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Edited version of private ruling
Authorisation Number: 1011864210523
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Ruling
Subject: Employee share scheme
Question:
Is the whole of the amount specified in the statement assessable in the 20XX-XX income year?
Answer:
No.
This ruling applies for the following period:
Year ended 30 June 2010.
The scheme commences on:
1 July 2009.
Relevant facts and circumstances
You acquired some options under an employee share scheme (ESS) in the 20XX-XX ncome year. The options are qualifying rights.
Your employer issued you an Employee share scheme statement (the statement) for the 20XX-XX income year which stated the 'discount on ESS interests acquired pre 1 July 2009 and 'cessation time' occurred during the financial year' and included an amount.
The ESS amount in the statement relates to two events:
You entered into a selling contract in the 20XX-XX income year to sell some of your options.
You also obtained an ownership of some shares in the 20XX-XX income year.
The portion of stock options that event 1 relate to are part of a larger block of stock options that were granted to you in the 20XX-XX income year.
You made an upfront section139E election and included the discount amount as other income in the 20XX-XXincome year.
For the 20XX-XX income year you included a capital gain relating to event 1 based on the difference between the capital proceeds and the cost base.
For the 20XX-XX income year you included the ESS amount according to the statement given to you by your employer.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 139C,
Income Tax Assessment Act 1936 Section 139CD,
Income Tax Assessment Act 1936 Section 139E,
Income Tax Assessment Act 1936 Section 139B,
Income Tax Assessment Act 1936 Section 139CC and
Income Tax (Transitional Provisions) Act 1997 Section 83A-5.
Reasons for decision
The employee share scheme provisions for the 20XX-XX income year are contained in Section 83A Income Tax (Transitional Provisions) Act 1997 but the application to you is guided by Division 13A of the Income Tax Assessment Act 1936 (ITAA 1936).
As an employee you were granted a portion of stock options in the 20XX-XX income year.
You therefore acquired the options under an employee share scheme as you acquired them in respect of your employment, and you did not pay anything to acquire these options.
These options are qualifying rights for the purposes of section 139CD of the ITAA 1936
· you acquired them under an employee share scheme
· the options are exercisable for ordinary shares in your employer
· after acquiring the options you do not have a beneficial interest in more than 5% of the shares in the company
· after acquiring the options you do not control more than 5% of the voting power of the company
You acquired the options at a discount to their market value. A taxpayer who acquires options under an employee share scheme may elect to include the discount in their assessable income in the income year in which they were acquired, by making an election under section 139E of the ITAA 1936. The election can be made by ticking the correct box and stating the amount in your return.
You did make a section 139E election in respect of your employee share scheme options for the 20XX-XX income year, therefore the taxing point for the stock options you received is at the date of grant.
Note:
Employers are asked to report to the ATO when a 'cessation time' happens to options granted before 1 July 2009 as they won't know whether their employees have made section 139E elections. Employees need to check their records for the election before determining whether or not they need to declare the amount shown on the statement provided.