A tax-deferred scheme allows an employee to defer paying tax in relation to their employee share schemes (ESS) interests until the income year in which the deferred taxing point occurs, instead of paying tax in the year the interests are acquired.
To be able to defer tax, both the scheme and the employee must meet the general conditions as well as the specific conditions for each type of tax-deferred scheme.
From 1 April 2022, changes have been applied to tax-deferred employee share schemes (ESS).
If an employee has ESS interests in your company under a tax-deferred scheme, they will not be taxed when they cease employment on or after 1 July 2022.
The ATO has also released TD 2022/4, which outlines when an employee is “genuinely restricted” from disposing of shares or rights to acquire shares in an employee share scheme.
Many organisations use an ESS to attract and retain staff. The determination sets out the principles for working out whether a scheme’s disposal restrictions were ‘genuine disposal restrictions’ and, if they were, when you are no longer genuinely restricted by the scheme for the purposes of determining the ESS deferred taxing point.
The Determination TD 2022/4 also contains detailed examples that illustrate what is and is not a genuine disposal restriction.