Changes to Aussie employee share schemes for start-up companies came into effect from 1st July 2015
Employee share schemes (ESS) provide an opportunity for employees to receive shares (or options to buy shares) in the company they work for.
The Australian government has made changes to the tax rules for employee share schemes to make it more attractive to employers and employees to participate, including a new concession for start-up companies.
Changes to employee share schemes include:
when options are taxed
increasing the maximum ownership limit to 10% of the total shares (up from 5%)
increasing the deferral period to 15 years (up from seven years) for tax deferred schemes.
Additional concessions for start-up companies
Under the new rules if shares are acquired in a start-up at a discount of up to 15% (relative to market value), then the discount is exempt from income tax. The shares will only be subject to capital gains tax on disposal.
What is a start-up?
Start-up companies, from any industry, need to:
be incorporated for less than 10 years
be an Australian resident company
have no equity interests listed on an approved stock exchange
have an aggregated turnover less than $50 million.
What you need to know?
The Australian government have published a guide for employers and standard templates for start-up companies to help you develop and maintain an employee share scheme. We have also developed a guide for employees to help them in making decisions to participate.
Find out more at:- www.ato.gov.au
Employee share schemes
ESS: Guide for employers
ESS: Guide for employees