Eligible Person to whom an Award or Performance Right has been granted or, following the death or bankruptcy of the Eligible Person, his or her personal representative or trustee in bankruptcy.
The Board may determine that an Employee may participate in Plan A and in its absolute discretion, elect to grant Performance Rights or an Award based on a fixed value. At that point, the Board will issue an invitation to the Employee to participate in Plan A (Plan A Invitation). The Plan A Invitation will provide terms and conditions as the Board decides, including: • the number of Performance Rights or the Award being granted, or the method or formula for determining the number of Performance Rights or the Award being granted; • whether Award(s) or Performance Rights will be satisfied in Securities or by payment of a Cash Amount; • the Grant Date; • the method of applying for, accepting or rejecting; • any amount payable by the Participant upon the grant of an Award (as applicable); • details of any Conditions applicable to the Performance Rights and or Awards, including performance and/or service conditions, applicable Performance Period and expiry dates attaching to Performance Rights and circumstances which shall give rise to a lapse in Performance Rights;
• whether any Shares allocated to a Participant upon the satisfaction of a Condition shall be Restricted Shares, including details of any Trading Restriction on those Restricted Shares; • any other term applying to the Award or Condition as the Board see fit. To the extent of any inconsistency, the terms and conditions of an Award or Performance Rights contained within the Plan A Invitation will prevail over any other provision of the Plan A. Prior to an Award or Performance Right being converted into Securities, a Participant does not have any interest (legal, equitable or otherwise) in any Security the subject of a Performance Right or Award other than those expressly set out in the Plan A Rules, and a Participant is not entitled to various rights that are ordinarily attached to Securities, by virtue of holding Performance Rights or Awards. The Board shall determine the extent to which an Award or Performance Right shall vest and the Vesting Date.
A relevant vested portion of an Award may be satisfied, at the discretion of the Board, in cash rather than Shares, by a payment to the Participant of the Cash Amount. The Cash Amount will be paid to the Participant net of applicable taxes and other statutory withholdings. The Company has confirmed that if the Awards are cash settled, the cash settlement will not be actioned via the Trust, the cash settlement will be actioned via the Company's payroll system as a cash bonus. Performance Rights may not be exercised unless and until such Performance Rights has vested or such earlier date on which the Participant is entitled to exercise that Performance Right in accordance with Plan A. Subject to any restrictions imposed in accordance with the Plan A or any Trading Restrictions, any new Shares issued upon the vesting of an Award will rank equally in all respects with other existing issued ordinary shares of the Company from the date of issue of those Shares. Securities will be held in the Trust as Allocated Trust Shares or Unallocated Trust Shares. Allocated Trust Shares shall be legally owned by the Trustee and beneficially owned by the Participant.
If a Participant becomes a Leaver for any reason prior to the vesting of an Award, the Participant's unvested Award will immediately lapse on the date the Participant becomes a Leaver unless the Board determines otherwise. If a Participant becomes a Leaver and at that time is holding Securities, the Participant may be required to dispose or transfer all or part of its Securities. Subject to the direction of the Board, the purchase price for the Leaver Securities shall be in the case of a Bad Leaver, 90% of the Fair Market Value of such Securities at the time of issuance; and, in the case of a Good Leaver, the Fair Market Value of such Securities at the time the Participant became a Leaver. If a Liquidity Event arises or is deemed by the Board to have arisen, the Board may, in respect of the Participant's Award or Performance Rights, determine in its absolute discretion the treatment of unvested Awards or Performance Rights and the timing of such treatment (which may include Awards or Performance Rights being settled via payment of the Cash Amount). Participant's Award or Performance Rights will lapse upon the earliest to occur of (as applicable):
• failure to satisfy any Condition; • circumstances which shall give rise to lapse in Performance Rights, or in the case of Shares, forfeiture as stated in the Plan A Invitation; • an event or circumstance describe within the Plan A Rules which shall result in the lapsing of an Award (whether automatically or as the Board determines); and • the date being XX years from the Grant Date. The Company will not invite foreign employees to participate in Plan A. Plan B Plan B was established to allow employees, directors, or individual contractors to acquire shares at market value using their own funds. The purpose of Plan B is to assist in the reward, retention and motivation of Eligible Persons; link the reward of Eligible Persons to Shareholder value creation; and align the interests of Eligible Persons with Shareholders by providing an opportunity to Eligible Persons to earn rewards via an equity interest in the Company based on creating Shareholder value. The Board may in its sole and absolute discretion determine that an Eligible Person may participate in Plan B.
The Company may, at the sole and absolute discretion of the Board, offer and issue to an Eligible Person Plan Shares provided under Plan B, as set out in the Plan B Invitation Letter (Plan B Invitation). To the extent that there is any inconsistency between Plan B and the terms of the Plan B Invitation, the Plan B Invitation prevails. The terms and conditions of an offer of Plan Shares under Plan B to each Eligible Person will be determined by the Board in its sole and absolute discretion and include as a minimum: • that the offer is expressed to be made under Division 1A of Part 7.12 of the Corporations Act • the number of Plan B Shares • consideration to be paid by an Eligible Person for the Plan Shares • the Grant Date • any rights attaching to the Plan Shares • any disposal restrictions attaching to the Plan Shares • whether the Plan Shares shall be allocated to the Trust and held by the Trustee as Allocated Trust Shares to be managed by the Trustee, and
• the Participants subscribing for Plan Shares must agree by executing an Accession Deed, to be bound by a Shareholders' Agreement. As set out in the Plan B Invitation Letter delivered to the Eligible Person. Plan Shares shall be recorded in the register of members of the Company and will rank pari passu in all respects of the Shares of the same class for the time being on issue. A Participant will be entitled to any dividends declared and distributed by the Company on the Plan Shares which, at the closing date or determining entitlement to such dividends, are standing to the account of the Participant (or a Trustee for and on behalf of the Participant). A Participant may exercise any voting rights attaching to Plan Shares held by the Participant (or a Trustee for and on behalf of the Participant).
If the Plan B Invitation provides that any Plan Shares are subject to any restrictions as to the disposal or other dealing by a Participant for a period, the Board may implement any procedure it deems appropriate to ensure the compliance by the Participant with this restriction, including but not limited to procuring a holding lock be noted on the register of members in respect of Plan B Shares or using the Trust to hold the Plan Shares during the relevant restriction period. For so long as an Plan B Share is subject to any disposal restrictions under Plan B, the Participant will not transfer, encumber or otherwise dispose of, or have a Security Interest granted over that Plan Share, or take any action or permit another person to take any action to remove or circumvent the disposal restrictions without the express written consent of the Company. Subject to any restrictions as to the disposal or other dealing by a Participant over Plan Shares as imposed by the Board from time to time, a Participant may not dispose or deal with Plan shares unless and until the occurrence of a Sale Event the subject of which is a Participant's Shares.
For the avoidance of doubt, the imposition of a disposal restriction on a Plan Share held by a Participant will not affect the Participant's entitlement to receive a notice of, or to vote or attend at, a meeting of the members of the Company, and to receive any dividend declared by the Company during the relevant disposal restriction period on that Plan Share. In respect of the Trust, the Board may implement such procedures it deems appropriate to give effect to the intent of this clause. Subject to the Plan B Invitation Letter, where a Participant becomes a Good Leaver, unless the Board in its sole and absolute discretion determines otherwise in its sole and absolute discretion, the Participant must, at the discretion of the Board: • dispose or transfer all or part if its Plan B Shares to a Shareholder or third party nominated by the Board, or • do everything necessary to facilitate a Buy-Back of some or all of Plan B Shares. Subject to the Plan B Invitation Letter, where a Participant becomes a Bad Leaver, unless the Board in its sole and absolute discretion determines otherwise, that participant must, at the direction of the Board:
• dispose or transfer all or part of its Plan B Shares to a Shareholder or third party nominated by the Board; or • do everything necessary to facilitate a Buy-Back or some or all of Plan B Shares. • If the Bad Leaver is a beneficiary pursuant to the Trust, then the Trustee must take all steps within its control to ensure that the Trust Shares are dealt with in accordance with Plan B. The Company may at any time Buy-Back Plan Shares at the direction of the Board held by a Participant for an amount agreed with the Participant at any time, or, where there is a Sale Event, the Company may Buy-Back Plan Shares at the price or prices offered by the bidder under the takeover offer, and, or, as considered appropriate by the Board in its reasonable opinion in light of such an offer. The Company will not invite foreign employees to participate under Plan B.
Only Shares that the Trust has already acquired and are unallocated or Shares other Shareholders have nominated as available for sale will be available to be acquired under Plan B. Plan B Rules contemplate an issue of new shares and / or transfer of existing Shares from other Shareholders. For issuance of new shares, upon receipt of a signed copy of the Application and receipt of payment for such Plan Shares, its acceptance by the Company, the expiry of the waiting period, the Company will issue the Plan Shares to the Participant. Such shares shall be held by the Trustee of the Trust. For shares that other Shareholders have nominated as available for sale, the Trustee will receive the funds from the employee and use these funds to acquire the shares from the selling Shareholder. The Company will engage an independent valuer to value the shares at the time of transfer or issue. Company A Employee Share Trust The Company established Company A Employee Share Trust to acquire, hold and provide the shares needed to satisfy the provision of Awards or Shares under the Plans. The objects of the Trust are for the sole purpose of:
• obtaining Shares in the Company or rights to acquire Shares, • providing beneficial interests in those shares or rights to acquire Shares to participants under the Plans, and • conducting other activities that are merely incidental to these purposes, as the Trustee considers necessary, consistent with the definition of 'employee share trust' in subsection 130-85(4) of the ITAA 1997. If there is any inconsistency between the Trust Deed and the Rules, the terms of the Trust Deed prevail to the extent of the inconsistency. The Trustee has agreed to comply with the Rules and the terms of any invitation provided to a Participant in a Plan by the Company under the Rules. The Company may not acquire any interest in the Capital (or corpus) and may not become entitled to any Income of the Trust Fund. Upon termination of the Trust, the Company acknowledges that neither the Company nor any member of the Group has any entitlement to any part of the Trust Fund, including any Shares that form part of the Trust Fund, at any time. Trustee's powers and responsibility
The Company and the Trustee agree that the Trust will be managed and administered so that it satisfies the sole activities test for the purposes of subsection 130-85(4) of the ITAA 1997 and be an 'employee share trust' as defined in subsection 995-1(1) of the ITAA 1997. The Trustee in its reasonable discretion has the full power to do all things a trustee is permitted to do by law in respect of the Trust and the Trust Fund, including the following (but are not limited to): • to enter into and execute all contracts, deeds and other documents and do all acts, matters or things it in its discretion considers necessary to give effect to and carry out the trusts, authorities, rights, powers and discretions conferred on the Trustee under this Deed • to subscribe for, purchase or otherwise acquire Shares or rights which the Trustee is authorised by this Deed to acquire on such terms and conditions as it thinks fit, and do all things incidental to this activity
• to sell or otherwise dispose of Shares or rights which the Trustee is authorised by this Deed to dispose of on such terms and conditions as directed by the applicable Rules, and do all things incidental to this activity • to receive dividends or distributions on General Trust Property or Allocated Trust Property and to apply those amounts in accordance with this Deed • to transfer the General Trust Property or Allocated Trust Property to the Participants and apply the proceeds of sale in accordance with this Deed and the applicable Rules • to sell any rights relating to the Shares and apply the proceeds of sale in accordance with this Deed • to delegate to any person or company the exercise of all or any of the rights, powers or discretions conferred on the Trustee under this Deed and to execute any power of attorney or other instrument necessary to effect that delegation
• to employ or engage, and at its discretion, remove or suspend custodians, trustees, managers, employees or other agents, determine the powers and duties to be delegated to them, and pay any remuneration to them as it thinks fit • to rely on any document provided by a Participant, the form of which has been approved by the Company, whether signed by the Participant or otherwise • to take and act upon the advice or any opinion of any legal practitioner or other professional adviser (in relation to this Deed and the application Rules on the operation of the Trust or otherwise) and act on that advice in any manner it thinks fit without being liable in respect of any act done or omitted to be done by it in accordance with such advice or opinion • to open and operate any bank account, retain on current or deposit account at any bank any money which it considers proper, and make regulations for the operation of those bank accounts including the signing and endorsing of cheques with such accounts
• to commence, conduct, defend, compound, settle, abandon or otherwise compromise any legal proceedings relating to the Trust or Trust Fund and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Trustee in respect of the Trust • to refer any claim or demand by or against the Trustee in respect of the Trust to arbitration and to observe and perform an award under arbitration • make rules or adopt procedures, not inconsistent with the provisions of this Deed and the applicable Rules, in relation to the calculation and rounding off of the contributions, dividends, interest or other amounts, or to the determination of periods of time • undertake activities that involve bookkeeping, preparing financial, tax and regulatory statements, and other record-keeping and administrative actions necessary to operate the Trust and undertake the activities described in paragraphs 130-85(4)(a), (b) and (c) of the ITAA 1997
• borrow money for the purpose of acquiring Shares or rights in the Company, where no security is provided over the assets of the Trust and the interest payable on such a loan is not more than arm's length commercial rates • receive and immediately distribute Shares under a demerger or take action in order to participate in a takeover or restructure contemplated by section 83A-130 of the ITAA 1997 • to do all acts, matters or things which the Trustee in its discretion considers necessary or expedient to administer and maintain the Trust and the Trust Fund in accordance with this Deed and the applicable Rules, or for the purpose of giving effect to, and carrying out, the trusts, powers and discretions conferred on the Trustee by this Deed or the law. General Trust Property The Trustee holds General Trust Property on trust for the Participants to be nominated by the Company from time to time in accordance with the Trust Deed and the relevant Plan until termination of the Trust under the Trust Deed or by operation of law.
The Trustee may apply or set aside any part of the General Trust Property for the benefit of the Participants, in accordance with the Trust Deed and the relevant Plan. If there is Income from General Trust Property at the end of any Financial Year that is not paid, applied, set aside or appropriated to any Participant, then the Income will accumulate in the Trust Fund (in which case the Trustee is authorised to pay from the Trust Fund any amount of tax that may be payable by the Trustee in respect of that Income) for the general purpose of the Trust. Unless otherwise determined by the Board, if Shares are held as part of the General Trust Property, the Trustee: • holds all dividends and other distributions (including interest) received in respect of the Shares as part of the Trust Fund and may apply those amounts: - in repaying any loans from a member of the Group - in satisfactions of any Trust Expenses - acquiring Shares for the purpose of the Plans - otherwise must hold those amounts on trust for allocation to future Participants
• must not exercise any voting rights in relation to any unallocated Shares; • must not participate in any rights issues in respect of unallocated Shares; • may receive dividends in respect of unallocated Shares and interest from bank accounts and use those funds to: - acquire additional Shares for purposes of the Plan - pay necessary and incidental costs of administering the Trust and undertaking the activities described in subsection 130-85(4)(a), (b) and (c) of the ITAA 1997, including without limitation paying costs relating to the audit of the Trust and fees for professional services provided to the Trustee in relation to the Trust - pay interest on loans provided to the Trust for the acquisition of Shares or rights in the Company, where the interest payable does not exceed arm's length commercial rates. Allocated Trust Property The Trustee agrees to set aside and hold for the benefit of identified Participants (each an Allocated Trust Property Beneficiary) any part of the Trust Fund (Allocated Trust Property):
• subject to the conditions as may be required by the Rules, including any terms and conditions of any grant made pursuant to those Plans • as the Board may request from time to time, to the extent that request or stipulation is not inconsistent with the Rules. The Trustee must act at all times in accordance with the Rules of the relevant Plan and; • must comply with the relevant Rules, including any terms and conditions of any grants made under those Rules, and so far as is reasonable, with any requests made by the Board; • must maintain written records of the identity of each Allocated Trust Property Beneficiary, and the relevant Allocated Trust Property held on behalf of each. Subject to the terms and conditions imposed by the Board and the Rules of the relevant Plan, the Trustee must, at the request of an Allocated Trust Property Beneficiary on whose behalf an identified part of the Allocated Trust Property is held, transfer that part of the Allocated Trust Property to the Allocated Trust Property Beneficiary.
If Shares that form part of the Trust Fund are held on trust for a specified Allocated Trust Property Beneficiary, the Allocated Trust Property Beneficiary will become absolutely entitled to the Shares including all dividends and other distributions or benefits received or distributed in respect of the Shares as against the Trustee in accordance with and at the time(s) provided under the Rules and the relevant Plan. If Shares that form part of the Trust Fund are held on trust for an Allocated Trust Property Beneficiary: • the Allocated Trust Property Beneficiary is presently entitled to receive all dividends and other distributions, bonus issues or other benefits payable to the Trustee in respect of those Shares • the Allocated Trust Property Beneficiary may direct the Trustee in writing how to exercise the voting rights attached to those Shares, either generally or in respect of a particular resolution, and in the absence of such a direction, the Trustee may not exercise any voting rights attaching to those Shares
• any bonus shares that are issued in respect of those Shares will be issued to the Trustee and held for the Allocated Trust Property Beneficiary on the same terms and conditions as the underlying Shares in respect of which they were issued and transferred to the Allocated Trust Property Beneficiary for no further consideration when those underlying Shares are transferred. The Trustee must seek instructions from the Allocated Trust Property Beneficiary as to how the Trustee should deal with rights associated with rights that arise from Shares that form part of the Allocated Trust Property. If no instructions are given by the Allocated Trust Property Beneficiary, or they do not provide sufficient funds to exercise all of the rights in respect of shares allocated to them, the Trustee must: • (where possible) use reasonable endeavours to sell those rights or the balance of those rights (if applicable) • must pay the proceeds of sale to that Allocated Trust Property Beneficiary • has no obligation to maximise the sale price of the rights • may aggregate the rights to be sold
• may attribute sale price to each right sold equal to the average price for each right sold by the Trustee. An Allocated Trust Property Beneficiary may forfeit any right or interest in some or all of the Allocated Trust Property that is held on their behalf (including allocated Shares, dividends and distributions in respect of allocated Shares, or cash) in accordance with the relevant Rules. Notice of the forfeiture will be given to the Trustee by the Company. The forfeited Allocated Trust Property will be held as General Trust property, unless the Rules or the relevant Plan provide otherwise. Termination Upon termination of the Trust (by the Board's resolution), the Trustee must, as soon as reasonably practicable, wind up the Trust and transfer the Trust Fund or the proceeds on sale of the Trust Fund: • in relation to Allocated Trust Property, to the appropriate Allocated Trust Property Beneficiary; • in relation to General Trust Property: - transfer any Shares to one or more Participants at the discretion of the Trustee, having regard to any corresponding request from the Board;
- sell or convert into money any remaining investments of the Trust; - pay out any debts and liabilities in relation to the Trust; or - the balance of the Trust to be distributed at the discretion of the Trustee, having regard to and not inconsistent with the object of the Trust, and no part of the balance can be repaid by the Trustee to the Group. Relevant legislative provisions Income Tax Assessment Act 1936 section 95 Income Tax Assessment Act 1936 section 99A Income Tax Assessment Act 1997 Division 83A Income Tax Assessment Act 1997 Subdivision 83A-C Income Tax Assessment Act 1997 section 83A-130 Income Tax Assessment Act 1997 section 83A-325 Income Tax Assessment Act 1997 section 104-75 Income Tax Assessment Act 1997 subsection 130-85(4) Income Tax Assessment Act 1997 paragraph 130-85(4)(a) Income Tax Assessment Act 1997 paragraph 130-85(4)(b) Income Tax Assessment Act 1997 paragraph 130-85(4)(c) Income Tax Assessment Act 1997 section 130-90 Income Tax Assessment Act 1997 subsection 995-1(1)