Background

As we reported in our April 2015 Clients & Friends newsletter, the Australian Government has released draft legislation to amend the employee share scheme (“ESS”) rules for ESS interests (i.e., awards) granted on or after July 1, 2015. 

Under the proposed legislation, stock options generally would be taxed (again) at exercise, rather than at vesting.  In addition, the draft legislation provides for favorable tax treatment for awards granted to employees of certain start-up companies.

Many of our clients have been anxiously waiting for the legislation to be adopted so they can start granting options again on or after July 1, 2015. 

Update

The draft legislation is still before the House of Representatives (Lower House).  On May 13, 2015, the bill was referred to the Senate Economics Legislation Committee for inquiry and report by June 16, 2015. Submissions close on June 5, 2015. 

We are still hoping the bill will be passed by July 1, 2015, but it is possible that it could be passed after that date.  In this case, it is likely that it would have retrospective application to July 1, 2015. However, in light of the remaining uncertainty, it may be prudent to wait to grant awards in reliance on the new legislation until it has been adopted.