- Home
- Moore Tax News
- Employee Share Scheme (ESS) Legislation introduced into parliament
Employee Share Scheme (ESS) Legislation introduced into parliament
- By Moore Stephens
- Published 26/10/2009
- Moore Tax News
- Unrated
On 21 October 2009, the Federal Government introduced the final form of the Employee Share Scheme legislation into parliament.
The legislation is substantially the same as the exposure draft and contains no material surprises. The changes that do exist are:
For those companies that have been designing or implementing schemes base on the Exposure Draft legislation, it will come as good news that there has been no fundamental changes to the mechanics of the provisions. However, for other companies, there will continue to be a need for great care and caution. There remains a significant degree of uncertainty as to the breadth of the ‘real risk of forfeiture’ test. In addition the Board of Taxation has been commissioned to report on whether there should be a range of specific concessions added to the ESS framework for R&D, speculative and start-up entities. Any R&D, speculative and start-up entity considering an ESS at the moment might be best advised not to implement any scheme now, in expectation of more favourable conditions to come.
As always, we recommend you speak to your taxation advisor before resolving a course of action.
The legislation is substantially the same as the exposure draft and contains no material surprises. The changes that do exist are:
- an expansion of the 75% rule (being a requirement that 75% of the permanent employees of the employer must be entitled to participate in a scheme in order for the scheme to qualify for the $1,000 discount or Salary Sacrifice concessions). The 75% rule now needs to be satisfied in relation to permanent employees that have completed at least 3 years of service (continuous or non-continuous) and who are Australian resident
- allowing a refund of tax paid on receipt of a grant of an ESS interest where benefits are forfeited as a result of leaving employment
- clearer Capital Gains Tax and Transitional provisions to limit uncertainty in respect to the jurisdiction of the Capital Gains Tax provisions and ESS provisions, as well as the old versus new ESS provisions.
For those companies that have been designing or implementing schemes base on the Exposure Draft legislation, it will come as good news that there has been no fundamental changes to the mechanics of the provisions. However, for other companies, there will continue to be a need for great care and caution. There remains a significant degree of uncertainty as to the breadth of the ‘real risk of forfeiture’ test. In addition the Board of Taxation has been commissioned to report on whether there should be a range of specific concessions added to the ESS framework for R&D, speculative and start-up entities. Any R&D, speculative and start-up entity considering an ESS at the moment might be best advised not to implement any scheme now, in expectation of more favourable conditions to come.
As always, we recommend you speak to your taxation advisor before resolving a course of action.