Gennai and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered a dispute between the Applicant, Mr Gennai, and the Commissioner of Taxation concerning the Applicant's assessable income for the 2015 financial year. The dispute arose from the Commissioner's amended assessment, which included an amount representing a discount in respect of employee share scheme (ESS) interests acquired by the Applicant from his employer, Cloudera.

The primary legal issue before the Tribunal was whether Subdivision 83A-C of the *Income Tax Assessment Act 1997* (Cth) applied to the ESS interests granted to the Applicant. Specifically, the Tribunal had to determine if, at the time the options were granted, there was a "real risk" that the Applicant would forfeit or lose those options under the terms of the scheme, as required by section 83A-105(3)(b)(i) of the Act.

The Tribunal reasoned that the phrase "real risk" required an objective assessment of whether there was an actual possibility of forfeiture or loss that was more than a mere possibility or rare eventuality. This interpretation was supported by the plain meaning of the words and the Explanatory Memorandum accompanying the legislation, which indicated that a risk is not real if a reasonable person would disregard it as highly unlikely or a rare eventuality. The Tribunal found that the conditions of the Cloudera scheme, including the potential for termination of employment, presented a real risk of forfeiture or loss of the ESS interests granted on 8 November 2013. Consequently, Subdivision 83A-C applied, deferring the inclusion of the discount in the Applicant's assessable income until the 2015 income year.

The Tribunal affirmed the decision under review.