The employee share scheme (ESS) continues to be a popular incentive for retaining and attracting key employees, especially in the current competitive labour market.

However, an often overlooked administrative aspect of setting up ESS arrangements, is being aware and complying with the reporting requirements to both your employees and the ATO.

This article provides a brief summary of the requirements and impending deadlines related to the ESS.

Employee ESS statement – due 14 July 2023

You must provide the ESS statement to your employee by 14 July 2023. The statement will help your employee complete their tax return.

An administrative penalty applies to providers who fail to provide the statement.

The information required on the ESS statement includes, but is not limited to, the following:

  • the discount for ESS interests acquired under each type of taxed-upfront scheme;
  • the discount for ESS interests acquired under a tax-deferred scheme if a taxing point happened during the financial year;
  • the discount for shares and rights acquired before 1 July 2009 if a cessation time occurred during the financial year;
  • the total TFN amount withheld from discounts during the financial year.

If your employee is eligible for the start-up concessions you must provide your employee with the following information about ESS interests acquired during the income year:

  • number of ESS interests acquired;
  • market value of ESS interests acquired;
  • acquisition price of ESS interests that are shares;
  • exercise price of ESS interests that are rights;
  • acquisition date of the ESS interests.

ESS annual report to ATO – due 14 August 2023

The ESS annual report is required to be provided to the ATO by 14 August 2023 and 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:

  • plan identifier – a reference that makes a plan unique within all plans offered by you;
  • acquisition date – the date the ESS interests were acquired;
  • plan date – the date a taxing point happens to an ESS interest; for a taxed-upfront scheme, this will be the acquisition date, for a tax-deferred scheme, this will be the deferred taxing point;
  • TFN amounts withheld from discounts on ESS interests if a taxing point arose during the financial year.

Additional and specific information is required for reporting under start-up concessions, taxed upfront schemes and tax deferred schemes.

Practical tips

Further information can be found on the ATO website.

Reporting requirements for your employees and the ATO will vary depending on the types of ESS interests offered and the number of participating employees. There are software providers that can streamline the reporting requirements.

Please contact one of our advisers if you have any questions or require assistance with your employee share scheme.

Co-Authored by Tom Peskett – Manager Tax Consulting Melbourne