Private ruling: Employee share scheme
Published: July 2012
Ruling period: Year ended 30 June 2009.
Date scheme commenced: 1 July 2008.

Ruling: Q1: Is the date of acquisition for the Restricted Stock Units (RSUs) granted under an ESS the vesting dates? | A1: Yes. | Q2: Is the date of acquisition for the RSUs granted under an ESS the date of acceptance of the Award Agreement? | A2: Yes. | Q3: Is the date of acquisition for the RSUs granted under an ESS the date of grant? | A3: Yes. Issue 2 | Q4: Are the RSUs acquired under the ESS qualifying rights? | A4: Yes. Issue 3 | Q5: Does the tax deferred concession apply to the RSUs acquired under the ESS? | A5: Yes. Issue 4 | Q6: Is the cessation time for the RSUs the vesting dates? | A6: Yes. Issue 5 | Q7: Will the discount received on the ESS's that have a cessation time during a financial year be included in your income tax return? | A7: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1936 - Section 139B | Income Tax Assessment Act 1936 - Section 139CB | Income Tax Assessment Act 1936 - Section 139CD | Income Tax Assessment Act 1936 - Section 139G | Income Tax Assessment Act 1997 - Section 83A-340

Reasons for decision: Detailed Reasoning - Question 1: You acquire a share or a right when: · the share or right is transferred to you, other than by a share issue, · in the case of a share, the share is allotted to you, · in the case of a right, your employer or another person creates a right (to acquire a share) in you, · you otherwise acquire a legal interest in the share or right, · you acquire a beneficial interest in the share or right. However, your rights to acquire shares may be subject to your employer's discretion to determine whether you ultimately receive shares or a cash equivalent. Under these circumstances, you will not acquire a right (to acquire a share) until your employer decides that your rights will be satisfied by shares and not cash. In this case the RSUs granted under certain years were subject to the discretion of the company at any time before the vesting dates to provide you with shares or a cash equivalent. Consequently you will only acquire the RSUs when the company decides if you will receive ordinary shares rather than a cash equivalent. For those years you received ordinary shares rather than the cash equivalent. Therefore the date of acquisition of the RSUs in those years is the vesting dates. | Detailed Reasoning - Question 2: You acquire a share or a right when: · the share or right is transferred to you, other than by a share issue, · in the case of a share, the share is allotted to you, · in the case of a right, your employer or another person creates a right (to acquire a share) in you, · you otherwise acquire a legal interest in the share or right, · you acquire a beneficial interest in the share or right. In this case the RSUs in a certain year were subject to acceptance of the Award Agreement including its Terms and Conditions. The deadline date for declining the Award Agreement was in that particular year. You did not decline the Award Agreement. You therefore accepted and were bound by the Award Agreement, including its Terms and Conditions on this date. Therefore the date of acquisition of the RSUs is the deadline date for acceptance of the Award Agreement as this is the date when your employer creates a right (to acquire a share) in you. | Detailed Reasoning - Question 3: You acquire a share or a right when: · the share or right is transferred to you, other than by a share issue, · in the case of a share, the share is allotted to you, · in the case of a right, your employer or another person creates a right (to acquire a share) in you, · you otherwise acquire a legal interest in the share or right, · you acquire a beneficial interest in the share or right. In this case the ESS was subject to the Award Agreement in a certain year and you were bound by the agreement including its Terms and Conditions effective as of the grant date. Therefore, the date of acquisition for the ESS is the grant date as this is the date your employer creates a right (to acquire a share) in you. | Detailed Reasoning - Question 1: A right in a company will be a qualifying right if it satisfies the following requirements: · the right is acquired by you from an ESS, · the company is your employer or your employer's holding company, · the rights to shares available from the ESS are rights to ordinary shares, · after acquisition of the share or right, you do not hold a legal or beneficial interest of more than 5% of the shares in the company, and · after acquiring the share or right, you are not in a position to cast, or control the casting of, more than 5% of the votes at the company's general meeting. In this case, you have stated you meet the above conditions. The company is your employer and the right was acquired by you under an ESS. The acquisition of the share or right did not give you more than 5% of the shares in the company or more than 5% of the votes at the company's general meeting. Therefore the RSUs you acquired are qualifying rights. | Detailed Reasoning - Question 1: The tax deferred concession available for qualifying shares or rights is that you can defer including the discount in your assessable income until a later year of income, up to a maximum of 10 years. The year you must include the discount in your assessable income will be the year in which cessation time occurs. The deferral of the discount is the default concession for qualifying shares and rights. This means that, unless you make an election, the discount on all qualifying shares or rights will not be assessed until a cessation time occurs. The $1,000 exemption is not available if the discount is declared at cessation time. In this case you have acquired qualifying rights over several years. You did not make an election to be taxed up front on the discount received under the ESS. Therefore, as you did not make an election to be taxed up front the tax deferred concession will apply and the discount will be assessed at cessation time. | Detailed Reasoning - Question 1: The cessation time for rights is the earliest of the following: · when you dispose of the rights - other than by exercise, · when your employment in respect of which the rights were acquired ceases, · when the rights are exercised, if the shares that are acquired by exercising the rights have no restrictions or conditions affecting their subsequent disposal or you forfeiting ownership of the shares, · if there are such restrictions or conditions on the shares acquired by exercising the rights, when the last of the restrictions or conditions cease to have effect, · ten years from the date you acquired the rights. In this case, the cessation time of the RSUs for each year is the vesting dates as this is the date that the restrictions or conditions on the shares acquired by exercising the rights cease to have effect. | Detailed Reasoning - Question 1: The tax deferred concession available for qualifying shares or rights is that you can defer including the discount in your assessable income until a later year of income, up to a maximum of 10 years. The year you must include the discount in your assessable income will be the year in which an event, known as a 'cessation time', occurs. In this case the cessation time for the ESS is the vesting dates. Therefore the discount received on the RSUs that have a cessation time during a particular financial year will be included in your income tax return.

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. | Relevant facts: You are an employee of a company. | You were granted a Restricted Stock Unit Award by that company pursuant to their Long Term Incentive Plan over several years. | The RSUs vest on the dates listed on each Award provided you are continuously employed by the company or you meet the requirements for continued vesting. | In relation to the ESS in several years, the company or one of its subsidiaries may at any time before the vesting dates provide you with the fair market value of the RSUs in the form of a cash payment or market value equivalent rather than providing you ordinary shares. For the ESS in these years you received ordinary shares rather than the market value equivalent of the RSUs. | Subsequent year ESS are not subject to the discretion of the company or one of its subsidiaries to provide the fair market value of the RSUs rather than ordinary shares. | In certain years the ESS is subject to acceptance of the Award Agreement including its Terms and Conditions. The deadline date for declining the Award Agreement was during that year. | In other years the ESS is subject to the Award Agreement and you are bound by the agreement including its Terms and Conditions effective as of the grant date. | For the RSUs acquired under the ESS you have stated they meet the conditions to be a qualifying right; | · The right is acquired by you under an ESS, | · That the company is your employer, | · That all the rights available for acquisition under the ESS are rights to acquire ordinary shares, | · That immediately after the acquisition of the share or right, you do not hold a legal or beneficial interest in more than five per cent of the shares in the company, and | · That immediately after the acquisition of the share or right, you are not in a position to cast, or control the casting of, more than five per cent of the maximum number of votes that might be case at a general meeting of the company. | You have not made an election to be taxed up front on the qualifying rights you acquired under the ESS.