Edited version of private advice

Authorisation Number: 1052481546576

Date of advice: 3 December 2025

Ruling

Subject: Employee share scheme

Question 1

Will the irretrievable cash contributions made by Company X, as head company of an income tax consolidated group (Group), to the Trustee of the Trust to fund the subscription for, or acquisition of, ordinary shares in Company X (Shares) for the purposes of the Company X Equity Plan (Plan) be assessable income of the Trustee under section 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

No.

Question 2

Will a capital gain or capital loss that arises for the Trust at the time when the participants of the Plan become absolutely entitled to the Shares be disregarded under section 130-90 of the ITAA 1997, if the participants acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trust?

Answer 2

Yes.

Question 3

Will dividends and other income received by the Trustee in respect of Shares held by the Trustee but not yet allocated to employees (Unallocated Shares):

a)             be included in the calculation of the net income of the trust estate under section 95 of the Income Tax Assessment Act 1936 (ITAA 1936), and

b)             be assessed to the Trustee under section 99A of the ITAA 1936?

Answer 3

Yes.

Question 4

Will the Trustee be entitled to a tax offset for the franking credits attached to the franked dividend it receives on the Unallocated Shares under Subdivision 207-B of the ITAA 1997?

Answer 4

Yes.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XX

The scheme commenced:

In a particular income year

Relevant facts and circumstances

Background

Company X is a company that carries on a business in Australia that derives assessable income and is listed on the Australian Securities Exchange.

Company X is the head company of the Group.

Certain subsidiary members of the Group that employ staff and/or make cash contributions to the Trust in relation to its employees who participate in the Plan.

Company X operates the Plan as part of its remuneration and reward program for the Group's employees.

Under the Plan, eligible employees may be granted one or more of the following awards:

•                rights to be allocated Shares (or in certain circumstances to receive a cash payment in lieu of Shares) for no consideration, subject to the satisfaction or waiver of any applicable vesting conditions (Rights)

•                a legal or beneficial interest in Shares acquired for no consideration, subject to the satisfaction or waiver of any applicable vesting conditions, and

•                an opportunity to use post-tax or pre-tax remuneration to acquire Shares at market value and for every Acquired Share, the employee is granted a conditional right (Matching Awards) to acquire a Share for no consideration at the end of the vesting period.

An eligible employee who has been granted one or more awards under the Plan is referred to as a 'Participant'.

The Plan may be administered using an employee share trust, with which the Trustee may acquire Shares for the purposes of transfer to, or holding on behalf of, the Participants.

Trust Deed and related matters

The Trust operates in accordance with the terms of the Trust Deed, which provides as follows:

•                Company X must make cash contributions to the Trustee to enable the Trustee to acquire and allocate Shares under the Plan and the Trustee is not obliged to act unless it is sufficiently funded by Company X's cash contributions.

•                The Participant is absolutely entitled to the Shares allocated to them by the Trustee and held on their behalf (Allocated Shares) and all other benefits or privileges attached to the Allocated Shares. The Participant is taken to be beneficial owner of the Allocated Shares and has substantially the same rights in respect of Allocated Shares as if the Allocated Shares were registered in their name. Participants are absolutely entitled to all accretions that arise in respect of an Allocated Share and is presently entitled to so much of the net income of the Trust for a year of income which is attributable to the Participant's Allocated Share.

•                Unallocated Shares are held by the Trustee for the benefit of Participants generally from time to time and if the Trustee receives any income, including dividends, deriving from Unallocated Shares, the income becomes trust property and the Trustee holds that income on trust for the general purpose of the Trust.

•                All funds received by the Trustee from Company X, or any members of the Group, will constitute accretion to the corpus of the Trust, will not be payable or repayable by the Trustee to Company X or any members of the Group, other than being paid to Company X as consideration for the subscription of Shares provided such Shares are held under the terms of the Trust Deed.

•                Company X or any members of the Group are not and will not be beneficiaries of the Trust, and may not acquire any interest in the capital, or be entitled to any income, of the Trust.

•                No encumbrance may be granted over any assets of the Trust by any persons, including any company in the Group, and nothing in the deed confers on Company X any encumbrance, proprietary right or proprietary interest in the Shares acquired by the Trustee.

•                Proceeds of sale of fractions of Shares or forfeited Shares and any balance available upon termination of the Trust may not be paid or transferred to any company in the Group.

•                No amendments may be made to the Trust Deed which confer on any company in the Group any rights to Shares or any other assets already in the hands of the Trustee.

•                Company X must pay all trust expenses and indemnify the Trustee in respect of all liabilities, reasonable costs and expenses incurred by the Trustee.

On-going administration costs

Company X will incur various costs in respect of the on-going administration and management of the Trust, including but not limited to:

•                employee plan record keeping

•                production and dispatch of holding statements to Participants

•                acquisition of Shares on market, such as brokerage and the allocation of such Shares to Participants

•                annual audit of the financial statements

•                preparation of the annual income tax return of the Trust, and

•                fees payable to the Trustee for its administrative services in relation to the Trust.

Other matters

Where vested Rights or Matching Awards are settled by a cash payment, Company X has confirmed that the cash payment will not flow through or involve the Trust.

All awards under the Plan are granted to employees who engage in activities that derive income for Company X which is assessable in Australia.

Assumption

The Trustee will be a qualified person for the purposes of Division 1A of former Part IIIAA of the ITAA 1936.

Relevant legislative provisions

Income Tax Assessment Act 1936 Division 1A former Part IIIAA

Income Tax Assessment Act 1936 section 95

Income Tax Assessment Act 1936 section 99A

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 Division 83A

Income Tax Assessment Act 1997 section 104-75

Income Tax Assessment Act 1997 section 130-85

Income Tax Assessment Act 1997 section 130-90

Income Tax Assessment Act 1997 subdivision 207-B

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