employee share schemes (ESS)

An employee share scheme (ESS) offers eligible employees the chance to purchase shares in the company they work for. They are often paid through salary sacrifice over a set period, or by using the dividends received on the shares. Employees can also receive shares as a performance bonus or as a form of remuneration instead of a higher salary.

Shares are commonly used as a way to align the interests of the employee with those of the company with regards to its financial performance. Share schemes are a long-term incentive and can be used by public and private companies of all sizes and times to improve business outcomes. 

There are different types of ESS available to companies in Australia, some which may qualify for start-up concessions, tax exemptions and tax deferments. 

For more information about ESS, legal requirements, and questions to consider before starting an ESS, you can find out more from ATO’s website. If you are considering implementing an ESS, you should seek independent, expert advice.

Employers must provide employees with an ESS statement by 14 July after the end of the financial year for them to complete their tax returns. An ESS annual report must be submitted to the ATO by the 14 August each year. 

share trusts

Employers who provide shares to an employee through a trust, and the employee has an interest in a specific number of shares in the trust (rather than specific shares), the ATO treats the employee as holding a beneficial interest in each of that number of shares.

An ESS statement must be provided to all employees who have acquired shares through that trust, and also included in the statement submitted to the ATO.

The trustee of the share trust is not required to provide a statement to its beneficiaries.

ATO’s website gives more information about share trusts and ESS annual reporting.

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