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Receiving shares from your employer

Employee Share Schemes

From 1 April 2017 Employee Share Scheme benefits (also known as Share Purchase Agreements) are being treated differently by your employer.

What is an Employee Share Scheme

You receive an Employee Share Scheme benefit when you purchase or are given shares from your employer free or below market value. From 1 April 2017 your employer is generally required to provide us with the value of the shares.

How much is taxable

The amount that will be treated as income is the difference between the market value of the shares and the amount that you paid (if any) for them. This is the amount that your employer will send to us.

During the year

Your employer has the option of making tax deductions from your Employee Share Scheme (ESS) benefits during the year. This is optional as it will not be suitable for all arrangements.

If your employer has not made tax deductions from your ESS benefit you will remain responsible for meeting your obligations. Refer to End of year responsibilities below.

ESS benefits are also treated as income for:

  • student loan deductions
  • child support payments, and
  • Working for Families Tax Credits.

Your employer will either make student loan deductions from the value of your ESS benefit or we may send your employer a student loan extra deduction notice to make additional deductions from future pays.

Find out more about paying off your student loan if you’re employed

If you receive Working for Families during the year you will need to tell us, as soon as you know, how much you will be receiving in ESS benefits so that we can work out your new entitlement and help you avoid an overpayment. If you wait for this information to come from your employer you may have to pay us back.

Find out more about types of changes you need to tell us for Working for Families Tax Credits

At the end of the year the value of any ESS benefits you receive will be taken into account for your child support formula assessment.

Find out more about what a child support formula assessment is

Some employers are given more time to tell us the value of your ESS benefit

If you receive an ESS benefit in the second half of a month it may not be included in your income calculation until the following month. This will affect:

  • Working for Families – when you receive an ESS benefit in March it will be included in your income calculation for April
  • Child support – when you receive an ESS benefit in December it will be included in your income calculation for January.

Please discuss with your employer whether this will affect you.

End of year responsibilities

From the 2017-18 income year:

Filing a Personal Tax Summary

You must have an end-of-year square-up and receive a Personal Tax Summary when:

  • your employer has provided us the value of your shares
  • your employer has not deducted tax, and
  • you have no other reason to file an IR3.

You can choose to have an end of year square up by requesting a Personal Tax Summary when:

  • your employer has provided us the value of your shares
  • your employer has deducted the appropriate amount of tax, and
  • you have no other reason to file an IR3.

Filing an IR3

You are required to file an IR3 if:

  • you have received an Employee Share Scheme benefit, and
  • it is not a Commissioner approved scheme, and
  • your employer hasn't provided the information to us.

Note

Please discuss with your employer to find out whether they have provided us with the value of your shares

Putting your tax returns right

If you have received Employee Share Scheme benefits in the past and you have not included these in your income tax return you may need to make a voluntary disclosure. More information is available in our Putting your tax returns right (IR280) guide.