Private ruling: International – residency - capital gains tax
Date of advice: 20 December 2018
Published: April 2019
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Is any capital gain or capital loss you make in relation to the employee share scheme (ESS) options disregarded due to the operation of section 768-915 of the Income Tax Assessment Act 1997 (ITAA 1997) when you leave Australia? | A1: Yes. After reviewing the facts of your situation the Commissioner considers that you meet the conditions contained in section 768-915 of the ITAA 1997. Therefore, any capital gain or capital loss you make on the ESS options when you leave Australia will be disregarded. | Q2: Is any capital gain or capital loss you make in relation to the sale of the resulting shares disregarded due to the operation of section 855-10 of the ITAA 1997? | A2: Yes. You will exercise the ESS options after you have left Australia and will dispose of the resulting shares. As the shares will not be taxable Australian property, and you will be a foreign resident when they are sold, you will be able to disregard any capital gain or capital loss made on their disposal.

Relevant facts and circumstances: You were born overseas and moved permanently to Australia after 20 September 1985, arriving on a Special Category Visa. You are not an Australian citizen. You are a temporary resident of Australia for taxation purposes. You participated in an employee share scheme (ESS) offered by your employer (the Company) under which you were granted ESS options. Your ESS options represent less than 10% of the Company’s shares and are not taxable Australian property. The Company issued an employee share scheme (ESS) statement which outlined that the ESS discount arising in relation to your ESS options had been assessed under the ESS provisions. You are married, with your spouse arriving on a Special Category Visa a number of years earlier. Your spouse is not a resident of Australia for the purposes of the Social Security Act 1991. The Company sent you a letter which outlined that: ● your ESS options were rights to acquire fully paid ordinary shares in the Company which are exercisable at a specified amount each once vested; ● a number of your ESS options had vested at that time and you were eligible to exercise some or all of them up to a specified future date; ● each of the remaining tranches of options would only vest subject to you remaining as an employee of the Company on the relevant vesting date, or else being a ‘Good leaver’ as defined in the ESS Plan. You will permanently relocate to an overseas country during the period covered by this private ruling. The options will be exercised after you have relocated overseas. You will dispose of the shares resulting from the exercising of the ESS options during the period covered by this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-160 | Income Tax Assessment Act 1997 Section 995-1 | Income Tax Assessment Act 1997 Subdivision 768-R | Income Tax Assessment Act 1997 Division 855 | Migration Act 1958 | Social Security Act 1991