ATO ID 2002/966: Income tax - Proceeds from disposal of shares or rights by Trustee of an employee share scheme on behalf of employees not assessable to Trustee
Date of decision: 22 August 2002
Year of income: Year ending 30 June 2002
Business line: Public Groups and International

Issue
Will the taxpayer, a Trustee of an employee share scheme Trust, be assessable under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 ('ITAA 1997') on the proceeds of the disposal, by the Trustee on the behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or the associate under the employee share scheme?

Decision
No. The taxpayer, a Trustee of an employee share scheme Trust, will not be assessable under sections 6-5 or 6-10 of the ITAA 1997 on the proceeds of the disposal, by the Trustee on behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or associate under the employee share scheme.

Facts
The employee share scheme complies with the provisions of Division 13A of the Income Tax Assessment Act 1936 ('ITAA 1936'). A Trustee is appointed to administer the scheme. Upon the employee or associate of the employee becoming absolutely entitled to the shares or rights, the shares or rights acquired by the employee or associate under the employee scheme are disposed of by the Trustee at the employee's or associate's request. The trustee distributes the proceeds to the employee or associate.

Reasons for decision
Summary: The Trustee taxpayer holds the shares for the benefit of the employee or associate of the employee for the purpose of and under the employee share scheme. After the employee or associate acquires the shares or rights under the scheme, the Trustee disposes of them at the request of the employee or associate. The Trustee is not a share trader in relation to these transactions for the purpose of the Act. It does not trade in these shares or rights in its own right. Any proceeds from the disposal of the shares or rights are distributed to the employee or the associate and not held for the benefit of the Trustee. The proceeds are not assessable income under sections 6-5 or 6-10 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5 section 6-10
Subject references: Income tax Assessable income Employee share schemes & options Share discounts on employee share schemes