ESS interests acquired by your associates
If an associate acquires ESS interests which are provided in relation to your employment or services, the ESS rules require you (rather than your associate) to include the discount in your assessable income. Your associates can be your spouse, child, company or trustee of a trust (other that the trustee of an employee share trust).
If you have included a discount in your assessable income in relation to the ESS interests and the ESS interests are subsequently forfeited or lost, you will be entitled to exclude the discount from your assessable income (rather than the assessable income of your associate), provided the conditions for obtaining a refund are met.
Your employer will give you an ESS statement which includes ESS interests provided to your associates. You will need this statement to help you complete your tax return.
Example 9: Taxed upfront scheme - eligible for reduction, ESS interests acquired by an associate
In example 6, assume that instead of Lester receiving the shares in his own name, the shares are acquired by his spouse, Margaret.
As the shares are provided in relation to Lester's employment and therefore are part of his income, Lester will include the discount on his own tax return. Margaret will not need to include the discount on her tax return.
As the shares are in Margaret's name, not Lester's name, Margaret has ownership of them. Therefore, once they have been included in Lester's income under the employee share scheme rules, they no longer have any connection to Lester.
For CGT purposes, Margaret is taken to have acquired the shares at market value, which is $2,000.
If Margaret incurs any additional costs in relation to the shares, they can be added to the $2,000 to form the cost base. When Margaret disposes of the shares, the cost base will be used to calculate any subsequent gains or losses on the shares.
These gains or losses will be recognised under the CGT regime and recorded only on Margaret's tax return. Lester will not need to include anything on his tax return in relation to the capital gain or capital loss.
Last Modified: Monday, 28 June 2010