When the current ESS rules do apply
The current law applies to ESS interests that are qualifying shares or rights you acquired before 1 July 2009 if:
- you did not elect to be taxed upfront under the previous law, and
- a cessation time did not happen to your shares or rights before 1 July 2009.
Deferred taxing point
Transitioned interests will have a deferred taxing point that is determined by reference to the cessation time worked out using the previous law. The market value of the ESS interests at the deferred taxing point is worked out using the new law.
The new 30-day rule will also apply so that if you dispose of your ESS interest (or the share acquired on exercise of the right) within 30 days after the deferred taxing point, the deferred taxing point becomes the date of that disposal.
Refund of tax for forfeiture of an ESS interest
The previous law continues to apply to a transitioned right where the right is forfeited or lost after 30 June 2009. If you satisfy the conditions for a refund of tax under the previous law then the conditions under the current rules are also satisfied.
Will you get an ESS statement?
Your employer will not know whether you elected to be taxed upfront under the previous law. As a result, your employer must include details on an ESS statement showing all transitioned interests with a possible deferred taxing point during the income year.
TFN withholding tax rules do not apply to transitioned interests
Your employer is not required to withhold tax if you have a deferred taxing point for a transitioned interest, even if you have not given them your TFN or ABN by the end of the income year.
A transitional rule provides that a right acquired before 1 July 2009, which only clearly becomes an ESS interest after 1 July 2009 (an indeterminate right), will be treated as if it were always subject to the previous law.
If under the previous law, tax is deferred on the right beyond 1 July 2009, the right will be treated as a transitioned interest.
The current ESS rules will apply to pre 1 July 2009 interests that are transitioned interest.