Edited version of your private ruling

Authorisation Number: 1012509629643

Ruling

Subject: Employee Share Schemes and Employee Share Trusts

Question 1

Will the irretrievable cash contributions made by Company A to Company B as trustee for (Trustee) the Company A Employee Share Trust (EST) to fund the acquisition of Company A shares by the EST in accordance with the deed of trust entered into between Company A and the Trustee (Trust Deed) be assessable income of the EST?

Answer

No.

Question 2

Will a capital gain or capital loss that arises for the Trustee of the EST at the time the participants become absolutely entitled to the Award Shares and company A shares (acquired on exercise of Options or Performance Rights to which Division 83A of the ITAA 1997 applies) be disregarded under section 130-90 of the Income Tax Assessment Act 1997 (ITAA 1997) if the participants 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:

1 July 2013 to 30 June 2014

1 July 2014 to 30 June 2015

1 July 2015 to 30 June 2016

1 July 2016 to 30 June 2017

1 July 2017 to 30 June 2018

Relevant facts and circumstances

Company A is the head entity of an Australian income tax consolidated group, and is listed on the Australian Securities Exchange (ASX). Company A is a full service stockbroking firm offering its investment and financial advisory services to private, institutional and corporate clients.

In 200X Company A implemented two employee share schemes, namely the Long Term Incentive Plan (LTIP) and the Employee Share Plan (Tax Exempt) (ESP) (collectively referred to as the Company A Equity Plans).

In July 20YY Company A established the Company A EST to facilitate the provision of shares in Company A to eligible staff under the Company A Equity Plans. The EST is managed by the Trustee and governed by the Company A EST Deed.

Whilst the Trustee is a subsidiary member of the Company A income tax consolidated group, for the purposes of the scheme to which this ruling relates, it will be acting solely in its capacity as Trustee. Further, the scheme will be an arm's-length arrangement and is intended to facilitate Company A's compliance with Corporations Law requirements.

Company A wishes to promote employee share ownership through the Company A Equity Plans, with ultimately, an anticipated positive impact upon company productivity and profitability.

Operation of the LTIP

The key features of the LTIP are as follows:

· It is at the absolute discretion of the Board of Company A (Board) to extend an invitation for the grant of Options or Performance Rights (as defined in the Long Term Incentive Plan Rules (LTIP Rules) and referred to collectively as Rights) over fully paid ordinary shares in Company A (Company A shares) to an eligible Director, Executive or Advisor of Company A (as defined in the Plan Rules and referred to collectively as an Executive).

· Invitations will be extended on such terms and conditions as the Board decides from time to time, including, amongst other things, whether or not Performance Rights are automatically exercisable on the Vesting Date (defined below).

· Under the present LTIP Rules, an Exercise Price (as defined in the LTIP Rules) is payable to Company A on the exercise of an Option whereas no Exercise Price is payable upon the exercise of a Performance Right.

· Where an Exercise Price is paid under an Option to acquire Company A shares, then Company A will treat this receipt as assessable income.

· Exercise of an Option or Performance Right entitles the Executive to one Company A share. Company A shares allotted under the LTIP will rank pari passu in all respects with ordinary shares outstanding in Company A.

· Rights will vest and become exercisable on or after a date pre-determined by the Board (Vesting Date) provided the Executive remains employed by Company A at the nominated Vesting Date. However, subject to the specific terms and conditions of any one grant as set by the Board, and as defined in the LTIP Rules (Vesting Conditions), the Board may at its discretion and in certain circumstances, decide to accelerate the vesting of all or part of the Rights (Accelerated Vesting Date).

· Following the Vesting Date or Accelerated Vesting Date (as the case may be) the vested Rights may be exercised by the Executive subject to any exercise conditions as defined in the LTIP Rules (Exercise Conditions) attaching to the grant, and in the case of Options, the payment of the Exercise Price.

· Rights will lapse upon the earliest of any of the conditions stated in the LTIP Rules.

· An Executive may not sell, assign, transfer or otherwise deal with or grant a Security Interest (as defined in the Plan Rules) over Rights granted to them without the prior consent of the Board in its absolute discretion.

· Once all Vesting Conditions and Exercise Conditions, as determined by the Board from time to time, have been satisfied, the Executive will be entitled to receive Company A shares.

· Once Rights have been exercised, the Trustee of the EST will acquire the Company A shares on behalf of the Executive (by purchase either on-market or via a new share issue). The Company A shares acquired will relate to both Options and Performance Rights acquired prior to, and after, the establishment of the EST.

· Whilst Company A shares are held on trust in the EST, the Executive will be entitled to exercise the voting rights attaching to those Company A shares, and subject to the LTIP Rules, will be entitled to dividends.

· The Executive may, subject to Board approval, have legal title in the Company A shares held by the Trustee on their behalf in the EST, transferred to them by submitting an appropriate withdrawal notice to Company A in accordance with clause 11 of the LTIP Rules. These Company A shares may remain subject to restrictions on dealings in accordance with the LTIP Rules.

Operation of the ESP

· Pursuant to the Employee Share Plan (Tax Exempt) Rules (ESP Rules) Company A may from time to time offer ordinary shares in Company A (Award Shares) to certain employees of a Group Company (defined in the ESP Rules as being Company A or any of it's subsidiaries).

· Pursuant to the ESP Rules, the Board will determine the employees who are eligible to participate in the ESP and it must do so on a non-discriminatory basis.

· An offer of Award Shares made to an employee must be in writing and on such terms as the Board determines from time to time. An offer can then be accepted by completing and returning a signed acceptance form to Company A.

· In accordance with the ESP Rules, Award Shares granted to an employee will be subscribed for, purchased and / or allocated by the Trustee in accordance with the Board's instructions and held by the Trustee in the EST on trust for the benefit of the employee subject to the terms and conditions of the EST set out in the Trust Deed.

· Clause 9 of the ESP Rules provides that whilst Award Shares are held on trust in the EST, the participating employees have specific entitlements. These include rights to dividends, bonus entitlements, participation in any new share issue, dividend reinvestment plans and voting rights.

· Subject to the satisfaction of the restriction on dealing in Award Shares set out under the ESP Rules (which, amongst other things, includes a restriction that the participating employee is not permitted to dispose of etc an Award Share before the end of the period three years after the issue, acquisition or allocation of the Award Share) , a participating employee may submit a withdrawal notice to Company A (in accordance with Clause 6 of the ESP Rules) in respect of some or all of the Award Shares held on their behalf. Pursuant to the ESP any withdrawal notice lodged with the Board cannot be reasonably refused.

(An Executive to whom Rights have been granted and an employee to whom Award Shares have been granted are collectively referred to as a Participant (in the singular) or Participants (in the plural) as the context so requires.)

All Participants under the Company A Equity Plans are employees of Company C. Company C is part of the Company A income tax consolidated group.

Operation of the EST

· Pursuant to Recital B of the Trust Deed, the EST has been established for the sole purpose of subscribing for or acquiring, delivering, allocating and holding Company A shares and Award Shares under the Company A Equity Plans (as well as any future plans established by Company A requiring shares to be held by the Trustee under the terms of the EST - see definition of the term 'Plan or Plans' in the Trust Deed).

· The EST is funded by cash contributions from Company A.

· Pursuant to the Trust Deed the Trustee is not permitted to carry out activities that are not matters or things which are necessary or expedient to administer and maintain the EST. In addition, it is not permitted to carry out activities which result in the Participants in the Company A Equity Plans being provided with additional benefits other than the benefits that arise from the relevant plan rules.

· Pursuant to the Trust Deed the Trustee of the EST is empowered to acquire Company A shares and Award Shares in Company A either on-market or via subscription for new shares in Company A.

· Pursuant to the Trust Deed the Board, on behalf of a Participant, will instruct the Trustee, by way of notice in writing, to subscribe for, purchase and/or allocate the requisite number of Company A shares or Award Shares in Company A specified in the notice.

· Pursuant to the Trust Deed, Company A must provide the necessary funds to the Trustee for the purpose of enabling it to acquire Company A shares or Award Shares as specified in the notice in accordance with the Trust Deed.

· The Trustee will, in accordance with instructions received pursuant to the LTIP Rules and ESP Rules, acquire, deliver and allocate Company A shares and Award Shares for the benefit of Participants provided that the Trustee receives, when required and necessary, sufficient payment from a Participant to subscribe for or purchase such shares and/or has sufficient unallocated trust shares available.

· The Trustee (or any other party which the Trustee considers appropriate) will establish and maintain a separate Trust Share Account or record in respect of each Participant in accordance with the Trust Deed.

· While Award Shares or Company A shares are held in trust, the Participant will be entitled to dividend and voting rights. These shares may be subject to a sale restriction under an ASX administered holding lock. By written notice, Participants can apply for legal title to the appropriate Company A shares or Award Shares held in the EST to be transferred to them.

· All funds received by the Trustee from Company A will constitute accretions to the corpus of the trust and no Participant will be entitled to receive such funds. The contributions will not be repaid to Company A unless they are used to subscribe for Company A shares or Award Shares.

· Where an amount paid by Company A to the Trustee in respect of the acquisition of Company A shares or Award Shares for the benefit of a Participant is in excess of the amount required by the Trustee to acquire those shares, Company A may require the Trustee to apply such amount to acquire, deliver or allocate the shares in accordance with the Trust Deed, the relevant plan rules or the relevant terms of participation or deposit the funds into any account opened and operated by the Trustee.

The Trustee of the EST holds all shares (that is, Company A shares and Award Shares) pursuant to each Company A Equity Plan on capital account.

The applicant has advised that in a limited number of cases, Options granted under the LTIP will be issued at an Exercise Price that is at a sufficient premium to the Company A share price at grant such that they will have a nil value for tax purposes based on the regulations made for the purposes of Division 83A of the ITAA 1997. As a result, Division 83A of the ITAA 1997 will not apply to these Options.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 10-5

Income Tax Assessment Act 1997 Division 83A

Income Tax Assessment Act 1997 Section 104-75

Income Tax Assessment Act 1997 Section 104-85

Income Tax Assessment Act 1997 Section 106-50

Income Tax Assessment Act 1997 Section 130-90

Income Tax Assessment Act 1997 Section 130-85

Income Tax Assessment Act 1936 Section 95

Reasons for decision

Question 1

Section 95 of the Income Tax Assessment Act 1936 (ITAA 1936) defines net income in relation to a trust as follows, insofar as it is relevant:

net income , in relation to a trust estate, means 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

Subsection 6-5(1) of the ITAA 1997 states:

Your assessable income includes income according to ordinary concepts, which is called ordinary income.

Further, subsection 6-10(1) of the ITAA 1997 states:

Your assessable income also includes some amounts that are not ordinary income.

Note: These are included by provisions about assessable income. For a summary list of these provisions, see section 10-5.

None of the provisions listed in section 10-5 of the ITAA 1997 are relevant in the present circumstances. Therefore non-refundable contributions made by Company A to the Trustee will not be assessable income under section 6-10 of the ITAA 1997. They will only be included in the calculation of the net income of the EST under section 95 of the ITAA 1936 if they are assessable as income according to ordinary concepts under section 6-5 of the ITAA 1997.

The Trust Deed provides that all contributions by Company A to the EST for the purpose of acquiring Company A shares and Award Shares constitute accretions to the corpus of the EST and that funds provided to the EST in excess of the amount required by the Trustee will not be repaid to Company A. Further, the applicant has stated as a fact that the Trustee of the EST holds all Company A shares and Award Shares pursuant to the Company A Equity Plans on capital account.

The non-refundable cash contributions made by Company A to the Trustee of the EST to fund the acquisition of Company A shares and Award Shares in accordance with the Trust Deed will not be assessable income of the EST pursuant to sections 6-5 or 6-10 of the ITAA 1997. 

Note that the Trust Deed provides that whilst the Trustee is not entitled to receive any fees, commissions or remuneration in respect of the performance of its obligations as Trustee of the EST, Company A may pay to the Trustee from its own resources any fees, commission or remuneration as Company A and the Trustee may agree from time to time. Such receipts will be assessable income of the Trustee in contrast to the irretrievable contributions made to facilitate the acquisition of Company A shares and Award Shares.

Note also that income derived by the employment of the property that is the fund or corpus of the trust and which the Trustee holds on trust will be income according to ordinary concepts. (See Federal Commissioner of v. Everett (1980) 143 CLR 440; (1980) 10 ATR 608; 80 ATC 4076 for a discussion of the distinction between the trust income and corpus)

Question 2

When a Participant becomes absolutely entitled to the Company A shares and Award Shares as against the Trustee, CGT Event E5 will occur and under section 104-75 of the ITAA 1997, the Trustee will make a capital gain or loss. However, section 130-90 of the ITAA 1997 may operate to disregard that gain or loss where specified conditions are satisfied.

Section 130-90 of the ITAA 1997

Section 130-90 of the ITAA 1997 states:

Shares held for future acquisition under employee share schemes

130-90(1A)

Disregard any capital gain or capital loss made by an employee share trust to the extent that it results from a CGT event if:

(a)  immediately before the event happens, an ESS interest is a CGT asset of the trust; and

(b) either of the following subparagraphs applies:

(i) the event is CGT event E5, and the event happens because a beneficiary of the trust becomes absolutely entitled to the ESS interest as against the trustee;

(ii) the event is CGT event E7, and the event happens because the trustee disposes of the ESS interest to a beneficiary of the trust; and

(c) Subdivision 83A-B or 83A-C (about employee share schemes) applies to the ESS interest.

Shares held to satisfy the future exercise of rights acquired under employee share schemes

130-90(1)

Disregard any capital gain or capital loss made by an employee share trust, or a beneficiary of the trust, to the extent that it results from a CGT event, if:

(a)  the CGT event is CGT event E5 or E7; and

(b)  the CGT event happens in relation to a share; and

(c)  the beneficiary had acquired a beneficial interest in the share by exercising a right; and

(d)  the beneficiary's beneficial interest in the right was an ESS interest to which Subdivision 83A-B or 83A-C (about employee share schemes) applied.

130-90(2)

Subsection (1A) or (1) does not apply if the beneficiary acquired the beneficial interest in the share for more than its cost base in the hands of the employee share trust at the time the CGT event happens.

Section 130-90(1A) applies to shares held for future acquisition under employee share schemes (as in the ESP) while section 130-90(1) applies in respect of shares held to satisfy the future exercise of rights acquired under employee share schemes (as in the LTIP).

The elements of each of these provisions needs to be satisfied in order for them to apply to the schemes (the LTIP and ESP) described in this ruling. Accordingly, each element will now be considered below by the Commissioner.

Firstly, as both provisions apply to capital gains or capital losses made by an employee share trust in the context of those provisions, the Commissioner needs to be satisfied that the EST is an employee share trust for the purposes of those provisions.

Employee share trust

Subsection 130-85(4) of the ITAA 1997 states:

An employee share trust, for an employee share scheme, is a trust whose sole activities are:

(a)  obtaining shares or rights in a company; and

(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).

In respect of Rights, the right to acquire a share and the beneficial interest in the share that is acquired pursuant to the exercise of the right are both ESS interests within the meaning of subsection 83A-10(1) of the ITAA 1997. In respect of Award Shares, the beneficial interests in the shares acquired upon their grant, are also ESS interests.

An employee share scheme is defined in subsection 83A-10(2) of the ITAA 1997 as a scheme under which ESS interests in a company are provided to employees, or associates of employees (including past or prospective employees) in relation to the employees' employment.

The LTIP and ESP are employee share schemes within the meaning of subsection 83A-10(2) of the ITAA 1997 because they are schemes under which rights to acquire Company A shares and Award Shares respectively in the company are provided to employees in relation to the employees' employment.

Under the LTIP and ESP, the employer has established the EST to acquire shares in the company (Company A) and to allocate those shares to employees to satisfy the Rights and Award Shares acquired under the employee share schemes, that is, the LTIP and ESP respectively. Note that in respect of Rights, the beneficial interest in the share acquired on exercise of the Option or Performance Right is itself provided under an employee share scheme because it is provided under the same scheme under which the Rights are provided to the employee in relation to the employee's employment, being an employee share scheme as defined in subsection 83A-10(2) of the ITAA 1997

Therefore, paragraphs 130-85(4)(a) and (b) of the ITAA 1997 are satisfied because:

· the EST acquires shares in a company (Company A); and

· the EST ensures that ESS interests as defined in subsection 83A-10(1) of the ITAA 1997, being beneficial interests in those Company A shares and Award Shares, are provided under an ESS (LTIP and ESP), as defined in subsection 83A-10(2) of the ITAA 1997, by allocating those Company A shares and Award Shares to the employees in accordance with the governing documents of the respective scheme.

Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 will require a Trustee to undertake incidental activities that are a function of managing the employee share scheme and administering the trust.

For the purposes of paragraph 130-85(4)(c) of the ITAA 1997, activities which are merely incidental, as set out in ATO ID 2010/108, include:

· the opening and operation of a bank account to facilitate the receipt and payment of money

· the receipt of dividends in respect of shares held by the trust on behalf of an employee, and their distribution to the employee

· the receipt of dividends in respect of unallocated shares and using those dividends to acquire additional shares for the purposes of the employee share scheme

· dealing with shares forfeited under an employee share scheme including the sale of forfeited shares and using the proceeds of sale for the purposes of the employee share scheme

· the transfer of shares to employee beneficiaries or the sale of shares on behalf of an employee beneficiary and the transfer to the employee of the net proceeds of the sale of those shares

· the payment or transfer of trust income and property to the default beneficiary on the winding up of the trust where there are no employee beneficiaries

· receiving and immediately distributing shares under a demerger.

Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered merely incidental.

For the purposes of the EST, the powers of the Trustee are set out in the Trust Deed. A clause in the Trust Deed limits the powers given to the Trustee under the Trust Deed in another clause so as to ensure that the powers of the Trustee under the Trust Deed are exercised in accordance with the purpose of the Trust Deed as evidenced in the Recitals, that is, for the '..sole purpose of obtaining shares for the benefit of Participants..'. These provisions collectively make it clear that the Trustee can only use the contributions received exclusively for the acquisition of Company A shares and Awards Shares for eligible employees and Executives in accordance with the Company A Equity Plans. To this end, all other duties/general powers listed in the Trust Deed are considered to be merely incidental to the functions of the Trustee in relation to its dealing with the Company A shares and Award Shares for the sole benefit of Participants in accordance with the LTIP and ESP respectively.

Therefore, the EST is an employee share trust as the activities of the EST in acquiring and allocating ESS interests meet the requirements of paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 as concluded above, and its other activities (general powers) are merely incidental to those activities in accordance with paragraph 130-85(4)(c) of the ITAA 1997.

Subparagraph 130-90(1A)(a) of the ITAA 1997

Award Shares held by the EST are ESS interests which are CGT assets of the EST. Therefore paragraph 130-90(1A)(a) is satisfied.

Subparagraph 130-90(1A)(b)(i) of the ITAA 1997 and paragraph 130-90(1)(a) of the ITAA 1997

CGT event E5 is the CGT event that will apply under the terms of each of the ESP and LTIP at the time that a Participant becomes absolutely entitled to Award Shares and Company A shares respectively, as against the Trustee. Therefore subparagraph 130-90(1A)(b)(i) of the ITAA 1997 and paragraph 130-90(1)(a) of the ITAA 1997 will be satisfied.

Paragraph 130-90(1)(b) of the ITAA 1997

Section 995 of the ITAA 1997 defines a share to mean a share in the capital of a company. An ordinary share in Company A held by the Trustee and to which a Participant is entitled to upon the exercise of a Performance Right or Option is a share in the capital of a company (Company A). Accordingly, paragraph 130-90(1)(b) is satisfied as CGT event E5 happens in relation to a share for the purposes of that paragraph.

Paragraph 130-90(1)(c) of the ITAA 1997

Paragraph 130-90(1)(c) is satisfied as a Participant will have acquired a beneficial interest in a share (in Company A) upon exercising of a Performance Right or Option granted under the LTIP.

Paragraph 130-90(1A)(c) of the ITAA 1997 and Paragraph 130-90(1)(d) of the ITAA 1997

Subsection 83A-20(1) of Subdivision 83A-B of the ITAA 1997 states:

This Subdivision applies to an *ESS interest if you acquire the interest under an *employee share scheme at a discount.

The term 'employee share scheme' is defined in subsection 83A-10(2) of the ITAA 1997. Subsection 83A-10(2) states:

An employee share scheme is a *scheme under which *ESS interests in a company are provided to employees, or *associates of employees, (including past or prospective employees) of:

(a) the company;….

in relation to the employees' employment.

For the purposes of subsection 83A-10(2) of the ITAA 1997, section 995 of the ITAA 1997 defines the term 'scheme' as follows:

scheme means:

(a) any *arrangement; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

The Company A Equity Plans are employee share schemes for the purposes of Division 83A of the ITAA 1997 as each is an arrangement/plan (scheme) under which an ESS interest, being a beneficial interest in a share of Company A or a beneficial interest in a right to acquire a beneficial interest in a share of Company A, is provided to employees or executives in relation to their employment by Company C (Company A).

Performance Rights are acquired under the LTIP at no cost.

Options may be exercised upon the payment of the Exercise Price.

Participants may or may not be required to pay an amount on grant of an Award Share.

Accordingly, prima facie Subdivision 83A-B of the ITAA 1997 will apply to Performance Rights or Options acquired under the LTIP or Award Shares granted under the ESP as pursuant to subsection 83A-20(1) of the ITAA 1997 the ESS interest (issued under the Company A Equity Plans) will be acquired under an employee share scheme (for the reasons stated immediately in the preceding paragraph) at a discount. (It should be noted however that whether a participant is ultimately taxed upfront on some or all of any discount received (under Subdivision 83A-B of the ITAA 1997) or is able to defer the timing of the inclusion of an amount in their assessable income (under Subdivision 83A-C of the ITAA 1997), will depend on which of the additional requirements in Subdivision 83A-B of the ITAA 1997 or Subdivision 83A-C of the ITAA 1997 have been satisfied. Under either circumstance subparagraph 130-90(d) of the ITAA 1997 will be satisfied).

Accordingly, all the conditions in subsection 130-90(1A) of the ITAA 1997 and subsection 130-90(1) of the ITAA 1997 have been satisfied.

Provided then (as stipulated in question 2 above) that the beneficiary does not acquire the beneficial interest in the share for more than its cost base in the hands of the EST at the time that CGT event E5 happens, subsection 130-90(2) of the ITAA 1997 will also have been satisfied.

In relation to Performance Rights, Participants will not pay any amount to acquire their ESS interests or Company A shares upon the vesting of the Performance Rights and therefore, subsection 130-90(2) of the ITAA 1997 will be satisfies in relation to Company A shares acquired by the grant of Performance Rights.

However, Participants are required to pay an Exercise Price upon vesting of an Option in order to acquire a Company A share. Likewise, it is possible that a Participant may be required to pay an amount in respect of a grant of Award Shares. Provided then, that the total Exercise Price paid by a Participant in respect of Options or the amount paid on grant of Award Shares (as stipulated in question 2 above) is not more than the cost base in the hands of the Trustee, and a Participant continues not to be required to pay/contribute any price that is more than the cost base in the hands of the Trustee under the ESP or LTIP, subsection 130-90(2) will have been satisfied.

Under these circumstances, section 130-90 of the ITAA 1997 operates to disregard any capital gain or loss made by the Trustee under CGT event E5 on any share in Company A when a Participant becomes absolutely entitled to that share.

Options with a nil value for tax purposes

As stated in the facts, some Options granted under the LTIP will have a nil value for tax purposes based on the regulations made for the purposes of Division 83A of the ITAA 1997. As a result, Subdivision 83A-B or 83A-C of the ITAA 1997 will not apply to these Options as they are not issued at a discount.

If Subdivision 83A-B or 83A-C of the ITAA 1997 cannot apply to these Options then subsection 130-90(1)(d) will not be satisfied and ultimately, section 130-90(1) of the ITAA 1997 will not apply. Accordingly, in these circumstances section 130-90 of the ITAA 1997 will not operate to disregard any capital gain or capital loss that arises for the Trustee of the EST at the time a Participant becomes absolutely entitled to the Company A shares pursuant to their Options.

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