Edited version of private ruling

Authorisation Number: 1011692924976

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Ruling

Subject: Employee share scheme - Cessation time

Question:

Does the cessation time happen due to the change in your employment?

Answer: No.

This ruling applies for the following period:

2009-10 income year

The scheme commences on:

1 July 2009.

Relevant facts and circumstances

You have been employed by an Australian company for the past ten or so years.

You were appointed to a position in a related company during 2010.

Both companies are wholly owned subsidiaries of the ultimate parent, which is listed on a foreign stock exchange.

The employees of all subsidiary companies of the parent company are eligible to participate in an employee share scheme (ESS) that confers parent company shares to employees within the group.

In transferring to the new subsidiary, you have been advised that it is a triggering 'cessation time' event for discounts on ESS interests acquired whilst working for your former employer.

You have received a notice from your former employer advising that your assessable discounts on ESS interests acquired pre 1 July 2009 with a 'cessation time' occurring during the financial year.

You have provided copies of certain documents that are to be read with and form part of the description of the scheme for the purpose of this ruling. They demonstrate that your employee entitlements (annual leave, sick leave and long service leave) continued when you changed employers.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 139B,

Income Tax Assessment Act 1936 Subsection 139B(3),

Income Tax Assessment Act 1936 Section 139CA,

Income Tax Assessment Act 1936 Section 139CB,

Income Tax Assessment Act 1997 Section 83A-110,

Income Tax Assessment Act 1997 Section 83A-115,

Income Tax Assessment Act 1997 Subsection 83A-115(5),

Income Tax Assessment Act 1997 Section 83A-120,

Income Tax Assessment Act 1997 Subsection 83A-120(5),

Income Tax (Transitional Provisions) Act 1997 Subsection 83A-5(2),

Income Tax (Transitional Provisions) Act 1997 Paragraph 83A-5(2)(a),

Income Tax (Transitional Provisions) Act 1997 Subparagraph 83A-5(2)(a)(iii) and

Income Tax (Transitional Provisions) Act 1997 Subparagraph 83A-5(4)(b)(i).

Reasons for decision

Summary

The cessation time does not happen due to the change in your employment.

Detailed reasoning

The employee share scheme provisions provide the regime for working out when an amount is to be included in your assessable income due to the grant of shares or rights to acquire shares as part of your remuneration package and how much is to be so included.

For shares and rights to acquire shares that are granted on or after 1 July 2009 and where the tax deferral conditions are met, an amount is included in your assessable income at the ESS deferred taxing point.

For shares or rights to acquire shares granted before 1 July 2009 that were qualifying shares or qualifying rights where you didn't choose to be assessable in the year of grant and for which the cessation time didn't happen before 1 July 2009, an amount is also included in your assessable income at the ESS deferred taxing point. However, there are modifications to the definition to ensure that the ESS deferred taxing point largely aligns with the cessation time that would have applied under the employee share scheme provisions that applied up until 30 June 2009.

There were two definitions of cessation time under the former employee share scheme provisions. The first applied to shares and the second applied to rights to acquire shares. Under both definitions, the cessation time was the earliest of a number of possible events.

Both definitions of cessation time included the time when the employment ends as a possible cessation time.

Does the cessation time happen due to the change in your employment?

For the purpose of both definitions of cessation time, you only cease employment in respect of which the share or right was acquired when you are no longer employed by any of the following:

· Your employer in that employment;

· A holding company of the employer;

· A subsidiary of the employer or of a holding company of the employer.

'Holding company' and 'subsidiary' have the same meaning as in the Corporations Act 2001.

In your case, you are still employed by a subsidiary of the holding company of the employer you had when the ESS interests were granted to you. Your employment has not ended for employee share scheme purposes due to the change.

Consequently, the change in your employment cannot cause a cessation time in respect of your ESS interests.

Note: This decision does not consider whether the cessation time happened for another reason - for example, because the selling restrictions and forfeiture conditions cease to have effect.