Changes in the Employee Share Scheme

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    Changes in the Employee Share Scheme

    As the new financial year rolls around, changes in tax regulations and rules always follow. Hillyer Riches accountants and tax agents in Caulfield want to inform you and assist you to make sound decisions in your tax planning. We’ve summarised some of the changes below to make it simple.

    From July 1st there are a few changes and new concessions in the Employee Share Scheme that you might need to be aware of. These changes apply to the ESS interest, shares, securities and rights to acquire them.  There are also a few changes and new concessions for start-up companies as well.

    Changes to existing rules:

    • In the tax-deferred schemes, the date on which they are acquired is no longer a taxing point.
    • The test for significant ownership(voting rights) limitations has been relaxed.
    • tax refundis possible when an employee acquires rights, but does not exercise them.

    Taxing Point

    The taxing point is determined by the type of scheme and will be the earlier of:

    • Rights - Where the employee has exercised rights, there is no risk of forfeiting the resulting share and no limitation on disposing of that share.
    • For other ESS interests, there is no risks of forfeiting the interest and all restrictions on the sale are now lifted.
    • When the employee ceases relevant employment
    • Fifteen years after the ESS interests were acquired

    Significant Ownership Test

    Now all interests in the company are taken in consideration, where previously only share owners were considered. An employee can acquire up to 10% ownership or control up to 10% of the voting rights before they are considered “significant”.

    Tax Refund

    Under the new rules, a tax refund may be possible in relation to your ESS rights.  If you choose not to exercise them or have them cancelled, you may qualify. However, the refund is not available if the ESS is structured to protect you from a fall in market value.

    Start-up Companies

    To be eligible for these new concessions, you must first qualify as a start-up.  These conditions include:

    The company…

    • must not be listed on any stock exchange
    • must be an Australian resident company
    • must not have been incorporated for more than 10 years
    • must have less than 50 Million aggregate annual turnover


    • The share must be provided at a discount of less than 15% of market value
    • A right must have an exercise price equal or greater than market value of an ordinary share in the issuing company


    The employee must hold the ESS interest for at least 3 years.


    If you have any questions about these new rules and how they may affect you, please give one of our tax agents in Caulfield a call.


    Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information

    Check out this post about ATO Updates on COVID-19.

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