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Edited version of your written advice
Authorisation Number: 1051511289978
Date of advice: 10 May 2019
Ruling
Subject: Employee share plan
Question 1
Will the irretrievable cash contributions made by the Company, or any subsidiary member of the Company Tax Consolidated Group (TCG), to the Trustee to fund the acquisition of the Company shares (Shares) by the Trust for the purposes of the employee share plans (the Plans), be assessable income of the Trust under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No
Question 2
Will a capital gain or capital loss that arises for the Trustee at the time when the Participants become absolutely entitled to the Shares (CGT event E5), or when the Trustee disposes of the Shares to the Participants (CGT event E7), be disregarded under section 130-90 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 period
XXXX
The scheme commences on
XXXX
Relevant facts and circumstances
1. The Company is an Australian resident company.
2. The Company is the head company of the Company TCG.
3. The Employer Entities for the group are subsidiary members of the Company TCG.
4. The Company operates the Plans as part of its remuneration strategy. The Plans are operated pursuant to a number of governance documents.
5. The Company and subsidiary members of the Company TCG pay for all the on-going administration costs of the Trust.
6. The Company and members of the group are not beneficiaries of the Trust or have, at any time, any legal or beneficial entitlement to any of the Shares held by the Trustee.
7. The Plans operate as follows:
● The Company established the Trust by executing the trust deed (Trust Deed) to facilitate the acquisition, holding and allocation of the Shares to eligible employees (Participants) in accordance with the Trust Deed.
● The Company or any subsidiary member of the Company TCG may make irretrievable cash contributions to the Trustee to enable the Trustee to acquire Shares in order to satisfy the grants of Options or Performance Rights. The contributions will be determined in accordance with certain protocols.
● The offer of Options or Performance Rights to Participants is subject to certain conditions.
● When a Participant satisfies the conditions of the Options and Performance Rights, the Trustee releases the Shares to the Participant.
● Once the Shares are transferred to a Participant by the Trustee, the Participant becomes absolutely entitled to such Shares.
● The Trustee holds all the Shares pursuant to the Plans on capital account.
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 130-90
Reasons for decision
Questions 1
The irretrievable cash contributions received by the Trustee from the Company will not be assessable income of the Trust pursuant to sections 6-5 or 6-10 of the ITAA 1997 because they are not ordinary income or statutory income of the Trust.
Question 2
Section 130-90 of the ITAA 1997 will operate to disregard any capital gain or loss made by the Trustee on any Share when a Participant becomes absolutely entitled to the Share (CGT event E5), or when the Trustee disposes of the Share to the Participant (CGT event E7).
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