For a right acquired before 1 July 2009, the previous ESS rules continue to apply to rights that are forfeited or lost. A refund is only available where both:
- you lose the right without having exercised it
- the company that granted the right was your employer or a holding company of your employer when the right was acquired.
The previous ESS rules did not apply to the forfeiture of shares.
You may request an amendment of your assessment to exclude the discount previously included in your assessable income. There is no time limit for amending an assessment to exclude an amount from assessable income for a right acquired before 1 July 2009 which is lost.
Under the previous ESS rules, a refund was available if the rights were lost because an employee chose not to exercise the rights or because the conditions of the scheme protected the employee from a fall in the market value of the rights.
You may not forfeit or lose your rights if you receive valuable consideration for no longer holding the rights.
See also
For information on the previous ESS rules for lapsed and forfeited rights:
- ESS interests with a taxing point before 1 July 2009
- ATO ID 2003/189 – Income tax: employee share scheme: employee loses rights for no valuable consideration
- ATO ID 2001/699 (Withdrawn) – Income tax: employee share scheme (accessibility of options received prior to redundancy)
Rights acquired by your associate before 1 July 2009
If your associate acquires rights under an employee share scheme, which were provided in relation to your employment, under the previous ESS rules you (rather than your associate) have to include the discount in your assessable income in the year the rights were acquired by your associate. An associate can be a spouse, child, company or trustee of a trust.
If your rights are subsequently lost, you will not be entitled to exclude the discount from your assessable income.
See how we treat eligibility for a refund in the following examples:
- Example 1: Forfeiture and lapse of rights – eligible for refund
- Example 2: Forfeiture and lapse of rights – eligible for refund
- Example 3: Forfeiture of rights – no refund
Example 1: Forfeiture and lapse of rights – eligible for refund
Millie is granted rights in her employer Blue Skies Ltd under an ESS before 1 July 2009.
The rights are qualifying and Millie elects to be taxed at acquisition.
In the 2010 income year, some of Millie's rights are forfeited when she ceases employment and some of her rights lapse because she does not exercise them within the exercise period.
Millie loses the rights without having exercised them and she was an employee of Blue Skies Ltd when the rights were acquired. Therefore, she can exclude the discount on the rights from her assessable income for the acquisition year.
End of example
Example 2: Forfeiture and lapse of rights – eligible for refund
Jake is granted rights in his employer Earth Ltd under an ESS before 1 July 2009.
The rights will lapse if not exercised before 1 January 2012.
The rights are qualifying and Jake does not elect to be taxed at acquisition. Jake does not have a cessation time before 1 July 2009.
In the 2011 income year, Jake ceases employment with Earth Ltd triggering a deferred taxing point (cessation time). Jake includes the discount for the rights in his assessable income for the 2011 income year.
In the 2012 income year, Jake's rights lapse because he does not exercise them.
As Jake loses the rights without having exercised them and he was an employee of Earth Ltd when the rights were acquired, he can exclude the discount he had previously included in his assessable income.
End of example
Example 3: Forfeiture of rights – no refund
Wilfred is an employee of Bird Mania Ltd.
An associate of Wilfred is granted rights in Bird Mania Ltd under an ESS, in the 2005 income year, in relation to Wilfred's employment.
The rights are non-qualifying, as Bird Mania Ltd is not the employer of the associate. Therefore, Wilfred includes the discount on the rights on his 2005 tax return.
In the 2011 income year, the rights lapse without being exercised.
Wilfred does not meet the eligibility criteria for a refund of tax because Wilfred's associate was not an employee of Bird Mania Ltd when the rights were acquired.
End of example