If an associate of yours acquires ESS interests which are provided in relation to your employment or services, the ESS rules require you (rather than your associate) to include the discount in your assessable income. Your associates can be your spouse, child, company or trustee of a trust (other than the trustee of an employee share trust). For example, you may give a portion of your shares to your wife or child. However, the rules still apply to you (meaning you need to include the discount in your assessable income).
If you have included a discount in your assessable income in relation to the ESS interests and the ESS interests are subsequently forfeited or lost, you will be entitled to amend your income tax return to exclude the discount from your assessable income (rather than the assessable income of your associate), provided the conditions for obtaining a refund are met.
Your employer will give you an ESS statement which includes ESS interests provided to your associates. You will need this statement to help you complete your tax return.
Example: Taxed upfront scheme – eligible for reduction, ESS interests acquired by an associate
Keiko works for Jester Pty Ltd and is entitled to shares under her employment agreement. She gives half of her shares to her daughter, Miyuki.
As the shares are provided in relation to Keiko's employment and therefore are part of her income, Keiko will include the discount on her own tax return. Miyuki will not need to include the discount on her tax return.
As the shares are in Miyuki's name, not Keiko's name, Miyuki has ownership of them. Therefore, once they have been included in Keiko's income under the employee share scheme rules, they no longer have any connection to Keiko.
For CGT purposes, Miyuki is taken to have acquired the shares at market value.
If Miyuki incurs any additional costs in relation to the shares, they can be included in the cost base. When Miyuki disposes of the shares, the cost base will be used to calculate any subsequent gains or losses on the shares.End of example