ATO Interpretative Decision

ATO ID 2001/699

Income Tax

Income: Employee share scheme (assessability of options received prior to redundancy)
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 discount given, in relation to options acquired under an employee share scheme, excluded from assessable income under section 139DD of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer, upon redundancy, loses the right to exercise those options?

Decision

Yes. The discount is excluded from assessable income as the requirements of section 139DD of the ITAA 1936 have been satisfied.

Facts

The taxpayer acquires options under an employee share scheme, and elects under section 139E of the ITAA 1936 to include the discount given in relation to the options, in his assessable income in the year the options were acquired.

The taxpayer is made redundant by his employer, being the company which issued the options. As a result, the taxpayer loses the right to exercise the options.

Reasons for Decision

Section 139E of the ITAA 1936 allows a taxpayer to elect to include the discount given, in relation to a share or right acquired under an employee share scheme, in the taxpayer's assessable income in the year the share or right was acquired.

Section 139DD of the ITAA 1936 provides that a right to acquire a share in a company is never acquired by a taxpayer if both of the following two requirements are satisfied:

(1): The taxpayer loses the right without having exercised it.
(2): The company is the employer of the taxpayer or a holding company of theemployer of the taxpayer.

As the taxpayer has lost the right to exercise the options, and the company which issued the options is the employer of the taxpayer, the taxpayer's assessment is amended under section 170 of the ITAA 1936 to exclude the discount from assessable income. Subsection 139DD(4) of the ITAA 1936 allows an assessment to be amended at any time for the purpose of giving effect to section 139DD of the ITAA 1936.

Date of decision: 11 October 2001

Legislative References:
Income Tax Assessment Act 1936
   section 139DD
   subsection 139DD(4)
   section 139E
   section 170

Keywords
Income
Forfeiture of rights & entitlements
Employee share schemes & options

Business Line: Small Business/Individual Taxpayers

Date of publication: 30 November 2001

ISSN: 1445-2782

history

	Date:	Version:
You are here	11 October 2001	Original statement
	17 July 2014	Updated statement
	18 July 2014	Archived

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