Tax Laws Amendment (2007 Measures No. 1) Act 2007 (56 of 2007)

Schedule 3   Employee share schemes and stapled securities

Part 1   Main amendments

Income Tax Assessment Act 1936

2   After Subdivision DA of Division 13A of Part III

Insert:

Subdivision DB - Stapled securities

139DSA Object of this Subdivision

The object of this Subdivision is to allow this Division to apply to stapled securities that include an ordinary share and are listed for quotation on the Australian Stock Exchange, and to rights to acquire such stapled securities.

139DSB Application of Division to stapled securities

(1) This Division (except this Subdivision) applies, with the modifications set out in this Subdivision, in relation to a stapled security in the same way as it applies in relation to a share (including an ordinary share) in a company.

Note 1: For the definition of stapled security , see subsection 139GCD(1).

Note 2: This means the Division also applies to rights to acquire a stapled security in the same way it applies to rights to acquire a share.

Example: Subsection 139CD(4) will be satisfied if all the securities available for acquisition under the scheme are stapled securities, and all the rights available for acquisition are rights to acquire stapled securities.

(2) For the purposes of the application of this Division (except this Subdivision) in relation to a stapled security or right to acquire a stapled security, a company, the shares in which are the subject of this Division, is taken to include (as part of the company) each stapled entity for the stapled security.

Note 1: For the definition of stapled entity , see subsection 139GCD(2).

Note 2: There are some modifications to this rule in this Subdivision.

Note 3: This rule has the effect that the company is treated as having all the interests in another entity that stapled entities for the stapled security have.

Example: The condition in subsection 139CD(3) will be satisfied if the company would be a holding company of the employer if all those stapled entities’ interests in the employer were counted together.

139DSC Discount not to be included in assessable income unless stapled security or right is qualifying

Section 139B includes a discount given in relation to a stapled security or right to acquire a stapled security in the assessable income of the taxpayer only if the stapled security or right to acquire a stapled security is treated as a qualifying share or qualifying right because of this Subdivision.

139DSD Division does not also apply to share part of stapled security

(1) If a stapled security or right to acquire a stapled security is treated as a qualifying share or qualifying right because of this Subdivision, this Division does not also apply separately in relation to a share that is a part of the stapled security.

(2) However, if a stapled security is not treated as a qualifying share because of this Subdivision, the rest of this Division applies separately in relation to each share that is a part of the stapled security. To avoid doubt, section 139DSC does not prevent a discount given in relation to such a share from being included in the assessable income of a taxpayer.

139DSE Modifications relating to employment

Proportion of permanent employees of employer

(1) Subsection 139DSB(2) does not affect a provision setting out a condition relating to a specified proportion of the permanent employees of a stapled entity that is the employer.

Example: In applying subsection 139CD(5), the employer of the taxpayer is not taken to include any other stapled entities. The condition in that subsection will be satisfied if it is satisfied for the employing entity alone.

(2) The reference in paragraph 139CD(5)(b) to a holding company of an employer includes a reference to the stapled entities for the stapled security if:

(a) the employer is not a stapled entity for the stapled security; and

(b) a company that included the stapled entities as parts of the company would be a holding company of the employer.

Cessation of employment

(3) For the purposes of working out the time when a taxpayer ceases to be employed by the employer of the taxpayer, that employer is taken to include (as part of it) each other stapled entity for the stapled security.

Note: This rule affects the operation of subsections 139CA(2), 139CB(1) and 139CE(3).

139DSF Modification relating to legal or beneficial interest

A taxpayer is taken to satisfy a condition that the taxpayer not hold a legal or beneficial interest in more than 5% of the shares in a company at a time only if the taxpayer does not hold a legal or beneficial interest in more than 5% of any of the following at that time:

(a) the shares in any company that is a stapled entity for the stapled security;

(b) the units in any unit trust that is a stapled entity for the stapled security.

Note: This rule affects the operation of subsections 139CD(6) and 139DR(5).

139DSG Modification relating to voting rights

A taxpayer is taken to satisfy a condition that the taxpayer not be in a position to cast, or control the casting of, more than 5% of the maximum number of votes that might be cast at a general meeting of a company only if the taxpayer is not in a position to control the casting of more than 5% of the maximum number of votes that might be cast at a general meeting of:

(a) a company that is a stapled entity for the stapled security because an ordinary share in the company is part of the stapled security; or

(b) if more than one company is a stapled entity for the stapled security because an ordinary share in the company is part of the stapled security - each of those companies.

Note: This rule affects the operation of subsections 139CD(7) and 139DR(6).

139DSH Cessation time when stapling arrangement ceases

The cessation time for a stapled security or right to acquire a stapled security is the earlier of:

(a) the time when any of the interests forming the stapled security cease to be stapled together; and

(b) the time when the stapled security ceases to be listed for quotation in the official list of the ASX Limited;

if that time is earlier than:

(c) in the case of a stapled security where subsection 139CA(1) does not apply - the earliest time when an event described in any of paragraphs 139CA(2)(a) to (d) happens; and

(d) in the case of a right to acquire a stapled security - the earliest time when an event described in any of paragraphs 139CB(1)(a) to (e) happens.

Note: The times mentioned in paragraphs (a) and (b) are additional to the times mentioned in subsections 139CA(2) and 139CB(1). The actual cessation time is the time that is the earliest, unless subsection 139CA(1) applies (when the cessation time is the time of acquisition).

139DSI Deduction to be apportioned

(1) If a stapled security is jointly provided by 2 or more taxpayers to another person in a year of income, each of those taxpayers is entitled to an allowable deduction in respect of income of the year of income under section 139DC if, because of this Subdivision:

(a) the stapled security is treated as a qualifying share; and

(b) the conditions in subsection 139DC(1) are satisfied for the stapled security.

(2) The amount of the deduction worked out under subsection 139DC(2) in respect of the stapled security must be apportioned between each of the taxpayers on a reasonable basis.