Edited version of private advice

Authorisation Number: 1012651755009

Ruling

Subject: Employee Incentive Plans

Question 1

Will the irretrievable and non-refundable cash contributions made by The Company to The Trustee of The Company Employee Share Trust (the EST) to fund the subscription for, or acquisition of, The Company shares under the Incentive Plans, be assessable income of the EST under either section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) or section 6-10 of the ITAA 1997?

Answer

No.

Question 2

Will any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E5 happening when Participants become absolutely entitled to shares in The Company, be disregarded under:

1. current section 130-90 of the ITAA 1997 in relation to 'Pre 1 July 2009 Division 83A Share Options' and 'Division 83A Share Options', and

2. former section 130-90 of the ITAA 1997 in relation to 'Division 13A Share Options'?

Answer

Yes.

Question 3

Will any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E7 happening when The Trustee disposes of The Company shares held under the Incentive Plans to Participants who are already absolutely entitled to those shares, be included in the assessable income of The Trustee under subsection 102-5(1) of the ITAA 1997?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commenced on:

1 July 2008

Relevant facts and circumstances

Background

1. The Company carries on a business.

The Company's remuneration and incentive programs

2. The objective of The Company's employee remuneration framework is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework conforms to market practice and aligns employee rewards with achievement of strategic objectives and the creation of value for shareholders.

3. Specifically, The Company's employee remuneration strategy and supporting incentive programs aim to:

• ensure remuneration is competitive in the relevant employment market to support the attraction, motivation and retention of employees

• align employee remuneration to business outcomes which deliver value to shareholders

• drive a high performance culture by setting performance objectives and rewarding high performing individuals, and

• comply with all relevant legal requirements and appropriate standards of governance.

4. The Company currently operates Incentive Plan 1 and Incentive Plan 2 (referred to collectively as the Incentive Plans). The Company envisages the Incentive Plans will continue to be a part of its remuneration strategy for the foreseeable future.

5. A number of interests in the Incentive Plans remain unexercised and / or unvested. The incentive plan obligations, once exercised and/ or vested, will be satisfied through The Trustee of the EST.

Use of the EST to facilitate Incentive Plans

6. The Company believes that the use of an employee share trust by a company provides greater flexibility in managing capital, a streamlined approach (in part through outsourcing) to incentivising employees with shares, and assists companies to satisfy requirements imposed by the Corporations Act 2001.

7. The commercial benefits of using the EST for The Company include providing:

• The Company with capital management flexibility by being able to direct the trustee of the EST to either buy shares or to subscribe for an issue of new shares in The Company (thereby providing flexibility to manage the dilution of existing shareholders if required)

• a single vehicle for the administration of the Incentive Plans and any plans which The Company introduces in the future, and for the convenient outsourcing of the administration to a third party administrator (The Trustee of the EST) who efficiently oversees such Incentive Plans as part of their business. This outsourcing will free up internal resources, and

• an arm's length vehicle (through the use of a third party trustee) for acquiring and holding shares in The Company. This assists The Company in meeting Corporations Law requirements and managing risks associated with dealing in its own shares and potential insider trading issues.

8. Eligibility considerations for Participants include the length of service of the employee to The Company and the employee's potential contribution to the growth of The Company.

Operation of Incentive Plan 1 (IP1)

9. The objectives of IP1 are to establish a method by which eligible persons can participate in the future growth and profitability of The Company, to provide an incentive and reward for eligible persons for their contributions to The Company, and to attract and retain a high standard of managerial and technical personnel for the benefit of The Company.

10. Broadly, IP1 operates as follows:

• From time to time, the board shall determine the number of options to be set aside for the purposes of IP1.

• An eligible participant is a person who is a full-time or part-time employee of The Company, other than such a person who has given notice of resignation, or who has been given notice of termination of his or her employment, or removed from his or her position.

• The board may in its absolute discretion determine criteria to apply to an eligible participant for participation in the plan.

• Eligibility to participate in the plan does not confer a right to participate in the plan. Participation in the plan will be solely determined by the board in accordance with the rules of IP1.

• Options may be granted to eligible participants or their associates as approved by the board from time to time.

• The Company may from time to time make offers in writing to eligible participants inviting them to accept an offer of options under the plan.

• Options must be offered under the plan for no more than nominal consideration, defined to be $0.01. Historically, options have been issued for nil consideration and it is the board's intention to continue issuing options for nil consideration.

• Each share option is granted pursuant to the following terms:

• Each option entitles the holder to be issued, transferred or allocated one share on exercise of the option.

• The exercise price of an option shall be the price determined by the board in its absolute discretion prior to or on grant of the option.

• The exercise period of an option shall be the period determined by the board in its absolute discretion prior to, or on grant of the option. If no period is determined by the board then the exercise period shall be the period from the date of grant of the option to the expiry date.

• Options may not be exercised during the period of 12 months from and including the date of issue of the option (restricted period).

• Options may also be exercised at other times as set out in the rules including:

a) during a takeover period

b) at any time after a change of control event has occurred, and

c) at any time after the announcement of a proposed capital reconstruction as referred to in the rules of IP1.

• In the board's absolute discretion, options may also be exercised within 12 months of the event of the death or permanent disablement of an eligible participant, in respect of options held by or on behalf of the eligible participant.

• The board may in its absolute discretion impose vesting conditions in respect of an option on such terms as the board considers appropriate. If an option is subject to vesting conditions then the option may only be exercised if the vesting conditions relating to it have been satisfied or waived by the board in its absolute discretion.

• On expiry of the exercise period an option not exercised shall automatically lapse.

• Where a reorganisation of the issued capital of The Company occurs (including consolidation, subdivision, reduction or return), the Share Options are to be reorganised in a manner required by the listing rules and, in any case, in a manner which will not result in any benefits being conferred on holders of options which are not conferred on shareholders.

• Options may only be exercised by notice in writing to The Company which specifies the number of options being exercised and must be accompanied by payment to The Company of the exercise price for the number of options specified.

• Shares issued, transferred or allocated pursuant to the exercise of options will be dispatched within ten business days after the holder has validly exercised the options.

• All shares issued, transferred and/ or allocated upon exercise of the options will be credited as fully paid and will be of the same class and rank equally in all respects with other shares. All shares issued will be 'equity interests' for the purposes of Subdivision 974-C of the ITAA 1997.

• Generally, options will automatically lapse and be forfeited if the Participant to whom the options were first granted voluntarily resigns, is dismissed from employment or removed from his or her position during the restricted period.

• Where a Participant voluntarily resigns, the board may, in its absolute discretion, determine that the Participant may exercise options granted to that Participant within ten business days after such resignation.

• In certain circumstances as set out in the rules, options will not lapse and be forfeited if the Participant ceases employment or is removed from his or her position. The discretion will not be exercised on a routine basis to allow Participants voluntarily ceasing employment to receive their unvested options.

• Where The Trustee of the EST holds shares on behalf of a Participant:

• The dividends payable on those shares will be paid by The Company to The Trustee of the EST, and The Trustee of the EST will then pay any such dividends to the Participant.

• The Participant may direct The Trustee of the EST by notice in writing how to exercise voting rights attaching to those shares, and in the absence of such direction, The Trustee of the EST must not exercise those voting rights.

• The Company, or The Trustee of the EST (if so directed by the directors), must forward to a Participant a copy of any notices of meetings of The Company.

• Within ten business days after delivery of the exercise notice and exercise price, The Company must instruct The Trustee of the EST to subscribe for, acquire and/ or allocate the relevant number of shares specified, and The Trustee of the EST will hold those shares on behalf of the Participant in accordance with the terms of the trust deed.

• Subject to The Trustee of the EST receiving from The Company sufficient funds to acquire the shares, the board may, in its absolute discretion, instruct The Trustee of the EST to subscribe for new shares or acquire shares to be held on a Participants' behalf, or instruct The Trustee of the EST to use a combination of both alternatives.

• A Participant may submit a withdrawal notice to The Company in respect of some or all of the shares the EST holds on behalf of the Participant. The board may approve the withdrawal from the trust of all or a specified number of shares held by The Trustee of the EST on behalf of the Participant. The board must not unreasonably withhold their approval of the withdrawal.

Operation of the Incentive Plan 2 (IP2)

11. IP2 was established on, or after 1 July 2009.

12. The purpose of IP2 is to align employee compensation with returns to shareholders and assist with staff retention. It is targeted at The Company employees whose responsibilities provide them with the opportunity to significantly influence long-term shareholder value. The vesting of the Rights is subject to satisfaction of performance objectives that have been developed to create a link to shareholder value.

13. Broadly, IP2 operates as follows:

• Responsibility for the establishment and operation of IP2 rests with the board of directors of The Company.

• IP2 operates on the basis of an annual cycle, correlated to The Company's financial year. At, or prior to, the commencement of a financial year, selected employees will be provided with a potential entitlement, being an amount expressed in Australian dollars, which will be used to determine the number of Rights issued and the relevant targets.

• Rights represent a right, subject to vesting, to be issued, transferred or allocated a number of fully paid shares in The Company. Rights are granted for nil consideration, unless otherwise stated by the board.

• Upon the vesting of a performance right:

• the board must instruct The Trustee of the EST to subscribe for, acquire and / or allocate the number of shares in respect of which the Participant was entitled, on behalf of the Participant in accordance with the terms of the trust deed

• The Company, or The Trustee of the EST (by instruction from The Company), must notify the Participant that The Trustee of the EST holds the shares on the Participants' behalf, and

• there is no exercise price to be paid by the Participant in relation to the rights. Once the Rights have vested, the Participant becomes entitled to receive the specified number of shares.

• All shares issued, transferred and / or allocated upon vesting of the Rights will rank pari passu in all respects with shares then on issue. All shares issued will be 'equity interests' for the purposes of Subdivision 974-C of the ITAA 1997.

• If a Participant ceases employment with The Company and at the cessation date of employment has any Rights which remain unvested, those unvested Rights will automatically lapse, subject to the overriding discretion of the board. The discretion of the board will not be exercised on a routine basis to allow Participants voluntarily ceasing employment to receive their unvested Rights.

• A Participant may submit a withdrawal notice to The Company in respect of some or all of the shares The Trustee of the EST holds on behalf of the employee. At this point, if the board approves the withdrawal notice, The Company must direct The Trustee of the EST to transfer legal title of the shares to the Participant in accordance with the terms of the approved withdrawal notice.

• Rights granted to a Participant under IP2 may not be transferred, mortgaged, charged or otherwise dealt with by a Participant, other than in accordance with the terms of IP2, and will lapse immediately if dealt with in such a way.

• Subject to applicable laws, in the event of any reorganisation (including consolidation, subdivision, reduction or return) of the issued capital of The Company, the number of Rights a Participant has, may be adjusted by the board on any basis in its absolute discretion to ensure no advantage or disadvantage accrues to Participants.

• Where The Trustee of the EST holds shares on behalf of a Participant:

• the dividends payable on those shares will be paid by The Company to The Trustee of the EST, and The Trustee of the EST will then pay any such dividend to the Participant

• the Participant may direct The Trustee of the EST by notice in writing how to exercise voting rights attaching to those shares, and in the absence of such a discretion, The Trustee of the EST must not exercise those voting rights, and

• The Company or The Trustee of the EST (if so directed by the board) must forward to a Participant a copy of any notices of meetings of The Company.

• Where a change of control event occurs, any Rights that have been earned but remain unvested, will vest automatically.

The EST

14. The Trustee of the EST is a resident of Australia for tax purposes.

15. The Trustee of the EST is independent from The Company and is under a fiduciary duty to act in the interests of the Participants.

16. The EST Trust Deed states that The Company:

Wishes to establish a trust for the sole purpose of obtaining Shares for the benefit of Participants, including subscribing for or acquiring, allocating, holding, and delivering Shares under the Incentive Plans and other employee equity plans for the benefit of Participants.

17. The EST is intended to operate as follows:

• The EST is being established solely for the purpose of obtaining securities for the benefit of employees, including accepting the grant of, subscribing for, acquiring, holding, allocating and delivering employee shares under The Company's Incentive Plans.

• The EST will be funded by contributions from The Company (that is, for the purchase of shares in accordance with the Incentive Plans) as specified in the trust deed. In accordance with the intended operation of the Incentive Plans, contributions are likely to occur subsequent to the Participant's valid request to exercise their Share Options or the vesting of Rights.

• These funds will be used by The Trustee of the EST to acquire shares in The Company based on notification from The Company.

• Shares acquired by The Trustee of the EST will be immediately allocated to the relevant employees and held on trust on their behalf. It is not the intention of The Company to warehouse the shares for long periods of time.

• The structure of the EST and the Incentive Plans are such that shares may be dealt with at any time after the restriction period lapses, in the following manner:

• shares allocated to each employee will generally be transferred into the name of the employee (that is, legal title) upon a withdrawal notice being lodged with, and approved by the board, or

• The Trustee of the EST can sell shares on behalf of the employee, where permitted to do so by the employee, resulting in a cashless exercise for them. That is, the employee receives proceeds on sale of the shares by the EST.

• The Trustee of the EST is an external trustee acting in an independent capacity on behalf of the beneficiaries of the EST in accordance with the terms of the trust deed. The Company will pay The Trustee of the EST's costs of operation to the extent they relate to the operation of the EST which will facilitate The Company's Incentive Plans.

18. The contributions made by The Company to The Trustee of the EST are irretrievable and non-refundable in that The Trustee of the EST must use them exclusively to purchase shares in The Company for Participants. The shares then form part of the assets of the EST. To facilitate the contributions, funds will flow from the bank account of The Company into the bank account of The Trustee of the EST. The Trustee of the EST will diminish each contribution through the direct provision of remuneration to employees within five years of receiving the contribution.

19. The contributions can only be used to acquire shares on behalf of the Participants.

20. The Company will fund the EST on an ongoing (at least annual) basis as needed.

21. The amount of contribution made to The Trustee of the EST by The Company will equal the fair market value of the shares to be acquired for employees.

22. The Company has no beneficial interest in the EST.

23. The Company has incurred and will continue to incur costs in relation to the implementation and on-going administration of the EST associated with services provided by The Trustee of the EST.

24. The Trust Deed provides:

The Trustee may pay any Tax, fees, costs and expenses incurred in the establishment, maintenance or administration of the trusts declared in this Deed. If the Trustee incurs any liability for any Tax, or pays any Tax on behalf of any Participant or other person in relation to any Trust Shares held by the Trustee, or any Tax, fees, costs and expenses in relation to the Trust, the Company must, on a full indemnity basis, provide to the Trustee, or cause the provision to the Trustee of, all necessary funds required by the Trustee for the Trustee to be able to pay such liability, Tax, fees, costs and expenses.

25. In accordance with the Trust Deed for EST, the scope of activities which can be undertaken by The Trustee of the EST are limited as follows:

Despite any other provision of this document, the Trustee:

(a) is not permitted to offer, issue or acquire any Share or any right to any Share if to do so would contravene any Applicable Law and is not obliged to offer, issue or acquire any Share or any right to any Share where compliance with any Applicable Law would in the opinion of the Trustee or the Board be unduly onerous or impractical;

(b) is not permitted to carry out activities that are not matters or things which are necessary or expedient to administer and maintain the Trust and the Trust assets 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;

(c) is not permitted to carry out activities which result in the Participants being provided with additional benefits other than the benefits that arise from this Deed, the relevant Plan Rules and or relevant Terms of Participation; and

(d) may not use any Trust Assets or Trust Shares as security.

26. The Trust Deed limits the activities of The Trustee of the EST to those that are 'necessary or expedient' to administer and maintain the Trust and the Trust Assets.

27. The Trust Deed states that all funds received by The Trustee of the EST 'will constitute Accretions to the corpus of the Trust and will not be repaid to The Company and no Participant shall be entitled to receive such funds'.

28. The Trust Deed states:

Subject to the terms and conditions of this document and the Rules, a Participant is absolutely entitled to all Employee Shares allocated to the Participant under clause 3.3. Subject to the terms and conditions of this document and the Rules, each Participant to whom Employee Shares have been allocated under clause 3.3 is entitled to the same rights in respect of the Shares (apart from the right to Dispose of the Shares that is limited by applicable Disposal Restrictions) as if he or she were the legal owner of the Employee Shares'.

(a) The Trustee declares and agrees that in respect of each Participant:

i) The Trust Shares held by the Trustee on behalf of that Participant;

ii) Prior to their distribution in accordance with clause 9, the proceeds of sales arising from the sale by the Trustee of rights under a Rights Issue on behalf of that Participant; and

iii) All other benefits and privileges related to or arising from Trust Shares held by the trustee on behalf of that Participant,

Will at all times be held by the Trustee on trust for and on behalf of that Participant on the terms of the Deed and subject to the relevant Plan Rules and relevant terms of Participation.

(b) The trustee declares and agrees that:

i) Each Participant is, subject to the relevant Plan Rules and relevant Terms of Participation:

1. The beneficial owner of the Trust Shares held by the trustee on their behalf; and

2. Absolutely entitled to all other benefits and privileges attached to, or resulting from holding, those Trust Shares; and

ii) It will deal with Trust Shares and any Trust Assets in respect of Trust Shares in accordance with the directions of the Company in accordance with the terms of this Deed, and subject to any inconsistency with the terms of this Deed:

A. The directions of the relevant Participant;

B. The terms of the relevant Plan Rules; and/ or

C. The relevant terms of Participation,

Except where it would be required to incur a cost, expense or liability in so doing for which it was not fully indemnified.

(c) Each party acknowledges that it is the intention of this Deed to give each of the Participants on whose behalf the Trustee holds Trust Shares substantially the same rights in respect of those Trust Shares (other than bare legal title) as if the Trust Shares were registered directly in the name of the relevant Participant.

29. The Company does not intend for The Trustee of the EST to hold more shares than are required to settle obligations arising in the future from Share Options or Rights. Any shares held by The Trustee of the EST in excess of these obligations will not be held for more than one year.

30. The Trustee of the EST holds all The Company shares pursuant to the Incentive Plans on capital account.

31. The Trustee of the EST will not price hedge when purchasing shares or buy shares in advance of the issue of a share option or performance right.

Share Options and Rights currently held by The Trustee of the EST

32. The Company issued a number of Share Options under IP1 prior to 1 July 2009. A number of these options have vested but have not been exercised. When they are exercised, shares will be issued by The Company or purchased for Participants through the EST.

33. Share Options were issued to Participants under IP1 prior to 1 July 2009 where the Participant has not made an election under section 139E of the ITAA 1936 and the cessation time referred to in subsection 139B(3) of the ITAA 1936 has not occurred prior to 1 July 2009. These Share Options are referred to as 'Pre 1 July 2009 Division 83A Share Options'.

34. Share options and Rights issued after 1 July 2009 are referred to as 'Division 83A Share Options'.

35. Share options issued to Participants under IP1 prior to 1 July 2009 where the Participant has made an election under section 139E of the ITAA 1936 are referred to as 'Division 13A Share Options'.

36. Share Options issued prior to 1 July 2009 were 'qualifying rights' as defined in former section 139CD of the ITAA 1936.

37. Share Options and Participation Rights are acquired for the purposes of Division 83A of the ITAA 1997 and former Division 13A of the ITAA 1936 by the relevant Participant on the date that they were issued to that Participant by The Company.

38. The Share Options and Rights are provided to Participants at a discount for the purposes of subsection 83A-20(1) of the ITAA 1997.

Assumptions

1. The cost base of the shares in the hands of The Trustee of the EST under Division 110 of the ITAA 1997 will equal the amount of the cash contributions utilised by The Trustee of the EST to acquire the shares (that is, the market value of the share on the date of acquisition of the share by The Trustee of the EST). For the purposes of subsection 130-90(2) of the ITAA 1997, Participants do not acquire the beneficial interest in the share for more than its cost base in the hands of the EST at the time any relevant CGT event E5 or CGT event E7 happens.

2. The Scheme will be carried out in accordance with the terms of the Incentive Plans and the Trust Deed.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 subsection 102-5(1)

Income Tax Assessment Act 1997 section 130-90 (repealed)

Income Tax Assessment Act 1997 section 130-90

Reasons for decision

Question 1

Will the irretrievable and non-refundable cash contributions made by The Company to the EST to fund the subscription for, or acquisition of, The Company shares under the Incentive Plans, be assessable income of the EST under either section 6-5 of the ITAA 1997 or section 6-10 of the ITAA 1997?

Detailed reasoning

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

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

Subsection 6-5(2) of the ITAA 1997 further provides that:

If you are an Australian resident, your assessable income includes the *ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Pursuant to the Trust Deed all funds received by The Trustee of the EST will constitute accretions to the corpus of the Trust. Furthermore, pursuant to the terms of the Trust Deed, The Trustee must, when directed by The Company, acquire The Company shares on behalf of Participants and use the contributions made by The Company to do so.

The general powers granted to The Trustee of the EST pursuant to the Trust Deed must be exercised only for the purposes of the EST and only to give effect to the Incentive Plans which the EST supports. The contributions received from The Company must, therefore, only be used to acquire The Company shares in accordance with the terms of the Trust Deed and the Incentive Plans.

ATO Interpretative Decision ATO ID 2002/965 provides that the trustee of an employee share scheme (ESS) Trust will not be assessed under section 6-5 of the ITAA 1997 on contributions made to the trust by an employer for the purpose of, and under, the employer's employee share scheme as the contributions constitute capital receipts to the trustee.

Accordingly, the irretrievable and non-refundable contributions made by The Company to The Trustee of the EST to acquire The Company shares will not be included in the assessable income of the EST under section 6-5 of the ITAA 1997, but will constitute capital receipts to the trustee.

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 of these provisions, see section 10-5.

None of the provisions listed in section 10-5 of the ITAA 1997 are relevant. Further, ATO ID 2002/965 also confirms that the trustee of an ESS trust will not be assessed under section 6-10 of the ITAA 1997 on contributions made to the trust by an employer for the purpose of, and under, the employer's employee share scheme, but will constitute capital receipts to the trustee.

Accordingly, the irretrievable and non-refundable contributions made by The Company to The Trustee of the EST to fund the subscription for, or acquisition of, The Company shares under the Incentive Plans will not be included in the assessable income of the EST under section 6-10 of the ITAA 1997.

Conclusion

The irretrievable and non-refundable contributions made by The Company to The Trustee as trustee of the EST to fund the subscription for, or acquisition of, The Company shares under the Incentive Plans will not be included in the assessable income of the EST pursuant to sections 6-5 of the ITAA 1997 or 6-10 of the ITAA 1997.

Question 2

Will any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E5 happening when Participants become absolutely entitled to shares in The Company, be disregarded under:

1. current section 130-90 of the ITAA 1997 in relation to 'Pre 1 July 2009 Division 83A Share Options' and 'Division 83A Share Options', and

2. former section 130-90 of the ITAA 1997 in relation to 'Division 13A Share Options'?

Detailed reasoning

When a Participant becomes absolutely entitled to the shares as against The Trustee of the EST, CGT event E5 will happen under section 104-75 of the ITAA 1997. Consequently, the trustee may make a capital gain or loss.

In Draft Taxation Ruling TR 2004/D25, the Commissioner states that the core principle underpinning the concept of absolute entitlement in the CGT provisions is the ability of a beneficiary, who has a vested and indefeasible interest in the entire trust asset, to call for the asset to be transferred to them or to be transferred at their direction.

However, section 130-90 of the ITAA 1997 may operate to disregard that capital gain or loss if an ESS interest is a CGT asset of the trust and other conditions are satisfied.

1. Current section 130-90 of the ITAA 1997 in relation to 'Pre 1 July 2009 Division 83A Share Options' and 'Division 83A Share Options'

Are 'Division 83A Share Options' an ESS interest?

Subsection 83A-5(1) of the ITTPA 1997 provides that Division 83A of the ITAA 1997 applies in relation to an ESS interest if:

a) the interest was acquired on or after 1 July 2009; and

b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre-Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009.

Subsection 995-1(1) of the ITAA 1997 provides that an ESS interest in a company has the meaning given by subsection 83A-10(1) of the ITAA 1997. An ESS interest in a company, is a beneficial interest in a share in the company; or a beneficial interest in a right to acquire a beneficial interest in a share in the company.

Subsection 995-1(1) of the ITAA 1997 defines a share in a company to mean a share in the capital of the company, and includes stock.

The Share Options and Rights represent a right to acquire a beneficial interest in a share in The Company, and subsequently represent an ESS interest for the purposes of subsection 83A-10(1) of the ITAA 1997. Under the Incentive Plans, the Participants were issued Share Options or Rights on, or after 1 July 2009. The Participants acquire these Share Options and Rights at the time that they are issued by The Company.

The 'Division 83A Share Options' were issued to Participants on or after 1 July 2009, therefore satisfying both conditions in subsection 83A-5(1) of the ITTPA 1997. Consequently, Division 83A of the ITAA 1997 applies in relation to those ESS interests.

Are 'Pre 1 July 2009 Division 83A Share Options' an ESS interest?

Paragraph 83A-5(2)(a) of the ITTPA 1997 also provides that Subdivision 83A-C of the ITAA 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if all of the following apply:

(i) at the pre-Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest

(ii) the interest was acquired (within the meaning of former Division 13A) before 1 July 2009, and

(iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre-Division 83A time, for the interest did not occur before 1 July 2009.

Former subsection 139B(3) of the ITAA 1936 provided that if the share or right is a qualifying share or right and the taxpayer has not made an election under former section 139E of the ITAA 1936 covering the share or right, the discount is included in the taxpayer's assessable income of the year of income in which the cessation time occurs. Therefore, subsection 139B(3) applies to a qualifying right in relation to which a taxpayer had not made an election under section 139E covering that right.

The definition of a qualifying right was provided by former section 139CD of the ITAA 1936. In the present context, all Share Options issued prior to 1 July 2009 were 'qualifying rights' for the purposes of former section 139CD of the ITAA 1936. Further, the Participant had not made an election under former section 139E of the ITAA 1936 in relation to 'Pre 1 July 2009 Division 83A Share Options'. 'Pre 1 July 2009 Division 83A Share Options' were issued prior to 1 July 2009. As such, subparagraph 83A-5(2)(a)(i) of the ITTPA 1997 is satisfied.

The Share Options were acquired, for the purposes of former Division 13A of the ITAA 1936, when The Company issued the Share Options to the Participant. Given that the 'Pre 1 July 2009 Division 83A Share Options' were issued to Participants by The Company prior to 1 July 2009 they are taken to be acquired before 1 July 2009 and consequently satisfy subparagraph 83A-5(2)(a)(ii) of the ITTPA 1997.

The cessation time referred to in former subsection 139B(3) of the ITAA 1936 did not happen before 1 July 2009 in relation to the 'Pre 1 July 2009 Division 83A Share Options'. Consequently, subparagraph 83A-5(2)(a)(iii) of the ITTPA 1997 is satisfied.

Accordingly, the 'Pre 1 July 2009 Division 83A Share Options' satisfy paragraph 83A-5(2)(a) of the ITTPA 1997.

In summary, all 'Division 83A Share Options' and 'Pre 1 July 2009 Division 83A Share Options' satisfy either subsection 83A-5(1) or paragraph 83A-5(2)(a) of the ITTPA 1997 and consequently are ESS interests.

Application of current section 130-90 of the ITAA 1997 to 'Division 83A Share Options' and 'Pre 1 July2009 Division 83A Share Options'

Current subsection 130-90(1) of the ITAA 1997 applies where shares are held by an EST to satisfy the future exercise of rights acquired under an ESS. Given that The Trustee will not buy shares in advance of the issue of a Share Option or Performance Right, that subsection may apply.

Current subsection 130-90(1) of the ITAA 1997 states:

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.

Employee Share Trust (EST)

In order for any capital gain or capital loss to be disregarded under current section 130-90 of the ITAA 1997, it must be made by an EST. Current subsection 130-85(4) of the ITAA 1997 provides that an EST for an ESS 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).

As documented in the trust deed of the EST, The Company has established the EST for the sole purpose of obtaining Shares for the benefit of Participants, including subscribing for, or acquiring, allocating, holding, and delivering Shares under the Incentive Plans and other employee equity plans for the benefit of Participants.

The terms of the trust deed limit The Trustee of the EST to only undertake activities that enable the EST to satisfy its stated purpose in the trust deed. Further, the Trust Deed limits the activities of The Trustee to those that are 'necessary or expedient' to administer and maintain the Trust and the Trust Assets in fulfilling the purpose for which the trust was established.

An ESS interest in a company is defined in subsection 83A-10(1) of the ITAA 1997 as either a beneficial interest in a share in the company or a beneficial interest in a right to acquire a beneficial interest in a share in the company.

The Share Options and Rights acquired by the Participants represent a right to acquire a beneficial interest in a share in The Company, and subsequently represent an ESS interest for the purposes of subsection 83A-10(1) of the ITAA 1997.

Subsection 83A-10(2) of the ITAA 1997 defines an employee share scheme (ESS) as:

…. 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; or

(b) subsidiaries of the company;

in relation to the employees' employment.

These ESS interests in The Company are provided to the Participants (being employees of The Company) or their associates by The Company under the Incentive Plans. The Share Options and Rights are issued to Participants as part of their remuneration package from The Company and are subsequently considered to be in relation to the relevant employees' employment. The scheme in the form of the Incentive Plans therefore represents an ESS under subsection 83A-10(2) of the ITAA 1997.

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

• uses money contributed by The Company to acquire shares in The Company, and

• ensures that ESS interests, being beneficial interests in those The Company shares, are provided under the ESS, to the employees of The Company or their associates in accordance with the Trust Deed and relevant rules of the Incentive Plans.

Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 will also require that the trustee undertake incidental activities that are a function of managing the Incentive Plans, and administering the EST.

For the purposes of paragraph 130-85(4)(c) of the ITAA 1997, ATO Interpretative Decision ATO ID 2010/108 sets out the Commissioners views on when an employee share trust satisfies the sole activities test. In particular, the Commissioner considers that activities that are a necessary function of managing an ESS and administering a trust will satisfy the sole activities test. Such activities include:

• the opening and operating of a bank account to facilitate the receipt and payment of money

• the receipt of dividends in respect of shares held by the EST on behalf of an employee, and their distribution to an 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 purpose 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, and

• 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.

The Trustee as trustee of the EST will satisfy the sole activities test as there is nothing to indicate that it will undertake any activities that are not necessary functions of managing the ESS and administering the trust. Therefore, paragraph 130-85(4)(c) of the ITAA 1997 is satisfied.

The trust is therefore an EST within the meaning provided by subsection 130-85(4) of the ITAA 1997 as the conditions of that subsection are satisfied.

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

Paragraph 130-90(1)(a) of the ITAA 1997 requires the relevant CGT event to be either a CGT event E5 or CGT event E7. A CGT event E5 will happen under the terms of the Incentive Plans at the time the Participant becomes absolutely entitled to the shares in The Company as against The Trustee of the EST. Therefore paragraph 130-90(1)(a) will be satisfied.

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

Paragraph 130-90(1)(b) of the ITAA 1997 requires that the relevant CGT event happens in relation to a share. Subsection 995-1(1) of the ITAA 1997 defines a share to mean a share in the capital of a company. An ordinary share in The Company held by The Trustee of the EST to which a Participant is entitled upon exercise of a Share Option or vesting of a Performance Right is a share in the capital of a company (The Company). Accordingly, paragraph 130-90(1)(b) is satisfied as CGT event E5 happens in relation to a share.

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

Paragraph 130-90(1)(c) of the ITAA 1997 requires the beneficiary to have acquired the beneficial interest in the share by exercising a right Paragraph 130-90(1)(c) is satisfied as a Participant will have acquired a beneficial interest in a share in The Company by either exercising a Share Option under IP1 or the vesting of a Right under the IP2.

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

Paragraph 130-90(1)(d) of the ITAA 1997 requires that the beneficiary's beneficial interest in the relevant right was an ESS interest to which Subdivision 83A-B of the ITAA 1997 or Subdivision 83A-C of the ITAA 1997 applied.

Application of Subdivision 83A-B of the ITAA 1997

Section 83A-20(1) of the ITAA 1997 provides that Subdivision 83A-B applies to an ESS interest if you acquire the interest under an ESS at a discount. Note 1 of subsection 83A-20(1) provides that if Subdivision 83A-C of the ITAA 1997 applies to the ESS interest, then Subdivision 83A-B of the ITAA 1997 will not apply to that ESS interest.

ESS interests

An ESS interest in a company is defined in subsection 83A-10(1) of the ITAA 1997 as either a beneficial interest in a share in the company or a beneficial interest in a right to acquire a beneficial interest in a share in the company.

The Share Options and Rights acquired by the Participants represent a right to acquire a beneficial interest in a share in The Company, and subsequently represent an ESS interest for the purposes of subsection 83A-10(1) of the ITAA 1997.

ESS interests provided under an employee share scheme (ESS)

Subsection 83A-10(2) of the ITAA 1997 defines an ESS as:

…. a scheme under which ESS interests in a company are provided to employees, or associates of employees, including past or prospective employees of:

(c) the company; or

(d) subsidiaries of the company;

in relation to the employees' employment.

The ESS interests in The Company are provided to the Participants (being employees of The Company or their associates) by The Company under the Incentive Plans. The Share Options and Rights are issued to Participants as part of their remuneration package from The Company and are subsequently considered to be in relation to the relevant employees' employment. The scheme in the form of the Incentive Plans therefore represents an ESS under subsection 83A-10(2) of the ITAA 1997.

The Share Options and Rights are issued to Participants at a discount. Therefore, section 83A-20(1) of the ITAA 1997 applies to the Share Options and Rights as they represent ESS interests acquired under an ESS at a discount.

Consequently, Subdivision 83A-B of the ITAA 1997 will apply to the ESS interests or, depending on the circumstances, Subdivision 83A-C of the ITAA 1997 would alternatively apply. In either case the requirement in paragraph 130-90(1)(d) of the ITAA 1997 will be met.

Accordingly, the conditions in subsection 130-90(1) of the ITAA 1997 are satisfied.

However, subsection 130-90(1) of the ITAA 1997 does not apply if the beneficiary acquired the beneficial interest in the share for more than its cost base in the hands of the EST at the time the CGT event happens (subsection 130-90(2) of the ITAA 1997).

Participants do not acquire their beneficial interest in the share for more than its cost base in the hands of the EST at the time any relevant CGT event E5 happens. Accordingly, subsection 130-90(2) of the ITAA 1997 does not prevent subsection 130-90(1) of the ITAA 1997 from applying.

Current section 130-90 of the ITAA 1997 operates to disregard any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E5 happening in relation to The Company shares acquired as a result of a Participant holding 'Division 83A Share Options' or 'Pre 1 July 2009 Division 83A Share Options' when that Participant becomes absolutely entitled to those shares.

2. Application of former section 130-90 of the ITAA 1997 to 'Division 13A Share Options'

Current paragraph 130-90(1)(d) of the ITAA 1997 requires that Subdivision 83A-B of the ITAA 1997 or Subdivision 83A-C of the ITAA 1997 applies to an ESS interest in order for current section 130-90 of the ITAA 1997 to apply. Division 83A of the ITAA 1997 will only apply to ESS interests mentioned in subsections 83A-5(1) and 83A-5(2) of the ITTPA 1997. If an ESS interest is not mentioned in either of subsections 83A-5(1) and 83A-5(2) of the ITTPA 1997, then the current section 130-90 of the ITAA 1997 will not apply and consequently former section 130-90 of the ITAA 1997 may apply.

As determined above, the Share Options and Rights under the Incentive Plans represent ESS interests when acquired by the Participants.

Given that all 'Division 13A Share Options' were acquired by Participants before 1 July 2009, the 'Division 13A Share Options' are not mentioned by subsection 83A-5(1) of the ITTPA 1997.

Had the Participants not made an election under former section 139E of the ITAA 1936, then paragraph 83A-5(2)(a) of the ITTPA 1997 may have mentioned the 'Division 13A Share Options'. However, given that Participants have made an election under former section 139E of the ITAA 1997 in relation to the 'Division 13A Share Options', paragraph 83A-5(2)(a) of the ITTPA 1997 is not taken to have mentioned the 'Division 13A Share Options'.

It is accepted that paragraph 83A-5(2)(b) of the ITTPA 1997 is not taken to have mentioned the 'Division 13A Share Options'.

Given that the 'Division 13A Share Options' are not mentioned in subsections 83A-5(1) and 83A-5(2) of the ITTPA 1997, current section 130-90 of the ITAA 1997 does not apply to the 'Division 13A Share Options' as current paragraph 130-90(1)(d) of the ITAA 1997 cannot be satisfied. It is therefore necessary to consider whether former section 130-90 of the ITAA 1997 will apply to disregard any capital gain or loss made by the trustee in relation to 'Division 13A Share Options'.

Former section 130-90 of the ITAA 1997 states:

130-90(1)

A capital gain or a capital loss a trustee or a beneficiary makes when the beneficiary becomes absolutely entitled to a share or right in a company is disregarded if these conditions are satisfied.

130-90(1A)

The beneficiary must be:

(a) an individual who receives (or is entitled to receive) withholding payments covered by subsection (5) from the company or from another company (at the time the beneficiary first became beneficially entitled to the share or right); or

(b) an associate or affiliate company of such an individual; or

(c) an individual who is engaged in foreign service (within the meaning of section 139GBA of the Income Tax Assessment Act 1936), or an associate or affiliate company of such an individual.

130-90(2)

The terms of the trust must have required or authorised the trustee to transfer the share or right to the individual, associate or affiliate company.

130-90(3)

Either:

(a) the individual, associate or affiliate company must have acquired the share or right:

i) under an employee share scheme; or

ii) alternatively in the case of a share - as a result of exercising a right acquired under an employee share scheme;

iii) in the case of a share - in satisfaction of a beneficial interest that was the result of exercising a right acquired under an employee share scheme;

(b) the share or right must, because of section 139DQ of the Income Tax Assessment Act 1936 , be a share or right that is treated, for the purposes of Division 13A of Part III of that Act, as if it were a continuation of a share or right acquired under an employee share scheme;

(c) if the share was acquired as a result of exercising a right, the right must, because of section 139DQ of the Income Tax Assessment Act 1936 , be a right that is treated, for the purposes of Division 13A of Part III of that Act, as if it were a continuation of a right acquired under an employee share scheme.

130-90(4)

The individual, associate or affiliate company must not have acquired the share or right for more than the cost base of the share or right (in the hands of the trustee) at the time of the transfer

130-90(5)

This subsection covers a withholding payment covered by any of the provisions in Schedule 1 to the Taxation Administration Act 1953 listed in the table.

Former subsection 130-90(1A) of the ITAA 1997

Former paragraph 130-90(1A)(a) of the ITAA 1997 will be satisfied where Participants, being beneficiaries of the EST, receive payments covered by former subsection 130-90(5) of the ITAA 1997 from The Company.

Participants were in receipt of payments that satisfy item 1 of the table in former subsection 130-90(5) of the ITAA 1997. Former paragraph 130-90(1A)(a) of the ITAA 1997 is satisfied. Consequently, former subsection 130-90(1A) of the ITAA 1997 is satisfied.

Former subsection 130-90(2) of the ITAA 1997

Former subsection 130-90(2) of the ITAA 1997 will be satisfied where The Trustee of the EST was required or authorised by the trust deed to transfer The Company shares to the relevant Participant.

The Trust Deed provides both a requirement and authorisation for The Trustee of the EST to transfer legal title in shares held by the EST under the Incentive Plans to Participants or other parties as directed by the Participant. This is facilitated by the Incentive Plans, both of which provide the capacity for Participants to issue withdrawal notices to The Company to have legal title to the relevant shares transferred to them. Former subsection 130-90(2) of the ITAA 1997 is satisfied.

Former subsection 130-90(3) of the ITAA 1997

Former subsection 130-90(3) of the ITAA 1997 will be satisfied where one of the paragraphs in that subsection are met. Former subparagraph 130-90(3)(a)(ii) of the ITAA 1997 is satisfied where the individual or their associate acquires the share as a result of exercising a right acquired under an employee share scheme.

The shares will be beneficially acquired by the Participant or their associate as a result of exercising the rights (the 'Division 13A Share Options'). Therefore, where the 'Division 13A Share Options' were acquired under an ESS, former subparagraph 130-90(3)(a)(ii) of the ITAA 1997 will be satisfied.

The circumstances where a right will be acquired under an employee share scheme for the purposes of former section 130-90 of the ITAA 1997 are provided by former section 139C of the ITAA 1936.

The circumstances in which former section 139C of the ITAA 1936 applies in relation to ESS interests are the same as those to which former section 130-90 of the ITAA 1997 apply. Therefore, former section 139C of the ITAA 1936 applies.

The relevant subsections of former section 139C of the ITAA 1936 in relation to the 'Division 13A Share Options' are that the Share Options must have been acquired by the taxpayer:

• in respect of, for, or in direct or indirect relation to any employment of the taxpayer or their associate (former subsection 139C(1) of the ITAA 1936), and

• for less than the market value of the Share Option at the time it is acquired (former subsection 139C(3) of the ITAA 1936).

The 'Division 13A Share Options' were issued to remunerate employees of The Company for their performance and to motivate future performance whilst the Participant is employed by The Company. Former subsection 139C(1) of the ITAA 1936 is satisfied.

Share Options are provided to Participants at a discount. Therefore, it is accepted that the Share Options are acquired for less than their market value and former subsection 139C(3) of the ITAA 1936 is satisfied.

Given that the 'Division 13A Share Options' satisfy the requirements of former section 139C of the ITAA 1936, the 'Division 13A Share Options' are taken to have been acquired under an ESS and the condition in former subsection 130-90(3) of the ITAA 1997 will be met as a result of former subparagraph 130-90(3)(a)(ii) of the ITAA 1997 being satisfied in relation to the acquisition of The Company shares.

Former subsection 130-90(4) of the ITAA 1997

Former subsection 130-90(4) of the ITAA 1997 is satisfied where Participants do not acquire The Company shares for more than the cost base of the share in the hands of The Trustee of the EST at the time of the transfer.

As stated above, Participants do not acquire the beneficial interest in the share for more than its cost base in the hands of The Trustee of the EST at the time any relevant CGT event E5 happens. Therefore, former subsection 130-90(4) of the ITAA 1997 is satisfied.

Given that former subsections 130-90(1A), 130-90(2), 130-90(3) and 130-90(4) of the ITAA 1997 are satisfied, any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E5 happening in relation to The Company shares acquired as a result of a Participant holding 'Division 13A Share Options' are disregarded when that Participant becomes absolutely entitled to those shares.

Conclusion

The Trustee of the EST can disregard any capital gain or capital loss made as a result of a CGT event E5 happening in relation to The Company shares acquired as a result of a Participant holding:

1. 'Division 83A Share Options' or 'Pre 1 July Division 83A Share Options' due to the operation of current section 130-90 of the ITAA 1997, and

2. 'Division 13A Share Options' due to the operation of former section 130-90 of the ITAA 1997.

Question 3

Will any capital gain or capital loss made by The Trustee of the EST as a result of a CGT event E7 happening when The Trustee disposes of The Company shares held under the Incentive Plans to Participants who are already absolutely entitled to those shares, be included in the assessable income of The Trustee under subsection 102-5(1) of the ITAA 1997?

Detailed reasoning

Subsection 102-5(1) of the ITAA 1997 provides that your assessable income includes your net capital gain (if any) for the income year. You work out your net capital gain using the method provided by subsection 102-5(1).

Step 1 of the methodology provided by subsection 102-5(1) of the ITAA 1997 provides that you reduce the capital gains you made during the income year by the capital losses you made during the income year.

Subsection 104-85(1) of the ITAA 1997 provides that CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 of the ITAA 1997 applies) disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital.

However, section 106-50 of the ITAA 1997 provides that where you are absolutely entitled to a CGT asset as against the trustee of a trust, Part 3-1 of the ITAA 1997 and Part 3-3 of the ITAA 1997 apply to an act done by the trustee in relation to that CGT asset as if that act had been done by you instead of by the trustee.

For example, where an individual becomes absolutely entitled to a CGT asset of a trust and the trustee later sells the asset, any capital gain or loss made from the sale is made by the individual, not the trustee.

Whilst section 106-50 of the ITAA 1997 was amended with general effect from 30 June 2013, the effect of both the former and current section 106-50 of the ITAA 1997 will be the same during the periods covered by this ruling.

Under the Trust Deed, each Participant is absolutely entitled to the trust shares allocated to them whilst they are held by The Trustee of the EST on behalf of that Participant. Each Participant is entitled to the same rights in respect of The Company shares allocated to them as if the Participant was the legal owner of the shares (subject to the relevant Incentive Plan rules and terms of participation). Consequently, Participants are absolutely entitled to The Company shares upon allocation of the share to the Participant by The Trustee of the EST.

Once Participants are absolutely entitled to shares held on their behalf by The Trustee of the EST, section 106-50 of the ITAA 1997 will deem the disposal of the shares by the trustee to have been by the relevant Participant.

Therefore, section 106-50 of the ITAA 1997 will apply, such that if The Trustee of the EST disposes of the shares under the Incentive Plans (by way of transfer to a participant), the Trustee will not make a capital gain or capital loss as a result of a CGT event E7 happening.

Accordingly, there will be no net capital gain or net capital loss required to be worked out or included in the assessable income of The Trustee of the EST under subsection 102-5(1) of the ITAA 1997.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).