ESS start up options held by associates

Amendments were made to the employee share scheme rules in 2015 to introduce concessions for small start up companies. If certain conditions are met, the discount provided in relation to shares / options is not included in the assessable income of the employee. Section 115-30 has been amended to ensure that for the purpose of the CGT discount, when options are issued under the start up rules the ownership period is not reset when the options are exercised (item 9A of the table). However, a strict reading of the legislation suggests that this concession only applies if the options are held directly by the employee and that the CGT discount ownership period would be reset if the options are held by an associate of the employee (eg, spouse, family trust etc) and they are exercised. It is not clear whether this is an intended or unintended outcome.