Section DC 12 — Income Tax Act 2007: Loans to employees under share purchase schemes

DC 12 Loans to employees under share purchase schemes Deduction (1) An employing company that provides financial assistance to an employee by way of an interest-free loan under a share purchase scheme is allowed a deduction for providing the assistance, under the following conditions: (a) the scheme must have the Commissioner’s approval, which must be given if the scheme meets all the criteria set out in sections DC 13 and DC 14 ; and (b) the deduction is allowed only for the 5 years after the date of the loan. Amount, and timing, of deduction (2) The amount of the deduction in each income year is equal to the interest that would have been payable by the employing company for the income year if the amount of the loan had been borrowed by the company at an interest rate of 10% annually with interest calculated with monthly rests, and as if repayments by the employee under the scheme were repayments of the notional loan by the company. Shares issued by another group company (3) Subsection (4) applies when— (a) an employing company is a member of a group of companies; and (b) an employee of the employing company acquires under a share purchase scheme a share issued by another company (the issuing company ) in the group; and (c) financial assistance is provided to the employee by way of an interest-free loan under the share purchase scheme; and (d) the scheme has the Commissioner’s approval, which must be given if the scheme meets all the criteria set out in sections DC 13 and DC 14 . Deduction for issuing company (4) The issuing company is entitled to the deduction that the employing company would have been allowed under subsections (1) and (2) had the employing company provided the loan. The employing company is not allowed a deduction for the loan under those subsections. Link with subpart DA (5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. Defined in this Act: amount , capital limitation , Commissioner , company , deduction , employee , employing company , general limitation , general permission , group of companies , income year , interest , pay , share , share purchase scheme , supplement , year , Compare: 2004 No 35 s DC 11