Streamline your Employee Share Scheme Reporting with Cake

The Employee Share Scheme (ESS) reporting season is upon us! If you’re a Founder, CFO, Finance Manager, or HR professional, you know that preparing ESS  is an important, albeit tedious annual requirement. 

We get it, digging through options, vesting schedules, and exercise details to compile accurate tax reports for your Employee Share Scheme (ESS) can be daunting. As always, here at Cake, we like to simplify complex equity-related processes so that you have more time for the parts of the job that you actually enjoy.

With the right tools and preparation, you can be in and out of this tax season without breaking a sweat!

Employee Share Scheme reporting

First things first, Employee Share Schemes are a way for startups and high-growth companies to offer employees a stake in the company’s success, or as we like to say, a slice of the cake. But as with any equity compensation program, ESS comes with legal and tax obligations.

ESS reporting is mandated by the Australian Taxation Office (ATO) for companies offering employee share schemes. It serves the following purposes:

• Compliance with tax laws. Simply put, filing an ESS report at the end of the tax year is a legal requirement. Ensuring compliance helps avoid penalties and audits from the ATO.
• Transparency for employees. Providing clear and accurate ESS statements helps employees understand their tax obligations and the value of their ESS interests.

For the above reasons, ESS statements must be filed carefully and accurately.

There are two important ESS documents that employers have to prepare:

What is an ESS Statement?

This is an annual tax statement that is given to individual employees. It contains details of the shares, rights, or options provided during the tax year, along with an estimate of the taxable amount related to these benefits.

The ESS Statements have to be provided to eligible employees by July 14 after the end of the financial year. 

These days most of you might be submitting these through your tax portals or relevant accounting software.

For smaller companies with only a handful of employees, preparing ESS statements for each employee might be a lot simpler. However, for bigger companies, you can imagine this process to be more complex and time-consuming!

Tips & Best practices

Helpful tips for preparing your ESS Statements

1. Understand the requirements

If this is the first time you’re doing this, you want to familiarise yourself with the ATO-prescribed Employee Share Scheme template. In a nutshell, the ESS statement requires you to provide the following information:

• Employee details — Name, contact details, Tax File Number (TFN)
• Taxable details and benefits — startup concession schemes,  taxed upfront schemes, deferred schemes, and deferred taxing point information
• Grant details — number of options/shares granted, market value of shares/options acquired, acquisition price of shares/options acquired, acquisition date

Preparing all the necessary data before filling up the forms will save you a lot of time.

2. Streamline data collection

With any tax-related reporting such as the ESS report, accuracy of data is of utmost importance. Using an equity management platform like Cake can be a real game-changer when it comes to centralising all of your equity data in one place.

Information like vested options, type of grant, and exercise prices often vary from employee to employee. When it’s time to prepare your ESS statements and annual report, you can simply export your employees’ equity grant details into a single file, no need to go over each equity grant one by one.

3. Prepare early, don’t wait til the last minute

You rushed your ESS reporting this year? Lesson learned: prepare early next time! It’s never too early to prepare for the next season by systemising your equity records in a single-source-of-truth, equity management platform like Cake.

More than the ESS reporting tool, Cake has other nifty features that help streamline and automate equity admin tasks that take up so much of your time and resources.

4. Are you still using spreadsheets?

We don’t know who needs to hear this today but, if you’re still using spreadsheets to keep track of your cap table and equity data, this is your sign that it's time to shift! Managing employee share schemes through spreadsheets can cause unnecessary stress, even more so when it’s time to file tax and legal documents. Think of all the typos, formula errors, and version control issues!

With Cake Equity, you can finally ditch the spreadsheet mayhem and streamline not only your ESS reporting process but your whole equity management.

5. Seek expert guidance

As always, we highly recommend seeking expert guidance. Speak to your accountants, lawyers, or equity management partners to ensure you’ve ticked all the boxes. A little professional advice can go a long way in avoiding costly mistakes. 

With the right tools and know-how, your ESS annual report doesn’t have to be a dreaded task. Stay organised, use smart solutions, and you’ll have that filing ready to go in no time.

CAKE's Guide to ESS Reporting

Prepare your ESS Statements in 4-steps!

1. Make sure Cake is up to date with all of the relevant offers you have granted over the last financial year
2. Go to reporting > ESS Reporting and export your financial year report
3. Add your additional information such as TFN, scheme type and discounts (not sure how to figure this out? We can introduce you to a tax specialist who can do this with you).
4. Submit to the ATO and share with your employee 🎉

Ready to get started? Join Cake today.