On 25 March 2015, the Federal Government introduced legislation to reverse changes made by the former Labor government to the taxation of employee share schemes. The Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 will introduce tax concessions and promote the use of employee share schemes in Australia.
The new scheme (which will come into force on 1 July 2015) will allow options to be deferred and taxed on exercise (rather than grant) in a broader range of circumstances. The new scheme (if passed into law) will allow employees to access deferred tax treatment where there is no real risk of forfeiture of the option, provided that the employee share scheme rules: (i) restrict the employee from immediately disposing of their option; and (ii) expressly state that the scheme is subject to deferred taxation.
The scheme also imposes other restrictions and conditions on the deferred tax treatment of options which employers should be careful to meet when implementing their employee share plans in Australia. Finally, the scheme creates special tax concessions for small start-up companies mainly related to broadening the scope of capital gains tax discounts and exemptions.
Thanks to associates Michael Whitbread and graduate Talia Calgaro for their assistance in the preparation of this Update.