• Income test for the upfront concession $1,000 reduction

    If you have participated in a taxed-upfront scheme – eligible for reduction, you may be able to reduce your taxable income by up to $1,000.

    In order to access the $1,000 reduction you must:

    • have a taxable income after adjustments in the income year of $180,000 or less, and
    • satisfy the    

    At the time you participate in an ESS you may not know whether you meet the income test. You will calculate your taxable income after adjustments when you complete your tax return for the year.

    Calculating your taxable income after adjustments

    When preparing your tax return, you must calculate your taxable income after adjustments for the income year in order to determine whether you are entitled to the $1,000 reduction.

    You calculate your taxable income after adjustments for the income year by adding your:

    If your taxable income after adjustments is $180,000 or less, you are entitled to reduce your employee share scheme discount amount by up to $1,000. You cannot use the reduction to reduce your discount amount from a taxed-upfront scheme - eligible for reduction to less than nil.

    Example 1: Taxed-upfront scheme – eligible for reduction, employee is eligible for the concession

    Lester works for Fishing Charters Ltd and acquires 600 shares in Fishing Charters under an ESS on 29 July 2015.

    The total market value of the shares is $3,000. Lester is only required to pay $1,500 to purchase the shares; therefore, he acquires the shares for a discount of $1,500 ($3,000 less $1,500).

    On 8 July 2016, Fishing Charters gives Lester an ESS statement with an amount of $1,500 at label D 'Discount from taxed upfront schemes – eligible for reduction'.

    Lester has to complete item 12 'Employee share schemes' on his 2016 tax return. He writes $1,500 at label D 'Discount from taxed upfront schemes – eligible for reduction'.

    Lester completes the remainder of his tax return and his taxable income after adjustments (including the $1,500 discount) is $91,000.

    As Lester acquired his shares under a taxed-upfront scheme eligible for reduction and his taxable income after adjustments is less than $180,000, Lester is eligible for the upfront concession of $1,000.

    As Lester has no other ESS interests, he now writes $500 ($1,500 total discount received less $1,000 concession) at label B 'Total assessable discount amount'.

    End of example

     

    Example 2: Taxed-upfront scheme – eligible for reduction, employee is not eligible for the concession

    Jane works for Star Ltd and acquires 500 shares in Star Ltd under an employee share scheme on 3 July 2009.

    The total market value of the shares is $4,000. Jane is required to pay $2,700 to purchase the shares; therefore, she acquires the shares for a discount of $1,300 ($4,000 less $2,700).

    On 5 July 2010 Jane's employer, Star Ltd gives Jane an ESS statement with an amount of $1,300 at label D 'Discount from taxed upfront schemes – eligible for reduction'.

    Jane has to complete item 12 'Employee share scheme' on her 2010 tax return. She writes $1,300 at label D 'Discount from taxed upfront schemes – eligible for reduction'.

    Jane completes the remainder of her tax return and after adjustments for reportable fringe benefits, reportable superannuation contributions and total net investment loss, her taxable income (including the $1,300 discount) is $200,000.

    As Jane's taxable income after adjustments exceeds $180,000, Jane is not eligible for the upfront concession of $1,000.

    As Jane has no other ESS interests and she is not entitled to claim the $1,000 concession, she now writes $1,300 at label B 'Total assessable discount amount'.

    Note: As Star Ltd will not know Jane's taxable income after adjustments they report the discount to us as $1,300.

    End of example
    Last modified: 21 Dec 2015QC 47651