What is Employee Share Scheme reporting?
Employee Share Scheme (ESS) reporting is an annual tax reporting requirement for companies that provide shares, rights and options to their employees under an employee share scheme.
Whilst employee equity continues to be a popular way to incentivise employees globally, the volume of reporting required by many employers has significantly increased over time. For those using Australian share plan administrators, many of the challenges with reporting can be streamlined, but reporting for foreign inbound companies or Australian companies with mobile employees continues to be challenging and time consuming.
What do I need to do? Where do I start?
As ESS reporting involves the reporting of taxing events in relation to employee equity awards, you first need to understand the potential taxing events for your employee equity plans. For example, are the awards taxable at grant, vest, exercise, sale or at some other event? Once you know what events to look for, you need to obtain the relevant data to calculate the taxable amount to be reported on the ESS statement and ESS annual report.
How do I prepare the ESS statements and lodge the ESS annual report?
For most Australian listed companies, your Australian share plan administrator should be able to assist you with ESS reporting. However, for most foreign listed companies and private companies that do not have an Australian share plan administrator, you typically have two options:
- Use the ATO’s ESS online form via the Business Portal to lodge the ESS annual report. You can only use this online form if you have an ABN and less than 50 employees to report. The online form does not produce ESS statements. You will need to do this manually.
- Find a vendor, such as PwC, who can prepare the ESS statements and lodge the ESS annual report on your behalf.
What are the key dates for ESS reporting?
ESS statements need to be provided to employees by 14 July following the end of the tax year.
The ESS annual report needs to be provided to the ATO by 14 August following the end of the tax year.
What are the tips for ESS reporting?
1. Start planning early
Ensure that your offshore parent or share plan administrator is aware of the lodgement dates and the data that is required to meet reporting requirements.
2. Data collection
The quality of your ESS reporting is largely dependent on the quality of the data you obtain. Being clear around the data that is needed to meet the requirements and ensuring there is common understanding around key terms such as vesting, exercise, and the nature of the award itself. For many multinationals, differences in terminology can cause significant issues when determining the correct taxing point. In relation to data for mobile employees, ensure you are also aware of their tax residency in Australia at the taxing point to enable accurate reporting.
3. Don’t forget about your payroll tax requirements
All too often many companies are not aware that equity awards are subject to state based payroll taxes. ESS reporting season is the opportune time to ensure you are meeting your payroll tax obligations.
3. Gender Pay Gap Reporting (GPG)
As we head into the ESS reporting season, it is also time to examine your ESS data from a GPG perspective. With many companies now subject to GPG reporting, ESS income vested to an employee in the 12 months up to the snapshot date is required to be reported.
How can PwC help?
We work with hundreds of companies to meet their ESS reporting, payroll tax (on equity) and gender pay gap obligations each year. PwC’s ESS reporting tool allows us to take multiple data sets and inputs and translate these into outputs in a meaningful and importantly cost-effective way.
The outputs meet the regulatory requirements but also help employees understand what they have received in equity which adds to the perceived value of the award they are receiving. Our assistance will also allow you more time to focus on the strategic aspects of your employee equity programs.
Michelle Kassis
Silvia Nuccio
Kimberley Levi
