The grant of a share or option to an employee by an employer under an Employee Share Scheme (ESS) includes any shares or options granted by someone acting on behalf of the employer, because the employer is deemed to have made such grants.
If you grant a share or option to an employee that is not an ESS interest (e.g. shares in an unrelated corporation), it will be taxable as a fringe benefit under section 9BA of the PTA Act.
A share includes a stapled security, which will be valued in the same way as a share.
WA payroll tax legislation no longer applies to units in a trust, or options to acquire units in a unit trust, unless
- the unit is part of a stapled security or
- the acquisition, or option to acquire, the units is a property fringe benefit for the purposes of fringe benefits tax (the fringe benefit provisions relating to payroll tax apply to this acquisition).
Liability dateShow more
The grant of a share or option becomes liable for payroll tax on the relevant day. In most circumstances, you may choose the relevant day as either
- the date that the share or option is granted to the employee or
- the vesting date of the share or option.
When is a share or option granted?
A share or option is granted to an employee if
- another person transfers the share or option to that employee (in the case of a share, other than by issuing the share to that employee)
- another person allots the share to that employee
- another person confers the option on, or otherwise creates the option in, that employee
- the employee otherwise acquires a legal interest in the share or option from another person or
- the employee acquires a beneficial interest in the share or option from another person.
To avoid doubt, if you
- provide an employee the right to be granted a share, option or some other material benefit and
- have the discretion to choose when to grant them,
these are deemed not to be granted until you make that choice.
When is the vesting date of a share or option?
The vesting date depends on whether the contribution is a share or an option.
For a share, the vesting date occurs at the earlier of two events
- when any conditions (e.g. performance criteria) attached to the grant of the share have been met and the employee’s legal or beneficial right in the share cannot be rescinded or
- seven years after the day the share is granted to the employee.
For an option, the vesting date occurs at the earliest of three events
- the day the share that the option relates to is granted to the employee
- the day the employee exercises his/her right under the option to have the relevant share transferred, allotted or vested or
- seven years after the day the option is granted to the employee.
Liability date – default positionShow more
Failure to declare
If you have not included the grant of shares or options in your payroll tax return during the assessment year in which they were granted, the grant will be taken to have been paid or payable on the vesting date of the share or option (section 9DC(1) PTA Act).
Nil taxable value at grant date
If you grant a share or option to an employee, and
- the share or option has nil value or
- the share or option would not have been liable for payroll tax if the employer had chosen to treat the grant date as the relevant day,
the grant is deemed to have been paid or payable on the grant day of the share or option (section 9DC(2) PTA Act).
Are directors included within the ESS provisions?Show more
Under section 9DG of the PTA Act, wages include the grant of shares or options to a director of a company as remuneration for his/her appointment or services to the company. Consequently, these are subject to payroll tax. This provision also refers to former directors of the company and prospective directors of the company.
If the director is appointed but no services have been carried out, the grant of the share or option is taken to be granted as though such services have been carried out, and at the place where the services could reasonably be expected to be carried out.
In which jurisdiction does the liability occur?Show more
Section 5(1) of the PTA Act states that payroll tax is payable on WA taxable wages. WA taxable wages are detailed in sections 6A–6D, and mean wages for services carried out wholly in WA in a month, irrespective of where they are paid or payable. Where this does not apply, WA taxable wages means wages
- paid or payable to a person who is based in WA
- paid by an employer that is based in WA or
- paid or payable in WA.
For more detailed information, see Revenue Ruling PTA 039 ‘Nexus Provisions’.
When it is necessary to consider whether wages are paid or payable in WA (see d) above), then where the share, or the underlying share where there is an option, is in a local company, the wages payable for the grant of the share or option are taken to be paid in WA.
Local company means a company that is registered in WA and is incorporated under the Corporations Act.
For example, if an employee performs all services in WA but the share or option made available by his employer (and therefore taken to have been paid) is not in a local company (i.e. the company is not registered in WA), the grant of the share or option will still be liable in WA. This is because all of the services are performed in WA, so all wages will be taxable in WA, irrespective of where the share or option is paid.