Under the former employee share scheme provisions a person could acquire a “right” if another person created the right in that person. The employee was required to include in his or her assessable income the discount given in relation to the right (unless an election was made to defer).
In a recent case, the taxpayer had a contractual right to have options issued to him which vested when he commenced employment although the options were not actually granted by the employer until a later date. The discount on the date of the creation of the contractual right to have the options issued was less than the date on which the options were actually issued. The taxpayer included the discount in his assessable income by reference to the former date but the Commissioner sought to assess on the basis of the discount on the latter date.
The former employee share scheme provisions provided that a person could acquire a right if another person created the right in that person.
The Full Court found that a contractual right of a person to have options issued to them was a right that fell within the former employee share scheme provisions. Thus the date that was relevant to determining the value of those rights was the date that the contractual right of a person to have options issued to them arose and not the date of the issue of the options.
The new employee share provisions deal with this circumstance. Under the new provisions if you acquire a beneficial interest in a right and the right later becomes a right to acquire a beneficial interest in a share (e.g. the right becomes an option) then the provisions apply as if the right had always been a right to acquire the beneficial interest in the share.