Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 2 - Employee share schemes

Overview

2.1 These amendments amend the employee share scheme provisions of the Income Tax Assessment Act 1936 (the Act) to make two technical amendments.

Summary of the amendments

Purpose of the amendments

2.2 The proposed amendments will:

•

amend subsection 139CD(5) so that it refers to 'permanent employees' rather than to 'employees'; and

•

amend paragraph 139GF(4)(b) to change the reference to 'two thirds' to '75%".

Date of effect

2.3 The amendment to subsection 139CD(5) will apply with effect from the original date of application of Division 13A, and the amendment to paragraph 139GG(4)(b) will apply to shares or rights acquired on or after 1 July 1996.

[Item 3]

Background to the legislation

2.4 The taxation of benefits arising under employee share schemes in respect of shares, or rights to acquire shares('rights'), issued after 6.00pm ACT time on 28 March 1995, is generally covered by Division 13A of Part III of the Act.

Explanation of the amendment

2.5 Request for Amendment 1 inserts Schedule 17. The Schedule amends subsection 139CD(5) so that it refers to 'permanent employees' rather than to 'employees' [Item 1] . This amendment is intended to remedy an omission from Division 13A. The amendment was foreshadowed in December 1995 by a spokesperson for the Treasurer of the previous Government, and subsequently announced by this Government on 20 August 1996 and 25 July 1997.

2.6 The Schedule also amends paragraph 139GF(4)(b) to change the reference to 'two thirds' to 75% [item2] . This amendment is intended to remedy a defect in the meaning of 'non-discriminatory basis' set out in section 139GF of the Act by ensuring that the participation percentage is the same throughout the section.