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Edited version of private ruling
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Ruling
Subject: Capital gains tax - employee share scheme - salary sacrificing scheme
Are shares acquired under a salary sacrificing scheme acquired at a discount?
Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You participated in a salary sacrificing scheme offered by your employer.
Under this scheme you gave up part of your salary and wages. This amount was used as a contribution by your employer to buy shares, at their market value. For each share acquired using the amount you sacrificed your employer contributed the same amount and acquired an additional share.
As part of a merger, your shares were acquired by another company and you have received an amount in consideration for the disposal of your shares.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 139B
Income Tax Assessment Act 1936 Section 139C
Income Tax Assessment Act 1936 Section 139CA
Income Tax Assessment Act 1936 Section 139CC
Income Tax Assessment Act 1936 Section 139CD
Income Tax Assessment Act 1936 Section 139E
Income Tax Assessment Act 1997 Section 130-83
Reasons for decision
A salary sacrifice scheme is an arrangement under which an employee agrees to forego part of their total remuneration, which they would expect to receive as salary or wages, in return for the employer providing benefits of a similar value. An effective salary sacrifice scheme requires the employee to agree to receive part of their total remuneration as a benefit before the employee has earned the entitlement to receive the amount as salary or wages.
As a result of entering into a salary sacrifice arrangement an employee's remuneration will consist of salary and wages and a benefit. The benefit that is now part of the employee's remuneration package has never been taxed as if was obtained by giving up the salary and wages before it was received.
In your case, you have salary sacrificed part of your salary to acquire the shares. Therefore, it is viewed that you did you pay any consideration to acquire these shares for the purposes of calculating your employee share discount.
As you did not pay anything to acquire these shares as they were obtained through an effective salary sacrifice scheme the employee share discount to be included in your assessable income is the market value of the shares at cessation time, the amount of consideration you received for the disposal of your shares. This amount should be recorded at Label 12 G in your income tax return in the income year in which the disposal of your shares occurred.