News & Analysis

ATO releases open source documents to help startups operate an Employee Share Scheme

- July 2, 2015 2 MIN READ

The Australian Taxation Office (ATO) has released a set of standard document templates to help startups establish and operate an Employee Share Scheme following amendments to the regulation of the scheme passed by the Senate last week.

The passing of the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 means that, as of July 1, employees issued with share options will now be able to defer paying tax on these options until they are exercised and converted into shares. Under changes to taxation legislation that were introduced by the Labor Government in 2009, employees issued with share options were made to pay tax up front.

The ATO has produced a standard Employee Option Plan, and a standard Offer letter, and an instruction guide to help startups use the documents. It states that the documents should be used to assist with initial planning and research, rather than as a replacement for professional legal and accounting advice.

As such, users will need to seek independent professional advice about certain aspects of their draft plan, as the standard documents are not necessarily designed to meet all the requirements of every company.

The ATO will also be compiling lists of software developers that have produced platforms to help startups with compiling the standard ESS documents, such as LawPath’s Easy ESS platform.

In bringing the bill to Parliament, Small Business Minister Bruce Billson said employee share schemes support and encourage innovation, and energise entrepreneurs.

“We know small firms sometimes lack the cash flow to pay salaries that can allow them to compete internationally. Employee share schemes allow firms to be globally competitive by supplementing employees’ salaries with equity in the company they work for,” Billson said.

“Unfortunately, the potential of employee share schemes has not yet been realised in Australia. This means we are missing opportunities every single day.”

The documents can be accessed via the ATO website.