Edited version of your private ruling

Authorisation Number: 1012440850626

Ruling

Subject: Employee Share Scheme (ESS) - Assessable discount - International

Question

Is any part of the discount amount shown on your ESS statement for the relative income year as being from ESS interests acquired pre 1 July 2009 included in your assessable income?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

Prior to 1 July 2009

Relevant facts and circumstances

You were granted the following options to buy Company A common stock under an ESS agreement:

*Shares acquired from the exercise of options were sold immediately after exercise (within 30 days of exercise date).

For Parcel A options you were employed by the Company A in Australia for the entire period from grant date to vesting date (vesting period).

You moved to Country A prior to 1 July 2009 and continued employment with Company A.

For Parcel B options you were employed by the Company A in Country A for the entire vesting period.

According to your ESS agreement:

· your option shall be exercisable only if you shall continue in the employment of Company A at all times during the period commencing date of grant continuing for a minimum of one year from and after the date of grant, and ending on the day three months before the date you exercise your option.

· no part of your option will be exercisable prior to the date of exercisability (vesting date). From and after the vesting date your option will be exercisable in full, provided that your employment shall not have terminated prior to vesting date.

You satisfied the above vesting conditions of your ESS agreement and received your full entitlement of options on the vesting date.

You did not pay any consideration for your options.

You did not make any elections for either parcel of options.

Your options are qualifying rights according to section 139CD of the Income Tax Assessment Act 1936 (ITAA 1936).

The following documents are to be read with and form part of the description of the scheme for the purpose of this ruling:

· Your private ruling application and attachments A to D

· Company A notice of grant of stock options

· Grant Agreement - applicable to non-statutory stock options granted under the Company A ESS agreement

· Computershare Exercise Summaries

· Employee Share Scheme Statement for the relevant year

· Company A ESS agreement Prospectus

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 139B(1)

Income Tax Assessment Act 1936 Subsection 139B(1A)

Income Tax Assessment Act 1936 Subsection 139B(2)

Income Tax Assessment Act 1936 Subsection 139B(3)

Income Tax Assessment Act 1936 Subsection 139C(1)

Income Tax Assessment Act 1936 Subsection 139CB(1)

Income Tax Assessment Act 1936 Section 139CD

Income Tax Assessment Act 1997 Section 83A-10

Income Tax Assessment Act 1997 Subsection 83A-110(1)

Income Tax Assessment Act 1997 Section 83A-120

Income Tax (Transitional Provisions) Act 1997 Section 83A-5

Reasons for decision

Your options were acquired under an ESS as they were acquired directly in relation to your employment and issued to you at a discount. Your options were acquired when they were granted to you. However, as there is a forfeiture condition under your ESS agreement, where you are required to maintain continuous employment, your options are earned over vesting period.

Both parcels of options are transitioned interests given that:

· they are qualifying rights under the old rules, and

· you have not elected to be taxed upfront under the rules, and

· a cessation time has not happened to the rights before 1 July 2009 under the old rules.

The transitional provisions prescribe that the new rules in Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997) apply to these rights. The discount amount on your options will not be included in your assessable income until the income year in which the deferred taxing point occurs.

Paragraph 83A-5(4)(b) of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997) ensures that the ESS deferred taxing point is determined using the cessation time from subsection 139CB(1) of the ITAA 1936. As you disposed of the underlying shares within 30 days of exercising your options, the ESS deferred taxing point is the time you disposed of the shares.

Subsection 83A-110(1) of the ITAA 1997 provides that your assessable income for the year that the deferred taxing point occurs includes the market value (calculated at the deferred taxing point) of shares that were granted under an employee share scheme reduced by their cost base.

Parcel A options are fully assessable at the deferred taxing point. Although you performed work outside of Australia during the period from grant to deferred taxing point, you were employed in Australia for the whole of the vesting period.

Parcel B options are not assessable as you were employed outside Australia over the entire vesting period.

Summary

Therefore, part of the discount amount shown on your ESS statement for the relevant income year as being from ESS interests acquired pre 1 July 2009 needs to be included in your assessable income. That is, only the discount amount relating to Parcel A where the entire amount relates to your work in Australia.