Employee Share Schemes – Are you aware of the tax implications for participants?

Posted on by Admin

17 September 2021

Many companies offer equity incentives to employees, directors and consultants as a remuneration incentive. The regulatory and tax rules relating to Employee Share Schemes (ESS) are complex and it is important to ensure that arrangements are structured to ensure that individuals do not have an unexpected tax liability at a time when they are unable to realise the benefit of the ESS interests.

  • Have your ESIP rules been reviewed to ensure that the rules allow for flexibility in the tax outcome and contain the necessary terms where tax deferral is desired?
  • Are you aware of the upfront tax implications for 10% owners? Are you aware how the 10% ownership rule is applied?
  • Are you aware of the valuation and timing of acquisition rules for tax purposes, which differ from the accounting treatment?
  • Are you reporting the correct ESS Discount to the ATO at the right time?
  • Are your employees aware of how the ESS works and their tax obligations? Can they have their family trust acquire the equity interest and is this of any benefit?
  • How can unlisted companies provide equity incentives to senior management?
  • Could your ESIP or ESOP be structured more effectively from a tax and reward perspective?

HOW COOPER PARTNERS CAN ASSIST

We are ESS tax specialists and can answer all of the above questions. We assist with tailoring ESS plans to your specific needs.

  • Structuring equity incentives to suit specific situations
  • Reviewing existing ESS Plans and implementing new ESS Plans which are tax effective
  • Preparation of ESS Reporting to the ATO
  • Drafting communication for participants to enable better understanding of the tax implications
  • Liaising with the ATO regarding disputes

This newsletter is current as of 17 September 2021, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
No responsibility can be accepted for those who act on the contents of this publication without first contacting us and obtaining specific advice.
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