Cth Releases Draft Employee Share Schemes Bills
Thursday 12 August 2021 @ 2.11 p.m. | Corporate & Regulatory | Taxation
On 29 July 2021, the Federal Treasury released two draft Bills for public consultation.
The Bills released were:
- the Draft Treasury Laws Amendment (Measures for a later sitting) Bill 2021: Employee Share Schemes (Cth) ("the Draft ESS Bill"); and
- the Draft Treasury Laws Amendment (Measures for a later sitting) Bill 2021: Employee Share Schemes—Removing cessation of employment as a taxing point (Cth) ("the Draft ESS Tax Bill")
What are Employee Share Schemes?
An employee share scheme ("ESS") is defined by the Draft ESS Bill's explanatory memorandum as:
"an arrangement put in place by a business to reward people who contribute to the business with shares or other interests in the business in exchange for their labour...
Employee share schemes:
- can be offered in addition to salary and wages;
- can be offered to all or only certain groups of people participating in the business (such as employees of a certain seniority, directors or independent contractors);
- can be in shares or other interests in the business (such as options or units in a trust); and
- can require the employee to make payments or take out loans to participate in the scheme."
ESS are employed by businesses in order to attract employees to make their company more attractive.
The two draft bills propose changes to implement 2021-22 Federal Budget changes as well as regulatory reforms previously exposed for public consultation in April 2019.
Overview of Proposed Changes
The Treasury's consultation page summarises the changes put forward by the two draft bills to include:
- "completely removing Corporations Act 2001 requirements for ESS offers to employees who do not pay or incur debt to participate in these schemes;
- increase the value cap, under which Corporations Act 2001 requirements do not apply, to $30,000 for all other ESS offers of unlisted companies;
- consolidating exemptions and class order relief from disclosure, licensing, hawking, advertising and other obligations under the Corporations Act 2001;
- expanding relief for unlisted companies to include contribution plans and limited or no recourse loans, where an employee can make a monetary contribution to acquire eligible financial products;
- relaxation of the requirements to lodge disclosure documents."
The Draft ESS Bill proposes amendments to the Corporations Act 2021 (Cth) in order to assist businesses in creating employee share schemes. The government aims to assist smaller businesses in attracting and retaining talent, by allowing these companies to offer ESS in addition to wages, in order to be more competitive in the job market.
The Draft ESS Tax Bill proposes amendments to the Income Tax Assessment Act 1997 (Cth) to remove termination of employment as a taxing point for employee share scheme interests, as these are subject to deferred taxation. Taxing will instead be deferred until the earliest remaining taxing points.
Consultation on the draft bills and explanatory materials is currently open. Further details on the survey and the progress of the consultation can be found on the Federal Treasury website.
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Sources:
[Draft] Treasury Laws Amendment (Measures for a later sitting) Bill 2021: Employee Share Schemes and explanatory materials available from TimeBase's LawOne service
[Draft] Treasury Laws Amendment (Measures for a later sitting) Bill 2021: Employee Share Schemes—Removing cessation of employment as a taxing point and explanatory materials available from TimeBase's LawOne service
