The ATO has finally announced via an article on its website that, from 1 July 2015, there are new rules for the tax treatment of employee share schemes, including tax concessions for start-up companies.

The employee share scheme changes allow employees to now own up to 10% of shares in their employer company (up from 5%), in order to access the $1,000 up-front discount concession or the deferral method of taxation.

If an employee’s shares or options are covered by a tax deferred scheme, the deferring point has also increased from 7 to 15 years.

Under the new rules, if shares are acquired in a start-up company at a discount of up to 15% (relative to market value), then the discount is exempt from CGT and income tax.

Any subsequent capital gain is therefore calculated on the market value when the share was acquired, not on the discount price they paid, as long as that discount was 15% or less than the market value.

To offer an employee share scheme with start-up concessions, employers must:

  • be an Australian resident company;
  • have an aggregated turnover of under $50 million;
  • be incorporated for less than ten years; and
  • have no equity interests listed on an approved stock exchange.

If you need help understanding these changes or if it will affect you in the future, why not contact The Quinn Group on 02 9223 9166 or submit an online enquiry.