TAX LAWS AMENDMENT (2009 BUDGET MEASURES NO. 2) BILL 2009

i Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Contents

1 Short

title

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2 Commencement

.................................................................................

3 Schedule(s)

........................................................................................

Schedule 1--Employee share schemes

Part 1--Main amendments

Income Tax Assessment Act 1997

Taxation Administration Act 1953

Part 2--Consequential amendments

A New Tax System (Goods and Services Tax) Act 1999

Fringe Benefits Tax Assessment Act 1986

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Taxation Administration Act 1953

Part 3--Application provisions

Income Tax (Transitional Provisions) Act 1997

Schedule 2--Non-commercial losses

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Schedule 3--Lost members' superannuation

Part 1--Amendment of the Superannuation (Unclaimed

Money and Lost Members) Act 1999

Part 2--Other amendments

Financial Transaction Reports Act 1988

Income Tax Assessment Act 1997

Taxation Administration Act 1953

Part 3--Application and saving provisions

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 1

A Bill for an Act to amend the law relating to

taxation and superannuation, and for related

purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Tax Laws Amendment (2009 Budget

Measures No. 2) Act 2009.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

2 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedule 1

The later of:

(a) the day this Act receives the Royal

Assent; and

(b) the day the Income Tax (TFN

Withholding Tax (ESS)) Act 2009

receives the Royal Assent.

However, the provision(s) do not commence

at all if the event mentioned in paragraph (b)

does not occur.

3. Schedules 2

and 3

The day this Act receives the Royal Assent.

Note:

This table relates only to the provisions of this Act as originally

passed by both Houses of the Parliament and assented to. It will not be

expanded to deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 3

Schedule 1--Employee share schemes

Part 1--Main amendments

Income Tax Assessment Act 1997

1 At the end of Part 2-40

Add:

Division 83A--Employee share schemes

Table of Subdivisions

Guide to Division 83A

83A-A Objects of Division and key concepts

83A-B Immediate inclusion of discount in assessable income

83A-C Deferred inclusion of gain in assessable income

83A-D Deduction for employer

83A-E Miscellaneous

Guide to Division 83A

83A-1 What this Division is about

Your assessable income includes discounts on shares, rights and

stapled securities you (or your associate) acquire under an

employee share scheme.

You may be entitled:

(a)

to have the amount included in your assessable

income reduced; or

(b)

to have the income year in which it is included

deferred.

Schedule 1 Employee share schemes

Part 1 Main amendments

4 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Subdivision 83A-A--Objects of Division and key concepts

Table of sections

83A-5

Objects of Division

83A-10 Meaning

ESS interest and employee share scheme

83A-5 Objects of Division

The objects of this Division are:

(a) to ensure that benefits provided to employees under

employee share schemes are subject to income tax at the

employees' marginal rates under

income tax law (instead of

being subject to

fringe benefits tax law); and

(b) to increase the extent to which the interests of employees are

aligned with those of their employers, by providing a tax

concession to encourage lower and middle income earners to

acquire

shares under such schemes.

83A-10 Meaning of ESS interest and employee share scheme

(1)

ESS interest, in a company, is a beneficial interest in:

(a)

share in the company; or

(b) a right to acquire a beneficial interest in a share in the

company.

(2)

employee share scheme is a

scheme under which

ESS

interests in a company are provided to employees, or

associates of

employees, (including past or prospective employees) of:

(a) the company; or

(b)

subsidiaries of the company;

in relation to the employees' employment.

Note:

See section 83A-325 for relationships similar to employment.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 5

Subdivision 83A-B--Immediate inclusion of discount in

assessable income

Guide to Subdivision 83A-B

83A-15 What this Subdivision is about

Generally, a discount you receive on shares, rights or stapled

securities you acquire under an employee share scheme is included

in your assessable income when you acquire the beneficial interest

in those shares, rights or securities.

You may be entitled to reduce the amount included in your

assessable income if you meet certain conditions which seek to

limit the concession to genuine schemes broadly available to all

permanent employees who do not already have anything other than

a minor interest in their employer.

The income year in which you are taxed may be deferred if there is

a real risk of forfeiture, or you acquired the shares or securities

under particular salary sacrifice arrangements (see

Subdivision 83A-C).

If you are a foreign resident, only the part of the discount that

relates to your employment in Australia is included in your

assessable income.

Table of sections

Operative provisions

83A-20 Application

Subdivision

83A-25

Discount to be included in assessable income

83A-30

Amount for which discounted ESS interest acquired

83A-35

Reduction of amounts included in assessable income

Schedule 1 Employee share schemes

Part 1 Main amendments

6 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Operative provisions

83A-20 Application of Subdivision

(1) This Subdivision applies to an

ESS interest if you acquire the

interest under an

employee share scheme at a discount.

Note 1:

This Subdivision does not apply if Subdivision 83A-C applies: see

section 83A-105.

Note 2:

If an associate of yours acquires an interest in relation to your

employment, this Division applies as if you, rather than your

associate, acquired the interest: see section 83A-305.

Note 3:

Regulations made for the purposes of section 83A-315 may be

relevant to working out whether you acquire the ESS interest at a

discount.

(2) However, this Subdivision does not apply if the

ESS interest is a

beneficial interest in a

share that you acquire as a result of

exercising a right, if you acquired a beneficial interest in the right

under an

employee share scheme.

83A-25 Discount to be included in assessable income

(1) Your assessable income for the income year in which you acquire

the

ESS interest includes the discount given in relation to the

interest.

(2) Treat an amount included in your assessable income under

subsection (1) as being from a source other than an

Australian

source to the extent that it relates to your employment outside

Australia.

Note:

For the CGT treatment of employee share schemes, see

Subdivision 130-D.

83A-30 Amount for which discounted ESS interest acquired

For the purposes of this Act (other than this Division), the

ESS

interest (and the

share or right of which it forms part) is taken to

have been acquired for its

market value (rather than for its

discounted value).

Note:

Regulations made for the purposes of section 83A-315 may substitute

a different amount for the market value of the ESS interest.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 7

83A-35 Reduction of amounts included in assessable income

Reduction and income test

(1) Reduce the total amount included in your assessable income under

subsection 83A-25(1) for an income year by the total of the

amounts included in your assessable income under that subsection,

for the income year, for

ESS interests to which subsections (3) to

(9) of this section apply.

(2)

However:

(a) do not reduce the total amount by more than $1,000; and

(b) only make the reduction if the sum of the following does not

exceed $180,000:

(i) your taxable income for the income year (including any

amount that would be included in your taxable income

if you disregarded this section);

(ii)

your

reportable fringe benefits total for the income

year;

(iii)

your

reportable superannuation contributions (if any)

for the income year;

(iv)

your

total net investment loss for the income year.

Employment

(3) This subsection applies to an

ESS interest in a company if, when

you acquire the interest, you are employed by:

(a) the company; or

(b)

subsidiary of the company.

Employee share scheme relates only to ordinary shares

(4) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, when you acquire the interest, all the

ESS interests available for acquisition under the scheme relate to

ordinary

shares.

Integrity rule about share trading and investment companies.

(5) This subsection applies to an

ESS interest in a company unless,

when you acquire the interest:

Schedule 1 Employee share schemes

Part 1 Main amendments

8 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(a) the predominant business of the company (whether or not

stated in its constituent documents) is the acquisition, sale or

holding of

shares, securities or other investments (whether

directly or indirectly through one or more companies,

partnerships or trusts); and

(b) you are employed by the company; and

(i)

subsidiary of the first company; or

(ii) a holding company (within the meaning of the

Corporations Act 2001) of the first company; or

(iii) a subsidiary of a holding company (within the meaning

of the Corporations Act 2001) of the first company.

Scheme must be non-discriminatory

(6) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, when you acquire the interest, both:

(a) the employee share scheme; and

(b) any scheme for the provision of financial assistance in

respect of acquisitions of ESS interests under the employee

share scheme;

are operated on a non-discriminatory basis in relation to at least

75% of the permanent employees of your employer who have

completed at least 3 years of service (whether continuous or

non-continuous) with your employer and who are Australian

residents.

No risk of losing interest or share under the conditions of the

scheme

(7) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, when you acquire the interest:

(a) if the ESS interest is a beneficial interest in a

share--there is

no real risk that, under the conditions of the scheme, you will

forfeit or lose the ESS interest (other than by disposing of it);

(b) if the ESS interest is a beneficial interest in a right to acquire

a beneficial interest in a

(i) there is no real risk that, under the conditions of the

scheme, you will forfeit or lose the ESS interest (other

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 9

than by disposing of it, exercising the right or letting the

right lapse); and

(ii) there is no real risk that, under the conditions of the

scheme, if you exercise the right, you will forfeit or lose

the beneficial interest in the share (other than by

disposing of it).

Minimum holding period

(8) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, at all times during the period that:

(a) starts when you acquire the interest; and

(b) ends at the earlier of:

(i) 3 years later; and

(ii) when you cease being employed by your employer;

the scheme is operated so that:

(i) any ESS interest (the scheme interest) you acquire

under the scheme; or

(ii) a beneficial interest in a

share you acquire as a result of

a scheme interest;

before the earlier of:

(iii) the end of the period of 3 years after you acquire the

scheme interest; and

(iv) when you cease being employed by your employer; and

(d) everyone else who acquires ESS interests under the scheme is

subject to a corresponding restriction.

Note:

This subsection is taken to apply in the case of a takeover or

restructure: see subsection 83A-130(3).

5% limit on shareholding and voting power

(9) This subsection applies to an

ESS interest in a company if,

immediately after you acquire the interest:

(a) you do not hold a beneficial interest in more than 5% of the

shares in the company; and

(b) you are not in a position to cast, or to control the casting of,

more than 5% of the maximum number of votes that might be

cast at a general meeting of the company.

Schedule 1 Employee share schemes

Part 1 Main amendments

10 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Subdivision 83A-C--Deferred inclusion of gain in assessable

income

Guide to Subdivision 83A-C

83A-100 What this Subdivision is about

If there is a real risk you might forfeit the share, right or stapled

security you acquired under an employee share scheme, you don't

include the discount in your assessable income when you acquired

it. Instead, in the first income year you are able to dispose of the

share, right or security, your assessable income will include any

gain you have made to that time. If you cease employment earlier,

or if 7 years pass, the gain is included in that income year instead.

A share or stapled security you acquire under salary sacrifice

arrangements can also be subject to this deferred taxing point if

you get no more than $5,000 worth of shares under those

arrangements.

Table of sections

Main provisions

83A-105 Application

Subdivision

83A-110 Amount to be included in assessable income

83A-115 ESS deferred taxing point--shares

83A-120 ESS deferred taxing point--rights to acquire shares

83A-125 Tax treatment of ESS interests held after ESS deferred taxing points

Takeovers and restructures

83A-130 Takeovers and restructures

Main provisions

83A-105 Application of Subdivision

Scope of Subdivision

(1) This Subdivision applies, and Subdivision 83A-B does not apply,

to an

ESS interest in a company if:

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 11

(a) Subdivision 83A-B would, apart from this section, apply to

the interest (see section 83A-20); and

(b) subsections 83A-35(3), (4), (5) and (9) apply to the interest;

and

(i) subsection (2) of this section applies to the interest; and

(ii) subsection (3) or (4) applies to the interest; and

(d) if the interest is a beneficial interest in a right to acquire a

beneficial interest in a share--subsection (3) applies to the

interest.

Note:

Subsections 83A-35(3), (4), (5), and (9) contain conditions relating to

the following:

(a) your

employment;

(b) the types of shares available under the employee share scheme;

(d) your shareholding and voting power in the company.

Broad availability of schemes

(2) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, when you acquire the interest, at least

75% of the permanent employees of your employer who have

completed at least 3 years of service (whether continuous or

non-continuous) with your employer and who are Australian

residents are, or at some earlier time had been, entitled to acquire:

(a) ESS interests under the scheme; or

(b) ESS interests in:

(i) your employer; or

(ii) a holding company (within the meaning of the

Corporations Act 2001) of your employer;

under another employee share scheme.

Real risk of losing interest or share under the conditions of the

scheme

(3) This subsection applies to an

ESS interest you acquire under an

employee share scheme if, when you acquire the interest:

(a) if the ESS interest is a beneficial interest in a

share--there is

a real risk that, under the conditions of the scheme, you will

forfeit or lose the ESS interest (other than by disposing of it);

Schedule 1 Employee share schemes

Part 1 Main amendments

12 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(b) if the ESS interest is a beneficial interest in a right to acquire

a beneficial interest in a share:

(i) there is a real risk that, under the conditions of the

scheme, you will forfeit or lose the ESS interest (other

than by disposing of it, exercising the right or letting the

right lapse); or

(ii) there is a real risk that, under the conditions of the

scheme, if you exercise the right, you will forfeit or lose

the beneficial interest in the share (other than by

disposing of it).

Salary sacrifice arrangement

(4) This subsection applies to an

ESS interest you acquire under an

employee share scheme during an income year at a discount if:

(a) the interest is provided:

(i) because you agreed to acquire the interest in return for a

reduction in your salary or wages that would not have

happened apart from the agreement; or

(ii) as part of your remuneration package, in circumstances

where it is reasonable to conclude that your salary or

wages would be greater if the interest was not made part

of that package; and

(b) at the time you acquire the interest:

(i) the discount equals the

market value of the ESS

interest; and

(ii) all of the ESS interests available for acquisition under

the scheme are ESS interests to which subsection (3)

applies, beneficial interests in

shares, or both; and

(iii) the governing rules of the scheme expressly state that

this Subdivision applies to the scheme (subject to the

requirements of this Act); and

(c)

the

total

market value of the

ESS interests in your employer

and any holding company (within the meaning of the

Corporations Act 2001) of your employer:

(i) that you acquire during the year under any employee

share scheme or schemes; and

(ii) to which both this Subdivision and this subsection

apply;

does not exceed $5,000.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 13

(5) For the purposes of paragraph (4)(c), work out the

market value of

each

ESS interest as at the time you acquire it.

Note:

Regulations made for the purposes of section 83A-315 may substitute

a different amount for the market value of the ESS interest.

83A-110 Amount to be included in assessable income

(1) Your assessable income for the income year in which the

ESS

deferred taxing point for the

ESS interest occurs includes the

market value of the interest at the ESS deferred taxing point,

reduced by the

cost base of the interest.

Note:

Regulations made for the purposes of section 83A-315 may substitute

a different amount for the market value of the ESS interest.

(2) Treat an amount included in your assessable income under

subsection (1) as being from a source other than an

Australian

source to the extent that it relates to your employment outside

Australia.

Note:

For the CGT treatment of employee share schemes, see

Subdivision 130-D.

83A-115 ESS deferred taxing point--shares

Scope

(1) This section applies if the

ESS interest is a beneficial interest in a

share.

Meaning of ESS deferred taxing point

(2)

The

ESS deferred taxing point for the

ESS interest is the earliest

of the times mentioned in subsections (4) to (6).

(3)

However,

the

ESS deferred taxing point for the

ESS interest is

instead the time you dispose of the interest, if that time occurs

within 30 days after the time worked out under subsection (2).

No restrictions on disposing of share

(4) The first possible taxing point is the earliest time when:

(a) there is no real risk that, under the conditions of the

employee share scheme, you will forfeit or lose the

ESS

interest (other than by disposing of it); and

Schedule 1 Employee share schemes

Part 1 Main amendments

14 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(b) if, at the time you acquired the interest, the scheme genuinely

restricted you immediately disposing of the interest--the

scheme no longer so restricts you.

Cessation of employment

(5) The 2nd possible taxing point is the time when the employment in

respect of which you acquired the interest ends.

Maximum time period for deferral

(6) The 3rd possible taxing point is the end of the 7 year period

starting when you acquired the interest.

83A-120 ESS deferred taxing point--rights to acquire shares

Scope

(1) This section applies if the

ESS interest is a beneficial interest in a

right to acquire a beneficial interest in a

share.

Meaning of ESS deferred taxing point

(2)

The

ESS deferred taxing point for the

ESS interest is the earliest

of the times mentioned in subsections (4) to (7).

(3)

However,

the

ESS deferred taxing point for the

ESS interest is:

(a) the time you dispose of the ESS interest (other than by

exercising the right); or

(b) if you exercise the right--the time you dispose of the

beneficial interest in the

share;

if that time occurs within 30 days after the time worked out under

subsection (2).

No restrictions on disposing of right

(4) The first possible taxing point is the earliest time when:

(a) you have not exercised the right; and

(b) there is no real risk that, under the conditions of the

employee share scheme, you will forfeit or lose the

ESS

interest (other than by disposing of it, exercising the right or

letting the right lapse); and

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 15

genuinely restricted you immediately disposing of the ESS

interest--the scheme no longer so restricts you.

Cessation of employment

(5) The 2nd possible taxing point is the time when the employment in

respect of which you acquired the interest ends.

Maximum time period for deferral

(6) The 3rd possible taxing point is the end of the 7 year period

starting when you acquired the interest.

No restrictions on exercising right and disposing of share

(7) The 4th possible taxing point is the earliest time when:

(a) there is no real risk that, under the conditions of the scheme,

you will forfeit or lose the

ESS interest (other than by

disposing of it, exercising the right or letting the right lapse);

and

(b) if, at the time you acquired the ESS interest, the scheme

genuinely restricted you immediately exercising the right--

the scheme no longer so restricts you; and

if you exercise the right, you will forfeit or lose the beneficial

interest in the

share (other than by disposing of it); and

(d) if, at the time you acquired the ESS interest, the scheme

genuinely restricted you immediately disposing of the

beneficial interest in the share if you exercised the right--the

scheme no longer so restricts you.

83A-125 Tax treatment of ESS interests held after ESS deferred

taxing points

For the purposes of this Act (other than this Division), the

ESS

interest (and the

share or right of which it forms part) is taken to

have been acquired immediately after the

ESS deferred taxing

point for the interest for its

market value, unless the ESS deferred

taxing point occurs at the time the interest is disposed of.

Note:

Regulations made for the purposes of section 83A-315 may substitute

a different amount for the market value of the ESS interest.

Schedule 1 Employee share schemes

Part 1 Main amendments

16 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Takeovers and restructures

83A-130 Takeovers and restructures

Object and scope

(1) The object of this section is to allow this Division to continue to

apply if:

(a) at least one of the following applies:

(i)

arrangement (the takeover) is entered into that is

intended to result in a company (the old company)

becoming a

100% subsidiary of another company;

(ii)

ESS interests in a company (the old company) acquired

under

employee share schemes can reasonably be

regarded as having been replaced, wholly or partly, by

ESS interests in one or more other companies as a result

of a change (the restructure) in the ownership

(including the structure of the ownership) of the old

company; and

(b) just before the takeover or restructure, you held ESS interests

(the old interests) in the old company that you acquired

under an employee share scheme.

Treat new interests as continuations of old interests

(2) For the purposes of this Division, treat any

ESS interests (the new

interests) in a company (the new company) that you acquire in

connection with the takeover or restructure as a continuation of the

old interests, to the extent that:

(a) as a result of the arrangement or change, you stop holding the

old interests; and

(b) the new interests can reasonably be regarded as matching any

of the old interests.

Note:

In determining to what extent something can reasonably be regarded

as matching any of the old interests, one of the factors to consider is

the respective market values of that thing and of the old interests.

(3) Subsection 83A-35(8) (about the 3 year rule) is taken to apply to

the

ESS interests.

(4) Subsections (2) and (3) only apply if the new interests relate to

ordinary

shares.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 17

Old interest not matched by new interests

(5) For the purposes of this Division, treat yourself as having disposed

of the old interests to the extent that, in connection with the

takeover or restructure, you acquire anything that:

(a) can reasonably be regarded as matching any of the old

interests; but

(b) is not treated by subsection (2) as a continuation of those

interests.

Continuation of your employment

(6) For the purposes of this Division, treat your employment by:

(a) the new company; or

(b)

subsidiary of the new company; or

Act 2001) of the new company; or

(d) a subsidiary of a holding company (within the meaning of the

Corporations Act 2001) of the new company;

as a continuation of the employment in respect of which you

acquired the old interests.

Apportionment of cost base of old interests

(7) Treat yourself as having given, as consideration for the assets

mentioned in subsection (8), the amount worked out by

apportioning among those assets, according to their respective

market values immediately after the takeover or restructure, the

total of:

(a)

the

cost bases of the old interests when you stop holding

them; and

(b) the cost bases of the assets mentioned in paragraph (8)(b)

immediately after the takeover or restructure (ignoring the

effect of this subsection).

(8) The assets are:

(a) the things that:

(i) you acquired in connection with the takeover or

restructure; and

(ii) can reasonably be regarded as matching the old

interests;

Schedule 1 Employee share schemes

Part 1 Main amendments

18 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(including all of the new interests); and

(b) in a case covered by subparagraph (1)(a)(ii)--any

ESS

interests in the old company that:

(i) you held just before, and continue to hold just after, the

restructure; and

(ii) that can reasonably be regarded as matching the old

interests.

Exceptions

(9) This section only applies if:

(a) at or about the time you acquire the new interests, you are

employed as mentioned in subsection (6); and

(b) at the time you acquire the new interests:

(i) you do not hold a beneficial interest in more than 5% of

the

shares in the new company; and

(ii) you are not in a position to cast, or to control the casting

of, more than 5% of the maximum number of votes that

might be cast at a general meeting of the new company.

Subdivision 83A-D--Deduction for employer

Guide to Subdivision 83A-D

83A-200 What this Subdivision is about

You can deduct an amount for shares, rights or stapled securities

you provide to your employees under an employee share scheme if

they are eligible for a reduction in their assessable income under

section 83A-35. The amount you can deduct is equal to that

reduction.

You must defer any deduction you are entitled to for amounts you

provide to finance your employees acquiring interests in shares,

rights or stapled securities under an employee share scheme until

the employees have actually acquired those interests.

Table of sections

Operative provisions

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 19

83A-205 Deduction for employer

83A-210 Timing of general deductions

Operative provisions

83A-205 Deduction for employer

(1) You can deduct an amount for an income year if:

(a) during the year you provided one or more

ESS interests to

an individual under an

employee share scheme; and

(b) you did so as:

(i) the employer of the individual; or

(ii) a holding company (within the meaning of the

Corporations Act 2001) of the employer of the

individual; and

individual's assessable income under subsection 83A-25(1)

in relation to some or all of the interests.

(2) Disregard paragraph 83A-35(2)(b) (income test) for the purposes

of paragraph (1)(c) of this section.

(3) The amount of the deduction is the amount of the reduction

mentioned in paragraph (1)(c).

Deduction to be apportioned if interest provided by multiple

entities

(4) The amount of the deduction worked out under subsection (3) must

be apportioned between 2 or more entities on a reasonable basis if

the entities jointly provide an

ESS interest for which an amount

can be deducted under subsection (1).

83A-210 Timing of general deductions

If:

(a) at a particular time, you provide another entity with money or

other property:

(i)

under

arrangement; and

(ii) for the purpose of enabling an individual (the ultimate

beneficiary) to acquire, directly or indirectly, an

ESS

interest under an

employee share scheme in relation to

Schedule 1 Employee share schemes

Part 1 Main amendments

20 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

the ultimate beneficiary's employment (including past

or prospective employment); and

(b) that particular time occurs before the time (the acquisition

time) the ultimate beneficiary acquires the

ESS interest;

then, for the purpose of determining the income year (if any) in

which you can deduct an amount in respect of the provision of the

money or other property, you are taken to have provided the money

or other property at the acquisition time.

Subdivision 83A-E--Miscellaneous

Table of sections

83A-305 Acquisition

associates

83A-310 Forfeiture etc. of ESS interest

83A-315 Market value of ESS interest

83A-320 Interests in a trust

83A-325 Application of Division to relationships similar to employment

83A-330 Application of Division to ceasing employment

83A-335 Application of Division to stapled securities

83A-340 Application of Division to indeterminate rights

83A-305 Acquisition by associates

If an

associate (other than an

employee share trust) of an

individual acquires an

ESS interest in relation to the individual's

employment (including past or prospective employment), then, for

the purposes of this Division:

(a) treat the interest as having being acquired by the individual

(instead of the associate); and

(b) treat any circumstance, right or obligation existing or not

existing in relation to the interest in relation to the associate

as existing or not existing in relation to the individual; and

associate in relation to the interest as being done or not done

by or in relation to the individual.

Example 1: The following are attributed to the employee, rather than to the

associate:

(a) the associate's voting rights;

(b) the associate's ability or inability to dispose of the ESS interest;

interest;

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 21

(d) the associate's cost base for the ESS interest.

Example 2: If the associate disposes of the ESS interest, the employee is taken to

have disposed of the ESS interest instead.

83A-310 Forfeiture etc. of ESS interest

This Division (apart from this Subdivision) is taken never to have

applied in relation to an

ESS interest acquired by an individual

under an

employee share scheme if:

(a) disregarding this section, an amount is included in the

individual's assessable income under this Division in relation

to the interest; and

(b)

either:

(i) the individual forfeits the interest; or

(ii) in the case of an ESS interest that is a beneficial interest

in a right--the individual forfeits or loses the interest

(without having disposed of the interest or exercised the

right); and

(i) a choice made by the individual (other than a choice by

that individual to cease particular employment); or

(ii) a condition of the scheme that has the direct effect of

protecting (wholly or partly) the individual against a fall

in the

market value of the interest.

83A-315 Market value of ESS interest

(1) Whenever this Division uses the

market value of an

ESS interest,

instead use the amount specified in the regulations for the purposes

of this section in relation to the interest, if the regulations specify

such an amount.

(2) To avoid doubt, apply the rule in subsection (1) to the

market

value component of any calculation for the purposes of this

Division that involves market value.

Example: If the regulations specify an amount in relation to an ESS interest, use

that amount instead of the market value of the interest in working out:

(a) whether there is a discount given in relation to interest; and

(b) if so--the amount of the discount.

Schedule 1 Employee share schemes

Part 1 Main amendments

22 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

83A-320 Interests in a trust

(1) This section applies if, at a time:

(a) you hold an interest in a trust whose assets include

shares;

and

(b) that interest corresponds to a particular number of the shares

(even if the interest does not correspond to particular shares).

(2) For the purposes of this Division, treat yourself as holding at that

time a beneficial interest in each of a number of the

included in the assets of the trust equal to the number mentioned in

paragraph (1)(b).

(3) If there are 2 or more classes of

shares included in the assets of

the trust, this section operates separately in relation to each class as

if the shares in that class were all the shares included in the assets

of the trust.

(4) This section applies to rights to acquire beneficial interests in

shares in the same way it applies to shares.

Note:

For the CGT treatment of employee share schemes, see

Subdivision 130-D.

83A-325 Application of Division to relationships similar to

employment

This Division applies to an individual covered by column 1 of an

item in the table as if:

(a) he or she were employed by the entity referred to in column 2

of that item; and

(b) the thing referred to column 3 of that item constituted that

employment.

Application of Division to relationships similar to employment

Item Column

This Division applies

to an individual who:

Column 2

as if he or she were

employed by:

Column 3

and this constituted that

employment:

receives, or is entitled

to receive,

work and

income support

withholding payments

the entity that pays

or provides the work

and income support

withholding

the relationship because of

which the entity pays or

provides the work and

income support

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 23

Application of Division to relationships similar to employment

Item Column

This Division applies

to an individual who:

Column 2

as if he or she were

employed by:

Column 3

and this constituted that

employment:

(otherwise than as an

employee)

payments (or is liable

to do so)

withholding payments to

the individual (or is liable

to do so).

is engaged in service in

a foreign country as the

holder of an office

the entity by whom

the individual is so

engaged

the holding of the office.

provides services to an

entity (other than

services covered by a

previous item in this

table and services

provided as an

employee)

the entity

the

arrangement between

the individual and the entity

under which those services

are provided.

83A-330 Application of Division to ceasing employment

For the purposes of this Division, you are treated as ceasing

employment when you are no longer employed by any of the

following:

(a) your employer in that employment;

(b) a holding company (within the meaning of the Corporations

Act 2001) of your employer;

(c)

subsidiary of your employer;

(d)

subsidiary of a holding company (within the meaning of

the Corporations Act 2001) of your employer.

83A-335 Application of Division to stapled securities

(1) This Division applies in relation to a stapled security in the same

way as it applies in relation to a

share in a company, if at least one

of the

ownership interests that are stapled together to form the

stapled security is a share in the company.

Note:

This means the Division also applies to rights to acquire such a stapled

security in the same way it applies to rights to acquire a share.

(2) This Division applies in relation to a stapled security in the same

way as it applies in relation to an ordinary

share in a company, if

Schedule 1 Employee share schemes

Part 1 Main amendments

24 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

at least one of the

ownership interests that are stapled together to

form the stapled security is an ordinary share in the company.

(3) For the purposes of this Division, in relation to a stapled security or

right to acquire a beneficial interest in a stapled security, a

company is taken to include (as part of the company) each

stapled

entity for the stapled security, if at least one of the

ownership

interests that are stapled together to form the stapled security is a

share in the company.

83A-340 Application of Division to indeterminate rights

(1) This section applies if:

(a) you acquire a beneficial interest in a right; and

(b) the right later becomes a right to acquire a beneficial interest

in a

share.

Example 1: You acquire a right to acquire, at a future time:

(a) shares with a specified total value, rather than a specified number

of shares; or

(b) an indeterminate number of shares.

Example 2: You acquire a right under which the provider must provide you with

either ESS interests or cash, whichever the provider chooses.

(2) This Division applies as if the right had always been a right to

acquire the beneficial interest in the

share.

Taxation Administration Act 1953

2 At the end of Division 14 in Schedule 1

Add:

Subdivision 14-C--Shares and rights under employee share

schemes

Table of sections

14-155

Liability for TFN withholding tax (ESS)

14-160

Employer may give individual tax file numbers to provider

14-165

Provider may recover TFN withholding tax (ESS) from individual

14-170

Application of rules in Division 18

14-175 Overpayment

TFN withholding tax (ESS)

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 25

14-180

Application of certain provisions of Division 83A of the Income Tax

Assessment Act 1997

14-155 Liability for TFN withholding tax (ESS)

(1)

Tax

(TFN withholding tax (ESS)) imposed by the Income Tax

(TFN Withholding Tax (ESS)) Act 2009 is payable if:

(a) a company (the provider) provides one or more

ESS

interests to an individual under an

employee share scheme;

and

(b) as a result, an amount is included in the individual's

assessable income under Division 83A of the Income Tax

Assessment Act 1997 for an income year (taking into account

subsection (2) of this section); and

provider before the end of the income year:

(i) if the individual acquired the interests in relation to any

services provided to the provider, or to a

subsidiary of

the provider, in the course or furtherance of an

enterprise

carried on by the individual--the

individual's

ABN;

(ii) in any case--the individual's

tax file number.

(2) For the purposes of paragraph (1)(b), disregard section 83A-35 of

the Income Tax Assessment Act 1997 (about reducing the amount

included in the individual's assessable income).

Note:

Disregard the 30 day rule in subsections 83A-115(3) and 83A-120(3)

of the Income Tax Assessment Act 1997 for the purposes of this

Subdivision: see subsection 392-5(6) in this Schedule.

(3)

The

TFN withholding tax (ESS) is payable by the provider.

(4)

The

TFN withholding tax (ESS) is due and payable at the end of

21 days after the end of the income year referred to in

paragraph (1)(b).

Note 1:

When it is due and payable, the TFN withholding tax (ESS) is payable

to the Commissioner: see paragraph 255-5(1)(b).

Note 2:

The provider must pay the TFN withholding tax (ESS) to the

Commissioner in accordance with Subdivision 16-B: see subsection

16-70(4). If any of it remains unpaid, the provider is liable to pay

general interest charge: see section 16-80.

Note 3:

The Commissioner may defer the time at which TFN withholding tax

(ESS) becomes due and payable: see section 255-10.

Schedule 1 Employee share schemes

Part 1 Main amendments

26 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

14-160 Employer may give individual tax file numbers to provider

(1) The individual is taken to have authorised a

subsidiary (the

employer) of the provider to inform the provider of the individual's

tax file number if:

(a) the individual has made a

TFN declaration in relation to the

employer; and

(b) some or all of the

ESS interests mentioned in paragraph

14-155(1)(a) were provided to the individual in relation to the

individual's employment by the employer.

(2) If the employer does so, the individual is taken, for the purposes of

this Subdivision and Division 392 (Employee share scheme

reporting), to have quoted his or her

tax file number to the

provider.

14-165 Provider may recover TFN withholding tax (ESS) from

individual

(1) The provider may recover from the individual as a debt any of the

TFN withholding tax (ESS) the provider pays.

(2) The provider is entitled to set off an amount that the provider can

recover from the individual under this section against a debt due by

the provider to the individual.

14-170 Application of rules in Division 18

These

provisions:

(a) subsection 18-15(1) (about credits for amounts withheld from

withholding payments); and

(b) sections 18-65 and 18-70 (about refunds of amounts withheld

in error);

apply as if any of the

TFN withholding tax (ESS) that has been

paid were an amount withheld under section 12-35 from a

withholding payment made to the individual and covered by that

section.

14-175 Overpayment of TFN withholding tax (ESS)

TFN withholding tax (ESS) has been overpaid:

(a) the Commissioner must refund the amount overpaid; and

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 27

(b) the individual is not entitled to a credit under section 18-15 in

respect of the amount overpaid.

14-180 Application of certain provisions of Division 83A of the

Income Tax Assessment Act 1997

The following provisions of the Income Tax Assessment Act 1997

have effect for the purposes of this Subdivision in the same way as

they have for the purposes of Division 83A of that Act:

(a) section 83A-130 (about takeovers and restructures);

(b) section 83A-305 (about associates);

(d) section 83A-325 (about relationships similar to employment);

(e) section 83A-335 (about stapled securities);

(f) section 83A-340 (about indeterminate rights).

3 After subsection 16-70(3) in Schedule 1 (before the note)

Insert:

(4) An entity that must pay an amount to the Commissioner under

Subdivision 14-C must do so in accordance with sections 16-80

and 16-85.

4 Section 16-80 in Schedule 1

Omit "or (3)", substitute ", (3) or (4)".

5 After Division 391 in Schedule 1

Insert:

Division 392--Employee share scheme reporting

Table of Subdivisions

Guide to Division 392

392-A Statements

392-B Miscellaneous

Schedule 1 Employee share schemes

Part 1 Main amendments

28 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Guide to Division 392

392-1 What this Division is about

A company that provides ESS interests to an individual under an

employee share scheme during a year must, at the end of the year

(and, in certain cases, at the end of a later year), give certain

information to the Commissioner and to the individual.

Note:

For the tax treatment of employee share schemes, see

Division 83A of the Income Tax Assessment Act 1997.

Subdivision 392-A--Statements

Table of sections

392-5

Statements by providers

392-10

Change or omission in information given to the Commissioner

392-5 Statements by providers

Statements

(1) An entity (the provider) must give a statement to the

Commissioner and to an individual for a

financial year if:

(a) both of the following subparagraphs apply:

(i) the provider provides

ESS interests to the individual

during the year;

(ii) Subdivision 83A-B or 83A-C of the Income Tax

Assessment Act 1997 (about employee share schemes)

applies to the interests; or

(b) all of the following subparagraphs apply:

(i) the provider has provided ESS interests to the individual

(whether during the year or during an earlier year);

(ii) Subdivision 83A-C of the Income Tax Assessment Act

1997 (about employee share schemes) applies to the

interests;

(iii)

the

ESS deferred taxing point for the interests occurs

during the year.

Note:

Section 286-75 provides an administrative penalty for breach of this

subsection.

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 29

Form of statements

(2) The statement must be in the

approved form.

(3)

The

approved form may require the statement to contain the

following information:

(a)

the

provider's

ABN;

(b) the following information about the individual:

(i) the individual's name and address;

(ii) if the individual has quoted his or her

tax file number to

the provider--that tax file number;

(iii) if the individual acquired the interests in relation to any

services provided to the provider, or to a

subsidiary of

the provider, in the course or furtherance of an

enterprise

carried on by the individual, and the

individual has

quoted his or her ABN to the provider--

that ABN;

paragraph (1)(a) of this section and Subdivision 83A-B of the

Income Tax Assessment Act 1997 apply:

(i) the number of the interests;

(ii) the amount paid, at or before the time of acquisition,

towards acquiring the interests;

(iii) the provider's estimate of the

market value of the

interests at the time of acquisition;

(iv) the amount of

TFN withholding tax (ESS) paid or

payable by the provider in respect of the interests during

the year;

(d) the following information about any interests to which both

paragraph (1)(a) of this section and Subdivision 83A-C of the

Income Tax Assessment Act 1997 apply:

(i) the number of the interests;

(ii) the amount paid, at or before the time of acquisition,

towards acquiring the interests;

(e) the following information about any interests to which

paragraph (1)(b) applies:

(i) the number of the interests;

(ii) the amount paid, after the time of acquisition but not

after the

ESS deferred taxing point, towards acquiring

the interests;

Schedule 1 Employee share schemes

Part 1 Main amendments

30 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(iii) the provider's estimate of the market value of the

interests at the ESS deferred taxing point;

(iv) the amount of TFN withholding tax (ESS) paid or

payable by the provider in respect of the interests during

the year.

Note:

Regulations made for the purposes of section 83A-315 of the Income

Tax Assessment Act 1997 may substitute different amounts for the

market values of the ESS interests: see section 392-15 in this

Schedule.

(4) Subsection (3) does not limit the information that the

approved

form may require the statement to contain.

When statements must be given

(5) The statement must be given:

(a) to the individual no later than 14 July after the end of the

year; and

(b) to the Commissioner no later than 14 August after the end of

the year.

Note:

Section 388-55 allows the Commissioner to defer the time for giving

an approved form.

Disregard 30 day rule for ESS deferred taxing point if provider

does not know when shares are disposed of etc.

(6) For the purposes of Subdivision 14-C (about TFN withholding tax

(ESS)) and this Division, in working out the

ESS deferred taxing

point for an

ESS interest, disregard subsection 83A-115(3) or

83A-120(3) (whichever is applicable) of the Income Tax

Assessment Act 1997 (about the 30 day rule) if the provider does

not know the time worked out under that subsection at the earlier

of:

(a) the time (if any) the provider gives a statement to the relevant

individual under this section for the

financial year

mentioned in subsection (7); and

(b) the later of:

(i) 14 July after the end of the financial year mentioned in

subsection (7); and

(ii) if, under section 388-55, the Commissioner defers to a

later time the time within which the statement under this

Employee share schemes Schedule 1

Main amendments Part 1

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 31

section for that financial year is required to be given to

the individual--that later time.

(7)

The

financial year is the financial year in which the

ESS deferred

taxing point for the

ESS interest occurs, disregarding subsection

83A-115(3) or 83A-120(3) (whichever is applicable) of the Income

Tax Assessment Act 1997 (about the 30 day rule).

392-10 Change or omission in information given to the

Commissioner

(1) If the provider becomes aware of a material change or material

omission in any information given to the individual or the

Commissioner under this Division, the provider must:

(a) tell the individual or the Commissioner, as applicable, of the

change in the

approved form; or

(b) give the omitted information to the individual or the

Commissioner, as applicable, in the approved form.

(2) Information required by subsection (1) must be given no later than

30 days after the provider becomes aware of the change or

omission.

Note 1:

Section 388-55 allows the Commissioner to defer the time for giving

an approved form.

Note 2:

Section 286-75 provides an administrative penalty for breach of this

section.

Subdivision 392-B--Miscellaneous

Table of sections

392-15

Application of certain provisions of Division 83A of the Income Tax

Assessment Act 1997

392-15 Application of certain provisions of Division 83A of the

Income Tax Assessment Act 1997

The following provisions of the Income Tax Assessment Act 1997

have effect for the purposes of this Division in the same way as

they have for the purposes of Division 83A of that Act:

(a) section 83A-130 (about takeovers and restructures);

(b) section 83A-305 (about associates);

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 33

Part 2--Consequential amendments

A New Tax System (Goods and Services Tax) Act 1999

6 Paragraphs 84-14(a) and (b)

Repeal the paragraphs, substitute:

(a)

the

recipient of the supply is not an entity that has acquired,

or may in the future acquire, an ESS interest (within the

meaning of the

ITAA 1997) under the scheme; and

(b) Subdivision 83A-B or 83A-C of the ITAA 1997 applies to

any ESS interest (within the meaning of that Act) acquired

under the scheme; and

7 Section 195-1 (definition of employee share scheme)

Omit "section 139C (including as affected by Subdivision DB of

Division 13A of Part III) of the

ITAA 1936", substitute "the

ITAA

1997".

Fringe Benefits Tax Assessment Act 1986

8 Subsection 136(1) (paragraphs (h) to (hc) of the definition

of fringe benefit)

Repeal the paragraphs, substitute:

(h) a benefit constituted by the acquisition of an ESS interest

under an employee share scheme (within the meaning of the

Income Tax Assessment Act 1997) to which

Subdivision 83A-B or 83A-C of that Act applies; or

(ha) a benefit constituted by the acquisition of money or property

by an employee share trust (within the meaning of the

Income Tax Assessment Act 1997); or

Income Tax Assessment Act 1936

9 Subsection 6(1) (paragraph (n) of the definition of passive

income)

Omit "Division 13A", substitute "Division 83A of the Income Tax

Assessment Act 1997 (about employee share schemes)".

10 Subsection 6BA(3)

Schedule 1 Employee share schemes

Part 2 Consequential amendments

34 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Omit "(other than section 26AAC)".

11 At the end of section 21A

Add:

(7) This section does not apply to an ESS interest (within the meaning

of the Income Tax Assessment Act 1997) to which

Subdivision 83A-B or 83A-C of that Act (about employee share

schemes) applies.

12 Subsection 23AF(18) (paragraph (a) of the definition of

eligible foreign remuneration)

Omit "Division 13A", substitute "Division 83A of the Income Tax

Assessment Act 1997 (about employee share schemes)".

13 Subsection 23AF(18) (paragraph (b) of the definition of

eligible foreign remuneration)

Omit "Division 13A", substitute "that Division".

14 Subsection 23AG(7) (definition of foreign earnings)

Omit "Division 13A", substitute "Division 83A of the Income Tax

Assessment Act 1997 (about employee share schemes)".

15 Sections 26AAC and 26AAD

Repeal the sections.

16 Section 109H

Omit "shares, rights or stapled securities", substitute "ESS interests".

17 Section 109NB

Repeal the section, substitute:

109NB Loans to purchase shares under employee share schemes not

treated as dividends

A private company is not taken under section 109D to pay a

dividend because of a loan made solely for the purpose of enabling

the shareholder, or an associate of the shareholder, to acquire an

ESS interest under an employee share scheme (within the meaning

of the Income Tax Assessment Act 1997) to which:

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 35

(a) Subdivision 83A-B and subsections 83A-35(3) to (9) of that

Act apply; or

(b) Subdivision 83A-C of that Act applies.

18 Division 13A of Part III

Repeal the Division.

19 Subsection 170(10AA) (after table item 25)

Insert:

Section 83A-310

Forfeiture of ESS interests acquired under

an employee share scheme

Section 83A-340

Rights that become rights to acquire shares

20 Section 530A

Repeal the section, substitute:

530A Reduction of foreign investment fund income because of

employee share scheme

(1) This section applies if a taxpayer acquires an ESS interest (within

the meaning of the Income Tax Assessment Act 1997) to which

Subdivision 83A-C of that Act (about employee share schemes)

applies.

(2) The foreign investment fund income of the taxpayer for a notional

accounting period of the FIF, to the extent that the income relates

to the interest, is zero if, for the whole of the period, the following

conditions are satisfied:

(a) the taxpayer holds the interest;

(b) the interest is an interest in the FIF;

Income Tax Assessment Act 1997) for the interest has not

occurred.

(3) The foreign investment fund income of the taxpayer for a notional

accounting period of the FIF is to be reduced by an amount equal

to any increase in the market value of the interest during a period

(if any):

(a) that forms part of the notional accounting period; and

(b) for the whole of which, the following conditions are satisfied:

Schedule 1 Employee share schemes

Part 2 Consequential amendments

36 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(i) the taxpayer holds the interest;

(ii) the interest is an interest in the FIF;

(iii) the ESS deferred taxing point (within the meaning of

the Income Tax Assessment Act 1997) for the interest

has not occurred.

(4) Section 83A-315 of the Income Tax Assessment Act 1997 (about

market values of ESS interests) applies to subsection (3) of this

section in the same way as it applies to Division 83A of that Act.

Income Tax Assessment Act 1997

21 Section 10-5 (table item headed "shares")

Repeal:

employee share acquisition schemes .................................. 26AAC, 139 to

139GH

Substitute:

employee share schemes .................................................... Subdivisions 83A-

B and 83A-C

22 Section 12-5 (table item headed "shares")

Repeal:

employee share acquisition schemes, deduction for

provider of qualifying shares or rights .........................

139DC

Substitute:

employee share schemes, deduction for provider of ESS

interests .........................................................................

Subdivision 83A-

23 At the end of subsection 15-2(3)

Add:

;

(e)

ESS interests to which Subdivision 83A-B or 83A-C (about

employee share schemes) applies.

24 Paragraph 59-40(2)(d)

Repeal the paragraph, substitute:

(d) if you acquired a beneficial interest in the rights under an

employee share scheme--neither Subdivision 83A-B nor

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 37

83A-C (about employee share schemes) applies to the

beneficial interest;

25 Paragraph 82-135(m)

Omit "Division 13A of Part III of the Income Tax Assessment Act

1936", substitute "Division 83A of this Act".

26 Subsections 104-60(5) and 104-75(4) and (6) (notes)

Omit "section 130-90", substitute "section 130-80".

27 Subsections 104-145(7) and (8)

Repeal the subsections, substitute:

(7) You cannot choose to make a

capital loss for a

share, or a right to

acquire a beneficial interest in a share, if:

(a) you acquired the beneficial interest (the ESS interest) in the

share or right under an

employee share scheme; and

(b) subsequent to an amount being included in your assessable

income under Division 83A (about employee share schemes)

in relation to the ESS interest, section 83A-310 (about

forfeiture) applies in relation to ESS interest.

28 Subsection 104-160(6)

Repeal the subsection.

29 Section 109-55 (table item 12)

Repeal the item.

30 Section 109-60 (after table item 11)

Insert:

11A

You acquire an

ESS interest

and Subdivision 83A-C

(about employee share

schemes) applies to the

interest

at the

ESS deferred

taxing point for the

interest

section 83A-125

31 Subsection 112-20(3) (note)

After "Note", insert "(1)".

32 At the end of subsection 112-20(3)

Schedule 1 Employee share schemes

Part 2 Consequential amendments

38 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Add:

Note 2:

This section does not apply to ESS interests acquired under employee

share schemes: see subsection 130-80(4).

33 Section 112-75

Repeal the section.

34 Section 112-97 (at the end of the table)

Add:

You acquire an

ESS interest

and Subdivision 83A-B or

83A-C (about employee share

schemes) applies to the

interest

First element of cost base

and reduced cost base

sections 83A-30

and 83A-125

35 Subsection 115-30(1) (table item 8)

Repeal the item.

36 Subsections 115-30(1A) and (1B)

Repeal the subsections.

37 At the end of section 116-30

Add:

Note:

This section does not apply to ESS interests acquired under employee

share schemes: see subsection 130-80(4).

38 Subsections 125-75(2) and (3)

Repeal the subsections, substitute:

(2)

ownership interest, in a company, that is owned by an entity is

disregarded under subsection (1) if:

(a) the entity acquired a beneficial interest in the ownership

interest under an

employee share scheme; and

(b) either Subdivision 83A-B and subsections 83A-35(3) to (9),

or Subdivision 83A-C, applies to the beneficial interest; and

share.

(3)

ownership interest, in a trust, that is owned by an entity is

disregarded under subsection (1) if:

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 39

(a) both of the following would apply if Division 83A (about

employee share schemes) applied to ownership interests in

trusts in the same way as it applies to

(i) the entity acquired a beneficial interest in the ownership

interest under an

employee share scheme;

(ii) either Subdivision 83A-B and subsections 83A-35(3) to

(9), or Subdivision 83A-C, applies to the beneficial

interest; and

(b) the ownership interest is not a fully-paid unit.

39 Subsection 130-40(1) (note)

Repeal the note, substitute:

Note:

For rights acquired under employee share schemes, see Division 83A,

Subdivision 130-D and Division 134.

40 Subdivision 130-D

Repeal the Subdivision, substitute:

Subdivision 130-D--Employee share schemes

Table of sections

130-75

Objects of Subdivision

130-80

ESS interests acquired under employee share schemes

130-85

Interests in employee share trusts

130-90

Shares held by employee share trusts

130-95

Shares and rights in relation to ESS interests

130-100 Application

certain

provisions of Division 83A

130-75 Objects of Subdivision

The objects of this Subdivision are:

(a) to recognise that:

(i) Division 83A contains the primary rules for taxing gains

ESS interests acquired under

employee share

schemes; and

(ii)

capital gains and

capital losses on such interests

should usually be disregarded during the period in

which Division 83A applies to them; and

(b) to align the treatment of ESS interests under Division 83A

and the CGT provisions by, for example:

Schedule 1 Employee share schemes

Part 2 Consequential amendments

40 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(i) turning off certain special CGT rules; and

(ii) extending some of the deeming provisions of that

Division into the CGT provisions; and

(c)

disregard

employee share trusts for most CGT purposes,

by treating ESS interests owned by such trusts as being

directly owned by the beneficiaries of the trusts.

130-80 ESS interests acquired under employee share schemes

Capital gains and losses

(1)

Disregard

any

capital gain or

capital loss to the extent that it

results from a

CGT event if:

(a) the CGT event happens in relation to an

ESS interest you

acquire under an

employee share scheme; and

(b) the CGT event is not CGT event E4, G1 or K8; and

acquisition is the time when the CGT event happens; and

(d) if Subdivision 83A-C applies to the interest:

(i) the time of the acquisition is the time when the CGT

event happens; or

(ii) the CGT event happens on or before the

ESS deferred

taxing point for the ESS interest.

(2) Subsection (1) does not apply if:

(a) Subdivision 83A-C applies to the

ESS interest; and

(b)

the

CGT event happens because you forfeit or lose the ESS

interest (other than by disposing of it) on or before the

ESS

deferred taxing point for the interest.

General acquisition rule

(3) Subsection 109-5(2) (about when you acquire a CGT asset) does

not apply to a

CGT asset and a

CGT event if:

(a) the CGT asset is:

(i)

share; or

(ii) a right to acquire a beneficial interest in a share; and

(b) the CGT event is CGT event A1; and

ESS interest; and

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 41

(d) the ESS interest is a beneficial interest in the share or right;

and

(e) Subdivision 83A-B or 83A-C (about employee share

schemes) applies to the ESS interest.

Market value substitution rule

(4) Sections 112-20 and 116-30 (about the market value substitution

rule) do not apply to the extent that they relate to:

(a) you acquiring an

ESS interest to which Subdivision 83A-C

(about employee share schemes) applies; or

(b)

you:

(i) forfeiting an ESS interest; or

(ii) forfeiting or losing an ESS interest that is a beneficial

interest in a right (without you having disposed of the

interest or exercised the right);

if Subdivision 83A-B or 83A-C applies to the ESS interest

(ignoring section 83A-310).

130-85 Interests in employee share trusts

Scope

(1) This section applies if:

(a)

you

acquire an

ESS interest under an

employee share

scheme; and

(b) Subdivision 83A-B or 83A-C applies to the ESS interest; and

in an

employee share trust.

Application of Division 83A, Part 3-1 and this Part

(2) Division 83A (Employee share schemes), Part 3-1 (Capital gains

and losses: general topics) and this Part apply as if you were

absolutely entitled to the relevant

share or right:

(a) from the time of acquisition of the

ESS interest; and

(b) until you no longer have an ESS interest in the share or right.

Note 1:

An interest you hold in an employee share trust may give rise to an

ESS interest because of the operation of section 83A-320.

Note 2:

As a result of subsection (2) of this section, CGT event E5 might

happen at the time of acquisition. This may result in the trustee

Schedule 1 Employee share schemes

Part 2 Consequential amendments

42 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

making a capital gain. However, any capital gain made by the

beneficiary would be disregarded under section 130-80.

(3) However, if this section applies to you because an

associate of

yours

acquired the

ESS interest, Division 83A, this Part and

Part 3-3 apply as if your associate were absolutely entitled to the

relevant

share or right (instead of you):

(a)

either:

(i) if Subdivision 83A-B applies to the ESS interest--from

the time of acquisition; or

(ii) if Subdivision 83A-C applies to the ESS interest--from

immediately after the

ESS deferred taxing point for the

ESS interest; and

(b) until your associate no longer has an ESS interest in the share

or right.

Note:

Once the ESS interest has been taxed to you under Subdivision 83A-B

or 83A-C, section 83A-305 (which treats the interest as having been

acquired by you, rather than your associate) is no longer relevant.

Subsection (3) of this section ensures that your associate then gets the

same tax treatment as you would have, had you originally acquired the

interest. This does not, however, imply a disposal from you to your

associate.

Meaning of employee share trust

(4)

employee share trust, for an

employee share scheme, is a trust

whose sole activities are:

(a)

obtaining

shares or rights in a company; and

(b)

ensuring

that

ESS interests in the company that are

beneficial interests in those shares or rights are provided

under the employee share scheme to employees, or to

associates of employees, of:

(i) the company; or

(ii)

subsidiary of the company; and

mentioned in paragraphs (a) and (b).

130-90 Shares held by employee share trusts

(1)

Disregard

any

capital gain or

capital loss made by an

employee

share trust, or a beneficiary of the trust, to the extent that it results

from a

CGT event, if:

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 43

(a) the CGT event is CGT event E5 or E7; and

(b) the CGT event happens in relation to a

share; and

by exercising a right; and

(d) the beneficiary's beneficial interest in the right was an

ESS

interest to which Subdivision 83A-B or 83A-C (about

employee share schemes) applied.

(2) Subsection (1) does not apply if the beneficiary acquired the

beneficial interest in the

share for more than its

cost base in the

hands of the

employee share trust at the time the

CGT event

happens.

130-95 Shares and rights in relation to ESS interests

For the purposes of Part 3-1 (Capital gains and losses: general

topics) and this Part, treat a

CGT event that happens in relation to

share or right in the same way as a CGT event that happens in

relation to an

ESS interest, if:

(a) Subdivision 83A-B or 83A-C (about employee share

schemes) applies to the ESS interest; and

(b) the ESS interest forms part of the share or right.

130-100 Application of certain provisions of Division 83A

The following provisions have effect for the purposes of this

Subdivision in the same way as they have for the purposes of

Division 83A:

(a) section 83A-130 (about takeovers and restructures);

(b) section 83A-305 (about associates);

(d) section 83A-325 (about relationships similar to employment);

(e) section 83A-335 (about stapled securities);

(f) section 83A-340 (about indeterminate rights).

41 Section 134-1 (note 3)

Repeal the note, substitute:

Note 3:

Item 1 in the table is modified for ESS interests acquired under

employee share schemes: see Division 83A and section 112-97.

Schedule 1 Employee share schemes

Part 2 Consequential amendments

44 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

Note 4:

This Division has no operation in relation to an option acquired under

an employee share scheme if the option is exercised before the ESS

deferred taxing point for the option: see Subdivision 130-D.

Division 83A applies instead.

42 Section 208-190

After "hold shares", insert "acquired".

43 Sections 208-205 to 208-215

Repeal the sections, substitute:

208-205 Distributions to employees acquiring shares under eligible

employee share schemes

Division 207 also applies to a

franked distribution made by an

exempting entity if:

(a) the distribution is made to an individual who, at the time the

distribution is made, is an employee of:

(i) the exempting entity; or

(ii)

subsidiary of the exempting entity; and

(b) the employee acquired a beneficial interest in the

share on

which the distribution is made:

(i)

under

employee share scheme; and

(ii) in circumstances specified as relevant in

section 208-215; and

trustee.

208-215 Eligible employee share schemes

(1) An individual acquires a beneficial interest in a

share in a

company under an

employee share scheme in circumstances that

are relevant for the purposes of paragraphs 208-205(b) and

208-235(b) if:

(a)

all

the

ESS interests available for acquisition under the

scheme relate to:

(i) ordinary shares; or

(ii) preference shares to which are attached substantially the

same rights as are attached to ordinary shares; and

(b) immediately after the individual acquires the interest:

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 45

(i) he or she does not hold a beneficial interest in more than

5% of the shares in the company; and

(ii) he or she is not in a position to control, or to control the

casting of, more than 5% of the maximum number of

votes that might be cast at a general meeting of the

company; and

non-equity share.

(2) An individual also acquires a beneficial interest in a

share in a

company under an

employee share scheme in circumstances that

are relevant for the purposes of paragraphs 208-205(b) and

208-235(b) if:

(a) the share is part of a stapled security; and

(b) Subdivision 83A-B or 83A-C (about employee share

schemes) applies to the beneficial interest in the stapled

security.

44 Section 208-235

Repeal the section, substitute:

208-235 Distributions to employees acquiring shares under eligible

employee share schemes

Division 207 also applies to a

distribution

franked with an

exempting credit made by a

former exempting entity as if it were

franked distribution if:

(a) the distribution is made to an individual who, at the time the

distribution is made, is an employee of:

(i) the former exempting entity; or

(ii)

subsidiary of the former exempting entity; and

(b) the employee acquired a beneficial interest in the

share on

which the distribution is made:

(i)

under

employee share scheme; and

(ii) in circumstances specified as relevant in

section 208-215; and

trustee.

45 Paragraph 208-240(b)

Omit "natural persons", substitute "individuals".

Schedule 1 Employee share schemes

Part 2 Consequential amendments

46 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

46 Paragraphs 208-240(c) and (d)

Omit "persons mentioned in paragraph (b)", substitute "individuals".

47 Paragraph 208-240(e)

Omit "a person", substitute "an individual".

48 Paragraph 208-240(f)

Omit "the person" (first occurring), substitute "the individual mentioned

in paragraph (e)".

49 Paragraph 208-240(f)

Omit "the person mentioned in paragraph (b)", substitute "that

individual".

50 Paragraph 208-240(g)

Omit "the person", substitute "the individual".

51 Subsection 247-15(3)

Repeal the subsection, substitute:

(3) This Division does not apply to a

capital protected borrowing if:

(a)

ESS interest is acquired under the borrowing; and

(b) Subdivision 83A-B or 83A-C (about employee share

schemes) applies to the ESS interest.

52 Paragraph 703-35(4)(b)

Omit "subsection (7)", substitute "subsection (5)".

53 Subsections 703-35(5), (6) and (7)

Repeal the subsections, substitute:

(5)

share or

membership interest in a company may be disregarded

under subsection (4) if:

(a) the entity who holds the beneficial interest in the share or

membership interest acquired that beneficial interest:

(i)

under

employee share scheme; or

(ii) by exercising a right, a beneficial interest in which was

acquired under an employee share scheme; and

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 47

(b) paragraphs 83A-105(1)(a) and (b) and subsection 83A-105(2)

apply to the beneficial interest acquired under the scheme;

and

stapled security.

54 Paragraph 707-325(5)(b)

Repeal the paragraph, substitute:

(b) in association with the acquisition of a

share in a company

in relation to which the conditions in subsection 703-35(5)

are met; or

55 Subsection 707-325(5) (note)

Omit "and section 139CD of the Income Tax Assessment Act 1936

deal", substitute "deals".

56 Subsection 709-80(1) (note 1)

Omit "held", substitute "acquired".

57 Subsection 713-140(5) (table item 3)

Repeal the item, substitute:

Income Tax

Assessment Act

1997

Division 83A

The Division does not apply in relation

to an

ESS interest acquired under an

employee share scheme before the day

specified in the choice if the Division

did not apply in relation to the interest

before that day.

58 Subsections 719-30(3), (4) and (5)

Repeal the subsections, substitute:

(3)

share or

membership interest in a company is covered by this

subsection if:

(a) the entity who holds the beneficial interest in the share or

membership interest acquired that beneficial interest:

(i)

under

employee share scheme; or

(ii) by exercising a right, a beneficial interest in which was

acquired under an employee share scheme; and

Schedule 1 Employee share schemes

Part 2 Consequential amendments

48 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

(b) paragraphs 83A-105(1)(a) and (b) and subsection 83A-105(2)

apply to the beneficial interest acquired under the scheme;

and

stapled security.

59 Paragraph 768-910(3)(c)

Omit "Division 86;", substitute "Division 86.".

60 Paragraph 768-910(3)(d)

Repeal the paragraph.

61 Subsections 768-910(4), (5) and (6)

Repeal the subsections.

62 Sections 768-920 to 768-945

Repeal the sections.

63 Subsection 768-955(2) (2nd sentence)

Repeal the sentence.

64 Subsection 768-955(4)

Repeal the subsection, substitute:

(4) This section does not apply to an

ESS interest if:

(a) Subdivision 83A-C (about employee share schemes) applies

to the interest; and

(b)

the

ESS deferred taxing point for the interest has not yet

occurred.

65 Subsection 855-45(4)

Repeal the section, substitute:

(4) This section does not apply to an

ESS interest if:

(a) Subdivision 83-C (about employee share schemes) applies to

the interest; and

(b)

the

ESS deferred taxing point for the interest has not yet

occurred.

66 At the end of Division 960

Employee share schemes Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009 49

Add:

960-415 Amounts that depend on market value

To avoid doubt, apply the rules in this Subdivision to the

market

value component of any calculation that involves market value.

67 Subsection 995-1(1) (definition of cessation time)

Repeal the definition.

68 Subsection 995-1(1) (definition of employee share

scheme)

Repeal the definition, substitute:

employee share scheme has the meaning given by subsection

83A-10(2).

69 Subsection 995-1(1) (definition of employee share trust)

Repeal the definition, substitute:

employee share trust has the meaning given by subsection

130-85(4).

70 Subsection 995-1(1)

Insert:

ESS deferred taxing point, for an

ESS interest, has the meaning

given by sections 83A-115 and 83A-120.

Note 1:

ESS is short for employee share scheme.

Note 2:

For ESS interests acquired before 1 July 2009, see subsection

83A-5(4) of the Income Tax (Transitional Provisions) Act 1997.

71 Subsection 995-1(1)

Insert:

ESS interest, in a company, has the meaning given by subsection

83A-10(1).

Note:

ESS is short for employee share scheme.

72 Subsection 995-1(1) (definition of qualifying right)

Repeal the definition.

Schedule 1 Employee share schemes

Part 2 Consequential amendments

50 Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 No. , 2009

73 Subsection 995-1(1) (definition of qualifying share)

Repeal the definition.

74 Subsection 995-1(1) (definition of subsidiary)

Repeal the definition, substitute:

subsidiary: the question whether a company is a subsidiary of

another company is to be determined in the same way as the

question whether a corporation is a subsidiary of another

corporation is determined under the Corporations Act 2001.

Note: The

expression

100% subsidiary has the meaning given by

Commonwealth of Australia Bills

TAX LAWS AMENDMENT (2009 BUDGET MEASURES NO. 2) BILL 2009