The AAT has held the taxpayer applied the correct acquisition date in relation to options acquired under an employee share scheme, and therefore was not subject to a shortfall amount or penalties as assessed by the Commissioner for the income year ended 30 June 2004.
The taxpayer was granted options in a company as a part of his negotiated employment conditions. On 1 July 2003, the taxpayer commenced employment with the company. Subsequently, on 28 November 2003, a resolution approving the issue of options to the taxpayer was passed by the shareholders of the company at the Annual General Meeting. Further, on 22 December 2003, the taxpayer and the company executed an option deed.
The taxpayer adopted 1 July 2003 as the acquisition date for the options to purchase the shares in the company. The Commissioner contended the correct acquisition date was 22 December 2003 or alternatively 28 November 2003. An amended assessment was therefore issued to the taxpayer and the Commissioner further imposed a tax shortfall penalty of 5%.
The Tribunal did not accept the Commissioner’s argument that the right created on 1 July 2003 when the taxpayer commenced employment was not a relevant right for the purposes of s 139B of the ITAA 1936. The AAT said based on the commercial realities of the agreement it accepts the taxpayer’s submission that “the right to obtain options is a relevant right within the meaning of s 139B, and is not a form of anterior entitlements which does not come within that provision”. Therefore, the AAT allowed the taxpayer’s objection in full, and held that no tax shortfall and penalties applied as the acquisition date was 1 July 2003.
(AAT Case [2012] AATA 142, AAT, Ref No: 2011/2356, Tamberlin DP, 9 March 2012.)
[LTN 48, 12/3]