ATO Interpretative Decision

ATO ID 2002/966

Income Tax

Income tax - Proceeds from disposal of shares or rights by Trustee of an employee share scheme on behalf of employees not assessable to Trustee
FOI status: may be released

CAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxpayer, a Trustee of an employee share scheme Trust, be assessable under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 ('ITAA 1997') on the proceeds of the disposal, by the Trustee on the behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or the associate under the employee share scheme?

Decision

No. The taxpayer, a Trustee of an employee share scheme Trust, will not be assessable under sections 6-5 or 6-10 of the ITAA 1997 on the proceeds of the disposal, by the Trustee on behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or associate under the employee share scheme.

Facts

The employee share scheme complies with the provisions of Division 13A of the Income Tax Assessment Act 1936 ('ITAA 1936').

A Trustee is appointed to administer the scheme. Upon the employee or associate of the employee becoming absolutely entitled to the shares or rights, the shares or rights acquired by the employee or associate under the employee scheme are disposed of by the Trustee at the employee's or associate's request. The trustee distributes the proceeds to the employee or associate.

Reasons for Decision

The Trustee taxpayer holds the shares for the benefit of the employee or associate of the employee for the purpose of and under the employee share scheme. After the employee or associate acquires the shares or rights under the scheme, the Trustee disposes of them at the request of the employee or associate. The Trustee is not a share trader in relation to these transactions for the purpose of the Act. It does not trade in these shares or rights in its own right. Any proceeds from the disposal of the shares or rights are distributed to the employee or the associate and not held for the benefit of the Trustee. The proceeds are not assessable income under sections 6-5 or 6-10 of the ITAA 1997.

Date of decision: 22 August 2002

Year of income: Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
section 6-5
section 6-10

Keywords
Income tax
Assessable income
Employee share schemes & options
Share discounts on employee share schemes

Siebel/TDMS Reference Number: CW3057156

Business Line: Public Groups and International

Date of publication: 2 October 2002

ISSN: 1445-2782

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