Employee Share Scheme Changes

Employee share schemes – election requirements from 01/07/08:

The first change is to the election requirements to access one of two tax concessions available to taxpayers who acquire qualifying shares or rights under an ESS. This change improves the integrity of the law by ensuring taxpayers appropriately report income in their tax returns.

The election procedures have changed so that a taxpayer who wishes to make an election to be assessed under the taxed-upfront concession, must make the election and include the value of the discount in their income tax return for the year of income the shares or rights are acquired. If the value of the discount is $1,000 or less, and the taxpayer is eligible for the $1,000 exemption available under the taxed-upfront concession, the taxpayer will be taken to have made the election.

If the $1,000 exemption does not apply, or the value of the discount is more than $1,000, taxpayers will be taken to have chosen to be taxed under the tax-deferred option if:

  • they do not make an election in the income tax return in the year the shares or rights are acquired, and
  • they do not include an amount in their income tax return in the year the shares or rights are acquired.

The change removes the ability for taxpayers to manipulate the taxing point and ensures that discounts provided on shares or rights under an ESS are properly included in their assessable income.

The measure takes effect with respect to shares and rights acquired from 1 July 2008 for the 2008–09 income year.

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