Recent amendments to the taxation of  Employee Share Schemes can mean exciting opportunities for your business.

Tune in below to learn more about how it can benefit you.

See below for complete transcript of this episode –

One of the greatest challenges of running a business is how to create a culture of responsibility and ownership amongst staff. While there exist a multitude of feel good motivational theories on how to achieve just that perhaps the simplest way is to actually make them an owner. Say hello to the Employee Share Schemes or the ESS.

Employee share schemes give employees a benefit such as shares in the company they work for at a discounted price or for free or the opportunity to buy shares in the company in the future (this is called a right or option).

There are many types of employee share schemes including the $1000 tax exempt plan and loan plans so it is important to find out that works for you and your employees. Generally, the type of scheme determines the tax treatment that applies which can be either non-concessional (this means the employee or scheme does not meet the conditions for special tax treatment to apply) or concessional which means the employee and scheme meet the conditions for concessional tax treatment to apply.

The exciting news in the world of Employee Share schemes is that in 2015 the Government announced important changes to the tax treatment of these making them, for the first time, a viable option for start-ups.

Previously employees were taxed at the point of issue on share options rather than when the options were exercised, unsurprisingly this made them redundant for start- ups as employees were not very keen to pay tax on something that may have never reached its proposed value. Under the new regime, which has been in force since July 2015, employee share schemes that meet certain conditions will not be subject to up-front taxation. Companies of all sizes can now move to give employees options.

This is also good news for employees of foreign companies. Previously Australian employees of multinationals would miss out as it was often too difficult for the foreign employer to localise their schemes in a tax-effective way.

While it goes without saying that there are many requirements for setting up a compliant and qualifying ESS but the benefits to you and your staff far outweigh these.

For some insight, A 2011 Study by the University of Melbourne Law School found that employees ranked the following elements as being the most important part of an ESS.

  1. Financial payoff (68%)
  2. Fair treatment (67%)
  3. A sense of community (59%)
  4. Employee influence on management of the Company (42%)
  5. Individual influence on decisions affecting daily work (38%)

Please contact You Legal for advise on how an employee share scheme could help improve your business.

Confidence to Lead podcast

Episode 4 & 5 of the Confidence to Lead series have arrived. Head on over to and listen in.  We explore two new directors’ duties, the duty not to act for an improper purpose & the duty of care and diligence.

What Should I Do Next?

Contact us if you would like further legal advice on Employee Share Scheme. Our lawyers at You Legal will be happy to assist you in whatever way we can.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.