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  • Employee share schemes

    We may send 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 does not match what you declared in your tax return.

    The letter will include a schedule showing the relevant information from your tax return compared with information we hold.

    The discount you received on the market value for employee share scheme interests should be included in your tax return as assessable income.

    Understanding your ESS schedule

    Below is a sample employee share scheme (ESS) schedule. Keep in mind that your schedule will contain your own details and may not look exactly like this one.

    Example – sample ESS schedule

    The table below shows an example of how the information is reported to us.

    Example of Income schedule for reporting employee share scheme (ESS) information to the ATO for year ended 30 June 2017. The schedule headings are Provider, Plan details, Plan date, Item D12 eligible for reduction, Item 12E not eligible for deduction, Item 12F discount form deferral schemes, Item 12G discount on ESS interests acquired pre- 1 July 2009, Item 12C TFN amounts withheld. There are also fields for Total employee share scheme discounts (income) and Total assessable employee share scheme discount amount - Item 12B. More information on fields Item 12D, Item 12E, Item 12F, Item 12G and Item 12C are below.

    End of example

    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 does not 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 – This is a term that belongs to the previous law. It does not apply to ESS interests acquired after 30 June 2009. 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.
    • 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.

    See also:

    Next step:

    Last modified: 10 May 2018QC 43488