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  • Employee share scheme letters

    We may send you a letter about your employee share schemes (ESS) interests if information from your employer shows that you paid less than market value for your interests and the discount doesn't match what you declared in your tax return.

    The letter will include an income summary schedule that compares the details you declared in your tax return with the information your employer reports.

    If you have a myGov account that is linked to ATO online services, we’ll send the letter to your myGov Inbox titled: We have found an error in your income tax return.

    If you don’t have a myGov account, we’ll send the letter to the most recent postal address we have for you.

    On this page:

    Eligibility for ESS interest discounts

    Employee share schemes give employees:

    • shares in the company they work for at a discounted price
    • the opportunity to buy shares in the company in the future (this is called a right or option).

    The discount you received on the market value for ESS interests needs to be included in your tax return as assessable income.

    What you need to do

    Review the income summary schedule and compare the information in your records. You can then determine if you agree or disagree with the amended details.

    If you have a question, phone us on 1300 768 912 and select option 3 between 8.00am and 6.00pm, Monday to Friday. Quote the reference number found at the top right of your letter when you contact us.

    Sample ESS schedule

    Below is a sample ESS schedule for the year ended 30 June 2020. Keep in mind your schedule will show the relevant information from your tax return compared with information we hold and may not look the same. Use the definitions to help understand your schedule.

    Table 1: Employee share scheme information

    Provider

    Plan details

    Plan date

    Item 12D Eligible for reduction ($)

    Item 12E Not eligible for reduction ($)

    Item 12F Discount from deferral schemes ($)

    Item 12G Discount on ESS interests acquired pre-1 July 2009 ($)

    Item 12C TFN amounts withheld ($)

    Provider 1

    ESS plan name

    ESS plan date

    $0.00

    $0.00

    $26,000

    $0.00

    $0.00

    Total employee share scheme discounts (income) = $26,000

    Total assessable employee share schemes discount amount – Item 12B = $26,000

    Table 2: Changes to your income tax return items for the 2019–20 financial year

    Tax return item and description

    Original amount reported

    New amount

    Variation

    <Label><description> $ amount $ amount $ amount

    Schedule definitions

    The following definitions will help you understand your schedule:

    • Taxed-upfront schemes (eligible for reduction) – if you acquire ESS interests under a taxed-upfront scheme that meets certain conditions, you may be eligible to receive a tax concession of up to $1,000. You need to satisfy an income test to be eligible for the reduction. You also must not hold more than 5% ownership of the company, or control more than 5% of the voting rights in the company after acquiring the ESS interests.
    • Taxed-upfront scheme (not eligible for reduction) – this is the default tax position. If you acquire ESS interests under a scheme that doesn't meet the conditions for a tax-deferred scheme or satisfy eligibility requirements for the $1,000 reduction, the total discount you receive will be assessable in the financial year you acquired the ESS interests.
    • Deferral schemes – if you acquired the ESS interests under the scheme and meet certain conditions, the ESS interests will be taxed in the income year that the deferred taxing point occurs in.
    • ESS interests – shares, stapled securities, or rights (including options) to acquire shares or stapled securities.
    • Cessation time – the cessation time for shares is generally the time when you acquire them. However, there could be restrictions or conditions related to those shares that make the cessation time a later date. It does not apply to ESS interests acquired after 30 June 2009.
    • TFN amounts withheld from discounts – withholding tax will apply if both of the following apply:
      • a discounted ESS interest was provided to an employee
      • the employee has not provided their tax file number (TFN) or Australian business number (ABN) by the end of the relevant financial year.
       

    If you agree

    If you agree with our information, you don’t need to do anything. We'll send you an amended notice of assessment 28 days after the date shown on your letter. If you have a myGov account linked to ATO online services, we'll send your amended notice to your myGov inbox.

    Once you receive your amended notice of assessment, you'll need to pay any amounts you owe us by the due date.

    If you disagree

    If you disagree with the details reported, you need to let us know before the due date noted in your letter. You can contact us by either:

    Be aware that the internet isn't a secure environment. We don't control the path of inbound and outbound emails. If you choose to communicate with us by email, the privacy of your personal information can't be guaranteed.

    Once we’ve assessed your response, you’ll receive an amended notice of assessment. The case officer reviewing your supporting documents may contact you if we require additional information.

    If we don't receive a response from you within 28 days of your letter's date of issue, we’ll automatically amend your tax return using the information we have. You’ll then receive an amended notice of assessment.

    Supporting documents

    If you disagree with information contained in the letter from us about your employee share schemes (ESS), we may ask you or your tax practitioner to provide the following supporting documents:

    • a calculation statement showing workings and the breakdown of figures
    • an amended ESS statement from your employer
    • share registry advice showing the market price on acquisition/disposal
    • the prior-year section 139E election.

    See also:

    Last modified: 22 Feb 2021QC 43488