If your business operates an employee share or option plan, you are subject to withholding and reporting obligations.

The offering of shares, stapled securities, options and rights to acquire shares and stapled securities are now often referred to as ESS interests. There is a withholding obligation if the employee has not provided a TFN or ABN. Under the new reporting requirements, employers are required to:

  • provide employees with an annual statement by 14 July 2010; and
  • provide an annual report to the ATO by 14 August 2010,

for interests acquired after 1 July 2009 and to some interests acquired before that date where the cessation date is after 30 June 2009.

The rules also apply to ESS interests acquired via a trust. The ATO has recently released the relevant forms.

Annual Statement for Employees

By 14 July 2010, employers must give their employees an ESS statement if:

  • employees (or their associates) have acquired ESS interests under a taxed up-front ESS at a discount during the financial year; or
  • a deferred taxing point for ESS interests acquired under a tax-deferred ESS (or a cessation time for shares and rights acquired before 1 July 2009) has arisen or could have arisen in the financial year.

This statement helps employees complete their tax return. When determining and reporting the discount at the deferred taxing point, employers must take account of the 30-day rule if they know that the ESS interests were disposed of by the employee within 30 days of the deferred taxing point.

Also, if there is any material change or omission in any information given to employees, employers must supply the employee with the corrected information within 30 days of becoming aware of the change or omission.

The form for the annual statement can be downloaded from the ATO website.

Annual Report for the ATO

By 14 August 2010, employers must also provide the ATO with an ESS annual report on the approved ESS annual report form. The form can be downloaded from the ATO website.

The ESS annual report must include, but is not limited to, the following information for each employee participating in an ESS and for each ESS that the employee is participating in:

  • a plan identifier (a reference that makes a plan unique within all plans offered by that employer);
  • a plan date (the date a taxing point happens to an ESS interest); and
  • TFN amounts withheld from discounts on ESS interests for which a taxing point arose during the financial year.

There are specific requirements for taxed-upfront schemes and tax deferred schemes.

If there is any material change or omission in any information given to the ATO, employers must supply the ATO with the corrected information within 30 days of becoming aware of the change or omission.

We can help you with completion of the relevant forms and any issues you may have regarding Employee Share and Option Plans.

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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.