Edited version of private ruling

Authorisation Number: 1011865570940

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Employee share plan

Question 1

Will the Company obtain an income tax deduction pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the subscription for or acquisition on-market of the Company shares by the Trust?

Answer

Yes

Question 2

Will the Company obtain an income tax deduction pursuant to section 8-1 of the ITAA 1997 in respect of costs incurred in relation to the implementation and ongoing administration of the Trust?

Answers

Yes

Question 3

Are irretrievable cash contributions made by the Company to the Trustee of the Trust, to fund the subscription for or acquisition on-market of the Company shares by the Trust, deductible to the Company at a time determined by section 83A-210 of the ITAA 1997?

Answers

Yes

Question 4

If the Trust satisfies the relevant Equity Plan obligations by subscribing for new shares in the Company, will the subscription proceeds be included in the assessable income of the Company under sections 6-5 or 20-20 of the ITAA 1997 or trigger a capital gains tax (CGT) event under Division 104 of the ITAA 1997?

Answers

No

Question 5

Will the Commissioner seek to make a determination that Part IVA of the ITAA 1936 applies to deny, in part or in full, any deduction claimed by the Company in respect of the irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the subscription for or acquisition on-market of the company's shares by the Trust?

Answers

No

Question 6

Is the provision of performance rights, options or shares by the Company to the Company's employees under the Company's Employee Incentive Plans (EIP) a fringe benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answers

No

Question 7

Will the irretrievable cash contributions made by the Company to the Trustee of the Trust, to fund the subscription for or acquisition on-market of the Company shares, be treated as a fringe benefit within the meaning of subsection 136(1) of the FBTAA?

Answers

No

Question 8

Will the Commissioner seek to make a determination that section 67 of the FBTAA applies to increase the fringe benefits taxable amount to the Company, by the amount of tax benefit gained from irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the subscription for or acquisition on-market of the Company shares?

Answers

No

This ruling applies for the following periods:

Year ended 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015

The scheme commences on:

29 April 2011

Relevant facts and circumstances

The scheme the subject of this Ruling has been ascertained from the following documents:

· Application for Private Ruling

· EIP Rules

· The Trust Deed of the Trust

· Annual Report of the Company

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997
Section 8-1 of the Income Tax Assessment Act 1997
Section 20-20 of the Income Tax Assessment Act 1997
Section 83A-10 of the Income Tax Assessment Act 1997
Section 83A-35 of the Income Tax Assessment Act 1997
Section 83A-205 of the Income Tax Assessment Act 1997
Section 83A-210 of the Income Tax Assessment Act 1997
Section 102-5 of the Income Tax Assessment Act 1997
Section 102-25 of the Income Tax Assessment Act 1997
Section 104-35 of the Income Tax Assessment Act 1997
Section 104-155 of the Income Tax Assessment Act 1997
Subsection 130-85(4) of the Income Tax Assessment Act 1997

Section 995-1 of the Income Tax Assessment Act 1997
Section 177A of the Income Tax Assessment Act 1936
Section 177C of the Income Tax Assessment Act 1936
Section 177D of the Income Tax Assessment Act 1936
Section 177F of the Income Tax Assessment Act 1936
Section 67 of the Fringe Benefits Tax Assessment Act 1986
Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Question 1

Summary

The Company can claim an income tax deduction pursuant to 8-1 of the ITAA 1997 in respect of the irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the subscription for or acquisition on-market of the Company shares by the Trust.

Detailed reasoning

Section 8-1 of the ITAA 1997, insofar as it is relevant, states:

8-1(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.

8-1(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;

The Company has established its employee share plans as part of its remuneration policy with the intention of attracting and retaining suitable employees in its business.

The cash contributions made by the Company to the Trustee of the Trust to fund the subscription for or acquisition on-market of the Company shares by the Trust are irretrievable and non-refundable under the Trust Deed.

The Company's purpose in establishing and funding its employee share plan is to encourage Employees to share in the ownership of the Company and to promote the long term success of the Company and is a key aspect of the Company's strategy to retain and attract high quality staff.

Therefore, the irretrievable cash contributions it makes to the Trustee under the rules of the plans are directed to enhancing the profitability of its business and producing assessable income.

In Pridecraft Pty Ltd v. FC of T [2004] FCAFC 339; 2005 ATC 4001; FC of T v. Spotlight Stores Pty Ltd [2004] FCA 650; 2004 ATC 4674; 55ATR 745, the Court held that payments by an employer company to a trust established for the purpose of providing incentive payments to employees were on revenue account and not capital or of a capital nature. This is consistent with the opinion expressed in ATO Interpretative Decision ATO ID 2002/1074 that a company will be entitled to a deduction under section 8-1 of the ITAA 1997 for non-refundable cash contributions made to the trustee of its employee share scheme.

Accordingly, the conditions of paragraph 8-1(1)(b) of the ITAA 1997 are satisfied.

The Company has advised that the company will make contributions to the Trust to provide benefits to eligible employees in the form of shares. Such contributions will be made if and when the rights vest. The Trust will then allocate shares to the relevant participants, having subscribed for or acquired on-market sufficient shares to fulfil the obligations as necessary.

Accordingly the Company will not be pre-funding the Trust with a lump sum payment but will be making contributions on a regular basis as required.

The irretrievable cash contributions are an on-going expense of conducting its business to which the Company has committed itself by establishing the share plans and entering into the Trust Deed with the Trustee. Therefore, they are not capital in nature and paragraph 8-1(2)(a) of the ITAA 1997 is satisfied.

Accordingly, the irretrievable cash contributions the Company makes to the Trustee to enable it to acquire shares, whether by on-market purchase or subscription, are allowable deductions.

Question 2

Summary

The Company will obtain an income tax deduction pursuant to section 8-1 of the ITAA 1997 in respect of costs incurred in relation to the implementation and on-going administration of the Trust.

Detailed reasoning

As provided in question 1 above, you can deduct an amount under section 8-1 of the ITAA 1997 if the expense is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

In respect of costs in administering an employee share trust, ATO Interpretative Decision ATO ID 2002/961 provides that costs incurred in implementing and administering an employee share scheme will be deductible under section 8-1 of the ITAA 1997 as they are part of the ordinary employee remuneration costs.

As outlined in the facts, the Company incurs various expenses in respect of the implementation and on-going administration of the Trust. These expenses form part of the ordinary employee remuneration costs.

Consistent with the analysis in question one, the costs are revenue and not capital in nature on the basis that they are regular and recurrent employment expenses. Accordingly the costs are deductible under section 8-1 of the ITAA 1997 in the year they are incurred.

Question 3

Summary

The provision of money to the Trustee of the Trust to acquire the Company shares is considered to be for the purpose of enabling the participating employees, indirectly as part of the EIP to acquire the rights or options. If that money is provided before the rights or options are acquired then section 83A-210 of the ITAA 1997 will apply. However, section 83A-210 of the ITAA 1997 will not apply to a deduction for the purchase of shares to satisfy the obligation arising from rights or options already granted, and that deduction is accordingly allowable to the Company in the year in which the money was paid to the Trustee of the Trust, under section 8-1 of the ITAA 1997.

However, if any amount of money is used by the Trustee of the Trust to purchase excess shares intended to meet a future obligation arising from a future grant of rights or options, the excess payment occurs before the employees acquire the relevant rights or options (ESS interests) under the scheme. Section 83A-210 of the ITAA 1997 will apply in that case and the excess payment will only be deductible to the Company in the year of income when the relevant rights or options are subsequently granted to the employees.

Detailed reasoning

As discussed in question 1, the provision of money to the trustee of the Trust by the employer for the purpose of remunerating its employees under an ESS is an outgoing in carrying on the employer's business and is deductible under section 8-1 of the ITAA 1997.

The deduction under section 8-1 of the ITAA 1997 would generally be allowable in the income year in which the employer incurred the outgoing but under certain circumstances, the timing of the deduction is specifically determined under section 83A-210 of the ITAA 1997.

With effect from 1 July 2009, section 83A-210 of the ITAA 1997 determines the timing of a deduction for contributions, as follows:

83A-210 If:

(a) at a particular time, you provide another entity with money or other property:

(i) under an arrangement; and

(ii) for the purposes of enabling an individual (the ultimate beneficiary) to acquire, directly or indirectly, an ESS interest under an employee share scheme in relation to the ultimate beneficiary's employment (including past or prospective employment); and

(b) that particular time occurs before the time (the acquisition time) the ultimate beneficiary acquires the ESS interest;

then, for the purposes of determining the income year (if any) in which you can deduct an amount in respect of the provision of the money or other property, you are taken to have provided the money or other property at the acquisition time.

Section 83A-210 of the ITAA 1997 will only apply if there is a relevant connection between the money provided to the Trustee, and the acquisition of ESS interests (directly or indirectly) by the Company under the EIP in relation to the employee's employment.

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.

Under the EIP a right or option granted to an employee will be an ESS interest as it is a right to acquire a beneficial interest in a share in the Company. This ESS interest is granted under an ESS in relation to the employee's employment. The share acquired by the Trustee of the Trust to satisfy such a right or option is granted under the ESS to an employee, in relation to the employee's employment.

The granting of the beneficial interests in the rights or options, the provision of the money to the Trustee of the Trust under the arrangement, the acquisition and holding of the shares by the Trustee of the Trust and the allocation of shares to the participating employees are all interrelated components of the EIP. All the components of the scheme must be carried out so that the scheme can operate as intended.

As one of those components, the provision of money to the Trustee of the Trust necessarily allows the scheme to proceed. Consequently, the provision of money to the Trustee of the Trust to acquire the Company shares is considered to be for the purpose of enabling the participating employees, indirectly as part of the EIP, to acquire the rights or options. If that money is provided before the rights or options are acquired then section 83A-210 of the ITAA 1997 will apply. However, section 83A-210 of the ITAA 1997 will not apply to a deduction for the purchase of shares to satisfy the obligation arising from rights or options already granted, and that deduction is accordingly allowable to the Company in the year in which the money was paid to the Trustee of the Trust, under section 8-1 of the ITAA 1997.

However, if any amount of money is used by the Trustee of the Trust to purchase excess shares intended to meet a future obligation arising from a future grant of rights or options, the excess payment occurs before the employees acquire the relevant rights or options (ESS interests) under the scheme. Section 83A-210 of the ITAA 1997 will apply in that case and the excess payment will only be deductible to the Company in the year of income when the relevant rights or options are subsequently granted to the employees.

Question 4

Summary

If the Trust satisfies its obligations under the EIP by subscribing for new shares in the Company, the subscription proceeds will not be included in the assessable income of the Company under sections 6-5 or 20-20 of the ITAA 1997 or trigger a capital gains tax event under Division 104 of the ITAA 1997.

Detailed reasoning

Section 6-5 Income according to ordinary concepts

Under subsection 6-5(1) of the ITAA 1997, a payment or other benefit received by a taxpayer is included in assessable income if it is income according to ordinary concepts. Income according to ordinary concepts is not defined in the income tax legislation. However, principles to determine whether a receipt is income according to ordinary concepts have been developed by case law. In determining whether a receipt is income according to ordinary concepts, it is necessary to apply the relevant principles developed by case law to the facts of the particular case.

Dixon J in Sun Newspapers Limited and Associated Newspapers Limited v. FCT (1938) 61 CLR 337; (1938) 5 ATD 23; 1 AITR 403 (Sun Newspapers) outlined the three matters to be considered in determining whether a payment is on capital or revenue account, as follows:

· the character of the advantage sought by the payment

· the way it is to be used or enjoyed; and

· the means adopted to obtain it.

The Company has established its employee share plans as part of its remuneration policy with the intention of attracting and retaining suitable employees in its business. Therefore, the character of the advantage sought is one of reward and retention of the human resources of the business, as a contribution to its long term success, which distinguishes it as capital in nature.

The receipt of the subscription will be accounted for as an addition to the share capital of the Company in its books and records. While this treatment of the subscription proceeds is not decisive in itself, it is indicative of Company's treatment of the receipt and consistent with accounting principles.

The payment is an outlay to secure shares in the Company as a means to structure the business to secure and enhance its long-term profitability.

Based on these three factors, the subscriptions proceeds are held on capital account.

Section 20-20 Assessable recoupments

Under Subdivision 20-A of the ITAA 1997, certain amounts received by way of insurance, indemnity or other recoupment are assessable income if the amounts are not income under ordinary concepts or otherwise assessable.

Under subsection 20-20(2) of the ITAA 1997, an amount you have received as recoupment of a loss or outgoing is an assessable recoupment if:

(a) you received the amount by way of insurance or indemnity; and

(b) you can deduct an amount for the loss or outgoing for the *current year, or you have deducted or can deduct an amount for the loss or outgoing for an earlier income year under any provision of this Act.

The subscriptions received by the Company from the Trust are for shares and are integral to the arrangement whereby the acquisition and holding of the shares by the Trustee and the allocation of shares to the participating employees are all interrelated components of the employee share plans. The character of the subscriptions paid to the Company for shares is not one of 'insurance, indemnity or other recoupment'.

Division 104 CGT events

Subsection 102-5(1) of the ITAA 1997 provides that your assessable income includes your net capital gain for the income year. Given that a capital gain or capital loss is made only if a CGT event happens, the initial step is to ascertain whether such an event has occurred. As the transaction is the payment of subscription proceeds by the Trust to the Company for shares, the possible CGT events are:

D1 Creating contractual or other rights; or

H2 Receipt for event relating to a CGT asset.

Subsection 102-25(3) of the ITAA 1997 provides that CGT event D1 applies in preference to CGT event H2.

Subsection 104-35(1) states that CGT event D1 'happens if you create a contractual right or other legal or equitable right in another entity'. However, the legal or equitable right has been created at the time of the issuance of the options or rights and not upon the payment of the subscription proceeds to the Company.

As no legal or equitable right is created CGT event D1 does not happen, further paragraph 104-35(5)(c) of the ITAA 1997 states that event D1 does not happen where a company issues or allots equity interests in the company.

As CGT event DI is excluded, CGT event H2 is to be considered. CGT event H2 happens if an act, transaction or event occurs to a CGT asset owned by a taxpayer and the occurrence does not result in an adjustment to the cost base or reduced cost base (subsection 104-155(1) of the ITAA 1997).

Consideration of the subscription proceeds received by the Company from the Trust establishes that they are for shares and are integral to the arrangement whereby the acquisition and holding of the shares by the trustee and the allocation of shares to the participating employees are all interrelated components of the relevant Plans. As part of the relevant Plans contractual rights of employees are exercised on their behalf to acquire shares in the Company, rather than an act, transaction or event relating to a CGT asset owned by the Company.

Paragraph 104-155(5)(c) of the ITAA 1997 provides that CGT event H2 does not happen where a company issues or allots equity interests in the company, which is applicable here.

Accordingly, a CGT event under Division 104 of the ITAA 1997 does not arise when the Trustee subscribes for shares in the capital of the Company.

Question 5

A consideration of all the factors referred to in paragraph 177D(b) of the ITAA 1936 leads to the conclusion that the dominant purpose of the scheme is to provide remuneration to the Company's employees who participate in the scheme in a form that promotes the company's business objectives, rather than to obtain a tax benefit.

Accordingly, the Commissioner will not make a determination that Part IVA of the ITAA 1936 applies to deny, in part or full, any deduction claimed by the Company in relation to irretrievable contributions made by the Company to the Trust to fund the acquisition of Employer shares in accordance with the scheme.

Question 6

Summary

The provision of rights, options or shares by the Company to its employees under the EIP are not fringe benefits within the meaning of subsection 136(1) of the FBTAA.

Detailed reasoning

A fringe benefit is defined in subsection 136(1) of the FBTAA as follows:

"fringe benefit", in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the "arranger") other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

i. the employer or an associate of the employer; and

ii. the arranger or another person; or

(f) a person other than the employer or an associate of the employer, of the employer or an associate of the employer:

i. participates in or facilitates the provision or receipt of the benefit; or

ii. participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so; in respect of the employment of the employee, but does not include:…

Paragraphs (f) to (r) of the definition of fringe benefit contain a number of exclusions from this definition. Paragraph (h) of the definition of a fringe benefit contained in subsection 136(1) of the FBTAA specifically excludes from the definition of a fringe benefit:

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 83A-B or 83A-C of that Act applies;

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 83A-10(1) of the ITAA 1997). An employee share scheme is a scheme under which ESS interests in the company are provided to employees (or associates of employees) of the company or subsidiaries of the company, in relation to the employee's employment. (Subsection 83A-10(2) of the ITAA 1997)

The Company's employees will receive beneficial interests in shares and rights and options to acquire beneficial interests in shares in respect of their employment, upon acceptance of participation in the plans in accordance with the EIP.

The Commissioner accepts that the scheme described in the facts is an employee share scheme under which relevant ESS interests (being beneficial interests in shares and rights to acquire beneficial interests in shares) are acquired by employees of the Company (or 'associates of those employees'), and the acquisition of those ESS interests are in relation to the employment of those employees. Therefore, the provision of those rights will not be subject to fringe benefits tax because they are specifically excluded from the definition of fringe benefit.

The shares acquired by the Trustee under the EIP to satisfy the rights are also provided to employees under that same employee share scheme.

However shares granted to employees under the EIP to satisfy the rights acquired on acceptance of participation in the EIP are not ESS interests acquired under an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 apply (see subsection 83A-20(2) of the ITAA 1997 and paragraph 83A-105(1)(a) of the ITAA 1997). Therefore the providing of these shares will not be specifically excluded from the definition of fringe benefits under paragraph (h) of the definition in subsection 136(1) of the FBTAA.

As stated above, a fringe benefit will only arise under subsection 136(1) of the FBTAA where the benefit is provided by an employer to an employee or associate of the employee in respect of the employment of the employee.

Under the relevant Plans, the benefit (beneficial interest in shares) that arises upon the end of the vesting period is considered to be provided as a result of the employee exercising rights (previously obtained upon acceptance to participate in the relevant Plans).

The situation mentioned above is considered to be analogous to that stated in ATO Interpretative Decision ATO ID 2003/316 which refers to the case of FC of T v. McArdle 89 ATC 4051;(1988) 19 ATR 1901. In that case, an employee was granted valuable rights in respect of his employment which he subsequently surrendered in return for a lump sum payment. The Court noted that what had occurred under the surrender agreement was not the granting of a valuable benefit, but the exploitation of rights received from the employer in previous years.

In the present circumstances, when an employee accepts to participate in the EIP, he or she obtains a right to acquire a beneficial interest in a share in the Company and this right constitutes an ESS interest. When this right is subsequently exercised, any benefit received, that is, beneficial interest in shares, would be in respect of the exercise of the right, and not in respect of employment.

Therefore, the benefit that arises to an employee after the vesting period under the EIP, being the beneficial interest in a share, does not give rise to a fringe benefit as no benefit has been provided to the employee 'in respect of' the employment relationship.

Question 7

Summary

The Trust is an employee share trust, as defined in subsection 995-1(1) of the ITAA 1997, as the activities of the Trust in acquiring and allocating ESS interests meet the requirements of paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 and its other activities are merely incidental to those activities in accordance with paragraph 130-85(4)(c) of the ITAA 1997. As such, paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA excludes the contributions to the Trustee of the Trust from being a fringe benefit.

Accordingly, the Employer will not be required to pay fringe benefits tax in respect of the irretrievable cash contributions it makes to the Trustee of the Trust to fund the acquisition of the Company shares.

Detailed reasoning

Subsection 136(1) of the FBTAA defines a 'fringe benefit', in relation to an employee, as a benefit in respect of the employment of the employee, and paragraph (ha) of that definition excludes:

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);

An 'employee share trust' is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by subsection 130-85(4) of the ITAA 1997.

Subsection 130-85(4) of the ITAA 1997 provides:

Meaning of employee share trust

130-85(4) 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).

The right to acquire a beneficial interest in an Employer Share is an ESS interest within the meaning of subsection 83A-10(1) of the ITAA 1997.

An employee share scheme is defined in subsection 83A-10(2) of the ITAA 1997 as 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 scheme is an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997 because it is a scheme under which either rights to acquire beneficial interests in shares in the Company are provided to employees in relation to the employee's employment or beneficial interests in shares in the Company are provided to employees in relation to the employee's employment.

Under the EIP, the Company has also established the Trust to acquire shares in the Company and to allocate those shares to employees. Therefore, paragraphs 130-85(4)(a) and (b) of the ITAA 1997 are satisfied because:

· the Trust acquires shares in the Company; and

· the Trust ensures that the ESS interests, being beneficial interests in those shares, are provided under an employee share scheme, to the employees in accordance with the Trust Deed and relevant Rules of the EIP.

Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 will require that the Trustee undertake incidental activities that are a function of managing the EIP and administering the Trust. The incidental activities are covered by paragraph 130-85(4)(c) of ITAA 1997.

The Trust is an employee share trust, as defined in subsection 995-1(1) of the ITAA 1997, as the activities of the Trust in acquiring and allocating ESS interests meet the requirements of paragraphs 130-85(4)(a) and 130-85(4)(b) of the ITAA 1997 and its other activities are merely incidental to those activities in accordance with paragraph 130-85(4)(c) of the ITAA 1997. As such, paragraph (ha) of the definition of fringe benefit in subsection 136(1) of the FBTAA excludes the contributions to the Trustee of the Trust from being a fringe benefit.

Accordingly, the Employer will not be required to pay FBT in respect of the irretrievable cash contributions it makes to the Trustee of the Trust to fund the acquisition of the Company shares in accordance with the Trust Deed.

Question 8

The benefits provided to the Trustee by way of irretrievable contributions to the Trust, and to Participants by way of the provision of rights, options and shares under the EIP are excluded from the definition of a fringe benefit as explained in questions 6 and 7. Therefore, as these benefits have been excluded from the definition of a fringe benefit and as there is also no FBT currently payable under the EIP, the FBT liability is not any less than it would have been but for the arrangement.

Accordingly, the Commissioner will not make a determination that section 67 of the FBTAA applies to include an amount in the aggregate fringe benefits amount of the Company in relation to a tax benefit obtained under the scheme from irretrievable cash contributions made by the Company to the Trustee of the Trust to fund the acquisition of the Company's shares under this scheme.