Edited version of your written advice

Authorisation Number: 1012835007462

Date of advice: 9 July 2015

Ruling

Subject: Employee share scheme

Question 1

Will Company A obtain a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for irretrievable cash contributions made by Company A to the Trustee of the Employee Share Plan Trust (ESP Trust) to fund the subscription for, or acquisition on-market of, Company A shares in respect of Company A employees?

Answer

Yes.

Question 2

If the answer to question 1 is yes, will the Commissioner seek to make a determination that Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies to the arrangement where irretrievable cash contributions are made by Company A to the Trustee of the ESP Trust to fund the subscription for, or acquisition on-market of, Company A shares in respect of Company A employees?

Answer

No.

Question 3

If the answer to question 1 is no, is the amount deductible under 40-880 of the ITAA 1997?

Answer

Not required to be answered.

Question 4

Is any amount required to be withheld from the irretrievable cash contributions made by Company A to the Trustee of the ESP Trust to fund the subscription for, or acquisition on-market of, Company A shares in respect of Company A employees under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)?

Answer

No.

The rulings for questions 1 to 4 inclusive each apply for the following periods:

Income year ended 30 June 2015

Income year ended 30 June 2016

Income year ended 30 June 2017

Income year ended 30 June 2018

Income year ended 30 June 2019

Question 5

Will the irretrievable cash contributions made by Company A to the Trustee of the ESP Trust to fund the subscription for, or acquisition on-market of, Company A shares in respect of Company A employees, be a fringe benefit under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 6

Is the provision of shares in Company A to employees of Company A under the Share Plan a fringe benefit within the meaning of subsection 136(1) of the FBTAA?

Answer

No.

The rulings for questions 5 and 6 each apply for the following periods:

Fringe benefits tax year ended 31 March 2015

Fringe benefits tax year ended 31 March 2016

Fringe benefits tax year ended 31 March 2017

Fringe benefits tax year ended 31 March 2018

Fringe benefits tax year ended 31 March 2019

Relevant facts and circumstances

In 20XX the Board of Company A resolved to establish the Company A Employee Share Plan (Share Plan).

The Share Plan is designed to simplify the remuneration structure of Company A, improve employee retention, improve alignment of employee effort with reward, foster a better culture of employee participation and motivation, align shareholder interests and build long term employee ownership in Company A.

The Share Plan is subject to rules that are outlined in the Company A Policy (Company A Policy).

All grants of deferred shares under the Share Plan comprise:

(a) Type A Shares; and

(b) Type B Shares.

All deferred shares whether Type A Shares or Type B Shares are subject to a minimum 3 year service obligation. Type A Shares vest once the 3 year service obligation is satisfied. Type B Shares vest once both the 3 year service obligation and other further performance conditions are satisfied.

Type A Shares

The following conditions apply to Type A Shares:

• employees must be employed on 30 June in the given year.

• employees must be employed as at the date of the payment to the ESP Trust.

• if an employee has tendered their notice of termination of employment they will not be eligible

• employees under probation are eligible

• employees under disciplinary action will not be eligible

• must be a permanent employee

• must 'meet expectations' as a minimum in terms of their last performance assessment

• an employee who joins Company A after the allocation of deferred shares will receive (when Company A makes its next allocation of deferred shares):

• an allocation of shares in respect of the forthcoming financial year; and

• an additional allocation of shares based on the formula:

• number of shares allocated under para (a) x days of previous financial year employed by Company A/days in previous financial year.

• Type A Shares are subject to the following vesting conditions:

• continuation of employment for 3 years

• where leave without pay is taken during the 3 year period the time of the leave will be added to the end of the 3 year vesting term for all deferred shares beneficially held by the employee

• on resignation, other than for a reason that the Board accepts is not within their control (such as total and permanent disability or to care for an immediate family member who is ill) all rights relating to deferred shares will be forfeited this includes the right to vote, the right to receive dividends and the right to have legal title vested in the employee in the future.

• if an employee is made redundant or resigns due to a reason that the Board accepts is not within their control (such as total and permanent disability or to care for an immediate family member who is ill), a portion of unvested shares will vest when employment terminates; the proportion being the number of days of employment in the vesting term divided by the total number of days in the vesting term.

• on death, all unvested shares will immediately vest to the employee's estate or Legal Personal Representative.

Type B Shares

The following conditions apply to Type B Shares:

• employees must be employed on 30 June in the given year.

• employees must be employed as at the date of the payment to the ESP Trust.

• if an employee has tendered a notice of termination of employment they will not be eligible.

• employees under probation are eligible.

• employees under disciplinary action will not be eligible.

• must be a permanent employee.

• must 'meet expectations' as a minimum in terms of performance assessment.

• where an employee joined Company A in the prior year they will receive an additional allocation of shares based on a pro-rata of the amount of shares they would have received in that year.

• Type B Shares are subject to the following vesting conditions:

• continuation of employment for 3 years.

• compound growth in earnings per share (EPS) as per the EPS vesting schedule below.

EPS vesting schedule:

Growth in EPS	Percentage of shares that will vest
EPS growth less than or equal to 5%	0%
EPS growth greater than 5% but less than 10%	Pro rate amount will vest on a straight line basis
EPS growth is greater than 10%	100%

EPS is based on:

• diluted EPS as reported in the half year financial statements of Company A.

• compound annual growth rate (CAGR) over 3 years.

• CAGR is the ratio of the ending EPS (year 3) to beginning EPS (year 0). For example (241.13 / 127.9 = 113.4) raised to the power of 1/3, then subtracting 1 from the resulting number, giving 37.8% average growth.

• where leave without pay is taken during the 3 year period the time of the leave will be added to the vesting term

• on resignation any deferred shares will be forfeited.

• if an employee is made redundant or resigns due to total and permanent disability, unvested shares granted are retained by the employee with vesting subject to the same performance conditions as if they had remained employed by Company A.

• on death, all unvested shares and performance rights are retained by the employee's estate with immediate vesting.

ESP Trust Deed

The Share Plan was implemented in 2015 when the Settlor, Company A and Company B (as Trustee of the ESP Trust) established the Employee Share Plan Trust (ESP Trust) by entering into the Company A Share Plan Trust Deed (ESP Trust Deed).

Under the ESP Trust Deed the Trustee of the ESP Trust can acquire shares in Company A and hold those shares in accordance with the ESP Trust Deed and the Company A Policy for the benefit of each Participant.

A Participant is defined under the ESP Trust Deed as being an Eligible Participant who has accepted an invitation to participate in the Share Plan.

The Trustee of the ESP Trust will only ever hold Company A shares for the benefit of permanent employees of Company A.

Under the ESP Trust Deed any shares in Company A acquired must be allocated by the Trustee of the ESP Trust to an account established for a Participant. The Trustee of the ESP Trust is only obligated to acquire and allocate shares to a Participant if they receive a sufficient contribution from Company A or already hold sufficient shares in the ESP Trust which have not been allocated to a Participant.

Under the ESP Trust Deed the Trustee of the ESP Trust deals with contributions it receives at the direction of a Director or the Company Secretary of Company A (or a delegate of either) and in accordance with the terms of the ESP Trust Deed.

Under the ESP Trust Deed in the event that the ESP Trust is terminated any surplus property in the ESP Trust to which no Participant is entitled will be distributed according to the terms of the ESP Trust Deed but cannot be returned to Company A.

Under the ESP Trust Deed the Trustee of the ESP Trust must administer the ESP Trust at all times so as to satisfy the definition of 'fringe benefit' in section 995-1 of the ITAA 1997.

In 2015 Company A extended an invitation to its permanent employees to participate in the Share Plan. All those invited accepted the invitation to participate in the Share Plan.

In 2015 Company A contributed an amount to the Trustee of the ESP Trust for the purpose of acquiring ordinary shares in Company A. The Trustee of the ESP Trust subsequently applied the total amount to subscribe for ordinary shares in Company A. The Trustee of the ESP Trust allocated the ordinary shares in Company A to accounts that it had established for each Participant. The amount of shares allocated to the account of each Participant was determined in accordance with a direction received from a Director of Company A.

In the future Company A will contribute an amount to the Trustee of the ESP Trust in order to fund the acquisition of ordinary shares for the purpose of those shares being allocated to each Participant in accordance with the ESP Trust Deed and Company A Policy. The amount contributed to the Trustee of the ESP Trust by Company A will be based on an agreed percentage of the salary of each Participant (reduced for each Participant to the extent that the Trustee of the ESP Trust holds any ordinary shares that are able to meet the current year allocation - for example ordinary shares acquired in an earlier year but which failed to vest in or were otherwise forfeited by Participant).

The amount Company A will contribute to the Trustee of the ESP Trust in each future year will be sufficient to fund the acquisition of the relevant number of shares at that time and no amount in excess of that required for that purpose will be provided to the Trustee of the ESP Trust.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 66

Fringe Benefits Tax Assessment Act 1986 136(1)

Fringe Benefits Tax Assessment Act 1986 136(1)(h)

Fringe Benefits Tax Assessment Act 1986 136(1)(ha)

Income Tax Assessment Act 1936 Part IVA

Income Tax Assessment Act 1936 177A

Income Tax Assessment Act 1936 177A(1)

Income Tax Assessment Act 1936 177A(5)

Income Tax Assessment Act 1936 177C(1)

Income Tax Assessment Act 1936 177CB(2)

Income Tax Assessment Act 1936 177CB(3)

Income Tax Assessment Act 1936 177CB(4)

Income Tax Assessment Act 1936 177D(2)

Income Tax Assessment Act 1936 177F(1)

Income Tax Assessment Act 1997 8-1

Income Tax Assessment Act 1997 8-1(1)

Income Tax Assessment Act 1997 8-1(2)

Income Tax Assessment Act 1997 83A-205

Income Tax Assessment Act 1997 83A-10(1)

Income Tax Assessment Act 1997 83A-10(2)

Income Tax Assessment Act 1997 130-85(4)

Income Tax Assessment Act 1997 130-85(4)(a)

Income Tax Assessment Act 1997 130-85(4)(b)

Income Tax Assessment Act 1997 130-85(4)(c)

Income Tax Assessment Act 1997 995-1

Taxation Administration Act 1953 Schedule 1 11-5 and

Taxation Administration Act 1953 Schedule 1 12-35.

Reasons for decision

Question 1

The general deduction provision is section 8-1 of the ITAA 1997 which states:

(1) You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income.


(2) However, you cannot deduct a loss or outgoing under this section to the extent that:

(a) it is a loss or outgoing of capital, or of a capital nature; or

(b) it is a loss or outgoing of a private or domestic nature; or

(c) it is incurred in relation to gaining or producing your * exempt income or your * non-assessable non-exempt income; or

(d) a provision of this Act prevents you from deducting it.

Losses or outgoings

Under the ESP Trust Deed the Trustee of the ESP Trust may upon direction from a Director or Company Secretary of Company A acquire ordinary shares in Company A. Under the ESP Trust Deed the Trustee of the ESP Trust must allocate ordinary shares in Company A that it acquires to the account of a Participant in accordance with the Company A Policy. Nothing in the ESP Trust Deed requires the Trustee of the ESP Trust to acquire shares if it does not receive sufficient contributions from Company A or have sufficient property in the ESP Trust.

In the event that the ESP Trust is terminated any surplus property in the ESP Trust to which no Participant is entitled will be distributed according to the terms of the ESP Trust Deed and will not be returned to Company A.

Under the terms of the ESP Trust Deed contributions made to the Trustee of the ESP Trust by Company A will be irretrievable and will therefore be considered a loss or outgoing for the purpose of subsection 8-1(1) of the ITAA 1997.

Sufficient nexus

In order for a loss or outgoing to be deductible under subsection 8-1(1) of the ITAA 1997 it must be either incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. A line of authorities have established that there will be a link between a loss or outgoing and the derivation of income where there is a sufficient nexus (The Herald and Weekly Times Limited v The Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 2 ATD 169), Amalgamated Zinc (De Bavay's) Limited v The Federal Commissioner of Taxation (1935) 54 CLR 295;(1935) 3 ATD 288, W. Nevill And Company Limited v The Federal Commissioner of Taxation (1937) 56 CLR 290;4 ATD 187;(1937) 1 AITR 67, Ronpibon Tin No Liability v The Federal Commissioner of Taxation(1949) 78 CLR 47; 4 AITR 236; (1949) 8 ATD 431, Charles Moore & Co (W.A.) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344;(1956) 6 AITR 379; (1956) 11 ATD 147).

The contributions made by Company A to the Trustee of the ESP Trust are part of the overall employee remuneration costs of Company A. The benefits provided to permanent employees under the Share Plan are designed to improve employee retention, improve alignment of employee effort with reward, foster a better culture of employee participation and motivation, and build long term employee ownership in Company A.

A sufficient nexus exists between the outgoings (being the irretrievable contributions made by Company A to the Trustee of the ESP Trust) and the derivation of assessable income for the purposes of subsection 8-1(1) of the ITAA 1997.

Capital or revenue?

Company A will make contributions from time to time to the Trustee of the ESP Trust as and when ordinary shares in Company A are to be subscribed for or acquired pursuant to the Share Plan.

In ATO ID 2002/1074 Income Tax - deductibility - irretrievable employer contributions paid to the Trustee of its employee share scheme to acquire a share or right under the employee share scheme the view is expressed that a company will be entitled to a deduction for irretrievable contributions made to the trustee of its employee share scheme under section 8-1 of the ITAA 1997.

In Spotlight Stores Pty Ltd v Federal Commissioner of Taxation (2004) 55 ATR 745 and Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 58 ATR 210 it was determined that payments by an employer company to an employee share trust established for the purpose of providing incentive payments to employees were on revenue account and were not capital or of a capital nature.

The irretrievable contributions made by Company A to the Trustee of the ESP Trust for the purposes of administering the Share Plan are outgoings incurred by Company A in carrying on its business and are not capital nor of a capital nature where the contributions are used to acquire shares on-market.

Apportionment

The combined operation of subsections 8-1(1) and 8-1(2) of the ITAA 1997 may require apportionment of a loss or outgoing into deductible and non-deductible components, where a single loss or outgoing is incurred for more than one purpose or on items of a different nature. This would be relevant in the circumstances where contributions made by Company A to the Trustee of the ESP Trust for the purposes of administering the Share Plan are used to subscribe for shares in Company A.

A contribution to the trustee of an employee share trust is capital or of a capital nature where the contribution secures for the employer an asset or advantage of an enduring or lasting nature that is independent of the year to year benefits that the employer derives from a loyal and contented workforce.

Where a contribution is, ultimately and in substance, applied by the trustee of an employee share trust to subscribe for equity interests in the employer (for example shares), the employer has also acquired an asset or advantage of an enduring nature.

Where a contribution is made for the purpose of securing for the employer advantages of both a revenue and capital nature, but the advantages of a capital nature are only expected to be very small or trifling by comparison, apportionment may not be required.

In this case, the outgoings incurred by Company A by way of the irretrievable contributions it makes to the Trustee of the ESP Trust in order to carry on its business are either not capital in nature or any capital component is considered to be sufficiently small or trifling such that the Commissioner would not seek to apportion the deduction.

Private or domestic in nature

Nothing in the facts suggest that the irretrievable contributions made by Company A to the Trustee of the ESP Trust are private or domestic in nature, or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible under a specific provision of the ITAA 1936 or ITAA 1997.

Conclusion

The irretrievable contributions Company A makes to the Trustee of the ESP Trust to fund the acquisition of ordinary shares in accordance with the ESP Trust Deed and Company A Policy will be an allowable deduction to Company A under section 8-1 of the ITAA 1997.

Question 2

Law Administration Practice Statement PS LA 2005/24 Application of General Anti-Avoidance Rules (PS LA 2005/24) deals with the application of the general anti-avoidance rules, including Part IVA of the ITAA 1936. Before the Commissioner can exercise the discretion in respect of Part IVA under subsection 177F(1) of the ITAA 1936, three requirements must be met:

1. there must be a scheme within the meaning of section 177A of the ITAA 1936

2. a tax benefit must arise based on whether a tax effect would have occurred, or might reasonably be expected to have occurred if the scheme had not been entered into or carried out, and

3. having regard to the matters in subsection 177D(2) of the ITAA 1936, the scheme is one to which Part IVA of the ITAA 1936 applies (dominant purpose).

On the basis of an analysis of these requirements, the Commissioner will not seek to make a determination that Part IVA of the ITAA 1936 applies to deny, in part or in full, any deduction claimed by Company A in respect of irretrievable contributions to the Trustee of the ESP Trust to fund the subscription for, or acquisition on-market of, ordinary shares in Company A.

Question 3

Not required to be answered.

Question 4

Section 12-35 of Schedule 1 to the TAA 1953 provides that an entity making a payment of salary or wages, or a bonus to an individual as an employee (that is not exempt income or non-assessable non-exempt income of that employee) is required to withhold an amount from that payment.

Section 11-5 of Schedule 1 to the TAA 1953 states that in working out whether an entity (the 'first entity') has paid an amount to another entity (the 'other entity'), and when the amount is paid, the amount is taken to have been paid to the other entity when the first entity applies or deals with the amount in any way on behalf of or as directed by the other entity.

Accordingly, as no payment is made directly to an Company A employee, the irretrievable cash contributions will only be taken to have been paid to an employee if the amount is paid to the Trustee of the ESP Trust for or on behalf of an employee or at the direction of an employee. The employee has no interest in the contributions paid to the Trustee of the ESP Trust by Company A, nor is it able to direct Company A to make the contributions to the Trustee of the ESP Trust. As such the contributions do not constitute a payment of salary, wages, commission, bonuses or allowances and the contributions do not satisfy the constructive payment provision in section 11-5 of Schedule 1 to the TAA.

Therefore, no amount will be required to be withheld from the irretrievable cash contributions made by Company A to the Trustee of the ESP Trust to fund the subscription for, or acquisition on-market of, Company A shares in respect of Company A employees under section 12-35 of Schedule 1 to the TAA 1953.

Question 5

Paragraph (ha) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA states that a fringe benefit does not include:

(ha) a benefit constituted by the acquisition of money or property by an employee share trust (within the meaning of the Income Tax Assessment Act 1997);

Subsection 995-1(1) of the ITAA 1997 states that the expression an 'employee share trust' has the same meaning given by subsection 130-85(4) of the ITAA 1997.

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).

Paragraphs 130-85(4)(a) and (b) of the ITAA 1997

The beneficial interest in a share received by a Participant when an ordinary share in Company A is granted to them under the terms of the ESP Trust Deed is an ESS interest within the meaning of subsection 83A-10(1) of the ITAA 1997.

Subsection 83A-10(2) of the ITAA 1997 defines an employee share scheme as being 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 Share Plan is an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997 because it is a scheme under which ordinary shares in Company A are provided to employees in relation to the employee's employment.

The ESP Trust Deed was entered into so that the Trustee of the ESP Trust could acquire ordinary shares in Company A and allocate those shares to employees in order to satisfy ESS interests acquired by those employees under the Share Plan.

Paragraphs 130-85(4)(a) and (b) of the ITAA 1997 are therefore satisfied.

Paragraph 130-85(4)(c) of the ITAA 1997

Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 will also require the Trustee of the ESP Trust to undertake incidental activities that are a function of managing the Share Plan.

ATO Interpretative Decision ATO ID 2010/108 Income Tax - Employee share trust that acquires shares to satisfy rights provided under an employee share scheme and engages in other incidental activities sets out a number of activities which are merely incidental for the purposes of paragraph 130-85(4)(c) of the ITAA 1997:

• 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; 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 to be merely incidental.

Under the ESP Trust Deed the Trustee of the ESP Trust must administer the ESP Trust at all times so as to satisfy the definition of 'fringe benefit' in section 995-1 of the ITAA 1997.

Under the ESP Trust Deed the Trustee of the ESP Trust can acquire shares in Company A and hold those shares in accordance with the ESP Trust Deed and the Company A Policy for the benefit of each Participant. Under the ESP Trust Deed any shares in Company A that are acquired must be allocated to an account established for a Participant. Under the ESP Trust Deed the Trustee of the ESP Trust has no beneficial interest in any shares it acquires in Company A.

Paragraph 130-85(4)(c) of the ITAA 1997 is satisfied as all other activities undertaken by the Trustee are merely incidental to managing the Share Plan.

Conclusion

The ESP Trust satisfies the definition of an employee share trust in subsection 130-85(4) of the ITAA 1997 as:

• the ESP Trust acquires shares in a company, namely Company A;

• the ESP Trust ensures that ESS interests (as defined in subsection 83A-10(1) of the ITAA 1997, being beneficial interests in the shares of Company A), are provided under an ESS (as defined in subsection 83A-10(2) of the ITAA 1997) by allocating those shares to the employees in accordance with ESP Trust Deed and Company A Policy; and

• the ESP Trust Deed does not provide for the Trustee to participate in any activities which are not considered to be merely incidental to a function of managing the Share Plan and administering the ESP Trust.

As paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA excludes the contributions to the Trustee of the ESP Trust from being a fringe benefit, Company A will not be required to pay fringe benefits tax (FBT) in respect of irretrievable contributions made to the Trustee of the ESP Trust to fund the acquisition of ordinary shares in Company A.

Question 6

The liability of an employer to FBT arises under section 66 of the FBTAA which provides that tax is imposed in respect of the fringe benefits taxable amount of an employer for the relevant year of tax. The fringe benefits taxable amount is calculated under the FBTAA by reference to the taxable value of each fringe benefit provided.

No amount will be subject to FBT unless a 'fringe benefit' is provided.

In general terms, 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit provided to an employee or an associate of an employee 'in respect of' the employment of the employee.

However, certain benefits are excluded from being a 'fringe benefit' by virtue of paragraphs (f) to (s) of the 'fringe benefit' definition in subsection 136(1) of the FBTAA. Paragraph (h) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA relevantly states that a fringe benefit does not include:

(h) (h) a benefit constituted by the acquisition of an ESS interest under an employee share scheme (within the meaning of the Income Tax Assessment Act 1997) to which Subdivision 83AB or 83AC of that Act applies.

As detailed above in question 5:

• each share allocated to a Participant by the Trustee under the terms of the ESP Trust Deed is an ESS Interest within the meaning of subsection 83A-10(1) of the ITAA 1997.

• the Share Plan is an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997 as it is a scheme under which ordinary shares in Company A are provided to employees in relation to the employee's employment.

The provision of a share in Company A to a Participant by the Trustee of the ESP Trust under the terms of the ESP Trust Deed and in accordance with the Share Plan will not be subject to FBT on the basis that it occurs as part of an employee share scheme (to which Subdivision 83A-B or 83A-C of the ITAA 1997 will apply) and is thereby excluded from the definition of 'fringe benefit' by virtue of paragraph (h) of that definition in subsection 136(1) of the FBTAA .

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