Understanding the Employee Share Scheme (ESS) Sold Within 30 Days Rule

Fri, 5 Sep 2025

Understanding the Employee Share Scheme (ESS) "Sold Within 30 Days" Rule in Australia

Employee Share Schemes (ESS) are a popular way for companies to reward and retain employees by offering shares or options as part of their remuneration. While they can be financially rewarding, they also come with complex tax implications—especially when it comes to the 30-day rule.

What Is the 30-Day Rule?

Under a tax-deferred Employee Share Scheme (ESS), the taxing point is typically when the employee can freely sell the shares i.e., when restrictions on sale or forfeiture lapse. However, if the employee sells the shares within 30 days of that taxing point, the taxing point is reset to the date of sale.

This rule affects how the discount (the difference between market value and purchase price) is assessed for income tax purposes and can also influence CGT treatment.

Case Study: Matt's Employee Share Scheme (ESS) Sale Within 30 Days

Let’s walk through a real-world inspired example to illustrate how this works.

Scenario

Employee: Matt
Employee Share Scheme (ESS) Type: Tax-deferred scheme
Deferred Taxing Point: 1 March 2025 (when Matt exercises his rights and acquires shares)
Market Value at Taxing Point: $100,000
Amount Paid by Matt: $0 (shares given for free)
Sale Date: 15 March 2025 (within 30 days)
Sale Price: $80,000

Tax Implications

Because Matt sold the shares within 30 days of the deferred taxing point, the taxing point is reset to the sale date. This means:

Matt does not report the original $100,000 discount.
Instead, he reports $80,000 as assessable income in his tax return.
There is no CGT event, as the sale occurred within the 30-day window.

Had Matt waited beyond 30 days and the share price dropped, he would have been taxed on the $100,000 discount and then claimed a $20,000 capital loss, which could only be offset against future capital gains.

Key Takeaways for Tax Agents and Employees

Selling within 30 days of the deferred taxing point resets the taxing point to the sale date.
The discount is assessed based on the sale price, not the market value at the original taxing point.
No CGT discount applies if sold within 30 days.
Capital losses may still be available if sold after 30 Days at a loss.
This rule can help mitigate tax liabilities when share prices fall post-vesting.