Avoid the traps when reporting on employee share plans

By Hamish Wallace

The deadline for employers to report share-based awards is approaching. The Australian Taxation Office (ATO) is increasing its focus on ESS reporting compliance so employers should be aware of some of the traps, particularly if awards have been granted to internationally mobile employees.

Share plan reporting will be required in two broad situations: if an employee was granted an award during the 2013–14 tax year and the discount on that award was taxable during that year (that is, the award was taxed ‘up front’); and if an employee was granted an award in an earlier tax year and a deferred taxing point occurred during the 2013–14 tax year.

If reporting is required, the ‘provider’ of the award (which may or may not be the employer) has to give an ESS statement to the employee by 14 July and an ESS annual report to the ATO by 14 August. Employers should remember that reporting is also required for any employees that have left during the tax year and retained tax-deferred awards under a ‘good leaver’ policy. And if an award contained a cash-out discretion in the employer’s favour (common in many US plans), but the award was share-settled during the tax year, ‘retrospective’ reporting may have also been required for ‘good leavers’, which may have required reporting within 30 days of the award being settled…

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