There are a few countries that require special annual reports for share plan transactions (in addition to regular annual payroll reports). Australia and the UK are among these countries and are both on a fiscal year that differs from the calendar year. The UK tax year ended on April 5 and the Australian tax year will end on June 30.
- The UK Annual Share Plan Return (formerly known as Form 35, for tax-qualified awards, and Form 42, for non tax-qualified awards) is due to Her Majesty’s Revenue & Customs (“HMRC”) by July 6.
- The Australian Employee Share Scheme (ESS) Return must be filed with the Australian Tax Office by August 14. In addition, companies are required to provide their Australian employees with ESS statements by July 14.
Both returns (and the Australian ESS statements) can take a while to prepare (especially if companies need to report transactions for mobile employees and/or awards that were adjusted in a corporate transaction) and will need to be submitted electronically.
Please see our client alerts for Australia and the UK for more information on how to prepare the returns and make the submission. We are aware that the HMRC website was affected by an outage during the month of May, so companies may have less time than normal to make the UK submission.
Our Sydney and London offices are available to assist with the preparation and submission of the returns.
The Australian tax year just ended (on June 30, 2016) and the deadlines for Australian Share Plan Reports are just around the corner! This year, to make things more complicated, the Australian Tax Office (ATO) has made a number of changes to the reporting requirements for both the Employee Share Scheme (ESS) Statements and Annual Reports.In addition to a new online reporting system, the ATO is requesting additional data for both the ESS Annual Report and Statement, including specific information relevant to mobile employees and start-ups. Continue reading
As we reported in our July 2, 2015 client alert, the new Australian share plan legislation received Royal Assent on June 30, 2015 and applies to all equity awards granted on or after July 1, 2015. Under the new tax regime, stock options are generally taxed at exercise only (not at vesting).
In this post, I want to explore the practical implications of the new legislation for most companies and examine the exceptions to the rule.
Grant Document Changes
Under the old tax regime that was in effect from July 1, 2009 until June 30, 2015, options generally were taxed at vesting which obviously was not a good result for companies nor for employees. As a result, many companies stopped granting options in Australia altogether. The companies that persevered (often private companies with no alternatives, such as RSUs, available to them) usually imposed special terms designed to avoid a taxable event prior to a liquidity event or at a time when options were underwater. To achieve this, they restricted exercisability of the options until a liquidity event occurred and/or until the option was in the money.
For options granted prior to July 1, 2015, these restrictions should continue to be enforced because the old tax regime continues to apply to these grants. However, for options granted on or after July 1, 2015, these restrictions are no longer needed. This means companies should revise their award documents and delete these restrictions (usually contained in the Australia appendix to the award agreement). Continue reading
October has been an important month for equity awards in Australia.
New Tax Rules
First, the Australian Government announced on October 14, 2014 that it would revise the tax rules applying to employee share plans. The legislation still needs to be written and will most likely be effective only for grants made on or after July 1, 2015, but it seems clear that the taxable event for stock options will revert back to exercise (as it was the case for options granted before July 1, 2009).
This is great news for companies that had stopped granting options to employees in Australia after tax rules effective July 1, 2009 provided for tax at the time the awards were no longer subject to a substantial risk of forfeiture (typically at vesting). Apparently, the Australian Government finally realized its mistake after many companies aggressively lobbied for changes and pointed out that, by not being able to grant options, they were not able to compete with companies in other countries that are able to use stock options to incentivize employees. Continue reading