About ESOP Startup Concessions

Entrepreneurs that create startup companies need a way to attract and reward the best staff before the company has become successful. Employee Share Ownership Plans (ESOPs) are one way to do this. As of 2015 the Australian Tax Office recognized this by offering a series of ESOP startup concessions. The tax concessions mean that employees pay no tax when they are issued shares and are only liable to pay tax on any profits they achieve from them (such as when they sell the shares or the company is sold).

Certain criteria apply for a company to be eligible, including:

• Must be a private company that is not listed on any stock exchange.
• Must be less than 10 years old (including any companies in a group of which it is a member).
• Combined turnover (for the company or the group of which it is a member) must not exceed $50 million.
• Must be an active business, that is, not an investment vehicle.
• The company that is the employer must pay tax as an Australian resident company.

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