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Edited version of private ruling
Authorisation Number: 1011705657606
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Ruling
Subject: Employee share scheme and Salary sacrifice
Question and answer
Are the shares that you have acquired through salary sacrifice acquired through an employee share scheme?
Yes.
This ruling applies for the following period
Income year ended 30 June 2010
Relevant facts
You are employee of Company A.
As a requirement of the ESSS (Employee Share Savings Scheme) in Company A, you have sacrificed part of your wage for Company A shares.
You have salary sacrificed different amounts of your before tax wage to Company A.
You have provided the following documents that are to be read with, and form part of the description of the scheme for the purpose of this ruling:
· Annual Employee Share scheme tax statement summary
· Historical transactions transcript
· Payslip
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 139C (1)
Income Tax Assessment Act 1936 subsection 139C (3)
Income Tax Assessment Act 1997 Division 83A
Reasons for decision
When a taxpayer acquires shares or rights under an employee share scheme, the acquisition is to be in respect of or in relation directly or indirectly to any employment of the employee. The consideration paid for the acquisition of the shares or rights must be less than the market value of the share at the time of acquisition, in effect giving you a discount.
Amounts that you forgo under an effective salary sacrifice arrangement do not form part of the consideration provided to acquire shares from an employee share scheme.
In your situation, you are an employee with Company A and you have received shares in direct relation to your employment with Company A. As you have you salary sacrificed the market value of your Company A shares before tax is withheld, this means that you have paid nothing for these shares. As the money did not come from your income and the consideration paid for the acquisition of your Company A shares is less than the market value of the share at the time of acquisition you have received a discount.
Accordingly, you have acquired your Company A shares under an employee share scheme and they will be subject to the relevant taxation provisions regarding employee share schemes.