Current as of October 2014
The former Government made changes in 2009 to the Employer Share Scheme rules that effectively brought the use of the scheme for start-up companies to a halt.
The current Government has announced that they will reform the tax treatment of Employee Share Schemes to bolster entrepreneurship and support start-up companies and they will reverse the changes made in 2009 to the taxing point for options.
This announcement will mean that discounted options will be taxed when they are exercised (converted to shares), rather than the existing rules that tax the discount when the employee receives the options.
The proposal will not tax the up-front discount if the Employee Share Scheme options or shares are issued by an eligible company and are held by the employee for at least three years. The discount on options will be deferred until sale and the discount on shares (issued at a small discount) will be exempt from tax.
To be eligible for the concessions a company is required to:
- have aggregate turnover of not more than $50 million
- be unlisted
- be incorporated for less than 10 years
The Government will also update the valuation tables used by companies to value their options and the integrity provisions introduced in 2009 and the $1,000 up-front tax concessions for employees who earn less than $180,000 p.a. will be retained.
The proposed legislation will commence from 1 July, 2015.
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