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.
The Australian financial year runs from July 1 to June 30 and the ATO runs a tight ship. Just two weeks after close of the year (i.e., by July 14), the ATO requires providers (i.e., the issuer / parent company) to distribute ESS Statements to all employees. The ESS Annual Report is due to the ATO one month later (i.e., typically by August 14, but this year, by August 15, since August 14 falls on a Sunday).
The ESS statements and Annual Report are required if a taxable event related to a share plan has occurred during the prior financial year. What exactly needs to be reported depends on the award type, the date of grant and the specific award terms. Very generally speaking, you can assume the taxable event occurs:
RSUs = Vesting date
- Options =
- Granted before July 1, 2009 or after July 1, 2015 = Exercise
- Granted between July 1, 2009 – June 30, 2015 = Vesting date
- ESPP = Purchase date
But please beware, because many exceptions apply. In particular, a taxable event can occur at termination if the employee does not forfeit the award upon termination, or, the taxable event can be moved to sale if the employee sells the shares within 30 days of the original taxing point.
So What Has Changed?
The most dramatic change is that the ATO will no longer accept a submission of the ESS Annual Report by paper or by using the bulk load excel spreadsheet. Instead, the ATO is slated to release a new online submission form. Unfortunately, the form can be used only by companies that have 50 or less employees with taxable events during the financial year. In addition, non-Australian companies without an Australian Business Number (ABN) cannot use the online form, regardless of the number of employees. These companies will need to utilize filing software that meets the ATO’s Electronic Reporting Specifications by either developing the software in-house, or by hiring a third-party provider that has developed the software and can make the submission on behalf of the issuer.
It is important to note that it is no longer possible for an Australian subsidiary of a non-Australian issuer to submit the ESS Annual Return using its own ABN. Therefore, effectively, non-Australian issuers are not able to use the online submission form, but will need to use the special software to submit the ESS Annual Return. However, one benefit of using the software is that it generally also automatically produces the ESS Statements, unlike the online submission form.
There are additional differences to prior years for the preparation of the ESS Annual Return and Statement, which you can find summarized in an alert from our Sydney office. Please note, however, that the ATO recently confirmed that it is NOT necessary to include the acquisition date (typically the grant date) for any awards with taxable events during the tax year (contrary to what the ATO originally announced and reported in the alert).
Our Sydney office has developed the special software needed to make the submission of the ESS Annual Report (and which can generate the ESS Statements), and can assist with the submission. Please see our fee proposals for the submission here.
For more information on the Australian share plan reporting process, listen to our complimentary webinar.