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Learn more about your company's employee share option plan reporting obligations, due every 14 July and 14 August.
Share options, issued under employee share option plans (ESOPs), are one of the most common and tax effective ways to remunerate employees, contractors and key advisors of your startup. However, there are a lot of different types of employee share schemes (ESS) that are implemented that may not fall under the standard ESOP model.
Employee share schemes usually enable a company to give an employee who is not a shareholder of the company an interest in shares, or unit of shares, in the company. In return for this interest (usually called an option) the employee will often times pay a reduced purchase price, and agree to a certain set of rights and obligations set out in the ESOP rules. Sometimes, loan arrangements are put into place for the purchase price as well.
If you are a startup with an ESOP, or if you issued other types of options or rights to shares in your company under a different type of ESS, the Australian Tax Office (ATO) expects you to report key information about those issues to both employees and the ATO at the start of every new financial year.
Who needs to report?
You need to report interests issued under an ESS if you:
- Are a company;
- Provided shares, options, stapled securities, or other rights to acquire shares (ESS interests) in your company to employees; or
- Provided ESS interests to associates of your employees.
You must meet two reporting deadlines at the start of the financial year.
Reporting to your employees
- 14 July for employees
- 14 August for the ATO
You need to provide your employee (or their associate) an ESS statement if they:
- acquired ESS interests under a taxed-upfront ESS at a discount during this financial year,
- have ESS interests under a tax-deferred ESS for which a deferred taxing point has occurred*, or
- the start-up concession applies to their ESS interests which were acquired after 2016.
Here is a link to the ESS statement.
*This applies only to ESS interests acquired before 1 July 2009, and is unlikely to apply this financial year. However, we recommend reviewing your earlier years’ compliance with your tax accountant.
Reporting to the ATO
You need to provide the ATO details of your employee’s ESS interests each year by 14 August.
The ATO requires you to populate the ESS annual report online and lodge it electronically with the ATO. Most startups can complete this form online on the Business Portal. You can also get a tax agent to do it on your behalf.
Find out more
If you’d like to know more on the reporting obligations, you can read the ATO’s explanation here, or feel free to get in touch with us with any questions you may have. Your accountant may also be able to assist with annual reporting requirements as part of their ongoing services for you.
If you have any questions, please contact Hana or Ryan from the Startup & Capital team here at Burch&Co.
Last updated: 09 May 2023