Calculating the discount
For ESS interests that are shares acquired under a start-up concession, you will need to calculate the discount to ensure that the eligibility criteria for the concession have been met. The discount must be no more than 15% of the share's market value when the employee acquires it. If all criteria for the concession are met, the discount is not taxable and the employee does not need to report the discount amount to us.
For ESS interests that are rights acquired under a start-up concession, you will need to ensure that the eligibility criteria for the concession have been met by checking that the amount payable to exercise the ESS interest is greater than or equal to the market value of an ordinary share in the company when the ESS interest is acquired. If all criteria for the concession are met, the employee does not need to report the discount amount to us.
For ESS interests acquired under taxed-upfront schemes, you will need to calculate the discount (market value of the ESS interests when they are acquired less any consideration paid or payable by your employees, for the interests) and then include this amount on the statements you provide to us and your employees.
For ESS interests acquired under tax-deferred schemes you will need to determine the amount to be included in your employee's assessable income in the income year that the deferred taxing point occurs. The amount to be included is the market value of the ESS interest at the deferred taxing point, reduced by the cost base of the ESS interest (the cost base may include other expenses, such as brokerage fees).
When calculating the discount amount at the deferred taxing point, you may not know all the elements of the cost base. In that case you may reasonably estimate costs when calculating the discount.
You need to work out the discount amount to include on your employee’s ESS statement.