Withholding for employee shares

Does your company have an employee share scheme (ESS)? If it does, you will have withholding obligations.

See this link for more on what share schemes mean to you as an employee

See here for your ESS obligations as an employer

When does withholding apply?

Withholding will apply if:

  • you provide a discounted ESS interest to your employee
  • that employee has not given you their TFN or ABN by the end of the relevant income year – so there is no withholding if your employee has provided their TFN.

If your employee has given you a TFN declaration for their employment, no withholding is payable.

How is withholding calculated?

Withholding is calculated on the discount your employee should include in their assessable income under the ESS rules.

If you have engaged the services of a third party to administer your ESS, you may give them your employee’s TFN. In these circumstances, no withholding is payable.

The rate of withholding is the highest individual marginal tax rate plus the Medicare levy, ie 47% for the current tax year. Under no circumstances can you withhold in excess of this rate.

Pay the amounts withheld

You must pay amounts you withheld to the ATO within 21 days after the end of the income year your employee is taxed on the discount.

If you pay amounts withheld to the ATO, you can recover these amounts from your employee. You can do this by offsetting the amount of withholding paid against any amount you owe to your employee, such as salary and wage income.


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Thompsons Australia Newsletters and articles are distributed by professional tax practitioners to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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