The Federal Court has dismissed a taxpayer’s appeal and held that he did not acquire a right with respect to share options for the purposes of Div 13A of the ITAA 1936 until 30 November 2006.
- In the 2007 income year, the taxpayer, through a company called Tess Aust Pty Ltd, acquired 742,500 options in Nexus Energy Limited in respect of his services as a non-executive director of the company.
- When lodging his 2007 tax return, the taxpayer did not include any amount in respect of the options in his assessable income, and he did not make an election in respect of the options for the purposes of s 139E of the ITAA 1936.
- Following an audit in 2009, a notice of amended assessment was issued which included an additional $415,800 in his assessable income plus an administrative penalty of $48,336.75.
- The Commissioner determined that the market value of the options was, at the relevant date of 30 November 2006, $0.56 per option.
- The taxpayer’s objection was disallowed and the matter came before the Federal Court.
- It was not in dispute that the $415,800 was correctly included in the taxpayer’s assessable income for the 2007 income year if the date of acquisition was correctly regarded as 30 November 2006.
The appeal was primarily concerned with the date on which the taxpayer acquired the relevant right with respect to the options for the purposes of s 139G and this date would determine the amount to be included in his assessable income for the 2007 income year under s 139B(2) or s 139D(2) of the ITAA 1936. The Commissioner considered that the relevant date was 30 November 2006, whereas the taxpayer maintained that the date was 14 September 2006 or, alternatively, 29 September 2006.
The Court dismissed the taxpayer’s appeal and held he did not acquire a right for the purposes of Div 13A until 30 November 2006. It also held it was open to the Commissioner to impose an administrative penalty at the determined rate.
(Fowler v FCT [2012] FCA 1040, Federal Court, Kenny J, 21 September 2012.)
[LTN 189, 28/9]
Catchwords
TAXATION — employee share schemes — where director received options to unissued shares in lieu of cash remuneration — date on which director acquired right to shares — where grant of options conditional on the shareholders’ approval — where approval was expected — nature of right acquired — meaning of “right” in Division 13A of the Income Tax Assessment Act 1936 (Cth) — right for the purposes of Division 13A acquired only upon the shareholders’ approval — Income Tax Assessment Act 1936 (Cth) s 139G.
TAXATION — administrative penalties — failure to take reasonable care to comply with a taxation law — where no amount returned in respect of options granted in lieu of cash remuneration — where taxpayer mistaken as to date right to shares acquired — where no evidence of enquiries into tax treatment of options — reasonable care test distinct from reasonably arguable position test — administrative penalty justified — Taxation Administration Act 1953 (Cth) s 284-90.