The Government has proposed improvements to the tax and regulatory regime applying to employee share schemes (ESS). These measures are designed to make ESS arrangements more attractive and accessible to businesses when seeking to attract and retain talent.
Key take-aways
- Removal of the “cessation of employment” as one of the potential trigger events under the tax employee share scheme (ESS) rules.
- Removal of disclosure requirements and offer to be exempt from licensing, anti-hawking and advertising prohibitions for ESS for schemes where employers do not charge or lend to the employees to whom they offer ESS.
- Where employers charge or lend for issuing employees shares in an unlisted company, the value of shares that can be issued to an employee with simplified disclosure requirements, and exemptions from licensing, anti-hawking and advertising requirements, be increased from $5,000 to $30,000 per employee per year.
Removing termination of employment as a taxing point
Under the current tax ESS rules, the time at which the value of shares in or rights acquired by an employee can be deferred, provided certain criteria are satisfied, and by reference to various trigger events. The Government has proposed to remove the “cessation of employment” as one of the potential trigger events. Removing this trigger event should make it more attractive for businesses to offer share incentives to employees, without those employees being taxed on ESS arrangements should they later cease employment.
This change will take effect from the first income year after the date of Royal Assent of the amending legislation.
Regulatory changes
The Government also put forward a number of regulatory changes aimed at reducing red tape and making it easier for companies to offer ESS to their employees.
For those schemes where employers do not charge or lend to the employees to whom they offer ESS, it is proposed that there be a removal of disclosure requirements and that the offer be exempt from licensing, anti-hawking and advertising prohibitions for ESS.
Where employers charge or lend for issuing employees shares in an unlisted company, it is proposed that the value of shares that can be issued to an employee with simplified disclosure requirements, and exemptions from licensing, anti-hawking and advertising requirements, be increased from $5,000 to $30,000 per employee per year.
These changes are set to take effect three months after the date of Royal Assent of the amending legislation.
