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22 Aug 13 Decision Impact Statements - McWilliam

The ATO has published a Decision Impact Statement in relation to the decision of the Full Court of the Federal Court in FCT v McWilliam [2012] FCAFC 105; 2012 ATC 20-339.

The case concerned the question of when a taxpayer acquires a "right" under an employee share scheme for the purposes of former Division 13A of ITAA 1936. Specifically, the issue before the Full Court concerned whether the taxpayer acquired a "right" under an employee share scheme upon acquiring a right to require the employer to issue options to purchase shares, or whether the employee acquired that right only upon the issue of the options under the employee share scheme

On 1 July 2003, the taxpayer commenced employment with the company. No formal employment contract was executed. However, a draft contract given to the taxpayer prior to him starting work included a term granting him a specified number of options

The Full Court relied on the finding of the Tribunal that the taxpayer had acquired the options on 1 July 2003. On that basis, the Commissioner's appeal was found by the Court to be incompetent as not being on a question of law.

The Full Court also concluded, in the alternative, that if the taxpayer did not acquire the options on 1 July 2003, he nevertheless obtained 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.

The Decision Impact Statement states as follows:

"The decision of the Full Court was based on the findings of fact made by the Tribunal.

The Full Court's conclusion that if the taxpayer did not acquire the options on 1 July 2003, he nevertheless obtained a contractual right to obtain the options to the shares in the company and that was a right for the purposes of Division 13A, appears predicated on a conclusion that the right to the options was unconditional and not subject to a future event. A conditional right to an option of the kind considered by the Full Court in Fowler v FCT [2013] FCAFC 69 will not be a Division 13A right.

Division 13A has been repealed so the case has little ongoing significance."

 


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