In the 2021-22 Budget, the Federal Government announced that changes would be made to the employee share scheme (ESS) rules, an overview of which is accessible here.

The ESS is used as a tax planning tool for various businesses and involves employees having receiving shares in the company, either as an option or share subscription. The taxing point varies by how the scheme is designed. In accordance with the Budget, amendments will be made to remove the ‘ceasing employment’ point which normally triggers tax on deferred taxation ESS schemes.

The Government also announced an intention to reduce certain aspects of red tape surrounding the ESS to encouraging domestic companies to recruit and retain high-quality employees by issuing them equity. In doing so, Australian employers will be better placed for global competition in accordance with recommendations from the Global Business and Talent Attraction Taskforce. In particular, the regulatory requirements will change as follows:

  • Where employers elect not to charge or lend to employees that are offered the scheme, requirements will be removed; and
  • Where employers do elect to charge or lend to employees that are offered the scheme, the scheme offers are worth up to $30,000; and the company is unlisted, the requirements will be streamlined.

There is no firm date for these measures to commence and we expect draft legislation to be introduced shortly.