Private ruling: : Employee share schemes - reporting obligations
Date of advice: 3 April 2026
Published: 29 June 2026
Ruling period: An income year
Date scheme commenced: DD Month YYYY

Ruling: Q1: Will the Company, in relation to the Participant's Options, have an obligation to provide the Commissioner and the Participant with an amended Employee Share Scheme (ESS) statement under section 392-10 of Schedule 1 to the Taxation Administration Act 1953 (TAA) as a result of the share sale agreement? | A1: No

Relevant facts and circumstances: The Company has operated the employee share option plan (Plan) for a number of years. Under the Plan, the employees of the Company are granted options to acquire shares in the Company at an agreed upon exercise price (Options). During the income year, the Company made an offer to an employee to participate in the Plan (Participant). The terms of the offer were set out in an offer letter issued to the Participant (Offer Letter) and the rules of the Plan (Plan Rules). The Offer Letter set out a number of matters such as the number of Options issued and the vesting conditions. It also sets out that the rights and obligations which apply to the Options, including in relation to vesting, disposal and forfeiture, were specified in the Plan Rules and that the Company considered the offer would qualify for the start-up concession under section 83A-33 of the Income Tax Assessment Act 1997 (ITAA 1997). Under the Plan Rules, a participant that is granted options (Optionholder) is restricted from disposing their interest until the earlier of '(1) three years after the issue of the Option or such earlier time as the Commissioner of Taxation allows in accordance with subsection 83A-45(5); and (2) where the Optionholder becomes a Leaver'. The Company provided the Commissioner and the Participant with an ESS statement under section 392-5 of Schedule 1 to the TAA, whereby it declared that the Options were ESS interests to which the start-up concession under section 83A-33 applied. Within 3 years of the Options being granted to the Participant, the Company entered into a share sale agreement with Acquire Co whereby Acquire Co would acquire 100% of the shares in the Company. Due to the acquisition, the Participant exercised their Options and received shares in the Company. The acquisition was completed with the Company's shareholders (including the Participant) selling their shares to Acquire Co.

Relevant legislative provisions: • Section 392-10 of Schedule 1 to the Taxation Administration Act 1953 | • Section 83A-33 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: All legislative references are to the ITAA 1997, unless otherwise indicated. Subsection 392-5(1) of Schedule 1 to the TAA states that an entity (the provider) must give a statement to the Commissioner and to an individual for a financial year if the provider provides ESS interests to the individual during the year and Subdivision 83A-B or 83A-C applies to the interests. If the provider becomes aware of a material change in any information given to the individual or the Commissioner, the provider must tell the individual or the Commissioner, as applicable, of the change in the approved form (subsection 392-10(1) of Schedule 1 to the TAA). During the income year, the Company provided the Commissioner and the Participant with an ESS statement under section 392-5 of Schedule 1 to the TAA, declaring that the Options that were offered to the Participant during the year, under the Plan, were ESS interests to which the 'start-up concession' under section 83A-33 applied. To be eligible for the start-up concession in respect of the Options, the conditions under subsections 83A-33(2) to (6) and section 83A-45 need to be met. Subsection 83A-45(4) applies to an ESS interest you acquire under an employee share scheme if, at all times during the interest's 'minimum holding period', the scheme is operated so that every acquirer of an ESS interest (the scheme interest) under the scheme is not permitted to dispose of the scheme interest, or a beneficial interest in a share acquired as a result of the scheme interest, during the scheme interest's minimum holding period. Subsection 83A-45(5) states that an ESS interest's 'minimum holding period' is the period starting when the interest is acquired under the employee share scheme and ending at the earlier of: (a) 3 years later, or such earlier time as the Commissioner allows if the Commissioner is satisfied that: (i) the operators of the scheme intended for subsection 83A-45(4) to apply to the interest during the 3 years after that acquisition of the interest; and (ii) at the earlier time that the Commissioner allows, all membership interests in the relevant company were disposed of under a particular scheme; and (b) when the acquirer of the interest ceases being employed by the relevant employer. Unless the Commissioner allows the Options' minimum holding period to end at an earlier time, subsection 83A-45(4) will not be satisfied because the Participant was permitted to exercise their Options and dispose their corresponding Company shares to Acquire Co as a result of the share sale agreement (within 3 years of the Options being acquired by the Participant). This would constitute a 'material change' under subsection 392-10(1) of Schedule 1 to the TAA as the Participant would no longer be eligible for the start-up concession and the ESS statement that the Company provided to the Commissioner and the Participant would no longer be correct. The Company issued the Options to the Participant in accordance with the terms of the Plan Rules and Offer Letter. The Offer Letter made clear to the Participant that the Plan Rules applied to the Options and the Company considered that the offer will qualify to access the start-up concession under section 83A-33. It is also clear from the Plan Rules that the Company intended for subsection 83A-45(4) to apply to the Options by restricting disposal of the interest until the earlier of '(1) three years after the issue of the Option or such earlier time as the Commissioner of Taxation allows in accordance with subsection 83A-45(5); and (2) where the Optionholder becomes a Leaver'. As the share sale agreement is a scheme under which all membership interests in the Company were disposed, and having considered how the Company operated the Plan (including the terms of the offer to the Participant), the Commissioner is satisfied that there was a genuine disposal restriction imposed by the Company with the intention for subsection 83A-45(4) to be satisfied. Accordingly, the Commissioner will exercise his discretion under paragraph 83A-45(5)(a) to allow the minimum holding period for the Options to end at an earlier date and the condition under subsection 83A-45(4) will be satisfied. As the Participant continues to be eligible for the start-up concession (as a result of the Commissioner's discretion), there is no 'material change' and the Company is not required to provide the Commissioner and the Participant an amended ESS statement under subsection 392-10(1) of Schedule 1 to the TAA.