Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill

25 New sections CW 26B to CW 26G inserted

After section CW 26, insert:

CW 26B Share purchase schemes

An amount derived from a share purchase scheme is exempt income.

Defined in this Act: amount, exempt income, share purchase scheme

CW 26C Meaning of share purchase scheme
Share purchase scheme

(1)

Share purchase scheme means—

(a)

a scheme that had the Commissioner’s approval under section DC 12 (Loans to employees under share purchase schemes) before that section’s repeal by the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2017:

(b)

an arrangement of which the Commissioner has been notified under section 63B(1) of the Tax Administration Act 1994, and for which the requirements in section 63B(2) of that Act are met, if the arrangement meets the criteria in subsections (2) to (9).

Purchase of shares

(2)

The arrangement must provide that—

(a)

the shares are available for no more than their market value at the date of purchase or subscription; and

(b)

the market value of the shares purchased or subscribed for by an employee, or a trustee for an employee, under the arrangement is less than or equal to $5,000 in a year; and

(c)

the difference between the market value of the shares purchased or subscribed for by an employee or a trustee and the amount that an employee spends on buying shares under the arrangement is less than or equal to $2,000 in a year.

Eligibility

(3)

The arrangement must provide that—

(a)

a full-time permanent employee to whom an offer under the arrangement is made is eligible to participate in the arrangement, on an equal basis with 90% or more of other full-time permanent employees to whom an offer under the arrangement is not subject to foreign security disclosure rules; and

(b)

if it applies to part-time employees, those employees to whom an offer under the arrangement is made are eligible to participate in the arrangement, on an equal basis with 90% or more of other part-time employees to whom an offer under the arrangement is not subject to foreign security disclosure rules; and

(c)

if it applies to seasonal workers, those employees to whom an offer under the arrangement is made are eligible to participate in the arrangement, on an equal basis with 90% or more of other seasonal workers to whom an offer under the arrangement is not subject to foreign security disclosure rules; and

(d)

if it requires that an employee spend a minimum amount on buying shares, it requires no more than $1,000 to be spent in a year; and

(e)

if it requires that an employee must have a minimum period of employment or service before the employee is eligible to participate, it requires—

(i)

no more than 3 years full-time work, for full-time employees; and

(ii)

no more than an accumulated period that is equivalent of 3 years full-time work, for other employees.

Loans to employees

(4)

The arrangement must provide that—

(a)

if it requires that an employee must buy the shares for more than nominal consideration,—

(i)

a loan for the cost of the shares is available to the employee; or

(ii)

the employee may pay for the shares using regular instalments of a month or less, and that the regular instalments are subject to paragraph (d)(ii) and subsection (5); and

(b)

any loan to an employee to buy shares is free of interest and other charges; and

(c)

any loan or regular instalments have a maximum term of 60 months and a minimum term of 36 months; and

(d)

any loan to an employee to buy shares is repayable by regular instalments of a month or less, but—

(i)

the loan is repayable early in full or in part at the employee’s discretion; and

(ii)

in the case of an employee who is on unpaid or maternity leave for more than a month, the regular instalments are suspended while on leave and the term of the loan is extended as appropriate.

Serious hardship

(5)

The arrangement must provide, in the case of serious hardship that results or may result from an employee’s continued participation in the share purchase scheme, that, with the employee’s agreement,—

(a)

any regular instalments and any other terms related to payment by the employee may be varied; or

(b)

the employee may withdraw from the arrangement, and any shares are bought from the employee for their market value on the day of withdrawal, subject to the repayment of any outstanding loan.

Withdrawal

(6)

The arrangement must provide that the employee may withdraw from the arrangement on giving 1 month’s notice to the relevant party. Any shares must be bought from the employee for the lesser of their market value on the day of withdrawal and their cost to the employee, subject to the repayment of any outstanding loan.

Period of restriction

(7)

The arrangement must provide that,—

(a)

if the employee has not acquired the shares for market value, there is a period of restriction during which the shares must not be disposed of and that period of restriction is no longer than the shorter of—

(i)

a period of 3 years starting on the date the employee acquired the shares, or the period of repayment of a loan made to them under the scheme for this purpose, whichever is longer; and

(ii)

a period starting on the date the employer acquired the shares and ending on the date the employee ends their employment with the company that employs them, or a company in the same group of companies if the employee is transferred; or

(b)

if the employee has acquired the shares for market value, there is a period of restriction during which the shares must not be disposed of and that period of restriction is no longer than the shorter of—

(i)

the shortest period in paragraph (a)(i) and (ii); and

(ii)

any period of restriction provided by the arrangement, if that period finishes on or after the date on which the employee has no further repayment obligations for a loan made to them under the scheme.

End of period of restriction: general rule

(8)

When the period of restriction provided by subsection (7) ends, the arrangement must provide that—

(a)

the shares are transferred to the employee if the employee is still employed by the relevant company and they have not already been transferred; or

(b)

if the employee chooses, the shares are purchased for the lesser of—

(i)

the cost of the shares to the employee:

(ii)

the market value of the shares on the date the period of restriction ends.

End of period of restriction: certain cases

(9)

Despite subsection (8), when a period of restriction ends because the employee’s employment ends through their death, accident, sickness, redundancy, or retirement at normal retiring age, the arrangement must provide that—

(a)

the shares are transferred to the former employee if they have not already been transferred, or transferred to the legal representative of the employee’s estate, as appropriate; or

(b)

if the employee chooses, the shares are purchased for the lesser of—

(i)

the cost of the shares to the employee:

(ii)

the market value of the shares on the date the period of restriction ends.

Defined in this Act: amount, arrangement, Commissioner, company, employee, employer, employment, group of companies, interest, loan, market value, normal retiring age, notice, pay, share, share purchase scheme, trustee, year

CW 26D Meaning of employee

For the purposes of section CW 26C, employee

(a)

means a person that is employed by a company; but

(b)

does not include person who,—

(i)

is a director of the company, unless they are employed by the company:

(ii)

is a corporation sole, a body corporate, or an unincorporated body:

(iii)

with any associated person, holds 10% or more of the issued capital of the company.

Defined in this Act: associated person, company, director, employment

CW 26E Meaning of normal retiring age

For the purposes of section CW 26C, normal retiring age means—

(a)

for an employee other than 1 to whom paragraph (b) applies, no less than 60 years of age:

(b)

for a female employee who is entitled under a contract of employment entered into before 1 April 1978 with the company that employs her to retire before 60 years of age, no less than 55 years of age:

(c)

for any employee, an age that is earlier than the age referred to in paragraph (a) or (b) and that the Commissioner considers reasonable given the nature of the employment or the general terms of employment in the business or occupation of the employee.

Defined in this Act: business, Commissioner, company, employee, employment, normal retiring age

CW 26F Meaning of share

For the purposes of section CW 26C, share means, for a company whose shares are made available under a share purchase scheme, a fully paid ordinary share that ranks equally with, and has the same designation as, an existing ordinary voting share in the company.

Defined in this Act: company, share, share purchase scheme

CW 26G Meaning of trustee

For the purposes of section CW 26C, trustee means a group of persons appointed to administer a share purchase scheme of a company that employs an employee, and to hold shares under that scheme on trust for the employee during any period of restriction described in section CW 26(7).

Defined in this Act: company, employee, group of persons, share, share purchase scheme, trustee