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28 Aug 13 Decision Impact Statement - Fowler

The ATO has published a Decision Impact Statement in relation to the decision of the Full Court of the Federal Court in Fowler v FCT [2013] FCAFC 69; 2013 ATC 20-398.

The case concerned the date on which a director of a public company acquired rights under an employee share scheme (ESS) within the meaning of the former Division 13A of ITAA 1936.

At a meeting of the company's board of directors on 14 September 2006, it was resolved that, as part of their remuneration, options would be issued to the directors, and that shareholder approval would be obtained prior to issue. On 30 November 2006, an AGM approved the issue of options to the directors, including the issue of 742,500 options to the taxpayer.

The Full Court held that the contractual right created in the taxpayer on 14 September 2006 was not an unconditional right to acquire shares. Only on the giving of shareholder approval on 30 November 2006 did the taxpayer acquire unconditional rights to acquire shares under Division 13A.

Contrast this decision with the decision of the Full Court in FCT v McWilliam [2012] FCAFC 105, where an unconditional right to options was held to arise notwithstanding that it required shareholder approval. In particular, the Full Court held that the taxpayer acquired a contractual right to obtain the options to the shares in the company and the contractual right was a right for the purposes of Division 13A.

For the ATO's Decision Impact Statement on McWilliam, go here


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