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  • 12 - Employee share schemes 2011

    About question 12

    Question 12 image from tax return for individuals form.

    This question is about discounts on 'employee share scheme interests' (ESS interests) that you received under an employee share scheme. ESS interests are:

    • shares
    • stapled securities (provided at least one of the stapled interests is a share in a company)
    • rights to acquire shares and stapled securities.

    The discount is the difference between the market value of the ESS interests and the amount you or one of your associates paid to acquire them.

    The ESS interests can be:

    • from an Australian company or a foreign company
    • related to your employment inside or outside Australia.

    You will be taxed on the discount in the year in which you acquired the interest in the scheme. Such schemes are known as 'taxed-upfront schemes'. However, if you and the scheme meet certain conditions the taxing point is deferred until a later time. These schemes are known as 'tax-deferred schemes'.

    For more information, see the ESS - guide for employees

    Did you receive a discount on ESS interests you acquired under a 'taxed upfront scheme'?

    Did a deferred taxing point occur in respect of ESS interests you acquired at discount under a tax-deferred scheme?

    Did a 'cessation time' occur during the 2010-11 income year in relation to shares, stapled securities or rights you acquired before 1 July 2010 under an employee share scheme and you had not elect to be taxed upfront on the discount on those shares etc?

    For more information about 'cessation time', shares, stapled securities or rights acquired before 1 July 2009 see Employee Share Schemes answers to frequently asked questions by employees.

    No

     

    Yes

    If you answered yes to any question, read below.

    You can no longer choose when to be taxed on the discount you receive on ESS interests. The conditions of the scheme in which you participate and your personal circumstances determine when you pay tax on the discount you receive.

    In some circumstances, you may be entitled to reduce the amount of the discounts received under 'taxed-upfront schemes' by up to $1,000. You may qualify for the reduction if the following amounts add up to $180,000 or less:

    • your taxable income for the year (calculated as though you are not entitled to the $1,000 reduction )
    • your total reportable fringe benefits amounts (W item IT1)
    • your reportable employer superannuation contributions (T item IT2)
    • your net financial investment loss (X item IT5)
    • your net rental property loss (Y item IT6)
    • your deductible personal superannuation contributions (H item D12).

    For more information, see ESS - guide for employees.

    The rules of the scheme or a letter from your employer should advise you whether you have acquired ESS interests under a taxed-upfront or tax-deferred scheme. Your employer must provide you with an employee share scheme statement which shows you the value of any discounts you have received on your ESS interests in 2010-11. You will need this statement to complete this item.

    Answering this question

    You will need your Employee share scheme statement from each employer with whom you participated in an employee share scheme. Each statement shows the amount of your discount and whether your discount was from:

    • a taxed-upfront scheme eligible for reduction
    • a taxed-upfront scheme not eligible for reduction
    • tax-deferred schemes, or
    • a pre-1 July 2009 scheme and a 'cessation time' occurred during the income year.

    Statements may also show 'tax file number (TFN) amounts withheld' where applicable. TFN amounts withheld are amounts of tax withheld when you do not provide your TFN or Australian business number (ABN) to your employer.

    If you received ESS interests from a foreign employer, you might not receive an ESS statement. You will need to contact your employer for details of the employee share scheme in which you participated to enable you to complete your tax return.

    If you do not have all your employee share scheme statements or comparable statements, refer to statutory declaration.

    If an associate has acquired an ESS interest as a result of your employment, you must include the discount in your assessable income. Your associate will not need to include the discount on their tax return.

    If you qualify as a temporary resident for tax purposes, special rules may apply if you acquired ESS interests under pre-1 July 2009 employee share scheme rules or ESS interests under an employee share scheme. See Foreign income exemption for Australian residents and temporary residents - employee share schemes.

    If you disposed of your ESS interests because of a corporate restructure or takeover and received replacement shares, stapled securities or rights, special provisions may apply. See the electronic publication ESS - rollover relief.

    Completing your tax return

    For the purposes of steps 1 to 3, 'employee share scheme statement' includes comparable statements and statutory declarations.

    If a discount you have received is from a foreign source and it relates to a period when you were a foreign resident for income tax purposes, then you do not include the discount at this item or anywhere else on your tax return.

    Step 1

    Add up all the discount amounts you received from 'taxed-upfront schemes eligible for reduction' including amounts shown on your employee share scheme statements and any foreign source discounts you received.

    Write the total amount at D item 12.

    Step 2

    Add up all the discount amounts you received from 'taxed-upfront schemes not eligible for reduction' including amounts shown on your employee share scheme statements and any foreign sourced discounts you received.

    Write the total amount at E item 12.

    Step 3

    Add up all the discount amounts you received from 'tax-deferred schemes' where a 'deferred taxing point' occurred during 2010-11 including amounts shown on your employee share scheme statements and any foreign source discounts you received.

    Write the total amount at F item 12.

    Step 4

    Add up all the discount amounts from employee share scheme interests you acquired before 1 July 2009 where:

    • you did not make an election to be taxed upfront at the time you received them, and
    • a 'cessation time' occurred during 2010-11.

    Write the total amount at G item 12.

    If the discount amount is not on the statement, contact your employer or see ESS - guide for employees.

    Step 5

    If you did not write an amount at D, go to step 6.

    If you wrote an amount at D, you may be entitled to a reduction of up to $1,000 on the amount that you are assessed on. To determine your eligibility you will first need to work out whether you satisfy the income test. Calculate your taxable income (as if you were not entitled to this reduction). If you had a taxable loss, treat it as zero for the purposes of this calculation.

    Add your taxable income to the following amounts (which you must complete at Income tests on page 8 of your tax return; see Income tests):

    • your total reportable fringe benefits amounts (W item IT1)
    • your reportable employer superannuation contributions (T item IT2)
    • your net financial investment loss (X item IT5)
    • your net rental property loss (Y item IT6)
    • your deductible personal superannuation contributions (H item D12).

    If the amount that you calculated was greater than $180,000, you do not satisfy the income test and are not entitled to a reduction. Add up the amounts that you wrote at D, E, F and G. Write the total at B.

    If the amount that you calculated was less than or equal to $180,000, you satisfy the income test and are eligible for the reduction of up to $1,000:

    • if the amount at D is less than or equal to $1,000, add up the amounts that you wrote at E, F and G and write the total at B, or
    • if the amount at D is greater than $1,000, add up the amounts at D, E, F and G then take $1,000 away from the total. Write the resulting amount at B.

    Go to step 7.

    Step 6

    Add up the amounts that you wrote at E, F and G. Write the total at B.

    Step 7

    Add up all the TFN amounts withheld from discounts from your employee share scheme statements and write the sum at C.

    Step 8

    If you did not pay foreign income tax in respect of any discounts you received on ESS interests you have finished this question; go to Income that you show on the supplementary section of the tax return. Otherwise, read on.

    You may be entitled to claim a foreign income tax offset for discounts if you have paid foreign income tax in respect of the discounts.

    You will not be entitled to claim a foreign income tax offset for any discounts that relate to a period when you were a foreign resident for income tax purposes.

    Write at A the total amount of your discounts from ESS interests for which you are claiming a foreign income tax offset.

    To claim a foreign income tax offset, you must complete O item 20 on your tax return (supplementary section). For information on how to calculate a foreign income tax offset you will need to read Guide to foreign income tax offset rules.

    If you have paid foreign tax in respect of discounts on ESS interests included in your assessable income in a prior financial year, you may be entitled to foreign income tax offset for that year. To claim this tax offset, you need to request an amendment to your tax return for that financial year. See Amendment requests on how to request an amendment to your prior year return.

    Helpful hints

    Do not attach your employee summaries to your tax return. Make sure you keep your summaries for at least five years after you are assessed on your discounts.

    Where to go next

     
      Last modified: 10 Nov 2014QC 25450