Payroll tax on shares and options schemes
You must include shares or options in your payroll tax return if they have been granted to:
- deemed employees
- company directors (past, present or future).
Shares or options may be a fringe benefit or Employee Share Scheme (ESS) interest.
Declaring shares and options as fringe benefits
Shares and options may be a fringe benefit under the Fringe Benefits Assessment Act 1986 (Cwlth), if they are not defined as an employee share scheme interest under the Income Tax Assessment Act 1997 (Cwlth).
In that case, the value of these shares and options should be included as taxable wages under the fringe benefits provisions.
Learn more about payroll tax on fringe benefits.
Declaring ESS interests
If the share or option is an ESS interest within the meaning of the Income Tax Assessment Act, to calculate the value of these wages you must consider the 'relevant day', which is:
- the day a share or option is granted to a person
- the day they vest in a person.
Declaring the relevant day
You must declare the value of any shares and options in the payroll tax return period for the period in which the relevant day falls.
When the relevant day is automatically chosen
|Relevant day||Situation||When share or option should be declared|
Return period that includes the grant day
Return period that includes vesting day
The granting of a share or option can occur under various events. In general, a grant occurs if a person acquires a share or, in the case of an option, a right to the share.
Vesting day for shares and options
The vesting day of a share is the earlier of the following:
The vesting day of an option is the earliest of the following:
Taxable wages in Queensland
As payroll tax is administered in each state and territory, you need to work out if the wages are taxable in Queensland. The nexus provisions generally indicate in which Australian jurisdiction payroll tax should be paid.
Overseas-based employee or employer
If the employee and employer are not based in Australia during the return period that applies to the relevant day, the shares or options are taken to be Queensland taxable wages if the share or option is in a company registered in Queensland under section 119A of the Corporations Act 2000.
An employee is employed by Overseas Pty Ltd. He does not have a principal place of residence in Australia, and Overseas Pty Ltd does not have an ABN address or a principal place of business in Australia during the month of June.
The employee performed services in New South Wales and Victoria. During this time he was granted shares in a Queensland company, related to Overseas Pty Ltd. The relevant day for this transaction was 15 June.
The shares are taxable in Queensland because the company is registered in Queensland, even though the employee usually lives overseas and was paid wages by a company outside an Australian jurisdiction in the month containing the relevant day.
Taxable value in Queensland
The value of taxable wages consisting of a share or option must be calculated as follows:
- the value of the share or option on the relevant day
- any contribution the employee pays for the share or option (excluding payment in the form of services performed).
To determine the value of a share or option, you must use the market value of that share or option, or the amount determined under the regulations of the Income Tax Assessment Act.
Refund on withdrawn shares and options
You may get a refund if a share or option you granted to an employee is withdrawn, cancelled or exchanged for something that is not a share or option before the vesting day.
If you paid payroll tax on withdrawn shares or options, your taxable wages in the financial year or final period in which this happened will be adjusted by the value of the withdrawn shares or options.
Shares or options that are forfeited or lapse are valued as nil at the 7-year vesting date, because the share or option does not exist at the time.
You cannot get a refund if the share or option expires just because the employee fails to exercise the rights attached to it.
- Last reviewed: 22 Feb 2021
- Last updated: 2 Dec 2021