Private ruling: Assessable income - shares - employment - in kind - bonus payment
Published: March 2012

Ruling: Q1: Will the market value of your Company B shares on the date they were allotted be included in your assessable income in the 2010-11 income year? | A1:  | Q2: Will the bonus amount be included in your assessable income in the 2010-11 income year? | A2: This ruling applies for the following period: Year ended 30 June 2011 The scheme commenced on: 1 July 2010

Relevant facts and circumstances: You were an employee of Company A, which went into administration. Company B became the new majority shareholder in Company A a number of weeks after Company A went into administration. A number of months later, your salary payments were stopped with Company A asserting that it had run out of money, stating that further cash injections from Company B were imminent. During the following month, you were advised to accept shares in lieu of your salary as further cash payments were some time away. Shares in Company B were issued to you on various dates in lieu of your salary. You received a bonus payment from Company A. You disposed of a number of your Company B shares on various dates. You have provided copies of a number of documents which should be read in conjunction with, and form part of, this private ruling:

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 15-2

Reasons for decision: Summary: Subsections 6-5(2) and 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of a taxpayer includes ordinary or statutory income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages and similar remuneration, including a benefit in kind which are paid in an employment context, are either ordinary or statutory income for the purposes of subsections 6 5(2) or 6-10(4) of the ITAA 1997, unless the benefit is not assessable and not exempt income as listed in section 11-55 of the ITAA 1997. In your case, you received a number of Company B shares in lieu of your salary. It is viewed that as you received these shares in relation to your employment, they must be included in your assessable income in the 2010-11 income year. The Commissioner views that the appropriate method to value the shares is the market value of the shares on the date they were allotted. Therefore, you must include the market value of the shares as assessable income in the 2010-11 income year. Note: While we acknowledge that you disposed of a number of your Company B shares and still hold a number of your Company B shares, you are assessed on the market value of all of your Company B shares on the date they were allotted and not on the difference between the market value of the shares on their allotment date and the proceeds you received on the disposal of the shares. | Detailed Reasoning - Bonus payment: Subsection 15-2(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes the value to a taxpayer of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by the taxpayer. Based on the information you have provided, you were paid a bonus payment which was recorded as wages by Company A in your payslip. As the bonus was paid to you in relation to your employment with Company A for services rendered by you, this amount must be included in your assessable income in the 2010-11 income year in accordance with section 15-2 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.