ATO Interpretative Decision

ATO ID 2002/1074 (Withdrawn)

Income Tax

Income Tax - deductibility - irretrievable employer contributions paid to the Trustee of its employee share scheme to acquire a share or right under the employee share scheme
FOI status: may be released

This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found at Share trusts (QC 47636).

This document has changed over time. View its history.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Will a company taxpayer obtain an income tax deduction under section 8-1 of Income Tax Assessment Act 1997 (ITAA 1997) for irretrievable contributions of money or other property made by it to the Trustee of its employee share scheme when the employee or associate of the employee acquires a share or right under Subdivision 139G of ITAA 1997?

Decision

Yes. The company taxpayer is able to obtain an income tax deduction under section 8-1 of ITAA 1997 for irretrievable contributions of money or other property made by it to the Trustee of the employee share scheme. The deduction will be allowed at the time determined by section 139DB Income Tax Assessment Act 1936 (ITAA 1936), being not before the time the ultimate beneficiary (ie employee or associate of the employee) acquires a share or right under Subdivision 139G of ITAA 1936.

Facts

The Scheme is an Employee Share Scheme which complies with the provisions of Division 13A of ITAA 1936.

A Trustee is appointed to administer the Scheme. Under the employee share scheme, the employer makes irretrievable contributions of money or property to the trustee each year. The trustee uses the funds and/or property to acquire shares or rights for the purpose of and under the employee share scheme for the benefit of the employer's employees or associates of employees.

Reasons for Decision

The purpose of the employee share plan is to provide a benefit to an employee, or an associate of the employee, by allowing them to obtain a share or right in the employer company at a discount. The discounted share or right is part of the overall remuneration of the employee. The employer contributions of money and/or property to the trustee of its employee share scheme are part of the overall employee remuneration costs of the employer. The contributions when used to acquire shares or rights are deductible to the employer under section 8-1 of ITAA 1997 subject to section 139DB of ITAA 1936.

Section 139DB of ITAA 1936 determines when an amount that is represented by the money or property that is deductible under section 8-1 of ITAA 1997 will be allowed. The amount will be deductible not before the time when the ultimate beneficiary (ie employee or associate of the employee) acquires a share or right. In the case of a property contribution, this will be when the property or proceeds from the sale of the property is used to acquire a share or right for the ultimate beneficiary. Section 139G of ITAA 1936 determines when the employee or associate of the employee acquires a share or right for the purposes of Division 13A of ITAA 1936.

Date of decision: 30 July 2002

Year of income: Year ended 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Income Tax Assessment Act 1936
section 139DB
section 139G

Related ATO Interpretative Decisions
ATO ID 2002/960
ATO ID 2002/961
ATO ID 2002/962

Keywords
Deductions
Employee share schemes & options
Share discounts on employee share schemes

Business Line: Private Groups and High Wealth Individuals

Date of publication: 30 November 2002
Date reviewed: 16 October 2014

ISSN: 1445-2782

history

	Date:	Version:
	30 July 2002	Original statement
You are here	22 September 2017	Archived

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