You can provide benefits to your employees in the form of employee share schemes (ESS).
Taxing employee share scheme benefits
You need to choose how the ESS will be taxed. Whichever option you choose needs to apply to all your employees.
Option 1: Your employee pays the tax
- The ESS benefits are treated as income, which may affect an employee's student loan deductions, child support payments or Working for Families payments.
- Each employee will have their tax squared up either through an automatic income tax assessment or an individual tax return – IR3 if they have any other untaxed income. They will have to pay the balance of any tax owing.
Option 2: You pay the tax
- You tax the ESS benefits as lump sum payments, also known as extra pay.
- You do not need to deduct KiwiSaver or pay ACC.
If your employee agrees you can sell some of the shares to pay any tax owing.
Exempt employee share schemes
If you operate an exempt employee share scheme you need to:
- tell us you are operating the scheme
- report at the end of the tax year on the total value of the shares granted to your employees.
Do not include exempt schemes in your regular employment information filing.