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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

7. Withdrawal, cancellation or exchange shares or options

When a grant of a share or option is:

  • withdrawn, cancelled or exchanged before the vesting date (i.e. the conditions attached to the grant are not yet met), and
  • the employer provides compensation other than the grant of another share or option,

the initial grant is deemed to have vested on the date of withdrawal, cancellation or exchange. See section 21(1) of the Payroll Tax Act 2007.

If the employer elected the vesting date as the relevant day, the employer needs to declare the value of the compensation (given to the employees) on the date the share or option is withdrawn, cancelled, or exchanged.

If the employer elects the grant date as the relevant day and pays the payroll tax at grant date, no adjustment can be made when the share or option is withdrawn or cancelled.

 

Example: Shares cancelled due to acquisition

Blue Ltd grants shares to employees for no consideration under an Employee Share Scheme (ESS). The shares have a 3-year vesting period. The company elects the vesting date as the relevant day. Before the shares vest in the employees, Blue Ltd is acquired by Green Ltd.

All shares granted to employees under the above-mentioned ESS are cancelled because of the acquisition. Each employee receives $1,000 from Blue Ltd to compensate them.

The shares in Blue Ltd are deemed to have vested on the date of cancellation. The employer should declare the total amount of compensation paid as wages for payroll tax in the relevant return period.