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Edited version of private ruling
Authorisation Number: 1011659896320
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Ruling
Subject: Share and Share Option Plan
Question 1
Will the provision of the options to the Employee by the Employer under the Plan constitute a 'fringe benefit' provided by the Employer to the Employee as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Answer
No
Question 2
Will the granting of options by the Employer to the Employee constitute a CGT event for the Employer under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No
Question 3
Will the allocation of options by the Employer to the Employee for no consideration constitute an acquisition of an ESS interest under an employee share scheme by the Employee at a discount, as referred to in section 83A-20 of the ITAA 1997, which will be excluded from the definition of a fringe benefit under subsection 136(1) of the FBTAA?
Answer
Yes
Question 4
Will the general anti-avoidance provisions under Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the scheme described?
Answer
No
Question 5
Will the general anti-avoidance provisions under section 67 of the FBTAA apply to the scheme described?
Answer
No
This ruling applies for the following periods:
Income Tax Year ended 30 June 2011
Income Tax Year ended 30 June 2012
Income Tax Year ended 30 June 2013
FBT Year ended 31 March 2011
FBT Year ended 31 March 2012
FBT Year ended 31 March 2013
The scheme commences on:
1 July 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The Employer intends to implement an employee share plan which is designed to reward employees for their service and to encourage them to remain with the Employer by providing them with an opportunity to acquire beneficial ownership of rights to acquire a beneficial interest in shares and annually access the deferred taxation concession available under section 83A-105 of the ITAA 1997.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 67
Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)
Fringe Benefits Tax Assessment Act 1986 Paragraph 136(1)(h)
Income Tax Assessment Act 1936 Part IVA
Income Tax Assessment Act 1997 Subdivision 83A-B
Income Tax Assessment Act 1997 Subsection 83A-10(2)
Income Tax Assessment Act 1997 Section 83A-20
Income Tax Assessment Act 1997 Subsection 83A-20(1)
Income Tax Assessment Act 1997 Subdivision 83A-C
Income Tax Assessment Act 1997 Division 104
Income Tax Assessment Act 1997 Subsection 104-40(1)
Income Tax Assessment Act 1997 Subsection 104-40(2)
Income Tax Assessment Act 1997 Paragraph 104-40(6)(a)
Reasons for decision
These reasons for decision accompany the Notice of private ruling for the Employer.
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Question 1
Will the provision of the options to the Employee by the Employer under the Plan constitute a 'fringe benefit' provided by the Employer to the Employee as defined in subsection 136(1) of the FBTAA?
No.
A 'fringe benefit' is defined in subsection 136(1) of the FBTAA and pursuant to paragraph (h) of that definition does not include a benefit constituted by the acquisition of an ESS interest under an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 applies.
The Plan constitutes an employee share scheme within subsection 83A-10(2) of the ITAA 1997 to which Subdivision 83A-C applies.
The benefit, represented by the acquisition of the beneficial interest in the options to acquire a beneficial interest in shares provided to the Employee by the Employer under the Plan is therefore excluded as a benefit as defined under fringe benefit in paragraph 136(1)(h) of the FBTAA.
Question 2
Will the granting of options by the Employer to the Employee constitute a CGT event for the Employer under Division 104 of the ITAA 1997?
No.
CGT event D2 happens if you grant an option to an entity at the time the option is granted (subsections 104-40(1) and (2) of the ITAA 1997).
However, pursuant to paragraph 104-40(6)(a) of the ITAA 1997, CGT event D2 does not happen where the option granted by a company is to acquire a CGT asset that is a share in the company.
The granting of options by the Employer to the Employee to acquire shares in the Employer will therefore not give rise to a CGT event under Division 104 of the ITAA 1997.
Question 3
Will the allocation of options by the Employer to the Employee for no consideration constitute an acquisition of an ESS interest under an employee share scheme by the Employee at a discount, as referred to in section 83A-20 of the ITAA 1997, which will be excluded from the definition of a fringe benefit under subsection 136(1) of the FBTAA?
Yes.
Subsection 83A-20(1) of the ITAA 1997 refers to ESS interests acquired under an employee share scheme at a discount.
As the options are acquired under the Plan by the Employee for no consideration, they are acquired at a discount.
A 'fringe benefit' is defined in subsection 136(1) of the FBTAA and pursuant to paragraph (h) of that definition does not include a benefit constituted by the acquisition of an ESS interest under an employee share scheme to which Subdivision 83A-B or 83A-C of the ITAA 1997 applies.
The Plan constitutes an employee share scheme within subsection 83A-10(2) of the ITAA 1997 to which Subdivision 83A-C applies.
The benefit, represented by the acquisition of the beneficial interest in the options to acquire a beneficial interest in shares provided to the Employee by the Employer under the Plan for no consideration is therefore excluded as a benefit as defined under fringe benefit in paragraph 136(1)(h) of the FBTAA.
Question 4
Will the general anti-avoidance provisions under Part IVA of the ITAA 1936 apply to the scheme described?
No.
Provided that the scheme as implemented is materially identical to the scheme described in this ruling it is considered that Part IVA of the ITAA 1936 would not apply in respect of the Employer.
Question 5
Will the general anti-avoidance provisions under section 67 of the FBTAA apply to the scheme described?
No.
Provided that the scheme as implemented is materially identical to the scheme described in this ruling it is considered that section 67 of the FBTAA would not apply in respect of the Employer.