Buying out employee incentives - buyer beware

As outlined by Angelina Lagana and Jack Aquilina, taxpayers who have issued employee options and share rights and who are undergoing mergers or acquisitions should seek advice early.

The Full Bench of the Federal Court has in Clough Limited v Commissioner of Taxation [2021] FCAFC 197 (Clough) affirmed the primary Federal Court judge’s decision to deny a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 97) for expenses the taxpayer incurred in cancelling employee options and incentive rights. However, the Full Court allowed the taxpayer’s appeal to the extent of the taxpayer being entitled to a deduction for the expense over five years under section...

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Authors: Angelina Lagana, Jack Aquilina

Published Date: 24 November 2021