ATO Interpretative Decision
ATO ID 2006/150 (Withdrawn)
Income Tax
Employee Share Scheme: deduction for the issue of sharesFOI status: may be released
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This ATO ID is withdrawn as it does not contain an interpretative issue.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a company entitled to a deduction under section 139DC of the Income Tax Assessment Act 1936 (ITAA 1936) for the issue of shares to its employees?
Decision
Yes. A company is entitled to a deduction for the issue of shares to its employees where the issued shares are provided under an employee share scheme (ESS), within the meaning of Division 13A of Part III (Division 13A) of the ITAA 1936, and the conditions specified in subsection 139DC(1) of the ITAA 1936 are satisfied.
Facts
A company issues shares to its employees under an ESS within the meaning of Division 13A of the ITAA 1936.
Shares issued to employees under the ESS:
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- are qualifying shares, within the meaning of section 139CD of the ITAA 1936
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- satisfy the exemption conditions set out in section 139CE of the ITAA 1936
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- have a total market value (as determined under Division 13A of the ITAA 1936) of $1,000 for each employee, and
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- were provided for no consideration.
The company is, but for section 139DC of the ITAA 1936, not entitled to a deduction at any time for the provision of the shares to employees under the ESS.
Reasons for Decision
Where in a year of income a company provides one or more qualifying shares, as defined in section 139CD of the ITAA 1936, to employees that satisfy the following conditions as specified in subsection 139DC(1) of the ITAA 1936:
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- the exemption conditions in section 139CE of the ITAA 1936, and
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- the condition that (but for section 139DC of the ITAA 1936) no amount has been allowed, is allowable, or will be allowable, as a deduction in the assessment of the company in respect of income of any year of income in respect of expenditure incurred in providing that share,
- the company is entitled to an allowable deduction, in the year of income in which the shares are provided to the employees. The amount of the deduction, under subsection 139DC(2) of the ITAA 1936, is equal to the total market value of those shares less any consideration provided by the employees for their shares, up to a maximum of $1,000 per employee.
Where a company issues (or allots) shares to its employees under an ESS, the taxpayer will provide those shares to the employees, within the meaning of section 139G of the ITAA 1936.
As the company, in the year of income, issues shares to its employees under an ESS and the conditions in subsection 139DC(1) of the ITAA 1936 are satisfied, the company is entitled to a deduction under section 139DC of the ITAA 1936. The amount of the deduction allowable is $1,000 per employee, as the shares have a total market value of $1,000 and the employees provided no consideration for their shares.
Date of decision: 31 May 2006Year of income: Year ended 30 June 2006
Legislative References:
Income Tax Assessment Act 1936
Division 13A of Part III
section 139CD
section 139CE
section 139DC
subsection 139DC(1)
subsection 139DC(2)
section 139G
ATO ID 2002/569
Keywords
Employee share schemes & options
ISSN: 1445-2782
| Date: | Version: | |
| 31 May 2006 | Original statement | |
| You are here | 21 March 2016 | Archived |