Has your company provided shares, performance rights or options, to your employees, directors or individual consultants during the income year ending 30 June 2013, or a prior year?

If so, there’s a strong possibility you have an obligation to report details of these shares or rights to the recipient employees and the Tax Office at the end of the 2013 income year.

In particular, if any of your employees (directors, etc) have a “taxing point” (i.e. are subject to income tax) during the 2013 income year on these shares, performance rights or options under the ‘employee share scheme’ (‘ESS’) tax rules, then you are required to:

  1. Issue an ESS Statement to the employee by 14 July 2013 disclosing the estimated assessable ESS discount; 
  2. Include details of the recipient employees and ESS discount in an ESS Annual Report to be lodged with the Tax Office by 14 August 2013; and 
  3. Withhold Pay-As-You-Go (‘PAYG’) tax from the estimated ESS discount (at the top marginal personal tax rate of 45% + Medicare levy), in the event the recipient of the shares (or rights) has not quoted their Tax File Number or Australian Business Number to you by 30 June 2013.

Further, you are likely to be liable for payroll tax to the applicable State Revenue Office on the shares, performance rights or options, either in the income year they were provided, or a later year.

The determination of whether an ESS taxing point has arisen during a particular income year calls for consideration of the terms and conditions under which the ESS shares, performance rights or options were provided and various other factors, including an employee’s actions after acquiring the shares or rights. Further, the valuation of the shares, performance rights or options needs to be done on the applicable ESS taxing point, having regard to special valuation rules in the ESS tax laws.

We offer a full suite of tax services to clients in respect of ESS shares or rights (and other equity-based employee incentive arrangements).