ATO Interpretative Decision
ATO ID 2002/645 (Withdrawn)
Income
Employee Share Scheme - Share Appreciation Rights - no right to acquire a shareFOI status: may be released
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This ATO ID is withdrawn following the repeal of the former division on employee share in 2009 and replacement with Division 83A of the ITAA 1997.
This ATOID has been amended to remove from the reasons for decision comments made on certain incidental issues. The comments removed were, with respect to the kind of arrangement described in CR 2001/76, capable of being regarded as inconsistent with the Tax Office position set out in that Class Ruling.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the discount given on a Share Appreciation Right acquired by the taxpayer under an employee share scheme, included in the taxpayer's assessable income under section 139B of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The discount given on a Share Appreciation Right is not included in the taxpayer's assessable income under section 139B of the ITAA 1936 as it is not a right to acquire a share.
Facts
The taxpayer was granted Share Appreciation Rights (herein referred to as SARs), by their employer under an employee share plan.
The taxpayer paid no consideration to acquire the SARs.
The SARs entitled the taxpayer to receive a cash sum equal to the difference between the market value of the underlying shares in the employer company and the exercise price if they were exercised prior to their expiry date.
As a result of a takeover of the taxpayer's employer company, the employer settled the entitlements of the taxpayer under the SARs by paying the taxpayer the agreed takeover price less the exercise price and taxes.
Reasons for Decision
In order to determine if the discount given on the SARs is included in the taxpayer's assessable income under section 139B of the ITAA 1936 it must be established if they were acquired under an employee share scheme.
A taxpayer acquires shares or rights to shares under an employee share scheme if they were acquired in respect of, or in relation directly or indirectly to any employment of the taxpayer (subsection 139C(1) of the ITAA 1936) and if any consideration for the acquisition is less than their market value at the time of acquisition (section 139C(3) of the ITAA 1936).
The SARs were not for the acquisition of shares but rather, when exercised, resulted in a cash equivalent of the shares being paid to the taxpayer. Accordingly, they are not acquired under an employee share scheme as defined in section 139C of the ITAA 1936. The discount given on the SARs is not included in the taxpayer's assessable income under section 139B of the ITAA 1936 as they are not rights to acquire shares.
Date of decision: 14 December 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
subsection 136(1)
subsection 139C(1)
subsection 139C(3)
Keywords
Employee share schemes & options
ISSN: 1445-2782
| Date: | Version: | |
| 14 December 2001 | Original statement | |
| You are here | 3 October 2014 | Archived |