ATO Interpretative Decision
ATO ID 2004/812 (Withdrawn)
Income Tax
Employee Share Scheme - Restricted Share UnitsFOI status: may be released
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This ATO ID is withdrawn because it contains a view in respect of a provision of the Income Tax Assessment Act 1936 that does not apply after the 2008-09 income year.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.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Will a Restricted Share Unit (RSU) granted to an employee under an employee share scheme constitute a right acquired under an employee share scheme for the purposes of Division 13A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. An RSU granted to an employee under an employee share scheme will constitute a right acquired under an employee share scheme for the purposes of Division 13A of Part III of the ITAA 1936.
Facts
Pursuant to an employee share scheme established for the benefit of employees, an employee enters into an RSU agreement with the employer.
An RSU gives the holder the right to receive a share in the employer company at a specified time in the future.
Under the terms of the RSU agreement:
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- the employee is granted a specified number of RSUs;
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- if the employer company pays a dividend the employee is granted a further number of RSUs; and
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- no consideration is paid by the employee to acquire the RSUs.
Reasons for Decision
The expression 'right' is not defined, but as 'right' and 'right to acquire a share' are used interchangeably throughout Division 13A of Part III of the ITAA 1936, a 'right' is taken to mean a 'right to acquire a share'.
Where an employee is granted a right to receive a share they are considered to have been granted the right to acquire that share.
Where the right is granted in respect of, or for or in relation directly or indirectly to their employment and the right is acquired for less that its market value, the right will be a right acquired under an employee share scheme for the purposes of Division 13A of Part III of the ITAA 1936.
Thus where an employee is granted an RSU they will acquire a right under an employee share scheme for the purposes of Division 13A of Part III of the ITAA 1936.
Where the employer company pays a dividend and further RSUs are granted to the employee, the additional RSUs will be acquired under an employee share scheme at the time of grant.
Date of decision: 24 September 2004Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1936
Division 13A of Part III
Keywords
Employee share schemes & options
ISSN: 1445-2782
| Date: | Version: | |
| 24 September 2004 | Original statement | |
| You are here | 24 October 2014 | Archived |