Davies v Deputy Commissioner of Taxation

Davies v Deputy Commissioner of Taxation is a decision from the Australian court concerning the taxation of employee share schemes, specifically when shares and options should be brought to tax. The case involves the interpretation of section 83A-15 of the Income Tax (Transitional Provisions) Act 1997 (Cth) and whether it applies where the right to acquire shares is merely contingent. The court was also required to determine whether a contingent right to acquire shares can be considered a right to acquire shares upon satisfaction of the contingency. Additionally, the court examined whether the obligation to issue shares and options only arose upon satisfaction of conditions and if these conditions were related to the formation or performance of the contract. Finally, the court considered whether promissory estoppel arose in the context of the share acquisition.

The court's reasoning focused on the contingent nature of the share acquisition and whether the conditions attached to the shares and options went to the formation or performance of the contract. The court held that the contingent right to acquire shares was not a right to acquire shares until the contingency was satisfied, and therefore, section 83A-15 did not apply. The court also found that the conditions were related to the performance of the contract, not its formation. Consequently, the obligation to issue shares and options only arose upon satisfaction of the conditions. The court did not find that promissory estoppel arose in this case.

The outcome of the case was that Mr Davies' appeal was allowed, and he was entitled to succeed. The court directed that the applicant file and serve any affidavits and submissions on the question of costs together with a draft order substantively disposing of the proceeding within seven days. The respondent was directed to file and serve any affidavits and submissions in response together with any competing minute of order within a further seven days. The court stood over to 21 August 2015 for the making of final orders if not agreed. The court proposed to resolve these issues on the papers unless some substantive reason was presented for requiring an oral hearing.