Changes to Employee Share Schemes

Following on from our news post on 20 October last year, the Small Business Minister has recently announced that the Government will scrap many of the 2009 changes to the taxation of Employee Share Schemes, effective 1 July 2015 as follows:

All Companies:

The Government will reverse the changes made to the taxing point for options in 2009. This change will apply to all companies and will mean that discounted options are generally taxed when they are exercised by the employee (i.e. converted to shares) rather than when the employee receives the options. The $1,000 upfront tax concession for employees who earn less than $180,000 will be retained. Additional concessions will be available for start-up companies.

Start-Up Companies: 

Options or shares that are provided at a small discount (believed to be up to 15%) by eligible start-up companies will no longer be subject to upfront taxation provided the shares or options are held by the employee for at least three years. Subject to certain conditions, the taxation of options will be deferred until sale. Shares issued at a small discount will have that discount exempt from tax. To give start-up companies more time to be competitive and succeed, the maximum time for tax deferral will be extended from 7 years to 15 years.

The Treasurer will consult with industry to ensure that the draft legislation delivers the intended outcome, with the legislation to come into force on 1 July 2015.