Employee Share Scheme (ESS) Taxing Point on Ceasing Employment Removed

Employee Share Scheme (ESS) Taxing Point on Ceasing Employment Removed

Employee Share Schemes (ESS) have long been a popular tool used by companies to attract and retain talent. These schemes allow employees to acquire shares or options in the company they work for, aligning their interests with those of the organization. However, the taxation rules surrounding ESS have often been a point of concern for employees, particularly the taxation point when they cease employment. In this blog post, we’ll explore the recent removal of the ESS taxing point on ceasing employment and its implications for employees.

In a promising turn of events, the Federal Parliament passed the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 (referred to as the Bill) on February 10, 2022. This legislation eliminates the taxation of ceasing employment as a taxing point under the Australian Employee Share Scheme (ESS) provisions.

Importantly, the removal of the cessation of employment deferred taxing point will apply to both existing and new ESS interests that are subject to deferred taxation, provided the ESS taxing point occurs on or after 1 July of the financial year in which the Bill receives Royal Assent (i.e. from 1 July 2022).

This is a welcome development for employees who were previously potentially subject to a tax liability at the time when they ceased employment without the ability to sell the shares in order to fund the associated tax bill.

Please do not hesitate to get in touch with us if you have any questions in relation to the new rules and how they may impact you.