5 things you
need to know
about
Employee Share Schemes in Australia
- Employee share schemes grant employees benefits such as shares in the company they work for at a discounted price or an opportunity to purchase shares in their company in the future (also known as a right or option).
- From 1 July 2015, there are new tax laws regarding how employee share schemes, also known as employee share option plans, are taxed. These tax implications help startups to integrate ESSs into their employment structure and business model cost-effectively.
- A startup must meet certain eligibility criteria for tax concessions, including:
a) aggregated turnover (the company has an aggregated turnover of no more than $50m); b) the number of options offered to any person (the company can only offer options to people that hold (or have the right to hold) less than 10% of the fully diluted share capital of the company); and c) residency requirements (the employer company must be an Australian resident for tax purposes). - Startups who offer their employees the opportunity to participate in an employee share scheme must meet mandatory reporting obligations both to those employees and to the Australian Taxation Office.
- There are several legal and regulatory requirements to consider before implementing an ESS, including disclosure and taxation requirements as well as lodging fundraising documents to ASIC. A startup lawyer can assist with drafting and preparing these documents for you.
