Posted on October 13, 2014 by Ashley Dawson
Employee share schemes (also known as employee share purchase plans or employee equity schemes) give employees shares in the company they work for, or the opportunity to buy to shares in the company. Companies encourage employees to participate in employee shares schemes by offering them discounted shares or rights to acquire shares. The amount of the discount is treated as assessable income for tax purposes.
The discount you receive is worked out as the market value of the shares or rights less any money or other consideration you provided to acquire them. It is calculated at the date you acquired the shares or rights.
The key tax issues to be aware of are:
- You generally need to include the amount of the discount in your assessable income for the income year you acquire or receive the shares or rights (in some circumstances you can defer this until a later income year);
- Capital gains tax may apply when you dispose of the shares or rights. If you held the shares or rights for longer than 12 months you may be able to access the 50% general discount.
What can you expect from your employer?
Your employer will tell you if you are eligible to participate in an employee share scheme. They will also tell you whether the scheme meets the criteria for taxed-upfront scheme or tax-deferred scheme.
Your employer will give you an Employee Share Scheme Statement at the end of the financial year. The statement will detail all the shares or rights you acquired throughout the financial year. You will need to provide this statement to your accountant to assist in the preparation of your taxation return.
The government is currently reviewing the legislation on employee share schemes. There is speculation that they are close to finalising new legislation which aims to reduce the tax burden that employees are currently experiencing with the upfront taxing method.
We recommend contacting our office if you would like to discuss your specific circumstances or the new legislative changes.
Share this:
Posted on by Christabelle Harris
If you are considering purchasing a residential investment property or renting out your main residence, it is important to understand the tax implications of doing so. Some important things to consider include income that must be declared, the 6 year CGT rule, deductible expenses versus capital works and repairs and maintenance expenses.
Income generated from rental related activities which must be declared, include rental bond money that you become entitled to, insurance payouts, letting and booking fees received by you, reimbursement or recoupment for deductible expenditure and any other associated payments you receive including payments in the form of goods and services.
The 6 year CGT rule relates to renting out your main residence. It is now fairly common for people to move out of their main residence on a temporary basis. Whilst your main residence is being rented out you can claim deductions and still be eligible for the Capital Gains Tax exemption when it comes time to sell, as long as your main residence has not been rented out for more than 6 years at any one time. If the 6 years is exceeded you need to apportion the time that the property was classified as a rental property and a main residence and possibly pay tax on any capital gain made.
Expenses are only deductible for the period your property was rented out or available for rent although there is an exception on the following expenditure associated with land on which you have purchased to build a rental property or incurred during renovations to a property you intend to rent out:
- interest on loans,
- local council rates,
- water and sewage rates,
- land taxes, and
- emergency services levy.
It is important to remember that once you intention changes, these expenses are no longer deductible.
Confusing capital works expenses as repairs and maintenance is a common mistake. The general rule is that, if repairs or maintenance are carried out on the property in order to restore the fixture or fitting to it’s original state, then this is an outright deductible expense. If the items are completely replaced or restored to a condition beyond its original state, then this is capital works and must be depreciated at a general rate of 2.5% per annum.
If you have any concerns or questions about how to treat potential rental income in expenditure, please do not hesitate to contact our office.
Share this:
