Newsletter - April 2021
Cents & Sensibility | Tax News | Views | Clues
Employee Share Schemes – Horace Hung
To promote employee motivation and loyalty, employers often use employee share schemes (ESS) to provide employees with free or discounted shares or options. ESS generally fall into two categories – concessional and non-concessional, with different tax treatments depending on the terms of the scheme which are set out in a prospectus. Such terms may include disposal restrictions or circumstances under which those shares or options could be forfeited.
If the ESS qualifies as a concessional scheme, the employee participant may be able to reduce the “discount” amount to be included in their assessable income by up to $1,000, subject to meeting the $180,000 adjusted taxable income test and ownership and voting rights test. The term “discount” refers to the difference between the market value of the share or option less any amount paid, which is taxable in an income year. For example, if an employee were granted $800 worth of shares under the ESS in an income year, as the amount would be below the $1,000 threshold, no amount would be included in the employee’s assessable income for that year. With employees participating in a start-up business, ESS will enjoy a further concession – no amount of the discount is included in their assessable income, subject to meeting the ownership and voting rights test.
Another feature of concessional schemes is the deferred taxing point. If the relevant conditions under the law are met, the discount will only become assessable in the income year when the deferred taxing point occurs. This may be when the shares or options have vested after a number of years and disposal restrictions no longer apply.
For non-concessional schemes, i.e., schemes that do not meet the criteria for concessional treatment, no $1,000 reduction is available, and the discount is included in the employee’s assessable income in the year in which the shares or options are acquired.
And finally, capital gains tax may be payable on the disposal of the shares or options acquired from the ESS.
If you have been granted employee shares or options, ensure a sufficient amount of cash is set aside for any potential tax liability. This will avoid any surprises at tax time.
The above information is general in nature and may not cover all ESS legislative provisions or take into account your personal circumstances. Please speak to your knp contact for further details.
Paper PAYG and GST quarterly instalment notices
The ATO has previously advised that it will no longer issue paper activity statements after electronic lodgement. Instead, electronic activity statements will be available for access online, three to four days after the activity statement is generated.
As part of its digital improvement program, the ATO stopped issuing paper quarterly PAYG and GST instalment notices (forms R, S & T), where taxpayers had a digital preference on ATO systems. The September 2020 notice was the last one issued to these taxpayers.
However, the ATO has received feedback from tax professionals that issues have arisen for some of their clients as a result of this change. For example, some taxpayers who are self-lodgers rely on the receipt of the paper statements as a reminder that their instalments are due.
As an interim solution, the ATO said it will issue paper PAYG and GST quarterly instalment notices starting with the March 2021 quarterly notices.
For taxpayers impacted by this change, the ATO will work with their registered agents to take their circumstances into account. The ATO has a range of practical support options available, including lodgement deferrals and payment plans that agents can access online, on behalf of their clients.
For self-lodgers, the ATO has issued an email notification reminding them that their December 2020 PAYG and GST instalment notices are due for payment soon (by 2 March 2021).
The ATO said it will continue to work with the tax profession to develop a digital solution for the PAYG and GST instalment notices that is workable for registered agents and their clients.
Editor: Please contact our office if you require more information about paper PAYG or GST quarterly instalment notices.
Avoiding disqualification from SG amnesty
The superannuation guarantee (‘SG’) amnesty ended on 7 September 2020. Employers who disclosed unpaid SG amounts and qualified for the amnesty are reminded that they must either pay in full any outstanding amounts they owe, or set up a payment plan and meet each ongoing instalment amount so as to avoid being disqualified and losing the benefits of the amnesty.
The ATO will be sending employers reminders to pay disclosed amounts, if they have not previously engaged with the ATO. Employers will have 21 days to avoid being disqualified from the amnesty.
Registered agents can assist their employer clients who qualified for the SG amnesty avoid disqualification. In particular, if a client needs to set up a payment plan, agents can do this (online) on their behalf, if the employer:
- has an existing debit amount under $100,000 (total balance or overdue amounts);
- does not already have a payment plan for that debit amount; and
- has not defaulted on a payment plan for the relevant account more than twice in the past two years.
The ATO has advised that employers who are disqualified from the amnesty will:
- be notified in writing of the quarter they are disqualified for;
- be charged an administration component of $20 per employee for each disqualified quarter;
- have their circumstances considered when deciding a Part 7 penalty remission (this is an additional penalty of up to 200% of the unpaid SG amount that may be imposed under the SG laws); and
- be issued with a notice of amended assessment.
Employers who continue to qualify for the SG amnesty are reminded that they can only claim a tax deduction for amounts paid on or before 7 September 2020 (i.e., the amnesty end date).
Editor: Please contact our office if you require more information or would like us to set up a payment plan for SG amnesty amounts on your behalf.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Before the Easter long weekend break, our team was treated to a delicious barbecue lunch on a beautiful sunny day! Here a few photos of us enjoying each other’s company!