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Employer obligations

Employers have reporting obligations and must withhold tax if no TFN is provided.

Last updated 12 September 2019

If you provide ESS interests to your employees or to their associates, reporting and withholding obligations apply.

See also

TFN withholding (ESS)

Withholding will apply if:

  • you provide a discounted ESS interest to your employee
  • that employee has not given you their TFN or ABN by the end of the relevant income year.

If your employee has given you a TFN declaration for their employment, no withholding is payable.

Withholding is calculated on the discount your employee should include in their assessable income under the ESS rules.

If you have engaged the services of a third party to administer your ESS, you may give them your employee's TFN. In these circumstances, no withholding is payable.

Rate of withholding

The rate of withholding is the highest individual marginal tax rate plus the Medicare levy (and for the 2015–2017 income years, the Temporary Budget Repair levy).

Under no circumstances can you withhold in excess of this rate. Nor should you withhold amounts when your employee has provided you their TFN.

If your employee wants additional amounts withheld, they can only do so from salary or wage payments you make to them.

Pay the amounts withheld

You must pay amounts you withheld to us within 21 days after the end of the income year your employee is taxed on the discount.

For taxed-upfront schemes, this is the year your employee acquired the ESS interests. For tax-deferred schemes, this is the year the deferred taxing point arises.

If you pay amounts you withheld to us, you can recover these amounts from your employee. You can do this by offsetting the amount of withholding paid against any amount you owe to your employee, such as salary and wage income.

Employers have reporting obligations and must withhold tax if no TFN is provided. The withholding rate where no TFN is provided is 47% (from 1 July 2017).

Find out about:

A limited deduction is available if the employee share scheme is eligible for the $1,000 reduction.

ESS interests provided to an employee's associates are treated as if provided to the employee.

If you provide shares to your employees through a trust, you still have reporting obligations.

As an employer, you have ESS reporting obligations to your employees.

There are many legal and regulatory requirements to consider in implementing an employee share scheme (ESS).

The tax considerations in implementing an employee share scheme (ESS).