Employee share schemes - record keeping
Employee share schemes - record keeping
You may need to include as income in your tax return discounts on shares, stapled securities or rights to acquire them (ESS interests) that you received under an employee share scheme (ESS), whether issued in Australia or overseas.
ESS interests acquired before 1 July 2009
If you acquired qualifying ESS interests under an ESS, the discount received will be assessable at the cessation time, unless you elect to include the discount in the year you acquired the ESS interests. If you make this election, and you satisfy some additional conditions, only the amount of the discount over $1,000 is included in your income.
If the ESS interests are not qualifying, you will be taxed on the discount in the year in which you acquire the interests.
If you make an election, you must record it on your income tax return for the income year in which you acquire the qualifying ESS interests. Your election applies to all the qualifying ESS interests you acquire in an income year. You cannot revoke an election you have made.
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For the 2008-09 income year, the law treats you as if you had made an election if:
- the total discount you receive on qualifying ESS interests from all employee share schemes in the income year is $1,000 or less, and
- all the schemes from which you received qualifying ESS interests meet conditions that allow the first $1,000 of the total discount on qualifying interests to be exempt from tax.
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If a relative or other associate has acquired ESS interests as a result of your involvement in an employee share scheme, different rules apply. See Employee share schemes - answers to frequently asked questions by employees.
ESS interests acquired after 30 June 2009
If you acquired ESS interests under an ESS, you are required to report the discount received at acquisition. However, where you and the ESS meet certain conditions, you may be eligible to defer taxation. The discount on those ESS interests that are eligible for deferral of tax will be reported at the deferred taxing point, which may be up to seven years from the date the ESS interests were acquired.
If either you or the ESS do not satisfy the conditions for deferral and are required to report the discount in the year you acquire the interests, you may be able to reduce the discount by up to $1,000 where certain conditions are met.
For ESS interests, it is important to keep a record of:
- the date you acquired them and the date you sold them (or the date you exercised the rights)
- the total number you acquired, exercised or sold
- any amounts you paid or received
- the amount or percentage of the discount you received or other proof of the market price on the date of acquisition and the reporting date (if applicable)
- the rules of the employee share scheme, and
- for interests acquired before 1 July 2009, details of elections made to include discounts in the year of acquisition.
If you disposed of your ESS interests because of a corporate restructure or takeover, special provisions may apply. See ESS - rollover relief for further information.
If you qualify as a temporary resident or an Australian resident engaged in foreign service, and you acquire ESS interests, special rules may apply to calculate your discount. See ESS - foreign income exemption for temporary residents.
See Employee share schemes - answers to frequently asked questions by employees for information relating to ESS interests that were acquired before 1 July 2009, including:
- discount
- qualifying
- election
- acquisition
- cessation.
See ESS - a practical guide for employees for information relating to ESS interests that were acquired after 30 June 2009, including:
- discount
- acquisition
- deferred taxing point.
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If you need help in applying this information to your own situation, phone us on 13 28 61.
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Last Modified: Wednesday, 16 June 2010
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