Edited version of private ruling

Authorisation Number: 1011639384029

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Ruling

Subject: Employee Share Scheme - Cessation

Question: Is your employee share scheme discount calculated by using the market value at cessation time?

Answer: Yes.

This ruling applies for the following period

Year ended 30 June 2010.

The scheme commenced on

1 July 2009

Relevant facts

You were employed by an Australian bank (the bank) for a period of more than five years.

You acquired qualifying shares under a number of employee share plans:

You paid nothing to acquire these shares.

You did not seek taxation advice upon acquisition of your shares.

You did not make an election under section 139E of the Income Tax Assessment Act 1936

(ITAA 1936),

Early this year you ceased employment with the bank.

There were restrictions on these shares until after you ceased employment with the bank.

You received a letter from the bank advising you that the total discount amount for your shares.

The current bank share price at the time of requesting this ruling was $X.

You have provided a copy of the following 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:

· Correspondence from the bank - Employee Share Scheme (ESS) Detailed Tax Summary.

You will dispose of your shares.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 130-83.

Income Tax Assessment Act 1997 Section 104-10.

Income Tax Assessment Act 1936 Section 139E.

Income Tax Assessment Act 1936 Section 139C.

Income Tax Assessment Act 1936 Section 139CA.

Income Tax Assessment Act 1936 Section 139CD.

Income Tax Assessment Act 1936 Section 139B.

Income Tax Assessment Act 1997 Section 104-10

Income Tax (Transitional Provisions) Act 1997 Section 83A-10

Reasons for decision

You acquire shares under an employee share scheme if their acquisition was in respect of or in relation directly or indirectly to your employment and you paid less than market value of the shares at the time of acquisition.

There are two concessions available for qualifying shares. The first concession available is that you can defer including the discount in your assessable income until a later year or income up to a maximum of 10 years.

The second concession allows you to elect to be assessed upfront on all qualifying shares you acquired in the income years - an election under section 139E of the ITAA 1936, the discount is included in your assessable income in the year you acquired the qualifying shares.

In your case, the shares that you acquired from the bank were qualifying shares. At the time of acquisition of the shares you made the choice not to pay the tax up front by not making an election under section 139E of the ITAA 1936.

Therefore, the discount given on these shares must be included in your assessable income in the income year when the cessation time occurred.

Establishing cessation time

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

· when the shares are disposed of

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

· when the employees employment ceased with the employer, or

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

In your case, cessation occurred early this year when you ceased your employment with the bank.

The bank has provided you with the discount amount in their correspondence.

The discount amount must be included in your assessable income for the year ended 30 June 201X. This amount is included at item 12 of your income tax return.

The Commissioner does not have any discretionary powers which would allow you to use the share price upon acquisition to calculate the discount at cessation time.