Edited version of private ruling

Authorisation Number: 1011580390480

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Ruling

Subject: Employee Share Scheme - Acquisition date of shares

Is the market value of your employee shares on the date that your cessation event happened used to calculate your discount?

Yes.

This ruling applies for the following period

Year ended 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts

You acquire shares under an employee share plan scheme from your employer.

The company has now changed names.

The shares were listed on the Australian Stock Exchange.

The shares you acquired were acquired at the prevailing market prices on a monthly basis through a salary sacrifice scheme and where registered in the name of the Plan Trustee and are held on your behalf and are subject to the Plan rules.

These shares are qualifying shares.

These shares were subject to forfeiture restrictions.

You tendered your resignation effective from the date of the appointment of your successor.

Approximately three months later, the Australian Securities and Investment Commission (ASIC) placed a ban on the covered short selling of financial securities. Your employer's company was listed by ASIC as one of those financial securities specifically banned from short sales. ASIC lifted the ban.

Three months after tendering your resignation your employment was terminated.

At the time the market value of the shares was $X.

As part of the termination agreement, you were required to provide assistance to your employer in a consultative role to the extent it would be requested and as necessary for a period of time. You were paid for this service.

The shares were not issued to you until after the notification of your termination of employment.

You made several attempts to have the shares issued.

The company advised you that there was an issue with the shares you received in a prior year and the chairman of the board of directors was going to advise the company director of their decision.

Your shares were issued to you.

At the time the market value of the shares was $X.

You did not receive notice of the release until ten days later.

You have provided copies of documentation to support your application and these documents are to be read with and forms part of the scheme for the purpose of this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 139B

Income Tax Assessment Act 1936 Section 139G

Income Tax Assessment Act 1936 Section 139CA

Income Tax Assessment Act 1936 Section 139C

Income Tax Assessment Act 1936 Section 139E

Income Tax Assessment Act 1936 Section 139CC

Income Tax Assessment Act 1997 Section 130-80

Income Tax Assessment Act 1997 Section 130-83

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 109-10

Income Tax Assessment Act 1997 Section 110-25

Reasons for decision

Shares and rights acquired under the employee share scheme (ESAS)

You acquire shares and rights under an employee share scheme when they are acquired in respect of your employment and the consideration paid for their acquisition is less than the market value of the shares at the time you acquired them.

An election under section 139E of the Income Tax Assessment Act 1936 (ITAA 1936) can be made by an employee in respect of the qualifying shares and rights. The effect of making an election is that the discount given in respect of the qualifying shares and rights is included in the employee's assessable income in the year of acquisition.

If an election is not made, the discount is included in the employee's assessable income when cessation time occurs. As you did not make an election, you are required to include the discount in your assessable income in the year in which cessation time occurs.

Cessation time

The cessation time for shares with restrictions preventing disposal or conditions resulting in forfeiture, acquired under an employee share scheme is the earliest of the following:

· when the shares are disposed of

· the later of when the disposal restrictions cease and the lapsing conditions expire in relation to the shares

· when the employees employment ceased with their employer, or

· ten years from the date of acquisition of the shares.

In your case, cessation occurred on the date you ceased your employment with your employer. From the date of cessation you acted in a consultative role for a period of time.

As you did not dispose of these shares within 30 days of cessation the discount is the market value of the shares at cessation time less any consideration paid or given by the employee for their acquisition (subsection 139CC(4) of the ITAA 1936).

While you were not able to dispose of your shares due to ASIC placing a ban on covered short selling of financial securities, which included the company you were employed by. The Commissioner does not have any discretion powers to amend the date to the date ASIC lifted the ban on the disposal of these shares.

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