Employee share scheme changes

Posted on September 21, 2015 by ATB Chartered Accountants

The ATO has announced via an article on its website that, from 1 July 2015, there are new rules for the tax treatment of employee share schemes, including tax concessions for start-up companies.

The employee share scheme changes allow employees to now own up to 10 per cent of shares in their employer company (up from 5 per cent), in order to access the $1,000 up-front discount concession or deferral method of taxation.

If employee’s shares or options are covered by a tax deferred scheme, the deferring point has also increased from 7 to 15 years.

Under the new rules, if shares are acquired in a start-up company at a discount of up to 15 per cent (relative to market value), then the discount is exempt from capital gains tax and income tax.

Any subsequent capital gains therefore calculated on the market value when the share was acquired, not the discount price they paid, as long as that discount was 15% or less than the market value.

To offer an employee share scheme with start-up concessions, employers must:

• be an Australian resident company
• have an aggregated turnover of under $50 million
• be incorporated for less than ten years
• have no equity interests listed on an approved stock exchange.

Ref: ATO website Media Centre – Articles

Michael Mekhitarian comments that this is good news for entrepreneurs and small businesses. Particularly for those in technology and start-ups wanting to bring new products to market.