| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011713783299
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Salary Sacrifice Share Plan
Question 1
Will the contributions of monies by the Employer to the Trustee pursuant to the Trust Deeds be included in the calculation of the net income of the trust estates under section 95 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
No.
Question 2
Will the provision of shares to the Trustee pursuant to the Trust Deeds be included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936?
Answer
No.
Question 3
Will dividends and other income received by the Trustee be included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936?
Answer
Yes.
Question 4
Will any part of the net income of the trust estates to which no beneficiary is presently entitled be assessed to the Trustee pursuant to section 99A of the ITAA 1936?
Answer
Yes.
Question 5
To the extent that the net income of the trust estates does not include proceeds received on the disposal of shares as ordinary income of the trust estates:
(i) will the proceeds received by the trust estates from the sale of shares be taken into account in calculating their net capital gain under Division 102 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
(ii) will the sale of shares by the trust estates which had been allocated to the Employee constitute a CGT event of the trust estates under Division 104 of the ITAA 1997?
Answer
No.
(iii) will the proceeds received by the trust estates from the sale of shares allocated to the Employee be taken into account in calculating their net capital gain under Division 102 of the ITAA 1997?
Answer
No.
(iv) where the proceeds received by the trust estates from the sale of shares held by the Trustee for at least 12 months are taken into account in calculating a capital gain of the trust estates under Division 102 of the ITAA 1997, will the capital gain be a discount capital gain under Division 115 of the ITAA 1997?
Answer
Not applicable.
Question 6
Will the general anti-avoidance provisions under Part IVA of the ITAA 1936 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
The scheme commences on:
26 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 two employee share plans to assist in the retention and motivation of its employees by providing them with an opportunity to acquire beneficial ownership of shares and annually access the taxation concessions available under sections 83A-35 and 83A-105 of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 44.
Income Tax Assessment Act 1936 Section 95.
Income Tax Assessment Act 1936 Section 97.
Income Tax Assessment Act 1936 Section 99A.
Income Tax Assessment Act 1936 Subsection 99A(4).
Income Tax Assessment Act 1936 Subsection 99A(4A).
Income Tax Assessment Act 1936 Part IVA.
Income Tax Assessment Act 1997 Division 83A.
Income Tax Assessment Act 1997 Division 102.
Income Tax Assessment Act 1997 Division 104.
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Division 115.
Income Tax Assessment Act 1997 Subsection 130-85(1).
Income Tax Assessment Act 1997 Subsection 130-85(2).
Income Tax Assessment Act 1997 Subsection 130-85(4).
Reasons for decision
These reasons for decision accompany the Notice of private ruling for the TRUSTEE.
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 contributions of monies by the Employer to the Trustee pursuant to the Trust Deeds be included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936?
No.
Contributions of monies by the Employer to the Trustee pursuant to the Trust Deeds will be used in accordance with the Trust Deeds for the sole purpose of and under the Tax Exempt Share Plan and the Tax Deferred Share Plan which are employee share schemes. The contributions constitute capital receipts to the Trustee, and are not included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936 (see ATO Interpretative Decision 2002/965).
Question 2
Will the provision of shares to the Trustee pursuant to the Trust Deeds be included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936?
No.
The ESS rules under Division 83A of the ITAA 1997 tax employees with a beneficial interest in shares in an employee share trust as though they are the legal owners of those shares. The ESS rules essentially ignore the employee share trust for tax purposes.
The provision of shares to the Trustee on behalf of the Employee and other Participants cannot therefore constitute assessable income of the trust estates that is included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936.
Question 3
Will dividends and other income received by the Trustee be included in the calculation of the net income of the trust estates under section 95 of the ITAA 1936?
Yes.
Net income is defined by section 95 of the ITAA 1936 and means the total assessable income of the trust estate calculated under the ITAA 1936 as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions.
Section 44 of the ITAA 1936 includes in the assessable income of a shareholder in a company dividends that are paid to the shareholder by the company out of profits derived by it from any source.
If dividends and other income are received by the Trustee, those amounts are included in the Trustee's calculation of its net income for a year of income under section 95 of the ITAA 1936.
Question 4
Will any part of the net income of the trust estates to which no beneficiary is presently entitled be assessed to the Trustee pursuant to section 99A of the ITAA 1936?
Yes.
Where there is no part of the net income of a resident trust estate that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97 of the ITAA 1936, the trustee shall be assessed and is liable to pay tax on the net income of the trust estate (subsection 99A(4) of the ITAA 1936).
Where there is a part of the net income of a resident trust estate that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97 of the ITAA 1936, the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate (subsection 99A(4A) of the ITAA 1936).
Question 5
To the extent that the net income of the trust estates does not include proceeds received on the disposal of shares as ordinary income of the trust estates:
(i) will the proceeds received by the trust estates from the sale of shares be taken into account in calculating their net capital gain under Division 102 of the ITAA 1997?
No.
The Trust established for the purposes of the Plan is an employee share trust pursuant to subsection 130-85(4) of the ITAA 1997.
The employee shares scheme rules treat an employee who acquires an ESS interest through an employee share trust to be absolutely entitled to the share or right to which the ESS interest relates from the time that they acquire the ESS interest, if the employee share scheme rules apply to the interest (subsections 130-85(1) and (2) of the ITAA 1997).
If a beneficiary of a trust is absolutely entitled to an asset of the trust, the beneficiary (not the trustee) is taxed in relation to any gain or loss relating to the interest.
The proceeds received by the Trustee from the sale of shares held under the Plan on behalf of Participants who are absolutely entitled to the shares will therefore not be considered in calculating the net capital gain made by the trust estates under Division 102 of the ITAA 1997.
(ii) will the sale of shares by the trust estates which had been allocated to the Employee constitute a CGT event of the trust estates under Division 104 of the ITAA 1997?
No.
The sale of shares allocated to the Employee by the Trustee will represent a disposal of those shares and each disposal will give rise to CGT event A1 in section 104-10 of the ITAA 1997.
However, under the employee share scheme rules which treat an employee who acquires an ESS interest through an employee share trust to be absolutely entitled to the share or right to which the ESS interest relates from the time that they acquire the ESS interest, the disposal for the purposes of CGT event A1 is made by the Employee and not the Trustee.
(iii) will the proceeds received by the trust estates from the sale of shares allocated to the Employee be taken into account in calculating their net capital gain under Division 102 of the ITAA 1997?
No.
The Trust established for the purposes of the Plan is an employee share trust pursuant to subsection 130-85(4) of the ITAA 1997.
The employee shares scheme rules treat an employee who acquires an ESS interest through an employee share trust to be absolutely entitled to the share or right to which the ESS interest relates from the time that they acquire the ESS interest, if the employee share scheme rules apply to the interest (subsections 130-85(1) and (2) of the ITAA 1997).
If a beneficiary of a trust is absolutely entitled to an asset of the trust, the beneficiary (not the trustee) is taxed in relation to any gain or loss relating to the interest.
The proceeds received by the Trustee from the sale of shares held under the Plan on behalf of the Employee who is absolutely entitled to the shares will therefore not be considered in calculating the net capital gain made by the trust estates under Division 102 of the ITAA 1997.
(iv) where the proceeds received by the trust estates from the sale of shares held by the Trustee for at least 12 months are taken into account in calculating a capital gain of the trust estates under Division 102 of the ITAA 1997, will the capital gain be a discount capital gain under Division 115 of the ITAA 1997?
Not applicable.
The proceeds received by the Trustee from the sale of shares held on behalf of Participants under the Plan will not be taken into account in calculating a capital gain of the trust estates under Division 102 of the ITAA 1997.
Question 6
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 Trustee.