Payroll tax on shares and options schemes

• employees
• deemed employees
  Deemed employee

  Persons (including incorporated entities, trusts, partnerships and natural persons) who are taken to be employees under s.13D (relevant contract employees) and s.13I (service providers under employment agency contracts) of the Payroll Tax Act 1971

• company directors (past, present or future).

Shares or options may be a fringe benefit or Employee Share Scheme (ESS) interest.

When calculating your taxable wages, include these payments.

When you lodge your:

• periodic return, include these payments as part of your Queensland taxable wages
• annual return, enter these payments separately in the ‘Shares and options’ field as part of your Queensland taxable wages.

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
• or
• the day they vest
  Vest (for shares)

  When the conditions accompanying the share are fulfilled and the person who holds it cannot have their interest in it taken away

  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
Grant day	The market value of the share or option is nil Your wages are not liable for payroll tax	Return period that includes the grant day
Vesting day	The value of the shares and options was not included in the return period containing the grant date	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

Shares	Options
The vesting day of a share is the earlier of the following: the day all conditions applying to the grant are satisfied and the employee has a legal or beneficial interest in the shares that cannot be rescinded or 7 years after the day the share is granted	The vesting day of an option is the earliest of the following: the day the share that is subject to the option is granted or the day the employee exercises the option or 7 years after the day the option is granted

Commonwealth ‘safe harbour’ valuation methods

The Commonwealth ‘safe harbour’ methods cannot be used for valuing unlisted ordinary shares for Queensland payroll tax purposes. The methods are not prescribed under section 83A–315 of the Income Tax Assessment Act.

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.

Read the public ruling on payroll tax nexus provisions (PTA039).