Source: Taxation In Australia Journal Article
Published Date: 1 Aug 2016
Limited recourse loan plans remain a popular employee share scheme structuring option where the relevant company and/or a particular employee falls outside the scope of the new employee share scheme rules established by legislative amendments in 2015. Much of the commentary surrounding the implementation of loan plans centres on Div 7A of the Income Tax Assessment Act 1936 and the fringe benefits tax implications.
An often overlooked consideration is the operation of the share buy-back rules where, for example, the shares increase in value over the vesting period but, for whatever reason, fail to vest and are bought-back at the original subscription price. This article focuses on the interaction between the general CGT rules and the specific share buy-back rules, with a particular emphasis on the buy-back specific market value substitution rule and the relevant taxing point.
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