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Edited version of private ruling
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Ruling
Subject : Employee Share Schemes
Question
Do you include the discount you received on your performance rights in your assessable income for the 2009-10 income year?
Answer
Yes.
This ruling applies for the following period:
Period ending 30 June 2010
The scheme commences on:
During 2007
Relevant facts and circumstances
You have performance rights from your employer, which have not been vested. These were granted during 2007, prior to the new legislation being implemented on 1 July 2009. You have since ceased employment with the employer.
You have received an amended 2010 Tax Statement valuing these rights, which you did not include in your 2010 Tax Return. You did not elect to be taxed upfront in the year these rights were granted.
Detailed reasoning
Division 83A of the Income Tax Assessment Act 1997 deals with the taxation of discounts on shares, rights and stapled securities acquired under employee share schemes.
Detailed provisions in the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997) extend the application of Division 83A to employee share scheme interests acquired before 1 July 2009, on which tax was deferred beyond 1 July 2009 under the previous regimes.
Section 83A-10 of the ITTPA 1997 outlines that the former Division 13A will continue to apply, in spite of its repeal, to the share or right.
Division 13A of the ITAA provides that cessation will occur in relation to qualifying options at the earliest of:
· disposal of the option, other than by exercising it
· cessation of employment in respect of which the option was acquired
· time when disposal restrictions or forfeiture conditions end, if option exercised
· time when option is exercised if no disposal restrictions or forfeiture conditions; or
· 10 years after the options was acquired.
In your case, under ITTPA 1997, Division 13A of the ITAA applies to your rights in relation to the cessation time. This is because you were granted rights by your employer, which you did not make an election in relation to for tax purposes.
Therefore, the cessation time for your rights occurred when you ceased employment, as this event is the earliest of the above events listed. This discount amount must be included in the year you ceased employment.
If and when the rights lapse, legislative provisions provide unlimited periods to adjust tax returns.
Relevant legislative provisions
Income Tax Assessment Act 1936 Division 13A,
Income Tax Assessment Act 1936 Section 139DD,
Income Tax Assessment Act 1936 Section 139E,
Income Tax Assessment Act 1997 Division 83A,
Income Tax Assessment Act 1997 Subdivision 130-D,
Income Tax Assessment (Transitional Provision) Act 1997 Subdivision 83A-B and
Income Tax Assessment (Transitional Provision) Act 1997 Section 83A-5