Edited version of private advice

Authorisation Number: 1052223642284

Date of advice: 21 February 2024

Ruling

Subject: Indeterminate right

Question 1

Is the employee share scheme (ESS) interest an Indeterminate Right under Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. The ESS interest is an indeterminate right under Division 83A of the ITAA 1997.

The indeterminate right is a right to acquire a share when a condition of the contract is satisfied. The Original Offer Letter provides the conditions (Offer Conditions Precedent) that must be satisfied in order for the applicant to be invited to participate in XXX Performance Rights Plan.

If the Offer Conditions Precent are satisfied the applicant will be made an offer to acquire XXX Performance Rights.

Question 2

Is the taxing point the date the Applicant receives the Original Offer Letter to participate in the Performance Rights Plan.

Answer

Yes. The taxing point is the date the Applicant receives the Original Offer Letter.

This ruling applies for the following periods:

30 June 20XX

The scheme commences on:

XX XXX 20XX

Relevant facts and circumstances

The Applicant is an employee of XXX (the Company)

The Applicant currently holds more than XX% of the ordinary shares on issue in the Company. Together with the Performance Rights that may be acquired under the Offer if it proceeds, the Applicant will hold XX% shareholding and voting interest in the Company if and when the Performance Rights are offered.

The Company has established the XXX Performance Rights Plan (the Plan).

The Applicant will be invited to participate in the Plan, but only after certain conditions have been satisfied.

The Applicant will be provided with the Offer Letter (the letter) confirming the conditions that need to be satisfied in order for the Applicant to be invited to participate in the Plan.

The letter states:

In order for you to be invited to participate in the Plan, the following conditions (Offer Conditions Precedent) must be satisfied:

(a)  prior to XX XXX 20XX the Company must undertake a capital raise pursuant to which it raises an aggregate of at least $XXX (before costs and expenses) from investors. For the avoidance of doubt, the Company may raise the amount in one or more tranches; and

(b)  at all relevant times you must remain an Eligible Person.

If the Offer Conditions Precedent are not satisfied you will not be eligible to be offered any Performance Rights.

If the Offer Conditions Precedent are satisfied, you will be made an offer to acquire XXX Performance Rights for XXX consideration, subject to the terms and conditions of the Plan, and on the basis that the Performance Rights will only vest if:

(a)  on or before XX XXX 20XX the Company has completed the construction of its proposed XXX facility (Facility). Construction will be deemed to have been completed once the Facility is capable of commencing production; and

(b)  at all relevant times you remain an Eligible Person.

Any offer that may be made to you will be made using a document that is in substantially the same form as the Offer Letter set out in Schedule 1 of the Plan. The Offer will also be made on the basis that if a Performance Right vests and is exercised, the Board will have the discretion to make a cash payment to you (in lieu of issuing or transferring a Share to you) in accordance with XXX of the Plan.

Performance Rights Plan

The objective of this Plan is to enable the Company to offer incentives aimed at creating a stronger link between the Company's key personnel's performance and reward, whilst increasing Shareholder value in the Company.

The commencement and term of the Plan will commence on the date determined by resolution of the Board and will continue until terminated by resolution of the Board.

Eligible Person means

(a)  a director of any Group Company;

(b)  an employee of any Group Company;

(c)   a contractor who provides services to a Group Company, or

(d)  a Prospective Participant;

who is declared by the Board to be eligible to receive grants of Performance Rights under this Plan.

Performance Right means a right to acquire a Share (or, if applicable, a Cash Payment), subject to satisfaction of any Vesting Conditions, and the corresponding obligation of the Company to provide the Share (or, if applicable, a Cash Payment), under a binding contract made by the Company and a Participant in the manner set out in this Plan.

Vesting Condition means, in respect of a Performance Right, any condition set out in the Offer which must be satisfied (unless waived in accordance with this Plan) before that Performance Right can be exercised or any other restriction on exercise of that Performance Right specified in this Plan.

Vesting Conditions

(a)  Subject to clauses XXX and XXX, a Performance Right granted under this Plan will not vest and be exercisable unless the Vesting Conditions (if any) attaching to that Performance Right have been satisfied and the Board has notified the Participant of that fact.

(b)  The Board must notify a Participant in writing within 10 Business Days of becoming aware that any Vesting Condition attaching to a Performance Right has been satisfied.

Allocation of Share or Cash Payment

Subject to the Corporations Act, the ASX Listing Rules, and this Plan, provided the Board has not determined that a Cash Payment will be made in accordance, the Company must issue or transfer to the Participant or his or her personal representative (as the case may be) the number of Shares the Participant is entitled to be issued in respect of vested Performance Rights that are exercised, within 10 Business Days of the Performance Rights being exercised ...

Cash payment facility

(a)  Subject to the Corporations Act, the ASX Listing Rules and this Plan, where all Vesting Conditions in respect of a Performance Right have been satisfied or waived, the Board may, if permitted to do so in accordance with the terms of the relevant Offer, in its absolute discretion, within 10 Business Days of the Performance Right being exercised, in lieu of issuing or transferring a Share to the Participant, pay the Participant or his or her personal representative (as the case may be) a Cash Payment for the Performance Right exercised (which may be nil if the Cash Payment is a negative amount). For the avoidance of doubt where a valid notice of exercise is received in relation to a number of Performance Rights the Board may exercise its discretion to make a Cash Payment in relation to all or some of the Performance Rights.

(b)  A vested Performance Right automatically lapses upon payment of a Cash payment in respect of the vested Performance Right.

Blackout period, takeover restrictions, insider trading, cleansing notices

(a)  If the issue or transfer of Shares on exercise of a Performance Right would otherwise fall within a Blackout Period or breach the insider trading provisions of the Corporations Act, the Company may delay the allocation of the Shares until 10 Business Days following the expiration, as applicable, of the Blackout Period or the day on which the insider trading provisions no longer prevent the issue or transfer of the Shares.

(b)  If the issue or transfer of shares on exercise of a Performance Right would otherwise fall within a period during which the Company does not consider it is in its best interests to exercise its discretion and issue a cleansing notice in accordance with clause XXX, the Company may (acting reasonably), but is not obliged to, delay the allocation of the Shares until such time that it considers the Company's interests will not be adversely affected by issuing the cleansing notice.

Restrictions on Sale of Shares

(a)  A Participant must not sell, transfer or dispose of any Shares acquired on exercise of the Performance Rights (or any interest in them):

(i)    in contravention of the Corporations Act, including the insider trading and on-sale provisions;

(ii)   during any Restriction Period; and

(iii)  without complying with any relevant transfer restrictions contained in the Constitution of the Company of any Shareholders Agreement.

(b)  If the sale, transfer or disposal by the Participant of the Shares allocated to them on exercise of the Performance Rights (or any interest in them) would require the preparation of a disclosure document (as that term is defined in the Corporations Act) the Company may at its discretion issue:

(i)    a cleansing statement under Section 708A(5) of the Corporations Act at the time the Shares are issued; or

(ii)   a disclosure document in relation to the Shares which complies with the requirements of the Corporations Act.

Restriction on Disposal and Risk of Forfeiture of Shares

Request for waiver

Shares issued or transferred on exercise of Performance Rights are subject to the restrictions under clause XXX, unless the Participant requests that the Company waives those restrictions under clause XXX (such notice to be made at the same time the notice is provided in accordance with clause XXX) and that request is approved by the Company.

Restriction

Subject to clause XXX, any Share acquired by a Participant on the exercise of a Performance Right must not be disposed of or dealt with in any way by that Participant until the earlier of:

(a)  where a period is determined by the Board for the purpose of this clause XXX and set out in the Offer Letter, the expiration of that period; and

(b)  the expiration of any period determined by the Board in its discretion (up to a maximum period of five (5) years from the date of the grant of the Performance Right), provided the Board notifies the Participant in writing of the restriction before the Participant exercises the Performance Right.

(Restriction Period)

Risk of forfeiture

A Share issued or transferred to a Participant on the exercise of a Performance Right is allocated to the Participant on the terms that it will be forfeited while the Shares are subject to the restriction on disposal under clause XXX upon the Participant:

(a)  perpetuating fraud as against a Group Company;

(b)  acting dishonestly in its dealings with a Group Company;

(c)   committing a breach of the Participant's obligations to a Group Company, including those obligations that survive cessation of employment;

(d)  becoming an employee of, or providing services to, an entity considered by the Board (acting reasonably) to be a competitor of a Group Company; or

(e)  engaging in any activity considered by the Board (acting reasonably) to be detrimental to a Group Company.

When risk of forfeiture ceases

The right of The Company to cause a Share held by a Participant to be forfeited under clause XXX extinguishes at the end of the Restriction Period.

Assumptions

For the purpose of this ruling, it is assumed that:

• The Draft Letter will be issued to the taxpayer before XX XXX 20XX
• The company undertakes the capital raise before XX XXX 20XX
• The formal offer is made during the period of this ruling
• The taxpayer accepts the formal offer during the period of this ruling
• The Board of the Company will choose to equity settle the Rights

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 83A

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