2024 Employee Share Scheme (ESS) & Start-Up Concession
The deadline for reporting annual Employee Share Scheme (ESS) activities is approaching. Employers providing ESS interests to employees should take note of the due dates as follows:
- ESS Statements must be issued to employees by 15 July 2024.
- The ESS Annual report to the Australian Taxation Office (ATO) is due by 14 August 2024.
Let’s discuss how the start-up concessions are beneficial to companies and their employees.
What qualifies as a Start-up Company?
- The company must be a tax resident of Australia. Additionally, all companies in its corporate group must have been incorporated for less than 10 years.
- The main business activity of the company must not involve acquiring, selling, or holding shares, securities, or other investments.
- The company’s aggregate turnover must not exceed $50 million in the income year before the year the ESS interest is granted.
- Neither the company nor its corporate group can be listed on a stock exchange in the year before the ESS interest is offered.
What constitutes an Employee Share Scheme Interest?
- Shares – provided at a discount of 15% or less of the market value.
- Rights – the exercise price is at least equal to the market value of an ordinary share in the issuing company.
Who can participate in the Employee Share Scheme?
- Participants must be employed by the company or its subsidiary where the interest is granted.
- Employees must hold the ESS interest for a minimum of 3 years or until they cease employment.
- Participants cannot hold more than 10% of the maximum shareholding or voting rights in the company where the ESS interests are granted.
How does the start-up concession benefit employees?
- Employees can reduce taxable discount income on their ESS interest to zero (available only for interests acquired after 30 June 2015).
- Employees acquiring ESS interests under the start-up concession can still participate in other ESS schemes, whether concessional or non-concessional.
If you need further assistance on how this be beneficial to your business and/or employees, please contact our office for assistance.
