Edited version of private advice

Authorisation Number: 1052372740599

Date of advice: 25 March 2025

Ruling

Subject: Employee share scheme

Unless stated otherwise, all legislative references are to the Income Tax Assessment Act 1997.

Question 1

Will the irretrievable cash contributions by the Company to the Trustee to fund the acquisition of, or subscription for, Company Shares by the Trust for the purpose of the Plan be assessable income of the Trust under section 6-5 or 6-10 of the ITAA 1997?

Answer

No.

Question 2

Will contributions by the Company to the Trustee, following exercise of Awards, to fund the acquisition of Company Shares by the Trust for specific employees, be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936?

Answer

No.

Question 3

Will a capital gain or capital loss that arises for the Trustee at the time when either CGT Event E5 or E7 happens in relation to Company Shares held by the Trustee 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 Trustee?

Answer

No.

This ruling applies for the following periods:

Income tax year ended 30 June 20YY

Income tax year ended 30 June 20YY

Income tax year ended 30 June 20YY

Income tax year ended 30 June 20YY

Income tax year ended 30 June 20YY

The scheme commences on:

DD June 20YY

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below in the description of the scheme set out below, including the following documents, or relevant parts of them, which are to be read with the description:

a.            Request for private ruling dated lodged in 20YY

b.            Employee Option Plan (EOP) and associated Grant Agreement provided to the Commissioner

c.            Incentive Option Plan (IOP) and associated Invitation provided to the Commissioner

d.            Employee Share Option Plan and associated Invitation (ESOP) provided to the Commissioner

e.            Employee Share Trust Deed (Deed) provided to the Commissioner

Background

1.  The Company is an unlisted Australian company.

2.  At the time of and for the duration of the ruling application, the Company is a private company on the basis it is an unlisted company and is not a public company pursuant to section 103A of ITAA 1936.

3.  The Company is the head entity of a tax consolidated group consisting of itself and all wholly owned Australian subsidiaries.

4.  The Company has provided various offers of equity to its Australian employees (Participants) under the following incentive plans:

•                     Employee Option Plan (EOP), implemented and offers sent out in 20YY;

•                     Incentive Option Plan (IOP), implemented and offers sent out in 20YY; and

•                     Employee Share Option Plan (ESOP), implemented in 20YY

collectively, the Plans.

5.  The Plan is part of the Company's remuneration strategy and aims to ensure the long-term creation of value in the Company by:

•                     Rewarding eligible Participants (Participants) with options granted by the Company (Awards).

•                     Each Award represents a right to be issued a share in the capital of the Company, subject to the general terms of the Plans as well as the terms and conditions on which the Participants are specifically invited to participate (Invitation).

•                     Assisting with the retention of key talent personnel.

6.  The Shares are considered ordinary shares for purposes of Division 83A on the basis that the rights of the shares do not include any preferences to ordinary shares.

Awards

7.  Broadly, the Plans operate as follows in relation to the Awards granted under each of the Plans:

•                     It is at the absolute discretion of the Board to extend an invitation to grant Awards to eligible employees.

•                     Eligible employees are provided with the opportunity to apply for Awards being rights to acquire Shares in the Company upon meeting certain conditions.

•                     The Awards may be subject to vesting conditions as specified in the relevant Invitation.

•                     A Participant may not sell, assign, transfer or otherwise deal with their Awards, unless the Board so approves in their absolute discretion.

•                     Each Award may be converted into one Share in the Company following exercise by the Participant as specified in the Invitation.

•                     The Share may be held by the Trust on the Participant's behalf (note the EOP was specifically amended in 20YY to allow use of the Trust to facilitate the allocation of Shares to Participants).

•                     All Awards are subject to taxation under Division 83A of the ITAA 1997 in the hands of the Participant.

•                     An Award and Shares are subject to disposal restrictions as specified in the Invitation and the Plans.

The Plans

Employee Option Plan (EOP)

8.  Broadly, the key terms and rules of the EOP are:

•                     Clause 3 - the persons eligible to receive Options under the plan are Employees, Directors, Consultants and other persons approved by the Board (each, an Eligible Participant)

•                     Clause 4 - the Company may from time to time offer Options to an Eligible Participant, via a Grant Agreement. The Eligible Participant may accept an offer of Options via signing and returning a copy of the Grant Agreement

•                     Clause 5 - the terms of the grant; each Option is exercisable for 1 Ordinary Share. The exercise price will be as set out in the Grant Agreement and will be at least the market value of the Option on the Issue Date. Each Option shall vest as such time or times specified by the Grant Agreement, and

•                     Clause 22 - the Board may, in its discretion, use an employee share trust or other mechanism for the purposes of holding Ordinary Shares before or after the exercise of an Option or delivering any Ordinary Shares arising from exercise of an Option under this Plan on such terms and conditions as determined by the Board. The Board may do all things necessary for the establishment, administration, operation and funding of an employee share trust.

9.  The Grant Agreement outlines that the Options are provided for no consideration to the Participants.

10.  The Company considers that Options issued under the EOP will qualify to access the 'start-up' tax concessions.

Incentive Option Plan (IOP)

11.  Broadly, the key terms and rules of the IOP are:

•                     Clause 2.1 - the purpose of the plan is to assist in the reward, retention and motivation of Eligible Participants, and align the interest of the Eligible Participants with shareholder of the Group

•                     Clause 3 - outlines eligibility and application of options under the Plan as well as certain restrictions

•                     Clause 4 - outlines the rules on the Grant of Options

•                     Clause 6 - outlines that an Option will vest when a Vesting Notice is given or deemed to be given to the Participant. The Vesting Condition for an Option may be waived by the Board by written notice

•                     Clause 7 - outlines the rules on the exercise of Options. Options may only be exercised when all Vesting Conditions and Exercise Conditions applicable to the Option are satisfied or waived by the Company and Confirmation Notice provided to the Participant. The Exercise Conditions can be waived by the Board by written notice

•                     Clause 15 - the Board may, in its discretion, use an employee share trust or other mechanism for the purposes of holding Shares before or after the exercise of an Option or delivering any Resulting Shares under these Rules. For the avoidance of doubt, the Board may do all things necessary for the establishment, administration, operation and funding of an employee share trust, and

•                     Clause 19 - the cancellation of Cancellation of Options. A Participant and the Company (acting by the Board) can agree in writing that some or all of the Options granted to the Participant are to be cancelled.

12.  The Invitation to participate in the IOP outlines that the Options are provided for no consideration to the Participants.

Employee Share Option Plan (ESOP)

13.  Broadly, the key terms and rules of the IOP are:

•                     Clause 2.1 - the purposes of the plan is to assist in the reward, retention and motivation of Eligible Participants, and align the interest of the Eligible Participants with shareholder of the Group.

•                     Clause 3 outlines eligibility and application of options under the Plan as well as certain restrictions.

•                     Clause 4 outlines the rules on the Grant of Options.

•                     Clause 6 outlines that an Option will vest when a Vesting Notice is given or deemed to be give to the Participant. The Vesting Condition for an Option may be waived by the Board by written notice.

•                     Clause 7 outlines the rules on the exercise of Options. Options may only be exercised when all Vesting Conditions and Exercise Conditions applicable to the Option are satisfied or waived by the Company and Confirmation Notice provided to the Participant. The Exercise Conditions can be waived by the Board by written notice.

•                     Clause 15 - the Board may, in its discretion, use an employee share trust or other mechanism for the purposes of holding Shares before or after the exercise of an Option or delivering any Resulting Shares under these Rules. For the avoidance of doubt, the Board may do all things necessary for the establishment, administration, operation and funding of an employee share trust, and

•                     Clause 19 Cancellation of Options - A Participant and the Company (acting by the Board) can agree in writing that some or all of the Options granted to the Participant are to be cancelled.

14.  The Invitation to participate in the ESOP outlines that the Options are provided for no consideration to the Participants.

Employee Share Trust

15.  The Employee Share Trust (Trust) has been established to facilitate opportunities to align the interests of employees with the future growth and profitability of the Company and to administer the current and any future employee incentive plans by the Company for the benefit of Participants of the Plans.

16.  The Trust will be used to facilitate the acquisition of Shares acquired by Participants as referred to in the background. The Trust will have the additional role of acquiring other Shares following vesting/exercise of the Awards.

17.  XXXX Pty Ltd (Trustee) is the trustee of the Trust and is an independent third party to the Company and its subsidiaries.

18.  The Trust will not be involved in the process of satisfying or disposing of any of the Awards under the plans with cash or other than by allocation of Shares.

General Operation of the trust

19.  The Trust broadly operates as follows:

•                     The Trust will be funded by cash contributions from the Company or a subsidiary member of the Company income tax consolidated group (the Group) (refer Clause 5.3 of the Trust Deed).

•                     Contributions are made once the Board resolves to provide a particular Participant a Share upon exercise of an Award.

•                     Participants exercise their Award by paying the cash exercise price to the Company or the Company advances the exercise price to the Participants as a loan and Participants will repay this advance to the Company following the sale of Shares allocated to it in the Trust.

•                     At the time of each contribution, the Board will provide the Trustee a notice listing the Company's employees, for whom the contribution is being made, i.e. the portion of the contribution and the applicable number of shares to be acquired in respect of each employee. That is, the contribution is made to the Trust in respect of a particular Company employee.

•                     These funds will be used by the Trustee to acquire Shares in the Company either from an existing shareholder or via a subscription for new Shares in the Company, based on instructions from the Company (refer Clause 5.2 of the Trust Deed).

•                     Shares acquired by the Trustee will be allocated to the relevant employees following instructions from the Company (refer Clause 5.1 of the Trust Deed).

•                     The Trust will only be used to acquire Shares and allocate them to Participants who are residents of Australia for tax purposes.

Timing of contributions

20.  The Company will not provide cash contributions to the Trust prior to the grant of Awards. More typically, the Company will wait until receipt of the exercise notice from Participants before providing the Trust with the cash necessary to acquire Shares to satisfy the acquisition / subscription of shares related to those Awards. As noted above, this is in order to specify the particular employee that the contribution is made in respect of a particular Company employee.

Use of the Trust to facilitate the Plan

21.  It is intended that the Trust will be used to hold Shares for employees of the Company pursuant to the Plan. The Trust provides capital management flexibility for the Company, in that it has the ability under the Trust Deed to use the contributions made by the Company either to acquire Shares in the Company from other shareholders or subscribe for new shares in the Company.

22.  Some of the commercial benefits of using the Trust include:

•                     Provides capital management assistance and flexibility for the Company.

•                     Gives effect to disposal restrictions on the Shares allowing key shareholders to keep control over the Company ownership by preventing the disposal of shares to third parties.

•                     Greater flexibility for the Company to accommodate the long-term incentive arrangements both now and into the future for different employee and executive groups as the Company continues to expand operations and therefore employee numbers.

•                     Providing an external vehicle through which Shares in the Company can be acquired and possibly held on behalf of the relevant Participant. This assists the Company to satisfy corporate law requirements relating to a company dealing in their own shares.

•                     Ensure the number of shareholders does not exceed the maximum number of shareholders for a proprietary company.

•                     Enables the implementation of the Plan in line with the Group's policies on employee share plans.

Summary of the Trust Deed

23.  The key operating terms of the draft Trust Deed are outlined below:

•                     The Trust was established for the sole purpose of subscribing for, acquiring, holding and transferring Shares in connection with equity incentive plans established by the Company for the benefit of Participants in those plans (Background section of the Trust Deed).

•                     the Trust will be managed and administered so that it satisfies the definition of "employee share trust" for the purposes of subsection 130-85(4) of the ITAA 1997 (Clause 4.8).

•                     The Trustee may only carry out activities that constitute the management of the Plans or the administration and management of the Trust. (Clause 4.2).

•                     The Company must not establish any new plan which is to be operated by the Trust without consulting with and obtaining written consent of the Trustee (Clause 2.5)

•                     The Trustee must hold a Participant's Allocated Shares on trust under the terms of the Deed, the relevant Plan Rules and the Participant's Terms of Participation. Each Participant will be the beneficial owner of and be absolutely entitled to their allocated shares (Clause 3.1).

•                     The Trustee must hold all other assets on trust for the Participants who have one or more trust shares credited to their Trust Share Account from time to time and the Employees (Clause 3.2).

•                     Nothing in the Deed confers or is intended to confer on the Company any charge, lien or any other proprietary right or beneficial interest in the trust assets. The rights of the Company under the Deed are purely contractual (Clause 3.3).

•                     The Trustee must, following receipt of a Dealing Notice, either purchase or subscribe for the requisite number (or a proportion of that number determined by the Board) of Shares on behalf of the relevant Participant, subject to the relevant Plan Rules and the relevant Terms of Participants (Clause 5.2).

•                     The Company must provide the Trustee any funds required by the Trustee to comply with Clause 5.2, and all funds provided to the Trustee for this purpose will constitute accretions to the corpus of the Trust and will not be repayable by the Trustee and may be paid to the Company as consideration for the subscription of Shares provided such Shares are held under the terms of the Deed (Clause 5.3).

•                     The Trustee must, if directed by the Board in a Dealing Notice, reallocate any Forfeited Shares to one or more Participants to be held under the Deed as Allocated Shares. Absent a direction, the Trustee must hold these shares as part of other trust asset in accordance with clause 3.2 of the Deed (Clause 11).

•                     The Trustee and each Participant must not assign, transfer, sell or grant encumbrances over or otherwise deal with an interest in the allocated share of the Participant during any applicable restriction period (Clause 9.1).

•                     After the restriction period expires, a Participant may give the Trustee a withdrawal notice to require the Trustee transfer legal title in some or all of the Participant's allocated shares to the Participant (Clause 9.2).

•                     A Participant is presently entitled to so much of the net income of the Trust attributable to that Participant's allocated shares (Clause 12).

•                     If an accretion arises in respect of a Participant's Allocated Share other than by way of dividends, distributions, bonus share or rights issue, the Trustee will transfer or provide the benefits of the accretion to that Participant (Clause 7.6).

•                     Upon sale of any Allocated Shares, the Trustee shall apply the proceeds of sale firstly in payment of tax liability incurred and secondly in payment of brokerage and other expenses of the sale that the Participant has agreed to be deducted from the distribution and thirdly the balance (if any) in payment to the relevant Participant (Clause 10).

•                     No amount of Surplus Assets will be repaid to the Company or any Group member (Clause 15.3).

Relevant legislative provisions

Income Tax Assessment Act 1936 Division 7A

Income Tax Assessment Act 1936 subsection 109C(1)

Income Tax Assessment Act 1936 subsection 109ZB(3)

Income Tax Assessment Act 1936 subsection 109ZD

Income Tax Assessment Act 1936 section 318

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-75>

Income Tax Assessment Act 1997 section 130-90

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

Income Tax Assessment Act 1997 section 83A-10

Income Tax Assessment Act 1997 section 104-85

Income Tas Assessment Act 1997 subsection 960-100(2)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Does IVA apply to this private ruling?

Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement.

If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select 'Part IVA: the general anti-avoidance rule for income tax'.

Reasons for decision

These reasons for decision accompany the Notice of private ruling for The Trustee for the Employee Share Trust.

Legislative references in the following are to provisions of the Income Tax Assessment Act 1997 (ITAA 1997), unless otherwise indicated.

Question 1

Will the irretrievable cash contributions by the Company to the Trustee to fund the acquisition of, or subscription for, Company Shares by the Trust for the purpose of the Plan be assessable income of the Trust under section 6-5 or 6-10?

Summary

1.  The irretrievable cash contributions that the Company or any member of the Group makes to Trustee as the trustee of the Employee Share Trust (Trust) to fund the subscription for, or on-market acquisition of shares in the Company (Shares), for the purposes of the plans listed below (the Plans), will not be assessable income of the Trust under section 6-5 or section 6-10.

•                     The Employee Option Plan (EOP)

•                     The Incentive Option Plan (IOP)

•                     The Employee Share Option Plan (ESOP)

Detailed reasoning

2.  The total assessable income of a trust estate is calculated as if the trustee were a resident taxpayer in respect of that income (subsection 95(1) of the ITAA 1936).

3.  Subsection 6(1) of the ITAA 1936 states that 'assessable income' has the meaning given by subsection 995-1(1), which relevantly has the meaning given by sections 6 5 and 6-10.

4.  The assessable income of a taxpayer includes income under ordinary concepts (section 6-5) or statutory income (section 6-10).

5.  Section 10-5 contains a summary list of the provisions for statutory income. None of the provisions listed in section 10-5 are relevant in the present circumstances. Therefore, the irretrievable cash contributions made by the Company (or any member of the Group) to the Trustee of the Trust will not be assessable income under section 6-10. The contributions will only be included in the calculation of the net income of the Trust under section 95 if they are assessable as income according to ordinary concepts under section 6-5.

6.  Receipts of a capital nature do not constitute income according to ordinary concepts, whether or not incurred in carrying on a business.

7.  Additionally, in ATO Interpretative Decision ATO ID 2002/965 Income Tax - Trustee not assessable on employer contributions made to it under the employer's employee share scheme, the Commissioner expresses the view that funds provided to the trustee of an employee share scheme (ESS) for the sole purpose of providing shares under an ESS will constitute capital receipts to the trustee and are not assessable under sections 6-5 or 6-10.

8.  The contributions made by the Company (or any member of the Group) are irretrievable and non-refundable to it in accordance with the Trust Deed (refer clauses 3, 5.3 and 15.3 of the Trust Deed).

9.  The contributions made by the Company (or any member of the Group) to the Trustee will constitute accretions to the corpus of the Trust (Clause 5.3 of the Deed) that will be applied for the sole purpose of acquiring, or subscribing for, shares for the benefit of the Participants under the Plans (Background section of the Deed and clause 4.8).

10.  The cash contributions received by the Trustee constitute capital receipts and are not assessable under sections 6-5 or 6-10.

Question 2

Will contributions by the Company to the Trustee, following exercise of Awards, to fund the acquisition of Company Shares by the Trust for specific employees, be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936?

Summary

11.  The contributions by the Company to the Trustee, following the exercise of the Awards to fund the acquisition of Company Shares by the Trust for specific employees will not be treated as a deemed dividend within the meaning of Division 7A of the ITAA 1936.

Detailed reasoning

12.  Subsection 109C(1) of the ITAA 1936 states that a private company is taken to pay a dividend to an entity if the private company makes a payment to the entity during the year and either:

•                     the entity is a shareholder or an associate of the shareholder in the company at the time of the payment; or

•                     a reasonable person would conclude that the payment was made because the entity has been a shareholder or associate at some time.

13.  An entity is defined in subsection 960-100(2) and includes the trustee of a trust.

14. Contributions made by the Company to the Trustee would satisfy subsection 109C(1) of the ITAA 1936 if the Trustee holds Shares at the time the contribution is made, or the Trustee is an associate of a person who holds Shares, such as a beneficiary of the Trust. Subsection 109C(2) of the ITAA 1936 would then apply to treat the amount of the contributions to be a deemed dividend, subject to the Company's distributable surplus for the relevant income year.

Exception

15.  Certain payments made by a private company to an entity are excluded from the operation of section 109C of the ITAA 1936.

16.  Subsection 109ZB(3) of the ITAA 1936 provides that Division 7A does not apply to a payment made to a shareholder, or shareholder's associate, in their capacity as an employee or an associate of an employee.

17.  Subsection 109ZB(3) of the ITAA 1936 appears within a provision designed to set an 'ordering' between Division 7A and the fringe benefits tax provisions in the FBTAA. Specifically, what is meant by 'an employee' for the purpose of this provision takes on the meaning it is given in subsection 136(1) of the FBTAA.

18.  Paragraph 36 of Taxation Ruling TR 2018/07 Income tax: employer remuneration trusts, states that in considering benefits provided to employees or associates of employees in the context of the FBTAA (specifically, in the definition of a 'fringe benefit'), Edmonds J in FC of T v Indooroopilly Children Services (QLD) Pty Ltd [2007] FCAFC 16 [35] concluded that the reference to an employee is a reference to a particular employee.

19.  The Trustee is an associate of any Company employee who is a beneficiary of the Trust as defined in sections 109ZD and 318 of the ITAA 1936. Contributions are made by the Company to the Trustee once the Board resolves to provide a particular Participant a Share upon exercise of an Award. At the time of each contribution, the Board will provide the Trustee a notice listing Company employees, for whom the contribution is being made, i.e. the portion of the contribution and the applicable number of Shares to be acquired in respect of each employee. As the contribution would be made to the Trustee in respect of a particular Company employee, it would satisfy section 109ZB of the ITAA 1936.

20.  Therefore, the contributions made by Company to the Trustee will not be deemed to be dividends under section 109C of the ITAA 1936, as its operation would be excluded under section 109ZB of the ITAA 1936.

Question 3

Will a capital gain or capital loss that arises for the Trustee at the time when either CGT Event E5 or E7 happens in relation to Company Shares held by the Trustee 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 Trustee?

Summary

21.  A capital gain or capital loss that arises for the Trustee at the time when the Participants become absolutely entitled to Company Shares (CGT event E5) will 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 Trustee.

22.  In relation to the scheme as set out in the 'Relevant facts and circumstances' section above, CGT event E7 does not occur.

Detailed reasoning

23.  Under section 104-85, CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital.

24.  However, in relation to the scheme as set out in the 'Relevant facts and circumstances' section above, CGT event E7 does not occur. This is because the scheme does not include any facts that gives rise to CGT event E7 happening.

25.  Under subsection 104-75(1), CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee.

26.  A beneficiary becomes absolutely entitled to a CGT asset of a trust if they can call for the asset (for which they have a vested and indefeasible interest in) to be transferred to them or at their direction. The shares held on trust for the purposes of the Plans are CGT assets of the Trust as defined in subsection 108-5(1).

27.  Once any applicable relevant conditions/restrictions have been met (if any), the Trustee must transfer the relevant shares to the Participant and the Company will register the Participant as the holder of those shares.

28.  CGT event E5 will happen at that time as the Participant thereby becomes absolutely entitled to those shares.

29.  Any capital gain or capital loss that the Trustee makes, if CGT event E5 happens, is disregarded if section 130-90 applies. To qualify for this exemption, the Trust must be an 'employee share trust' (EST).

Employee Share Trust

30.  To determine whether the Trust is an 'employee share trust' for the purposes of subsection 130-85(4) an analysis of what the Trustee actually does and its powers and duties that are prescribed in the Trust Deed is required. However, as indicated in the facts the Trustee will exercise its powers and obligations as set out in the Trust Deed. Therefore, it meets the definition of 130-85(4) as:

•                     the Trust acquires shares in a company, namely the Company.

•                     the sole purpose being the acquisition, holding, and ongoing administration of holding Company Shares under the Plans for the benefit of the Participants (see "Background" of the Trust Deed).

•                     the Trustee may only carry out activities that constitute the management of the Plans established by the Company (see clause 4.2 of the Trust Deed)

•                     the Commissioner accepts that the other activities undertaken by the Trustee will be merely incidental to this purpose 130-85(4)(c)

•                     the Trust ensures that ESS interests as defined in subsection 83A-10(1) are provided under an employee share scheme (as defined in subsection 83A-10(2)) by allocating those shares to the employees in accordance with the Trust Deed and the Plan rules.

•                     the Trust Deed indicates that the Company and the Trustee agree the Trust will be managed and administered so that it satisfies the definition of 'employee share trust' for the purpose of subsection 130-85(4) (Clause 4.8 of the Trust Deed).

31.  Additionally, the other criteria for the exemption in section 130-90 to apply are met because:

•                     at the time the Participant becomes absolutely entitled to the Company shares as against the Trustee, CGT event E5 happens (paragraph 130-90(1)(a))

•                     CGT event E5 happens in relation to Company shares (paragraph 130-90(1)(b))

•                     the Participant acquires Company shares by exercising a right, option or award granted under the Plan (paragraph 130-90(1)(c)); and

•                     the Participant acquired the right, options, or awards under the Plan for nil consideration (i.e. at a discount) and therefore Subdivision 83A-B/Subdivision 83A-C will apply to those right, options or awards (paragraph 130-90(1)(d)).

As all the conditions in section 130-90 are satisfied, any capital gain or capital loss that arises for the Trust at the time when CGT event E5 happens will be disregarded if the Company shares are acquired by the employee for the same or less than the cost base of the shares in the hands of the Trust.