Understanding the ESS changes. Five things you need to know.


There have been some recent changes to the tax rules when it comes to employee share schemes. There has been an attempt to make them more appealing for employer and employee participation.


The changes to the ESS were significant as of 1 July 2015. They allow for a more extended tax deferment. There are some new rules for startup companies.


There are five significant changes to take note of.

  1. Changes to the tax treatment of these employees go into effect as of 1 July 2015.

It will be applied to interest in shares, stapled securities, option to acquire shares, and rights when it comes to dealing with the stapled securities.


  1. There are additional concessions that can be used by startups.

Under the new rules, employees are allowed to have a 15 per cent discount when they are working with a startup company, and this amount is tax-exempt. When employees sell them for making a profit, they may be subject to being taxed.

To be considered a startup the company has to be in business for less than ten years, have no equity interest listed on the stock exchange, and cannot have a turnover of fewer than 50 million dollars.

For a concession to apply to a company, the ESS must meet the following:

    • When working with interested that is issued under the ESS, and the shares cannot have a discount that is greater than 15 per cent of the market values.
    • The rights under the ESS must have a strike price that is SS that is great then or more than the market value from the company.
    • The employee mist holds this stock and any interest that they make for at least three years.


  1. When going for a tax-deferred scheme, the taxing point can be deferred from the date of the exercise.

This change can delay the first taxing point. The taxing point will be deferred if

Employees can exercise their right to have no risk forfeiting if there are no restrictions on getting rid of the share.

All ESS investments with no risk of forfeiting the internet and restrictions on the sales are removed.

There are times when the employee can resign for the job.

Interest may be deferred up to 15 years after the ESS were obtained.


  1. Requirements for Significant Ownership and Voting Right Limits have stopped.

The limits on voting power went up from 5 per cent to 10 per cent. The only ownership had to have a significant investment in the company, but now all shares are looked at.

This will allow the employees to gain a larger share of the company, but it will also look at the shares that they already have.


  1. An Income Tax Refund in possible even if an employee does not exercise their rights.

If an employee decides not to exercise their right with ESS but had to pay the taxes up front, they will be given a refund for the money that they have paid on income tax. The refund will be granted if the ESS was able to protect the employee from risk in the market.

These changes have been long-awaited by the tax professionals, including accountants. The changes are welcome by employees.


New Standard

The Australian Tax Office has released its standards to make things easier for startup companies. There is information on the website, including how to take advantage of these new offerings.

Do you think you may qualify for these stamp duty concessions? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialist will be pleased to assist you.

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