ATO Interpretative Decision
ATO ID 2003/255 (Withdrawn)
Income Tax
Employee Share Scheme: Market value of unlisted sharesFOI status: may be released
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This ATO ID is withdrawn because it contains a view in respect of a provision of the Income Tax Assessment Act 1936 that does not apply after the 2008-09 income year. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of decisions for income years up to, and including, the 2008-09 income year.This document has changed over time. View its history.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the Commissioner approve the initial public offer (IPO) price of shares as their market value under paragraph 139FB(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936), where a listed company makes an offer of shares or rights to acquire shares under an employee share scheme in association with the public offer?
Decision
Yes. The Commissioner will approve the IPO price of shares as their market value under paragraph 139FB(1)(b) of the ITAA 1936 where a listed company makes an offer of shares or rights to acquire shares under an employee share scheme in association with the public offer.
Facts
The employee acquires shares or rights to acquire shares under an employee share scheme prior to the listing of shares on a stock exchange in association with an IPO of the shares.
The IPO price was set several days prior to listing of the shares. There are no transactions (and there are no offers to buy such shares or rights) during the week leading up to and including the day of acquisition.
Reasons for Decision
Paragraph 139FB(1)(b) of the ITAA 1936 provides that where a share is not quoted on an approved stock exchange, the market value of that share for the purposes of an employee share scheme, is the arm's length value of the share calculated on a reasonable method approved in writing by the Commissioner.
The Explanatory Memorandum to Taxation Laws Amendment Act (No. 5) 2000, which introduced amendments to the employee share scheme provisions, states that current practice is to accept that the market value of shares issued to employees in association with an IPO of shares is equal to the IPO price.
Accordingly, the Commissioner will accept the IPO price of the shares as their market value as a reasonable method of calculating the arm's length value of the unlisted shares under paragraph 139FB(1)(b) of the ITAA 1936.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 7 November 2014 | Reasons for Decision | Corrected minor grammatical error |
Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
paragraph 139FB(1)(b)
The Act
Other References:
Explanatory Memorandum to Taxation Laws Amendment Act (No 5) 2000
Keywords
Employee share schemes & options
ISSN: 1445-2782
| Date: | Version: | |
| 29 August 2001 | Original statement | |
| 7 November 2014 | Updated statement | |
| You are here | 22 September 2017 | Archived |
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