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ATO Interpretative Decision

ATO ID 2003/255 (Withdrawn)

Income Tax
Employee Share Scheme: Market value of unlisted shares

Attention This ATO ID is withdrawn because it contains a view in respect of a provision of the Income Tax Assessment Act 1936 that does not apply after the 2008-09 income year.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.
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 22 September 2017.

CautionCAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 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

Date of decision: 29 August 2001

Year of income:Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1936
   paragraph 139FB(1)(b)

Taxation Laws Amendment Act (No. 5) 2000
   The Act

Other References
Explanatory Memorandum to Taxation Laws Amendment Act (No 5) 2000

Keywords
Employee share schemes & options

Siebel/TDMS Reference Number: 254877, 1-5TZH4EI

Business Line: Private Groups and High Wealth Individuals

Date of publication: 24 April 2003

ISSN: 1445-2782

ATO ID 2003/255 (Withdrawn) history   Top  
   Date   Version 
   29 August 2001   Original statement   
    7 November 2014   Updated statement   
 You are here ®  22 September 2017   Withdrawn   


 


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