ATO Interpretative Decision
ATO ID 2003/192 (Withdrawn)
Employee Share Scheme: issue of rights or shares because of the employment of an associate of the acquirer
FOI status: may be released
Status of this decision: Decision withdrawn 25 January 2018.
|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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Does the employee taxpayer, who is an associate of the acquirer, include in assessable income under subsection 139D(2) of the Income Tax Assessment Act 1936 (ITAA 1936) the discount given on rights or shares issued to an acquirer under an employee share scheme in the income year they were acquired?
Yes. The employee taxpayer includes in assessable income under subsection 139D(2) of the ITAA 1936 the discount given on rights or shares issued to an acquirer under an employee share scheme in the income year they were acquired.
The taxpayer is an employee of Company A Ltd.
Company A Ltd operates an employee share scheme that entitles the taxpayer or a nominated relative to be issued with rights or shares in the company. The taxpayer nominated the acquirer to receive the rights or shares. The taxpayer is an associate of the acquirer, being a natural person, partnership, company or trust under subsection 26AAB(14) and section 139GE of the ITAA 1936.
Company A Ltd issued rights or shares to the acquirer under this employee share scheme at less than their market value.
Reasons for Decision
Division 13A of the ITAA 1936 provides for the taxation treatment of rights or shares under employee share schemes by including any discount from the market price of the rights or shares in the taxpayer's assessable income.
The acquirer acquires rights or shares under an employee share scheme if they were acquired in respect of, or in relation directly or indirectly to any employment of an associate of the acquirer under subsection 139C(1) of the ITAA 1936.
As the taxpayer is an associate of the acquirer, the rights or shares were acquired by the acquirer under an employee share scheme.
These rights or shares are not qualifying rights or shares because the acquirer is not an employee of Company A Ltd under subsection 139CD(3) of the ITAA 1936.
But for section 139D of the ITAA 1936, the discount would be included in the assessable income of the acquirer in the income year that Company A Ltd issued the rights or shares to the acquirer under subsection 139B(2) of the ITAA 1936.
However, as the rights or shares were acquired by the acquirer because of the employment of the taxpayer who is an associate of the acquirer, the discount on the rights or shares is included in the taxpayer's assessable income rather than the acquirer's assessable income under subsection 139D(2) of the ITAA 1936.
For capital gains purposes, the rights or shares are acquired by the acquirer at their market value (calculated under Subdivision F of Division 13A of the ITAA 1936) on the day they were issued by Company A Ltd under section 130-85 of the Income Tax Assessment Act 1997 (ITAA 1997).
Date of decision: 29 October 2002
|Year of income:||Year ended 30 June 2001|
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Acquisition of shares
Employee share ownership
Employee share schemes & options
Siebel/TDMS Reference Number: 452309; 1-5TZH47U; 1-DA0NPIW
Business Line: Private Groups and High Wealth Individuals
Date of publication: 4 April 2003
Date reviewed: 24 October 2014