Share purchase scheme account maintained by CRS Nominees Limited

Determination CRS 2018/006 – share purchase scheme account maintained by CRS Nominees Limited is an excluded account for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994

Reference

This determination is made under section 91AAW of the Tax Administration Act 1994.

Interpretation

In this determination, unless the context otherwise requires:

“Benefit” means the value of a benefit that an employee receives under a share purchase scheme.

"CRS applied standard" means the CRS standard as modified by section 185O for the determination of requirements under the Tax Administration Act 1994.

“CRS publication” means the Standard for Automatic Exchange of Financial Account Information in Tax Matters, published by the Organisation for Economic Co-operation and Development.

“CRS reporting period” means the period from 1 July 2017-31 March 2018 and any subsequent period from 1 April-31 March.

"CRS standard" means the Common Standard on Reporting and Due Diligence for Financial Account Information, as amended from time to time, which is a standard—
(a) developed by the Organisation for Economic Co-operation and Development and the Group of Twenty countries; and
(b) agreed by the Council for the Organisation for Economic Co-operation and Development on 15 July 2014; and
(c) contained in Part IIB of the CRS publication.

“Employee” means (depending on the context) an employee of Fletcher Building Limited (FBL), Genesis Energy Limited (GEL), or Meridian Energy Limited (MEL).

“Employer” means (depending on the context) FBL, GEL, or MEL.

"Financial account" means an account defined as a financial account in Section VIII(C)(1) of the CRS standard.

“Good leaver” means when an employee with a share purchase scheme account leaves the share purchase scheme in any of the following situations – death, illness, injury, disability, redundancy, retirement (where required by the employer), or the relevant part of the employer being sold, closed down or otherwise ceases to be part of the employer.

“Share purchase scheme” means a share purchase scheme maintained by CRS Nominees Limited for an employee of any of the following companies:

• FBL;
• GEL; or
• MEL.

"Share purchase scheme account" means a share purchase scheme financial account maintained by CRS Nominees Limited for an employee of any of the following companies:

• FBL;
• GEL; or
• MEL.

Discussion (which does not form part of the determination)

CRS Nominees Limited (a wholly owned subsidiary of Computershare Investor Services Limited) acts as nominee and trustee in respect of the shares purchase schemes created by FBL, GEL, and MEL. FBL, GEL and MEL are listed on the NZX Main Board and are not in the business of providing financial services to customers.

CRS Nominees Limited’s role is to hold the legal title to the equity securities (being ordinary shares in FBL, GEL and MEL) on behalf of employees that participate in the share purchase schemes.

CRS Nominees Limited is a Reporting New Zealand financial institution for CRS purposes.

Scope of determination

A share purchase scheme account, as defined in this determination, does not fully satisfy the requirements for, but has substantially similar characteristics to, a savings or investment account in subparagraph (C)(17)(b) of Section VIII of the CRS standard.

This is determination is issued subject to the following conditions being satisfied (in relation to CRS Nominees Limited, each of the respective employers, each of the share purchase schemes, and each of the share purchase scheme accounts):

• The employer administers the share purchase scheme, and is not a financial institution under the CRS applied standard;
• CRS Nominees Limited holds the legal title to the shares as trustee of the trust established by the employer for the purposes of the share purchase scheme;
• The employer remains subject to applicable disclosure requirements under both the NZX Listing Rules and the Companies Act 1993;
• The share purchase scheme accounts are available to all of the employees of the employer on the same basis;
• The employee contributions to the share purchase scheme accounts are limited to the following amounts:
  • $5,000 per year (deducted from payroll);
  • any dividends declared by the employer companies that are reinvested in the share purchase schemes (for employees of FBL and GEL);
  • any bonus issues made subject to the share purchase schemes; and
  • any renounceable rights issues (or other forms of capital re-organisation) that are required to be cashed up and the proceeds used to subscribe for ordinary shares in the share purchase schemes.
• The employer contributions to the share purchase scheme account on a “2 for 1 basis”. This applies as follows (depending on who the employer is):
  • FBL: The employer contributes 1 “award share” to the account for every 2 shares that the employee acquires (with their employee contribution).
  • GEL: The employer contributes 1 “award share” to the account for every 2 shares that the employee acquires (with their employee contribution).
  • MEL: The employer contributes a $1 “award amount” for every $2 that the employee contributes to the account.
• An employee is generally only able to receive the full benefit of the employer contributions to the share purchase account upon holding the account for three years. The only exception to this is if they are a “good leaver”;
• All benefits provided to the employees in relation to the share purchase scheme accounts are reported to Inland Revenue; and
• The total contributions (employer and employer) to the share purchase scheme accounts are limited to USD 50,000 per CRS reporting period. This includes the following amounts which may (depending on the context) be contributed to the account:
  • Employee contributions;
  • Award shares; and
  • Award amounts.

The MEL share purchase scheme provides that the employer’s contribution is broken down into two parts, firstly a cash bonus provided that the shares are held for the 3 year qualifying period and secondly, a cash performance award bonus provided that MEL’s total shareholder return exceeds the average for the industry. In other words, an employee of MEL that holds a share purchase scheme account will only be eligible to receive the full “cash bonus”, if MEL achieves defined performance requirements.

Determination

A share purchase scheme account, as defined in this determination, is an excluded account for the purposes of the CRS applied standard and the requirements under Part 11B of the Tax Administration Act 1994. If any of the above conditions are not satisfied for a particular share purchase scheme account this determination will not apply to that account (i.e. the account will not be an excluded account).

Application date

This determination applies for the CRS reporting period 1 July 2017 to 31 March 2018, and subsequent CRS reporting periods under the CRS applied standard.

Tony Morris
Customer Segment Lead, Significant Enterprises Customer Segment