Taxation Laws Amendment Act (No. 2) 1995 (169 of 1995)

Schedule 2   EMPLOYEE SHARE SCHEMES

Part 1   INCOME TAX ASSESSMENT ACT 1936

Division 1   Insertion of Division 13A in Part III

1   After Division 13 of Part III

Insert:

"Division 13A-Employee share schemes

"Subdivision A-Key principle and overview of Division

The key principle

"139.

This Division provides for the taxation treatment of shares and rights

acquired under employee share schemes.

Any discount from the market price of the shares or rights is

assessable. However, 2 alternative concessions are available for

shares or rights provided under schemes that satisfy certain

requirements.

The first concession is that the discount will not be included in the

employee's assessable income until a later year of income.

The second concession is that the employee may make an election that

reduces the amount assessed. Additional requirements must be satisfied

to obtain this concession.

Overview of Division

"139A. The following table summarises the contents of this Division:

OVERVIEW

Subdivision Coverage

A Key principle and overview

B The basic requirement that the discount be included in

assessable income

C Key concepts: employee share scheme, discount,

cessation time, qualifying shares, qualifying rights

and exemption conditions

D Special provisions

E Elections

F Special provisions about the market value of a share or

right

G Definitions (including a list of all terms defined in

the Division)

"Subdivision B-Inclusion of discount in assessable income

Discount to be included in assessable income

"139B.(1) If a taxpayer has acquired a share or right under an

employee share scheme, the assessable income of the taxpayer includes

the discount given in relation to the share or right.

Note: Employee share scheme is defined in section 139C.

When the discount is to be included

"(2) Unless subsection (3) applies, the discount is included in the

taxpayer's assessable income of the year of income in which the share

or right is acquired.

"(3) If the share or right is a qualifying share or right and the

taxpayer has not made an election under section 139E for the year of

income in which the share or right is acquired, the discount is

included in the taxpayer's assessable income of the year of income in

which the cessation time (see sections 139CA and 139CB) occurs.

Reduction of amounts included-elections

"139BA.(1) This section applies if a taxpayer has made an election

under section 139E for a year of income and the exemption conditions

(see section 139CE) are satisfied in relation to shares or rights

covered by the election. It applies to the total amount otherwise

included in a taxpayer's assessable income for the year of income

under section 139B in respect of those shares or rights.

"(2) The total amount is only included in the assessable income to

the extent that it is greater than $500.

"Subdivision C-Key concepts: employee share scheme, discount,

cessation time, qualifying shares and rights and

exemption conditions

Employee share schemes

"139C.(1) A taxpayer acquires a share or right under an employee

share scheme if the share or right is acquired by the taxpayer in

respect of, or for or in relation directly or indirectly to, any

employment of the taxpayer or an associate of the taxpayer.

"(2) A taxpayer acquires a share or right under an employee share

scheme if the share or right is acquired by the taxpayer in respect

of, or for or in relation directly or indirectly to, any services

provided by the taxpayer or an associate of the taxpayer.

"(3) The taxpayer does not acquire a share or right under an

employee share scheme if the consideration for the acquisition is

equal to, or more than, the market value of the share or right at the

time that it is acquired.

"(4) The taxpayer does not acquire a share under an employee share

scheme if the taxpayer acquires the share as the result of exercising

a right that the taxpayer acquired under an employee share scheme.

"(5) The taxpayer does not acquire a share or right under an

employee share scheme if the taxpayer is a trust whose sole activities

are obtaining shares, or rights to acquire shares, and providing those

shares or rights to employees of a company or to associates of those

employees.

Cessation time-shares

"139CA.(1) The cessation time for a share is the time when the

taxpayer acquires the share if:

(a) there is no restriction preventing the taxpayer from disposing

of the share before a particular time; and

(b) the scheme under which the share was acquired did not have any

conditions that could result in the taxpayer forfeiting ownership of

the share.

"(2) If subsection (1) does not apply, the cessation time for a

share is the earliest of the following:

(a) the time when the taxpayer disposes of the share;

(b) the later of:

(i) the time when any restriction preventing the taxpayer from

disposing of the share ceases to have effect; and

(ii) the time when any condition that could result in the taxpayer

forfeiting ownership of shares ceases to have effect;

(c) the time when the employment in respect of which the share was

acquired ceases;

(d) the end of the 10 year period starting when the taxpayer

acquired the share.

"(3) For the purposes of subsection (2), a taxpayer only ceases the

employment in respect of which the share was acquired when the

taxpayer is no longer employed by any of the following:

(a) the employer of the taxpayer in that employment;

(b) a holding company of the employer;

(c) a subsidiary of the employer or of a holding company of the

employer.

Cessation time-rights

"139CB.(1) The cessation time for a right is the earliest of the

following:

(a) the time when the taxpayer disposes of the right (other than by

exercising it);

(b) the time when the employment in respect of which the right was

acquired ceases;

(c) if the right is exercised and there is a restriction preventing

the taxpayer from disposing of the share acquired as a result of the

exercise of the right or a condition that could result in the taxpayer

forfeiting ownership of the share-the time when the last such

restriction or condition ceases to have effect;

(d) if the right is exercised and there is no such restriction or

condition-the time when the right is exercised;

(e) the end of the 10 year period starting when the taxpayer

acquired the right.

"(2) For the purposes of subsection (1), a taxpayer only ceases the

employment in respect of which the right was acquired when the

taxpayer is no longer employed by any of the following:

(a) the employer of the taxpayer in that employment;

(b) a holding company of the employer;

(c) a subsidiary of the employer or of a holding company of the

employer.

Calculation of discount

"139CC.(1) This section sets out how to calculate the discount given

in relation to a share or right.

Case 1-discount covered by subsection 139B(2)

"(2) If subsection 139B(2) applies to the discount, the discount is

the market value of the share or right at the time when it was

acquired by the taxpayer less any consideration paid or given by the

taxpayer as consideration for the acquisition of the share or right.

Case 2-discount covered by subsection 139B(3)-share or right disposed

of at arm's length within 30 days

"(3) If subsection 139B(3) applies to the discount, and the share or

right (or any share acquired as a result of the exercise of the right)

is disposed of by the taxpayer in an arm's length transaction at the

cessation time or within 30 days after the cessation time, the

discount is:

(a) the amount or value of any consideration received by the

taxpayer for the disposal;

reduced by:

(b) the amount or value of any consideration paid or given by the

taxpayer as consideration for the acquisition of the share or right;

and

(c) for a right that has been exercised-the amount or value of any

consideration paid or given to exercise the right.

Case 3-discount covered by subsection 139B(3)-share or right not

disposed of at arm's length within 30 days

"(4) If subsection 139B(3) applies to the discount, and the share or

right (or any share acquired as a result of the exercise of the right)

is not disposed of by the taxpayer in an arm's length transaction at

the cessation time or within 30 days after the cessation time, the

discount is:

(a) the market value of the share or right (or the share acquired as

a result of the exercise of the right) at the cessation time;

reduced by:

(b) the amount of any consideration paid or given by the taxpayer as

consideration for the acquisition of the share or right; and

(c) for a right that has been exercised-the amount of any

consideration paid or given by the taxpayer to exercise the right.

Meaning of qualifying shares and qualifying rights

"139CD.(1) For the purposes of this Division:

(a) a share in a company is a qualifying share if the 6 conditions

below are satisfied; and

(b) a right to acquire a share in a company is a qualifying right if

the first, second, third, fifth and sixth of the 6 conditions below

are satisfied.

Note: Section 139DF excludes certain shares from being qualifying

shares.

"(2) The first condition is that the share or right is acquired by a

taxpayer under an employee share scheme.

"(3) The second condition is that the company is the employer of the

taxpayer or a holding company of the employer of the taxpayer.

"(4) The third condition is that all the shares available for

acquisition under the scheme are ordinary shares and all the rights

available for acquisition under the scheme are rights to acquire

ordinary shares.

"(5) The fourth condition is that, at the time the share was

acquired, at least 75% of the employees of the employer were, or at

some earlier time had been, entitled to acquire:

(a) shares or rights under the scheme; or

(b) shares or rights in the employer, or a holding company of the

employer, under another employee share scheme.

"(6) The fifth condition is that, immediately after the acquisition

of the share or right, the taxpayer does not hold a legal or

beneficial interest in more than 5% of the shares in the company.

"(7) The sixth condition is that, immediately after the acquisition

of the share or right, the taxpayer is not in a position to cast, or

control the casting of, more than 5% of the maximum number of votes

that might be cast at a general meeting of the company.

"(8) The Commissioner may determine that the fourth condition (see

subsection (5)) is taken to have been satisfied in relation to a share

or a right if the Commissioner considers that the employer has done

everything reasonably practicable to ensure that the condition was

satisfied.

Exemption conditions

"139CE.(1) This section sets out the 3 exemption conditions that

must be satisfied for section 139BA to apply to a share or right

acquired under an employee share scheme.

"(2) The first condition is that the scheme did not have any

conditions that could result in any recipient forfeiting ownership of

shares or rights acquired under it.

"(3) The second condition is that the scheme was operated so that no

recipient would be permitted to dispose of a share or right (the

scheme share or scheme right) acquired under it, or of a share

acquired as a result of a scheme right, before the earlier of the

following times:

(a) the end of the period of 3 years after the time of the

acquisition of the scheme share or scheme right;

(b) the time when the taxpayer ceased, or first ceased, to be

employed by the employer.

"(4) The third condition is that both the employee share scheme and

any scheme for the provision of financial assistance in respect of

acquisitions of shares or rights under the employee share scheme are

operated on a non-discriminatory basis (see section 139GE).

"(5) For the purposes of subsection (3), a taxpayer only ceases the

employment in respect of which the share or right was acquired when

the taxpayer is no longer employed by any of the following:

(a) the employer of the taxpayer in that employment;

(b) a holding company of the employer;

(c) a subsidiary of the employer or of a holding company of the

employer.

"Subdivision D-Special provisions

Discount assessable to associate if share acquired by taxpayer in

respect of associate's employment

"139D.(1) This section applies if:

(a) a taxpayer has acquired a share or right under an employee share

scheme; and

(b) the share or right was acquired by the taxpayer in respect of,

or for or in relation directly or indirectly to, any employment of, or

services rendered by, an associate of the taxpayer; and

(c) apart from this section, an amount would be included in respect

of the acquisition in the assessable income of the taxpayer of a year

of income under this Division.

"(2) If this section applies, the amount is included in the

associate's assessable income of the year of income instead of in the

taxpayer's assessable income.

Acquisition of legal interest in shares or rights- certain discounts

not assessable

"139DA. If:

(a) a taxpayer has acquired the legal interest in a share or right;

and

(b) the taxpayer, or an associate of the taxpayer, is required to

include an amount under section 139B in the taxpayer's or the

associate's assessable income as a result of the acquisition; and

(c) the taxpayer, or the associate, is, or would apart from section

139BA be, required to include an amount under section 139B in his or

her assessable income as a result of the acquisition of the beneficial

interest in the share or right;

the taxpayer, or the associate, is not required to include the amount

mentioned in paragraph (b).

No deduction until share or right acquired

"139DB. If, at a particular time, a person (the provider) provides

another person with money or other property:

(a) under an arrangement; and

(b) for the purpose of enabling another person (the ultimate

beneficiary) to acquire, directly or indirectly, a share or right,

under an employee share scheme;

then, for the purpose of determining when any deduction is allowable

to the provider in respect of provision of the money or other

property, the provider is taken to have provided it not before the

time when the ultimate beneficiary acquires the share or right.

Note: The amount included in assessable income for the acquisition

of an interest in a share is the same as for the acquisition of the

share-see Subdivision F and section 139G.

Deduction for provider of certain qualifying shares or rights

"139DC.(1) A taxpayer is entitled to an allowable deduction in the

taxpayer's assessment in respect of income of a year of income (the

benefit year) if the taxpayer provides one or more qualifying shares

or qualifying rights to another person in the benefit year that

satisfy the following conditions:

(a) the exemption conditions (see section 139CE);

(b) the condition that no amount has been allowed, is allowable, or

will be allowable, as a deduction in the assessment of the taxpayer in

respect of income of any year of income in respect of expenditure

incurred in providing the share or right.

"(2) The amount of the deduction in respect of the shares or rights

provided by the taxpayer to the person in the benefit year is the

lesser of:

(a) $500; and

(b) the sum of the market values, at the time that the share or

right is provided, of each qualifying share or qualifying right that

satisfies the conditions in subsection (1) reduced by the sum of any

amounts paid by the person as consideration for those shares or

rights.

Note: Only one deduction is allowable under this section in

respect of each person to whom the taxpayer provided shares or rights

in a year.

No benefit where rights lost

"139DD.(1) For the purposes of this Division, a right to acquire a

share in a company is never acquired by a taxpayer if the following 2

requirements are satisfied.

"(2) The first requirement is that the taxpayer loses the right

without having exercised it.

"(3) The second requirement is that the company is the employer of

the taxpayer or a holding company of the employer of the taxpayer.

"(4) Section 170 does not prevent the amendment of an assessment at

any time for the purpose of giving effect to this section.

Amount not assessable under section 21A or paragraph 26(e)

"139DE. Section 21A and paragraph 26(e) do not apply to:

(a) a share or right that a taxpayer acquires under an employee

share scheme; or

(b) any share acquired by a taxpayer as a result of a right covered

by paragraph (a).

Anti-avoidance-certain shares and rights not qualifying shares and

qualifying rights

"139DF.(1) Despite any other provision of this Part, a share in a

company, or a right to acquire a share in a company, acquired by a

taxpayer is not a qualifying share or right if:

(a) the predominant business of the company (whether or not stated

in its constituent documents) is the acquisition, sale or holding of

shares, securities or other investments (whether directly or

indirectly through one or more companies, partnerships or trusts); and

(b) the taxpayer is employed by the company and is also employed by

another company; and

(c) the company and the other company are members of the same

company group.

"(2) A company is a member of the same company group as another

company if one of the companies is a holding company of the other or

if another company is a holding company of both companies.

"Subdivision E-Elections

Taxpayer may make election

"139E.(1) A taxpayer may make an election under this section that

subsection 139B(2) applies for a year of income. The election covers

each qualifying share or qualifying right acquired in that year by the

taxpayer.

How and when election must be made

"(2) The election must be in writing in a form approved by the

Commissioner and be made before the taxpayer lodges his or her return

of income for the year of income, or within such further time as the

Commissioner allows.

"Subdivision F-Special provisions about the market value

of a share or right

Meaning of market value of a share or right

"139F. This Subdivision sets out how to determine the market value

of a share or right to acquire a share on a particular day.

Listed shares or rights-market value

"139FA. If the share or right is quoted on a stock market of an

approved stock exchange on that day, the market value is:

(a) if there was at least one transaction on that stock market in

shares or rights of that class during the one week period before that

day-the weighted average of the prices at which those shares or rights

were traded on that stock market during the one week period before

that day; or

(b) if there were no transactions on that stock market in that one

week period in such shares or rights-the last price at which an offer

was made on that stock market in that period to buy such a share or

right.

Unlisted shares-market value

"139FB.(1) If the share is not quoted on an approved stock exchange

on that day, the market value is the arm's length value of the share:

(a) as specified in a written report, in a form approved by the

Commissioner, given to the person from whom the taxpayer acquires the

share by a person who is a qualified person in relation to valuing the

share (see section 139FG); or

(b) as calculated in accordance with any other method approved in

writing by the Commissioner as a reasonable method of calculating the

arm's length value of unlisted shares.

Partly paid unlisted shares

"(2) Without limiting the factors that must be taken into account in

valuing, under paragraph (1)(a), a share that is partly paid, the

qualified person must take into account:

(a) the amount of the par value of the share that is already paid;

and

(b) the amount and timing of future calls; and

(c) rights to dividends that arise from holding the share.

Unlisted rights-market value

"139FC. If the right is not quoted on an approved stock exchange on

that day, the market value is the greater of:

(a) the market value, on the particular day, of the share that may

be acquired by exercising the right, less the lowest amount that must

be paid to exercise the right to acquire the share; and

whichever of the following applies:

(b) if the right can not be exercised more than 10 years after the

day when the right was acquired-subject to section 139FE, the value

determined in accordance with regulations for the purpose of this

paragraph or, if no such regulations are in force, the value

determined in accordance with sections 139FJ to 139FN;

(c) if the right can be exercised more than 10 years after the day

when the right was acquired-the greater of:

(i) the arm's length value of the right as specified in a written

report, in a form approved by the Commissioner, given to the person

from whom the taxpayer acquires the right by a suitably qualified

valuer; and

(ii) the value that would have been determined under paragraph (b)

if the right could be exercised 10 years after the particular day.

Conditions and restrictions to be disregarded

"139FD. In determining the market value of a share or right under

section 139FB or 139FC, the share or right, and any share that may be

acquired as a consequence of the exercise or operation of the right,

is taken not to be subject to any conditions or restrictions.

Value of right nil or can not be determined

"139FE. If the lowest amount that must be paid to exercise a right

to acquire a share is nil or can not be determined, the market value

of the right on a particular day is the same as the market value of

the share on that day.

Value of legal and beneficial interests

"139FF. To avoid doubt, if a person acquires either the beneficial

interest or the legal interest in a share or right, the value that is

applicable for the purposes of this Division is the value of the share

or right, not the value of the interest in the share or right.

Notes: 1. It is the value of the share or right that is relevant

because the taxpayer is taken to have acquired the share or right-see

section 139G.

2. Double taxation is avoided by section 139DA.

Meaning of qualified person

"139FG. A person is a qualified person in relation to valuing a

share in a company if the person is registered as a company auditor

under a law in force in a State or a Territory, and is not:

(a) a director, secretary or employee of the company; or

(b) a partner, employer or employee of a person referred to in

paragraph (a); or

(c) a partner or employee of an employee of a person so referred to.

Meaning of published price where multiple quotation

"139FH. If a share or right is quoted on a day on 2 or more approved

stock markets, the published price on that day of that share or right

is the published price on whichever of those stock markets is

nominated by the taxpayer.

Provision of information about market value

"139FI. If a taxpayer requests the person from whom he or she

acquired a share or right to provide information necessary for the

taxpayer to calculate the market value of the share or right at a

particular time, the person must take all reasonable steps to provide

that information within 30 days after the request.

Outline of remainder of Subdivision

"139FJ. The remainder of this Subdivision sets out the method of

calculating, for the purposes of paragraph 139FC(b), the market value,

on a particular day, of a right to acquire a share.

Step 1-calculate the calculation percentage

"139FK. Apply the following formula. The result is the calculation

percentage.

[(Market value, on the particular day, of the share that is the subject of the right)/(Amount, or lowest amount, that must be paid to exercise the right)]*(100%)

Step 2-how to use calculation percentage

If calculation percentage is less than 50%

"139FL.(1) If the calculation percentage is less than 50%, the

market value of the right is nil.

If calculation percentage is equal to or greater than 50% but less

than 110%

"(2) If the calculation percentage is equal to, or greater than, 50%

but less than 110%, go to the instructions for using Table 1 in

section 139FM that are set out below that Table.

If calculation percentage is equal to or greater than 110%

"(3) If the calculation percentage is equal to, or greater than,

110%, go to the instructions for using Table 2 in section 139FN that

are set out below that Table.

Table 1 and instructions

Table 1

"139FM.(1) The following is Table 1:

Calculation percentage

Exercise

period 50% to 60% to 70% to 75% to 80% to 85% to 90% to 92.5%

(months) 60% 70% 75% 80% 85% 90% 92.5% to 95%

108 to 120 0.6% 2.1% 4.8% 6.7% 8.9% 11.4% 14.1% 15.5%

96 to 108 0.4% 1.5% 4.0% 5.8% 7.9% 10.3% 13.0% 14.5%

84 to 96 0.2% 1.1% 3.2% 4.8% 6.8% 9.2% 11.8% 13.3%

72 to 84 0.1% 0.7% 2.4% 3.8% 5.6% 7.9% 10.5% 11.9%

60 to 72 0.0% 0.4% 1.6% 2.8% 4.4% 6.5% 9.0% 10.4%

48 to 60 0.0% 0.1% 0.9% 1.8% 3.1% 4.9% 7.3% 8.6%

36 to 48 0.0% 0.0% 0.4% 0.9% 1.9% 3.3% 5.4% 6.6%

24 to 36 0.0% 0.0% 0.1% 0.3% 0.8% 1.8% 3.4% 4.4%

18 to 24 0.0% 0.0% 0.0% 0.1% 0.4% 1.0% 2.3% 3.2%

12 to 18 0.0% 0.0% 0.0% 0.0% 0.1% 0.4% 1.3% 2.0%

9 to 12 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.8% 1.3%

6 to 9 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.7%

3 to 6 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2%

0 to 3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Calculation percentage

Exercise

period 95% to 97.5% to 100% to 102.5% to 105% to 107.5% to

(months) 97.5% 100% 102.5% 105% 107.5% 110%

108 to 120 16.9% 18.4% 20.0% 21.5% 23.1% 24.7%

96 to 108 15.9% 17.5% 19.0% 20.6% 22.2% 23.9%

84 to 96 14.8% 16.3% 17.9% 19.5% 21.2% 22.9%

72 to 84 13.4% 15.0% 16.6% 18.2% 19.9% 21.7%

60 to 72 11.8% 13.4% 15.0% 16.7% 18.5% 20.3%

48 to 60 10.1% 11.6% 13.2% 14.9% 16.7% 18.6%

36 to 48 8.0% 9.5% 11.1% 12.9% 14.7% 16.5%

24 to 36 5.7% 7.1% 8.7% 10.4% 12.2% 14.1%

18 to 24 4.4% 5.7% 7.2% 8.9% 10.8% 12.7%

12 to 18 2.9% 4.1% 5.6% 7.3% 9.1% 11.2%

9 to 12 2.2% 3.3% 4.7% 6.3% 8.2% 10.3%

6 to 9 1.4% 2.3% 3.6% 5.3% 7.2% 9.4%

3 to 6 0.5% 1.2% 2.4% 4.1% 6.1% 8.4%

0 to 3 0.1% 0.4% 1.3% 3.0% 5.3% 7.8%

Instructions for using Table 1

"(2) From Table 1, select the percentage (the Table 1 percentage)

that corresponds to:

(a) the period, in months, from the particular day until the last

day on which the right may be exercised (the exercise period); and

(b) the calculation percentage;

and then multiply the amount, or lowest amount, that must be paid to

exercise the right by the Table 1 percentage. The result is the market

value of the right.

Table 2 and instructions

Table 2

"139FN.(1) The following is Table 2:

Exercise period

(months) Column 1 Column 2

108 to 120 24.7% 0.6%

96 to 108 23.9% 0.6%

84 to 96 22.9% 0.7%

72 to 84 21.7% 0.7%

60 to 72 20.3% 0.7%

48 to 60 18.6% 0.7%

36 to 48 16.5% 0.8%

24 to 36 14.1% 0.8%

18 to 24 12.7% 0.8%

12 to 18 11.2% 0.9%

9 to 12 10.3% 0.9%

6 to 9 9.4% 0.9%

3 to 6 8.4% 0.9%

0 to 3 7.8% 1.0%

Instructions for using Table 2-calculating the base percentage

"(2) From column 1 of Table 2, select the percentage that

corresponds to the period, in months, from the particular day until

the last day on which the right may be exercised. This percentage is

called the base percentage.

Instructions for using Table 2-calculating the additional percentage

"(3) From column 2 of Table 2, select the percentage that

corresponds to the exercise period (the exercise period). This

percentage is called the additional percentage.

Instructions for using Table 2-calculating the excess

"(4) Work out the result of the following formula. Disregard any

fraction. The result is called the excess.

(100) * [(Calculation percentage) - (110%)]

Instructions for using Table 2-calculating the market value

"(5) The market value of the right is the amount worked out using

the following formula:

(Amount or lowest amount that must be paid to exercise the right)*[Base percentage * (Excess * Additional percentage)]

Note: If:

(a) the exercise period; or

(b) the calculation percentage in relation to a particular right;

is the top of one range in Table 1 or 2 and is also the bottom of

another range in that Table, it is taken to be in the lower range and

not in the higher range.

"Subdivision G-Definitions

Meaning of acquiring or providing a share or right

"139G. A person acquires a share or right if:

(a) another person transfers the share or right to that person

(other than, in the case of a share, by issuing the share to that

person); or

(b) in the case of a share-another person allots the share to that

person; or

(c) in the case of a right-another person creates the right in that

person; or

(d) the person otherwise acquires a legal interest in the share or

right from another person; or

(e) the person acquires a beneficial interest in the share or right

from another person.

In those circumstances, the other person provides the share or right.

Meaning of employee and employer

"139GA. The expressions employee and employer have the same meanings

as in section 221A.

Meaning of permanent employee

"139GB.(1) Subject to subsections (2) and (3), permanent employee of

a company is:

(a) a full-time employee of the company; or

(b) a permanent part-time employee of the company;

with at least 36 months service (whether continuous or

non-continuous).

"(2) A person is not a permanent employee of the company at any time

when the person is a director of the company.

"(3) A person is not a permanent employee at any time when the

person:

(a) is an exempt visitor within the meaning of section 517 of the

Income Tax Assessment Act 1936; or

(b) is not a resident within the meaning of that Act; or

(c) is not physically present in Australia.

"(4) For the purposes of subsection (1), the length of a person's

service includes any period when the person is, in accordance with the

terms and conditions of that service:

(a) absent on recreation leave; or

(b) absent from work because of accident or illness.

"(5) In paragraph (4)(a), recreation leave does not include:

(a) long service leave, furlough, extended leave or leave of a

similar kind (however described); or

(b) leave without pay or on reduced pay.

Meaning of holding company

"139GC. The expression holding company has the same meaning as in

the Corporations Law.

Meaning of approved stock exchange

"139GD. A stock exchange is an approved stock exchange if:

(a) the stock exchange is named in regulations made for the purposes

of this section; or

(b) if no such regulations are in force-the stock exchange is an

approved stock exchange within the meaning of Part XI.

Meaning of associate

"139GE. The expression associate has the same meaning as it would

have in section 26AAB if:

(a) the following paragraph were inserted before paragraph (14)(a)

of that section:

"(aa) a company where the taxpayer holds (whether directly or

indirectly through one or more interposed companies, partnerships or

trusts) a share in the company, or a right to acquire a share in the

company;"; and

(b) 'paragraph (a)' wherever occurring in subsection (14) were

omitted and 'paragraph (aa) or (a)' were substituted.

Meaning of conducting a scheme on a non-discriminatory basis

"139GF.(1) This section sets out the conditions that must be

satisfied for the employee share scheme mentioned in subsection

139CE(4) or a scheme for the provision of financial assistance in

respect of acquisitions of shares or rights under the employee share

scheme to be operated on a non-discriminatory basis.

Non-discriminatory employee share scheme

"(2) The employee share scheme is operated on a non-discriminatory

basis if, and only if, the following conditions are satisfied in

relation to all offers to acquire shares or rights under the scheme:

(a) participation in the scheme is open to at least 75% of permanent

employees of the employer;

(b) the time for acceptance of each offer is reasonable;

(c) the essential features of each offer are the same for at least

75% of permanent employees of the employer.

Essential features of offer

"(3) The essential features of an offer for an employee share scheme

are:

(a) the consideration for the acquisition of the share or right

concerned (whether that consideration is determined by reference to

the value of the share or right or otherwise); and

(b) the number of shares or rights, the minimum number of shares or

rights or the maximum number of shares or rights, offered to each

employee, as the case may be; and

(c) the time for acceptance of the offer; and

(d) the steps taken for the circulation of information about the

offer.

Non-discriminatory financial assistance schemes

"(4) The scheme for the provision of financial assistance in respect

of acquisitions of shares or rights under the employee share scheme is

operated on a non-discriminatory basis if, and only if, the following

conditions are satisfied in relation to all financial assistance

provided under the scheme:

(a) the time for taking up each offer of assistance is reasonable;

(b) the essential features of each offer of assistance are the same

for at least 75% of permanent employees of the employer.

Essential features of offer of financial assistance

"(5) The essential features of an offer of financial assistance are:

(a) the terms and conditions of the offer; and

(b) the amount, the minimum amount, or the maximum amount, of

assistance offered to each employee, as the case may be.

"(6) The Commissioner may determine that the condition mentioned in

paragraph (2)(a), (2)(c) or (4)(b) is taken to have been satisfied in

relation to a scheme if the Commissioner considers that the employer

has done everything reasonably practicable to ensure that the

condition was satisfied.

Meaning of provision of financial assistance

"139GG. The expression provision of financial assistance includes

the making of a loan, giving of a guarantee, provision of security,

release of an obligation and forgiving of a debt.

Index of definitions

"139GH. The following table lists the definitions in this Division

and shows their location:

Definition Provision

Acquiring a share or right 139G

Approved stock exchange 139GD

Associate 139GE

Cessation time - rights 139CB

Cessation time - shares 139CA

Discount 139CC

Employee 139GA

Employee share scheme 139C

Employer 139GA

Exemption conditions 139CE

Financial assistance 139GG

Holding company 139GC

Market value of a

share or right Subdivision F

Non-discriminatory schemes 139GF

Permanent employee 139GB

Providing a share or right 139G

Published price 139FH

Qualified person 139FG

Qualifying shares and

qualifying rights 139CD