Things you need to know
Declare at this question 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.
Schemes where you are taxed on the discount in the year you acquired the interest are known as 'taxed-upfront schemes'. However, if you and the scheme meet certain conditions the taxing point is deferred until a later time, this is known as the 'deferred taxing point'. These tax-deferred schemes are known as 'deferral schemes'.
Changes to ESS interests acquired on or after 1 July 2015 include:
- changes to the timing of 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 you meet the eligibility criteria. 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.
From 1 July 2022, ceasing employment with the employer you acquired the ESS interests from is no longer a deferred taxing point. If you cease employment on or after 1 July 2022, the deferred taxing point will become the earliest of the remaining deferred taxing points. This change applies to ESS interests under deferral schemes, regardless of when they are acquired.
For more information, see Key ESS changes in detail.
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 in the supplementary tax return 2023, or return to main menu Individual tax return instructions 2023. |
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 total of following amounts is $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.
- total reportable fringe benefits amounts (question IT1 – labels N and W)
- reportable employer superannuation contributions (question IT2 – label T)
- net financial investment loss (question IT5 – label X)
- net rental property loss (question IT6 – label Y)
- deductible personal superannuation contributions (question D12 – label H).
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.
Associates
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.
Temporary residents
If you qualify as a temporary resident for tax purposes special rules may apply to the ESS interests you acquired.
For more information, see ESS – Foreign income exemption for Australian residents and temporary residents.
Disposal of ESS interests
Special provisions may apply if:
- you disposed of your ESS interests because of a corporate restructure or takeover, and
- you received replacement shares, stapled securities, or rights.
For more information, see ESS – Rollover relief.
What you need to answer this question
You will need your Employee share scheme statement from each employer with whom you participated in an employee share scheme. You may have a paper or electronic statement. 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 do not have all your Employee share scheme statements or comparable statements, contact your employer. If you are unsuccessful, see Income statement not finalised or missing payment summary.
If you received ESS interests from a foreign employer, you might not receive an Employee share scheme statement. A foreign employer can provide you the relevant details in writing.
Do not attach your Employee share scheme statements to your tax return. Make sure you keep your statements for at least 5 years after you are assessed on your discounts.
Completing your tax return
To complete this question, follow the steps below.
For the purposes of steps 1 to 3, the term 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
- any foreign source discounts you received.
Write the total amount at label 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
- any foreign sourced discounts you received.
Write the total amount at label E.
Step 3
Add up all the discount amounts you received from deferral schemes where a deferred taxing point occurred during 2022–23, including:
- amounts shown on your Employee share scheme statements
- any foreign source discounts you received.
Write the total amount at label F.
Step 4
If you did not write an amount at label D, add up the amounts that you wrote at label E and label F.
Write the total at label B, and go to step 6.
If you wrote an amount at label D, continue to step 5.
Step 5
If you wrote an amount at label D, you may be entitled to a reduction of up to $1,000 on the amount that you are assessed on.
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 total of following amounts is $180,000 or less.
Calculate your taxable income (as if you were not entitled to this reduction) and excluding any assessable First home super saver released amount. If you had a taxable loss, treat it as zero for the purposes of this calculation.
Add the following amounts from the relevant labels to your taxable income:
- your total reportable fringe benefits amounts (question IT1 – label N and W)
- your reportable employer superannuation contributions (question IT2 – label T)
- your net financial investment loss (question IT5 – label X)
- your net rental property loss (question IT6 – label Y)
- your deductible personal superannuation contributions (question D12 – label H).
If the amount that you calculated was more than $180,000, you are not entitled to a reduction. Add up the amounts that you wrote at label D, E, and F.
Write the total at label B.
If the amount that you calculated was $180,000 or less, are eligible for the reduction of up to $1,000. If the amount at label D is:
- $1,000 or less, add up the amounts that you wrote at label E, and F and write the total at label B.
- More than $1,000, add up the amounts at label D, E, and F then subtract $1,000 away from the total and write the amount at label B.
Go to Step 6.
Step 6
Add up all the TFN amounts withheld from discounts from your Employee share scheme statements. Write the total TFN amounts withheld from discounts at label 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.
If you have paid foreign income tax in respect of the discounts, you may be entitled to claim a foreign income tax offset for the discounts.
Write at label 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 question 20 – label O on your supplementary tax return. For information on how to calculate a foreign income tax offset, read Guide to foreign income tax offset rules 2023.
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 2023.
Where to go next
- Go to Income in the supplementary tax return 2023.
- Return to main menu Individual tax return instructions 2023.
- Go back to question 11 Dividends 2023.