We’ve had a few conversations lately with clients about their ESS reporting requirements, so we’ve compiled some of the information provided by the ATO to hopefully help you get started.

What is an ESS interest?

An ESS interest is either a beneficial interest in a share of a company or a right to acquire a beneficial interest in a share of a company.

These interests can come in the form of shares or stapled securities, or rights (including options) to acquire shares or stapled securities.

You’re required to provide the ATO and your employee with details of your employee’s ESS interests. If an associate of your employee acquires ESS interests that are provided for employment or services, the employee (rather than the associate) is required to include the discount in their assessable income.

Reporting to your employee

You may need to report to your employee on the following:

You must give your employee an employee share scheme (ESS) statement if:

  • ESS interests have been acquired at a discount under a taxed-upfront ESS by them or their associates during the financial year.
  • 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, happened or could have happened in the financial year.

You must provide your employee with the ESS statement by 14 July after the end of the financial year. The statement will help them complete their individual tax return. There is an administrative penalty if you fail to provide such statement.

For information on what the ESS statement needs to include, head to the ATO website.

If your employee is eligible for the start-up concession, you must provide them with the following information about ESS interests acquired during the financial 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.

Your employee will need this information to determine the cost base of their capital gains tax (CGT) asset and calculate any gain or loss when they dispose of their interests. They will not need to include a discount amount in their income tax return when they acquire the ESS interests.

View an example of shares eligible for the start-up concession here.

The ESS rules treat ESS interests provided to an associate of your employee as if they were acquired by your employee, rather than their associate. The ATO’s website has more information on the reporting requirements.

You must complete the Amended employee share scheme statement form if you become aware of any material change to or omission from any information given to your employee on their ESS statement. You must provide them with the corrected information within 30 days of becoming aware of the change or omission.

If you provide an employee with a right to an employee benefit that could later become an ESS interest, see indeterminate rights.

Reporting to the ATO

The ESS annual reports are due by 14 August each year, and 2015-16 and onwards lodgments will only be accepted electronically.

Specific information on what must be included in your ESS annual report can be found on the ATO’s website.

Extensions and amendments to a report must be done directly to the ATO. Details on this can be found on their website.

How Carbon can help

If you need help understanding how these requirements relate to you, get in touch with our experts today.