This question 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 in respect of 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
- related to your employment inside or outside Australia
- related to a work relationship other than employment, for example sub-contracting.
You will be taxed on the discount in the year in which you acquired the interest. Such schemes are known as 'taxed-upfront schemes'. However, if you and the scheme meet certain conditions the taxing point is deferred until a later time. These tax-deferred schemes are known as 'deferral schemes'.
Changes to ESS interests acquired on or after 1 July 2015 include:
- changes to the 'deferred taxing point'
- a tax concession through which some discounts on ESS interests in start-up companies will not be taxed under the employee share scheme regime, as long as the eligibility criteria are met. Subsequent gains on the disposal of these ESS interests will be taxed under the capital gains tax rules.
Discounts on eligible ESS interests provided to you by a start-up company will not be included on your Employee share scheme statement and should not be included at this question.
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Did any of the following apply to you?
- You received a discount on ESS interests acquired under a 'taxed-upfront scheme'.
- A 'deferred taxing point' occurred in respect of your ESS interests under a 'deferral scheme'.
No |
Go to Income that you show on the supplementary section of the tax return 2021, or return to main menu Individual tax return instructions 2021. |
Yes |
Read on. |
The conditions of the scheme in which you participate and your personal circumstances determine when you pay tax on the discount you receive.
You may be entitled to reduce the amount of the discounts received under taxed-upfront schemes by up to $1,000. You may qualify for the reduction if the following amounts add up to $180,000 or less:
- your taxable income for the year (calculated as though you are not entitled to the $1,000 reduction), excluding any assessable First home super saver released amount
- your total reportable fringe benefits amounts (N and W item IT1)
- your reportable employer superannuation contributions (T item IT2)
- your net financial investment loss (X item IT5)
- your net rental property loss (Y item IT6)
- your deductible personal superannuation contributions (H item D12).
The rules of the scheme or a letter from your employer should advise you whether you have acquired ESS interests under a taxed-upfront or deferral scheme. Your employer must provide you with an Employee share scheme statement which shows you the value of any discounts you have received on your ESS interests in 2020–21. You will need this statement to complete this item.
Discounts on eligible ESS interests provided to you by a start-up company will not be included on your Employee share scheme statement. Do not show the discount at this question.
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Answering this question
You will need your Employee share scheme statement from each employer with whom you participated in an employee share scheme. Each statement shows the amount of your discount and whether your discount was from a:
- taxed-upfront scheme eligible for reduction
- taxed-upfront scheme not eligible for reduction
- deferral scheme.
Statements may also show 'tax file number (TFN) amounts withheld' where applicable. TFN amounts withheld are amounts of tax withheld when you do not provide your TFN or ABN to your employer.
If you received ESS interests from a foreign employer, you might not receive an Employee share scheme statement.
If you do not have all your Employee share scheme statements or comparable statements, contact your employer. If you are unsuccessful in obtaining any of these, see PAYG payment summary – individual non-business.
If an associate has acquired an ESS interest as a result of your employment, you must include the discount in your assessable income. Your associate does not include the discount on their tax return.
If you qualify as a temporary resident for tax purposes, special rules may apply if you acquired ESS interests under an employee share scheme. For more information, see ESS – Foreign income exemption for Australian residents and temporary residents.
If you disposed of your ESS interests because of a corporate restructure or takeover and received replacement shares, stapled securities or rights, special provisions may apply.
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Completing your tax return
For the purposes of steps 1 to 3, 'Employee share scheme statement' includes comparable statements and statutory declarations.
Step 1
Add up all the discount amounts you received from 'taxed-upfront schemes eligible for reduction' including amounts shown on your Employee share scheme statements and any foreign source discounts you received.
Write the total amount at D.
Step 2
Add up all the discount amounts you received from taxed-upfront schemes not eligible for reduction, including amounts shown on your employee share scheme statements and any foreign sourced discounts you received.
Write the total amount at E.
Step 3
Add up all the discount amounts you received from deferral schemes where a deferred taxing point occurred during 2020–21 including amounts shown on your Employee share scheme statements and any foreign source discounts you received.
Write the total amount at F.
Step 4
If you did not write an amount at D, go to Step 5.
If you wrote an amount at D, you may be entitled to a reduction of up to $1,000 on the amount that you are assessed on.
To determine your eligibility you will first need to work out whether you satisfy the income test. Calculate your taxable income (as if you were not entitled to this reduction). If you had a taxable loss, treat it as zero for the purposes of this calculation.
Add your taxable income, excluding any assessable First home super saver released amount, to the following amounts (which you must complete at Income tests on your tax return; see Income tests 2021):
- your total reportable fringe benefits amounts (N and W item IT1)
- your reportable employer superannuation contributions (T item IT2)
- your net financial investment loss (X item IT5)
- your net rental property loss (Y item IT6)
- your deductible personal superannuation contributions (H item D12).
If the amount that you calculated was greater than $180,000, you do not satisfy the income test and you are not entitled to a reduction. Add up the amounts that you wrote at D, E, and F. Write the total at B.
If the amount that you calculated was less than or equal to $180,000, you satisfy the income test and are eligible for the reduction of up to $1,000. If the amount at D is:
- Less than or equal to $1,000, add up the amounts that you wrote at E, and F and write the total at B.
- Greater than $1,000, add up the amounts at D, E, and F then take $1,000 away from the total. Write the answer at B.
- Go to Step 6.
Step 5
Add up the amounts that you wrote at E and F. Write the total at B.
Step 6
Add up all the TFN amounts withheld from discounts from your Employee share scheme statements and write the total at C.
Step 7
If you did not pay foreign income tax in respect of any discounts you received on ESS interests you have finished this question. Otherwise, read on.
You may be entitled to claim a foreign income tax offset for the discounts if you have paid foreign income tax in respect of the discounts.
Write at A the total amount of your discounts from ESS interests for which you are claiming a foreign income tax offset.
To claim a foreign income tax offset, you must complete O item 20 on your tax return. For information on how to calculate a foreign income tax offset, read Guide to foreign income tax offset rules 2021.
If you have paid foreign tax in respect of discounts on ESS interests included in your assessable income in a prior income year, you may be entitled to a foreign income tax offset for that income year. To claim this tax offset, you need to request an amendment to your tax return for that income year. For instructions on requesting an amendment for a prior income year tax return, see Important information 2021.
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Helpful hints
Do not attach your Employee share scheme statements to your tax return. Make sure you keep your statements for at least five years after you are assessed on your discounts.
Where to go next
- Go to Income that you show on the supplementary section of the tax return 2021.
- Return to main menu Individual tax return instructions 2021.
- Go back to question 11 Dividends 2021.