Private ruling: Employee share scheme
Date of advice: 12 May 2026
Published: 20 July 2026
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: Will the Commissioner allow the minimum holding period for employee share option plan (ESOP) interests to be reduced in accordance with paragraph 83A-45(5)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes, the Commissioner will exercise their discretion under paragraph 83A-45(5)(a) of the ITAA 1997. All membership interests in the ESOP scheme were disposed of, and the operators of the scheme genuinely intended for the options to be held for the minimum holding period. This means that the requirements of subparagraphs 83A-45(5)(a)(i) and (ii) of the ITAA 1997 have both been satisfied. The Commissioner will therefore allow the minimum holding period for the ESOP interests to end at an earlier time, being DD MM 20XX.

Relevant facts and circumstances: You are a company known as Company A. You issued options to your employees under an ESOP agreement dated DD MM 20XX. Under the ESOP rules, Rule X contains the conditions relating to disposals and includes an overriding restriction on disposals within the first 3 years. On DD MM 20XX, you entered into a share subscription agreement with an investor to acquire additional capital funding. The investor entity is an unrelated third party and the subscription agreement was an arms-length transaction. A condition of the investment offer was that all the ESOP interests were to be cancelled. At completion of this transaction the shareholders agreement of Company A was amended to remove all ESOP provisions. All documents to cancel options were signed by DD MM 20XX and cancellation payments were made by DD MM 20XX. You have confirmed that all memberships of the company under the ESOP scheme have been disposed of. At the time that the ESOP was issued, there was no indication that the transaction with the investor was imminent.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 83A-45(5)(a) | Income Tax Assessment Act 1997 subparagraph 83A-45(5)(a)(i) | Income Tax Assessment Act 1997 subparagraph 83A-45(5)(a)(ii)