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Edited version of private advice
Authorisation Number: 1051243773945
Date of advice: 04 July 2017
Ruling
Subject: Employee share plan
Question 1
Will the irretrievable cash contributions made to the Trustee to fund the subscription for, or acquisition of, shares by the Trustee in accordance with the Plan Rules and the Trust Deed be assessable income of the Trust under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
Question 2
Will a capital gain or loss that arises under section 104-75 or section 104-10 of the ITAA 1997 for the Trust, at the time when a share is allocated by the Trustee to a Trust Participant, pursuant to the Plan Rules in satisfaction of a Performance Right, be disregarded under section 130-90 of the ITAA 1997?
Answer
Yes.
Question 3
Will dividends and other income received by the Trustee on Unallocated Shares be included in the calculation of the net income of the Trust under section 95 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes.
Question 4
Will the net income of the Trust under section 95 of the ITAA 1936 be assessed to the Trustee under section 99A?
Answer
Yes. Only in respect of the net income to which no beneficiary is presently entitled to the income of the Trust estate.
Question 5
Will the Trustee be entitled to the benefit of franking credits under Subdivision 207-B of the ITAA 1997, attached to franked distributions on Unallocated Shares?
Answer
Yes. Provided the Trustee holds the Unallocated Shares for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45th day after the Unallocated Shares become ex-dividend.
This ruling applies for the following periods:
1 July 20XX - 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
A company has established a Plan, including an independent trust structure to partly administer the Plan, to reward, retain and provide an incentive for the benefit of employees participating in the Company Plans.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 section 10-5
Income Tax Assessment Act 1997 Subdivision 83A-B
Income Tax Assessment Act 1997 Subdivision 83A-C
Income Tax Assessment Act 1997 section 100-20
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 104-75
Income Tax Assessment Act 1997 section 106-50
Income Tax Assessment Act 1997 section 130-85
Income Tax Assessment Act 1997 section 130-90
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 99
Income Tax Assessment Act 1936 section 99A
Reasons for decision
Question 1
The irretrievable cash contributions to the trustee represent accretions to the corpus of the Trust. The contributions constitute capital receipts to the Trustee, and are not included in the assessable income of the Trust.
Question 2
All of the requirements in section 130-90 of the ITAA 1997 have been satisfied. Therefore a capital gain or capital loss that arises for the Trust at the time when a share is allocated by the Trustee to a Trust Participant pursuant to the Plan Rules in satisfaction of a Performance Right will be disregarded.
Question 3
Dividends and other income received by the Trustee on Unallocated Shares will be included in the calculation of the net income of the Trust under section 95 of the ITAA 1936.
Question 4
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
Provided the Trustee holds the Unallocated Shares for a continuous period of not less than 45 days during the period beginning the day after the Trustee acquires the Unallocated Shares and ending on the 45th day after the Unallocated Shares become ex-dividend then the Trustee will be a qualified person for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 and be entitled to the benefit of franking credits attached to franked distributions on Unallocated Shares. The tax offsets available to the Trustee is limited to the amount of tax payable. Any excess franking tax offset is not refundable.