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Taxation Determination

TD 93/234

Income tax: is the value of the shares received as consideration for providing services for research and development activities assessable income in the hands of an independent contractor?

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FOI status:

may be releasedFOI number: I 1216718

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. Yes. Shares in a company issued to an independent contractor as consideration for services performed in relation to research and development activities undertaken by the company, constitutes assessable income of the independent contractor under subsection 25(1) of the Income Tax Assessment Act 1936. That is, the value of the shares constitutes gross income derived by the contractor for the purposes of subsection 25(1). The amount of assessable income is the value of the shares at the time they are issued.

2. Section 21 applies where consideration is given other than in cash. The money value of the consideration is deemed to have been paid or received.

3. In Taxation Board of Review case, (1953) 4 TBRD Case D1, it was held that it was the market value of the shares and not their nominal value that was the correct amount to be assessed to the taxpayer for the services rendered to the company. The ATO agrees with this view.

Example:

An independent contractor performs services in relation to research and development activities on behalf of a mining company. The contractor receives as consideration for the services performed an issue of shares in that company. The market value of the shares at the time they are issued constitutes assessable income of the contractor.

Commissioner of Taxation
9/12/93

Previously issued as Draft TD 93/D173

References

ATO references:
NO NAT 88/4630-8

ISSN 1038 - 8982

Subject References:
assessable income,
issue of shares,
consideration,
research and development

Legislative References:
ITAA 21;
ITAA 73B

Case References:
Case D1
(1953) 4 TBRD Case D1

TD 93/234 history
  Date: Version: Change:
You are here 9 December 1993 Original ruling  
  18 August 1999 Consolidated ruling Addendum

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