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The Payroll tax guide: Shares and options provides detailed information and examples about Employee Share Scheme interests and payroll tax in New South Wales. For more general information read the shares and options page. We advise that you read this guide with:

Chapters

  1. What is an Employee Share Scheme (ESS) interest?
  2. Declaring ESS interest for payroll tax
  3. Calculating wages arising from the grant of a share or option
  4. Restrictions on the disposal of shares and options and other conditions
  5. Consideration paid or given
  6. Shares and options granted in an overseas parent company and exchange rates
  7. Withdrawal, cancellation or exchange shares or options
  8. Rescission, lapse or forfeiture of shares and options
  9. Dividend equivalents
  10. Application of nexus provisions to ESS

2. Declaring ESS interest for payroll tax

On this page

Legislative history

1 July 2003 or prior

Wages arising from shares or options granted prior to 1 July 2003 are not subject to payroll tax.

1 July 2003 to 30 June 2007

Wages arising from shares or options granted between 1 July 2003 to 30 June 2007 are subject to payroll tax under the Payroll Tax Act 1971.

1 July 2007 onwards

The Payroll Tax Act 2007 (PTA) applies to all shares and options grants until 30 June 2011.

From 1 July 2011 only ESS interests are liable under Division 4 of the PTA.

Other interests in shares and rights, including options, may be liable as fringe benefits.

Election of a relevant day

Taxable wages arising from the grant of a share or option are taken to be paid or payable on the relevant day elected by the employer.

Unless the grant date is deemed to be the relevant day, you can choose to include the taxable value of an ESS interest in the payroll tax returns when:

  • the ESS interest is granted, or
  • when it vests.

For payroll tax purposes the definition of a grant date and a vesting date do not take any meaning other than the one defined in the PTA.

Grant date

The date:

  • the share(s) is allotted to a person, or
  • an option is conferred on a person.

Vesting date of shares

The earliest of either:

  • the day all conditions applying to the grant are satisfied and the person has a legal or beneficial interest in the shares that cannot be rescinded, or
  • seven years after the grant date if the conditions of grant have not been met.

Vesting date of options

The earliest of either:

  • the day the person exercises the right to have the shares that is the subject of the option transferred to, allotted to, or vested in them (this is the most common vesting event for options), or
  • seven years after the grant date if the conditions of grant have not been met.

The seven-year rule only applies to options granted after 1 July 2011. Even if options have not been vested or exercised, they are considered vested seven years from the grant date.

Deeming rules under ESS provisions

In some cases the relevant day is automatically chosen.

You must declare taxable value at the vesting date if:

  • an ESS interest has a taxable value on the grant, and
  • you did not declare the value in your relevant monthly or annual return.

You are deemed to have chosen the vesting date as the relevant day. See section 20(1) of the PTA.

If the taxable value of the ESS interest on the grant date is nil, you do not need to declare any values when the ESS interest vests, even if the ESS interest on the vesting date has a positive taxable value.

You are deemed to have elected the grant date as the relevant day. See section 20(2) of the PTA.