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Edited version of private advice
Authorisation Number: 1051894395168
Date of advice: 17 September 2021
Ruling
Subject: ESS - start-up concession
Question 1
Will the options granted under the Employee Share Option Agreement (the 'final draft' Agreement) to your employee XX (the Employee) meet the 'Employee Share Scheme (ESS)' definition in subsection 83A-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The Commissioner considers that the ESS are offered 'in relation to' the Employee's employment.
Question 2
Will the options granted under the 'final draft' Agreement to the Employee satisfy the ESS start-up concession eligibility under section 83A-33 and section 83A-45 of the ITAA 1997?
Answer
Yes. The Commissioner considers that the conditions under section 83A-33 and section 83A-45 of the ITAA 1997 are or will be met, based on the information provided and the relevant clauses of the 'final draft' Agreement.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
XX Pty Ltd (the Company) is an Australian company incorporated in XX on XX XX 20XX.
The Company:
• operates a business relating to XX.
• does not have any of its equity interests listed on a stock exchange.
• had an aggregated turnover not exceeding $50 million in the financial year ending 30 June 20XX.
• expects an aggregated turnover not exceeding $50 million in the financial year ending 30 June 20XX.
• is an Australian resident company and taxpayer.
• has been incorporated for less than 10 years.
• does not engage in the trading or investing of unrelated shares.
• currently has XX Ordinary shares and XX Preference X shares on issue. It's been confirmed that the Company's ordinary share and Preference X share carry equal voting power per share.
The Employee
• has been employed by the Company since XX 20XX, will be employed by the Company when acquiring the ESS interest.
• may acquire up to XX fully paid ordinary shares of the Company under another employee share scheme (the Other ESS).
The Employee and their associates:
• will not hold a beneficial interest in more than 10% of the shares in the Company when maximum amount of shares from this 'final draft' Agreement and the Other ESS are acquired.
• will not control more than 10% of the maximum number of votes that might be cast at a general meeting of the Company, when maximum amount of shares from this 'final draft' Agreement and the Other ESS are acquired.
The ESS interests:
• is a beneficial interest in a right - the price that the Employee will pay to exercise the right will be greater than or equal to the market value of an ordinary share in the Company when the Employee acquire the ESS interest.
• only relates to ordinary shares of the Company.
• will met the minimum holding period requirement.
The Company is intending to implement the 'final draft' Agreement.
The 'final draft' Agreement was provided to the Commissioner on XX XX 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 83A-10(2)
Income Tax Assessment Act 1997 Section 83A-33
Income Tax Assessment Act 1997 Section 83A-45