How the 2026–27 Budget affects your employee share schemeHow the 2026–27 Budget affects your employee share scheme

The 2026–27 Federal Budget has introduced significant structural shifts to Australia’s tax policy. With an overarching objective to encourage productive investment in assets such as shares, a standout headline for businesses is the proposed overhaul of the capital gains tax (CGT) system.

From 1 July 2027, the familiar 50% CGT discount will be replaced. The new framework will index the cost base of assets held for at least 12 months to inflation, taxing only the real, above-inflation gain, while applying a new minimum 30% tax rate to that gain. This system means that while some may pay less, investors achieving gains well above inflation will likely see higher tax obligations.

What does this mean for companies with employee share schemes?

While the Budget makes no direct changes to employee share scheme (ESS) legislation, the broader CGT reforms will indirectly shift the landscape for employee equity. 

The core appeal of broad-based schemes, employee share option plans (ESOPs), and long-term incentives (LTIs) is their potential to generate significant capital gains after they vest or are exercised.  By design, successful employee share schemes generate returns that far outpace standard inflation.

Under the proposed new rules, these outperforming gains will be taxed differently, which alters the after-tax outcome for employees holding employer shares. Furthermore, the introduction of an inflation-based discount and a 30% minimum tax floor adds a new layer of complexity, making it harder for everyday employees to calculate and forecast the value of their vested shares without additional support. For long-tenured employees with large unrealised gains, the eventual after-tax outcome on a sale could materially change. Transitional rules will soften this for existing holdings as gains accrued before 1 July 2027 will still qualify for the 50% discount, with apportionment applied to assets held across the transition date. This makes the period between now and mid-2027 an important window for reviewing equity structures.

The importance of structuring for tax efficiency

With the introduction of the new 30% minimum tax and the inflation-based discount, the way employee benefits are structured will be more critical than ever. To maintain the talent-attraction power of equity programs, companies must proactively review their current setups. Thoroughly evaluating ESOPs, LTIs, and share purchase loans ensures they are optimised for the post-2027 tax settings, maximising the net value that employees actually take home.

How can businesses help employees navigate these changes?

As these changes approach, companies have an opportunity to proactively support their workforce and maintain the appeal of their equity programs. Beyond structural reviews, here is how businesses can support their employees:

• Provide transparency and visibility: Ensure your employee share schemes are highly transparent. Give employees seamless, in-app visibility of their vesting schedules, past activity, and upcoming allocations so they can accurately forecast potential tax liabilities.

• Drive financial empowerment and education: Increased tax complexity drives a need for better education. Companies should offer dedicated courses and workshops to ensure their teams understand the evolving tax landscape and feel confident and supported.

• Equip employees to manage tax bills: A 30% minimum tax may leave employees facing tax bills before they have realised any cash from their equity. Companies should utilise platforms with expert, in-house dealing support so employees can seamlessly sell a portion of shares to cover tax liabilities, minimising both the administrative and emotional burden on your staff.

At Sharesies, we are committed to partnering with companies to ensure their employee share schemes remain a powerful, rewarding tool for workers to genuinely share in their business's success.