Employee Share Scheme (ESS)

Definition

The Australian tax and regulatory framework governing equity granted to employees, including specific "startup concession" tax treatment for eligible early-stage companies.

Why it matters for a secondary

ESS tax treatment shapes when Australian employees actually want liquidity — a tender offer timed around vesting or a tax-triggering event, like Canva's, is a common pattern directly downstream of ESS rules.

Australia coverage →

How it works in practice

Employee share scheme rules govern how Australian companies grant equity to staff and how that equity is taxed, with reforms over recent years aimed at making broad-based grants more workable for startups. The practical effect for secondaries is upstream: the more employee equity a market creates, and the fewer tax traps at vesting, the more shares eventually exist for a liquidity event to address.

A concrete illustration

A private Australian company with years of employee grants runs a tender offer. Participation depends on what has vested, what tax was triggered when, and what the plan rules permit — so two employees with the same paper holding can face materially different decisions about selling.

What people most often get wrong

Tax timing is the variable that drives employee behaviour in these events. Where a liability crystallised before any cash arrived, selling into a tender is often about funding the tax bill rather than about a view on the company's prospects — which is worth understanding before reading employee selling as a signal.