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Employee share scheme tax update

Published: 6th September 2016

Author: Lowndes Jordan

Published in: Commercial e.Speaking | Issue #44

Employee share schemes are globally recognised as an effective way for companies to recruit, retain and incentivise their staff. The legal requirements necessary to establish such schemes in New Zealand have recently been clarified under a new securities exemption in the Financial Markets Conduct Act 2013. Inland Revenue has now turned its attention to whether income tax is being properly collected on employee share scheme benefits, with new legislation passed and in the pipeline.

It has previously been up to employees to self-report and pay tax on any income arising under share schemes in their annual tax returns. However, from 1 April 2017:

  • Employers must report employees’ share scheme benefits to Inland Revenue, and
  • Employers may elect whether or not to withhold tax on any resulting income, using PAYE.

If you have an employee share scheme, you should be aware of the new reporting requirements, and should consider whether you will withhold tax. You can read more about the changes here.

Wider policy changes are currently under consultation: these are likely to affect the fundamental taxation of employee share schemes. If you have an employee share scheme, we recommend you seek specialist tax advice.

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