What is the $1,000 Employee Share Scheme (ESS) Concession
The $180,000 rule for the 1,000 Employee Share Scheme (ESS) concession relates to a specific tax benefit available under the taxed-upfront Employee Share Scheme (ESS) in Australia. Here's a breakdown of how it works:
What is the $1,000 Employee Share Scheme (ESS) Concession?
Under a taxed-upfront Employee Share Scheme (ESS), employees who receive shares or rights at a discount may be taxed on that discount in the year they acquire the shares. However, if certain conditions are met, they can reduce the taxable discount amount by up to $1,000.
The $180,000 Income Test
To qualify for the $1,000 reduction, the employee’s taxable income after adjustments must be $180,000 or less in the relevant financial year.
Adjusted taxable income includes:
- Taxable income (including ESS discounts)
- Reportable fringe benefits
- Reportable super contributions
- Net investment losses
Other Eligibility Conditions
The Employee Share Scheme (ESS) must also meet specific structural requirements:
- No real risk of forfeiture – The employee must not be at risk of losing the shares or rights.
- Non-discriminatory offer – The scheme must be offered to at least 75% of Australian-resident permanent employees with at least 3 years of service.
- Holding period – Employees must hold the shares or rights for at least 3 years or until they leave employment.
Example Scenario
Let’s say an employee receives $1,000 worth of shares at no cost under a taxed-upfront Employee Share Scheme (ESS):
- If their adjusted taxable income is ≤ $180,000, they can exclude the full $1,000 discount from their assessable income.
- If their income is above $180,000, the full $1,000 is taxable.