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Employee share schemes and corporate transactions


This article considers the employee share scheme (ESS) tax issues that arise in the context of corporate transactions. The focus of the article is on demerger transactions, but the core principles are generally applicable to other corporate transactions, including takeovers, divestments and initial public offerings. While it should be possible to achieve sensible tax outcomes for employees, there are a number of traps and counterintuitive rules that companies need to be aware of when planning for the transaction. The first part of the article explains the core ESS rules that are likely to come into play on a demerger transaction. The second part of the article considers the consequences of a demerger on ESS interests in the form of rights to acquire shares. The third part of the article briefly considers the consequences of a demerger on ESS interests in the form of beneficial interests in shares. The fourth part of the article considers the interplay between ESS interests and shareholders’ entitlement to CGT roll-over relief and the demerger dividend exemption.

Author profile

Shaun Cartoon FTI
Shaun advises on a broad range of taxation issues in corporate, international and employment taxation, with a focus on M&A, capital management, employee share plans and superannuation. He also has experience in tax audits and disputes and has been involved in the carriage of tax cases through the Australian courts. Shaun is a member of Allens' Accelerate, an initiative aimed at providing cost efficient tax and legal services to high growth startup companies in Australia. - Current at 24 April 2017
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