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Employee Share Schemes worksheet (emp)

This item is about discounts on employee share scheme interests (ESS interests) that you or your associate 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.

An ESS interest acquired by your associate as regards your employment is treated as though the ESS interest was acquired by you.

The discount is the difference between the market value of the ESS interests and the amount paid to acquire them.

The ESS interests can:

  • be from an Australian company or a foreign company

  • relate to your employment inside or outside Australia

  • relate to a work relationship other than employment, for example sub-contracting.

Changes to employee share schemes took effect on 1 July 2015 and apply to ESS interests acquired on or after that date.

For essential information for Tax Agents on Employee Share Schemes home page click this link to the ATO website.

In calculating the income test amount, any reduction to the assessable discount amount due to the $1,000 exemption is to be ignored - that is, the discount amount up to $1,000 should be included in the amount entered at label D. Therefore, you must enter the FULL value of these discounts at label D.

Access to the existing tax exemption of up to $1,000 will be restricted to taxpayers with an adjusted taxable income* (income test amount) no more than $180,000.

For the income test to be satisfied, the sum of the following amounts must not exceed $180,000:

  • Taxable income (not including the $1,000 reduction)

  • Reportable employer superannuation contributions

  • Total reportable fringe benefits amounts

  • Net financial investment loss

  • Net rental property loss

  • Deductible personal superannuation contributions.

If the taxpayer has a taxable loss, this is to be treated as zero for the purposes of calculating the income test amount.

It is important therefore that where your client is in an Employee Share Scheme you check and complete all the items that fill the Income Test item fields at IT1 to IT6.

If the taxpayer satisfies the income test ($180,000) the reduced amount will be included at label B.

The calculation of the Total assessable discount amount label B is automated by Tax with the income test being performed at the same time.

Therefore, the details shown in the worksheet example above, where the taxpayer has Adjusted taxable income exceeding $180,000, the income test is applied during integration and if it is met, the $1,000 discount is not allowed.

Taxed upfront employee share schemes

Generally, the difference between the market value of an ESS interest and what an employee pays for the interest is taxed upfront.

The $1,000 tax concession remains available if an employee and the scheme meet certain conditions and the employee's taxable income (after adjustments) is $180,000 or less.

Deferral employee share scheme

Employees who acquire ESS interests under a deferral scheme are assessed in the income year when the deferred taxing point arises.

Employer reporting requirements and withholding tax

Employers must provide a statement to the ATO and their employees detailing the employee share scheme interests they have issued.

Withholding tax applies to discounted ESS interests provided to an employee on or after 1 July 2009 where that employee has not quoted their TFN or ABN to their employer by the end of the relevant income year.

Employees who have previously provided a tax file number (TFN) declaration to their employer with their TFN will not have to provide a new declaration.

Taxpayers who complete label A (Foreign source discounts) are not assessed separately on amounts declared at this label. Label A is simply an extraction of amounts declared at labels D, E, F and G and should only be completed by taxpayers claiming the FITO at item 20.

Tax Pre-fill

This schedule can be pre-filled using the Pre-fill Manager. The Pre-fill Manager enables you to download pre-fill reports for clients using the Practitioner Lodgment Service (PLS). You can view these reports in PDF format, and populate the pre-fill information into the client's Tax return. For more information on pre-filling, see Pre-fill Manager.

Tax Pre-fill is dependant on available ATO data. Validate the Tax return by pressing [F3] for a list of the imported values and any errors before lodgment.

CCH References

10-085 Employee share schemes - application of the rules

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