Edited version of private advice

Authorisation Number: 1052249780896

Date of advice: 24 May 2024

Ruling

Subject: ESS - market value

Question 1

For the purposes of ascertaining the taxable discount under sections 83A-110 and 83A-315 of the Income Tax Assessment Act 1997 (ITAA 1997) and for reporting purposes under Subdivision 392-A of the Taxation Administration Act 1953 (TAA 1953), was the 'market value' of a XXX ordinary share as at xx xx xx $x.xx?

Answer

Yes.

Question 2

For the purposes of ascertaining the taxable discount under sections 83A-110 and 83A-315 of the ITAA 1997 and for reporting purposes under Subdivision 392-A of the TAA 1953, was the 'market value' of XXX ordinary share as at xx xx xx $x.xx?

Answer

Yes.

Question 3

For the purposes of ascertaining the taxable discount under sections 83A-110 and 83A-315 of the ITAA 1997 and for reporting purposes under Subdivision 392-A of the TAA 1953, was the 'market value' of a XXX ordinary share as at xx xx xx $x.xx?

Answer

Yes.

This ruling applies for the following periods:

year ended 30 June 2021

year ended 30 June 2022

year ended 30 June 2023

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

The scheme that is the subject of this Ruling is identified and described in the following documents, which form part of the facts of this ruling:

•         Entity X - Valuation of issued shares as at 30 June 2021, prepared by XXX (Valuer) with a valuation date of 30 June 2021 and a report date of xx xx xx (FTI report 2021)

•         Entity X - Valuation of issued shares as at 30 June 2022, prepared by Valuer with a valuation date of 30 June 2022 and a report date of xx xx xx (FTI report 2022)

•         Entity X - Valuation of issued shares as at 30 June 2023, prepared by Valuer with a valuation date of 30 June 2022 and a report date of xx xx xx (FTI report 2023) (together 'Valuation Reports').

In accordance with the valuation reports, the reported mid-point value for an ordinary share in Entity X as 30 June of each income year is:

Table 1: In accordance with the valuation reports, the reported mid-point value for an ordinary share in Entity X as 30 June of each income year is:

The Valuation Reports were prepared in compliance with APES 225 Valuation Services standard.

The X Rights Plan (Plan) is an employee share scheme for the purposes of the ITAA 1997.

The rights issued by Entity X under the Plan constitute the grant of rights under an employee share plan to which Division 83-A applies.

The rights are unlisted rights.

The employee participants in the Plan only hold minority interests in Entity X both before and after the grant of rights under the Plan. No employee participant has or will become the owner of more than 3% of the issued shares in Entity X including any shares held by their associates, even assuming that all rights they hold, will he exercised and become shares in XXXXX Trust Pty Ltd.

The terms of the rights give rise to deferred taxation under Division 83A so that Subdivision 83A-C applies and Subdivision 83A-B of the ITAA 1997 does not apply.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 83A-110

Income Tax Assessment Act 1997 section83A-315

Taxation Administration Act 1953 Subdivision 392-A

Reasons for decision

Questions 1, 2 and 3.

Detailed reasoning

Entity X commissioned Valuation Reports from Valuer, which arrived at a valuation for the ordinary shares of Entity X as at 30 June of each of the relevant income years. The Commissioner accepts that, based on the report data, the mid-point values arrived at represents the 'market value' for the purposes of sections 83A-110 and 83A-315 of the ITAA 1997 and for reporting purposes under Subdivision 392-A of the TAA 1953.

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