If you’ve been offered an opportunity to participate in an employee share scheme (ESS), the amount of information they provide you can seem overwhelming; HCQ is here to help simplify the tax consequences for you.

Here are the top tax considerations to take into account:

• Although each scheme will have different conditions, it’s common for them to stipulate that the shares can only be issued to you, the employee. This means that any amounts that need to be included as taxable income will be in your name, and taxed at your marginal tax rates.
• Dividends paid by your employer during the time that you hold the shares will need to be reported as income in your return, and taxed at your marginal rates. The tax on the dividends will be offset by any franking credits attached to the dividends.
• If your share scheme qualifies as a tax-deferred scheme, your shares will generally be subject to a ‘vesting period’, which is the time between when the shares are first issued to you and when you are able to access all the rights attached to the shares (typically, when you have the right to sell the shares should you wish). It is at the end of this vesting period (i.e. the vesting date) that a taxable event occurs, and not on the initial issue date.
• Generally, you will have several ‘taxing points’ as part of the employee share scheme. The most common tax implications are as follows: