Employee share schemes
Employee share scheme (ESS) valuations for Australian start-ups
We prepare the market valuation your start-up relies on to grant shares or options under Division 83A, sized to whichever of three ESS jobs applies to your grant.
- The company’s own discounted cash flow model is part of the deliverable
- Ready for your directors’ written resolution2
- Signed by a suitably qualified business valuer at Valuation Group
Standard start-up valuation $3,495 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
Get a scope and fixed fee
Tell us what needs valuing and why. We will come back to you with scope and fee before any work begins.
- Part of Valuation GroupValuation Group Pty Ltd, ABN 48 702 469 252
- Signed report plus the company’s DCF modelBoth start-up tiers include the model
- Fixed, published feesScope and fee agreed before we start
- Clear reasoning, cited sourcesSourced to the ATO and legislation
What we value, and on what basis
- An ESS grant under Division 83A
- Market value of an ordinary share for the start-up concession test
- One ordinary share
- The signed valuation and the company’s DCF model
Basis of value and unit of value
- Basis of value
- Market value of an ordinary share for the start-up concession test, or market value of the ESS interest, option or right where the concession does not apply, or a valuation of the ESS interest usable as a s 1100X(3)(a) document where an unlisted offer needs supporting information
- Unit of value
- One ordinary share, or the specific option or right being granted, depending on which of the three ESS jobs applies
Granting shares or options under the ESS start-up concession needs a market value of an ordinary share, worked out under one of two safe harbour methods in LI 2025/19, or under ordinary valuation principles 1, 2. An ESS offer to participants may separately need a valuation document under Corporations Act s 1100X(3) 3. Outside the concession, the ESS interest itself is valued at its taxing point: a share at its market value, and an unlisted right that must be exercised within 15 years at either its market value or the regulation value 4, 5. Three questions, three answers: this page tells you which one you have.
01Start here
Which ESS job do you have?
"ESS valuation" gets asked for three different reasons. Naming the right one saves time.
Start-up concession test
- What is valued
- Market value of one ordinary share when the interest is provided
- When it comes up
- Before granting shares or options meant to qualify for the concession
ESS offer document
- What is valued
- The valuation document s 1100X(3) requires for certain unlisted offers
- The rule that applies
- Corporations Act 2001 Part 7.12 Division 1A 3
- When it comes up
- An offer to employees needing supporting information under s 1100X
Taxing point outside the concession
- What is valued
- Market value of the ESS interest, option or right itself
- When it comes up
- A taxed-upfront grant, a deferred grant reaching its taxing point, or a failed condition
The detail and sources
In our view, most start-ups asking for "an ESS valuation" mean the first job. Meeting the concession test does not remove the Corporations Act document for an unlisted offer, and grants that fail a condition (for example to a holder above 10% 6) are valued under job three.
02Terms
ESS or ESOP: which name is right?
"ESOP" (employee stock ownership plan, or stock option plan) is a US term. In our view, it is also how many Australian founders search for this topic, though Australian law does not use it: Division 83A of the ITAA 1997 refers to an "employee share scheme" (ESS) 7, and the Corporations Act's disclosure regime is titled "employee share schemes" 3. We use "ESS" in every report, and keep "ESOP" here only because it is the search term.
The detail and sources
- ESOP
A US term. In our view, many Australian founders use it interchangeably with "ESS" in search, but it is not a term used in Australian tax or corporations law. We treat the two as the same arrangement.
03The safe harbour
What is the start-up concession safe harbour?
The ESS start-up concession can reduce the taxable discount on shares or options to nil at acquisition, subject to conditions on the group's listing status and age, its aggregated turnover, the employer's residency, the size of the discount or exercise price, the participant's ownership and voting power, and a minimum disposal restriction period 8, 6, 7. Our guide, How ESS valuations work, sets out those conditions in full under s 83A-45 and hosts a safe-harbour eligibility checker; in our view it is a timing and quantum benefit, not an exemption, since disposal gains and losses are still assessed under CGT 6.
6 months2
$10 million2
7 years2
Method One (comprehensive)
- Who can prepare it
- The CFO, or a suitable valuer with relevant skill and experience
- Core requirement
- Written valuation on four prescribed matters: asset values; market value of similar businesses; control, marketability and key person adjustments; present value of future cash flows 2, endorsed by the directors' written resolution 2
- Eligibility limit
- No change of control reasonably anticipated within 6 months 2
Method Two (net tangible assets)
- Who can prepare it
- Not specified; a mechanical calculation from NTA and preference obligations 2
- Core requirement
- Net tangible assets, less preference share obligations, divided across ordinary and participating preference shares 2
- Eligibility limit
- No change of control reasonably anticipated within 6 months; and only where the company has not raised more than $10 million of capital (debt, equity or both) in the 12 months before the valuation time, is 7 years old or less or a small business entity, and a financial report is prepared 2
The detail and sources
Thresholds last checked 27 Sep 2026 against 8, 2, 6, 7, 3.
Meeting the market value condition is where a valuation comes in. Since 1 October 2025 the current instrument is LI 2025/19, replacing the 2015 approval that would otherwise have sunset that date 2, 9. It sets two safe harbour methods for an unlisted ordinary share the company provides as an ESS interest at that time, available only where directors reasonably anticipate no change of control in the following six months 2. In our view this is the condition that most often catches a start-up out: a valuation obtained just before an acquisition approach, a term sheet, or signature on a priced round can fall outside the safe harbour if a change of control is then reasonably anticipated within that six-month window, even though the valuation date itself pre-dates the event.
A value worked out this way can also be used for Division 392 ESS reporting 9. The equity bridge and class allocation in full sit on our guide, How ESS valuations work.
Method One does not require an independent valuer: the instrument allows the CFO, or any suitable valuer with relevant skill, to prepare it 9. It requires a written valuation covering the four prescribed matters 9 and a directors' resolution 2. Equally plain the other way: no valuation, ours included, is approved by the ATO. Where the instrument's conditions are met, a value under an approved method binds the Commissioner for that specific test 1, 2, 9. Outside it, the same value is market value evidence, addressed to the ATO's usual expectations 10.
04What you receive
What does the Standard start-up valuation include?
An ESS grant is priced under our Standard start-up valuation, which is a written valuation of your ordinary shares, prepared by a suitable valuer to address the four matters LI 2025/19 Method One requires, ready for your directors' written resolution; whether the safe harbour then applies depends on your company meeting the instrument's other conditions 2, 9. It includes building the company's own discounted cash flow model, not as a separate add-on. In our view the DCF is one required input among the four, not automatically the primary method; for a pre-revenue company the asset position and any recent arm's-length round often carry more weight, and we say which matters most in the report itself. Each Simple or Standard start-up valuation is a valuation engagement, as described in the APES 225 guidelines we follow 11.
- The signed valuation A written valuation of your ordinary shares, ready for your directors’ written resolution.
- The company’s DCF model It includes building the company’s own discounted cash flow model, not as a separate add-on.
The detail and sources
A recent priced round is evidence, not the answer: in our view, a priced round usually prices a preferred or converting instrument, and where it does, its price is not automatically an ordinary share's value; the ATO has no rule equating the two 1, 10, 12. If your grant follows a raise, capital raise valuations covers how we reconcile the two, and our guide on a recent capital raise as valuation evidence works through the mechanics in full.
Fictional numbers. Not market evidence.
Illustrative. Fictional numbers.
Fictional numbers. Not market evidence.
A preference stack above the ordinary shares matters to the valuation itself, not just the cap table: it is why Method Two treats ordinary and preference shares differently 2. In our view, a Method One valuation of an ordinary share still has to deal with the preference stack through an allocation step; the instrument does not prescribe how. Our guide on ordinary versus preference shares explains that step.
05Offer document
Do you need a valuation document for an ESS offer?
Separately from the market value question, an offer of ESS interests by an unlisted company can trigger its own Corporations Act disclosure requirement under s 1100X(3), which sets out which documents count and a monetary cap on what a participant can pay 13, 3. Our guide, How ESS valuations work, sets out the full list of documents s 1100X(3) accepts and the cap amount. Where the ESS interest is an option or right rather than an ordinary share, LI 2025/19 only values an unlisted ordinary share, which is why ASIC Corporations (Employee Share Schemes) Instrument 2022/1021 (F2022L01686) separately allows an expert valuation of ESS interests that are not ordinary shares 13, 14.
The detail and sources
Whether your offer triggers s 1100X, and which s 1100Y timing rules apply, is a question for your lawyer; our guide covers the mechanics further. For an offer of ordinary shares, we can prepare a valuation under s 1100X(3)(a) consistently with an applicable approved method. For an offer of options or rights, the document is instead an expert valuation under ASIC's relief above, not a value under LI 2025/19 alone.
06Outside the concession
How are options and rights valued outside the concession?
Not every grant qualifies for the start-up concession, and even a qualifying company can have a taxing point outside it: a taxed-upfront scheme, a deferred grant reaching its taxing point, or a failed condition. Here what needs a market value is the option or right itself, not the share alone. For an unlisted right that must be exercised within 15 years of acquisition, the employee can choose the right's ordinary market value or a value under the income tax regulation tables; ordinary meaning must be used where the deferred taxing point is disposal of the right or the resulting share 4, 5. Anything that would prevent or restrict conversion to money, such as a forfeiture condition, is disregarded either way 4, 5. We do not reproduce the regulation tables here; our ESS guide explains how the tables work and links to them in the regulations 4.
The detail and sources
Where a grant is valued outside the concession, the report also has to value what the employee actually receives, which is typically a minority stake that ranks behind any preference shares. Restrictions on the right itself, such as a forfeiture or disposal condition, are disregarded in working out its market value 5, 4. In our view, a separate discount for lack of control or lack of marketability instead attaches to the value of the underlying share, depends on purpose and the governing documents, and where the report applies one, it sets out the basis and the quantum 10.
Where no specific rule applies, market value takes its ordinary meaning: a hypothetical valuation between a willing but not anxious buyer and seller, at arm's length, at the valuation date, using only information known or foreseeable then 10. The ATO says the onus for a replicable, defensible valuation stays with the taxpayer, even where a professional valuer is engaged 10; the company relies on the same value for its own ESS reporting 9. The ATO expects a report addressing purpose, scope, method and a cross-check where available, with a declaration of independence and conflicts 10.
07After the valuation
How long does the valuation last, and what should the board do next?
A value holds only for the facts known on its date. The approved methods value the share at the time each interest is provided, so a valuation worked out for an earlier date is not a valuation at the new grant date: it has to be worked out again, or formally updated and re-endorsed, as at that date, and the change-of-control condition is then tested for the six months following that time 2. In our view the triggers worth watching on a start-up file, ahead of any grant, include a priced raise, winning or losing a major customer, buying or selling a business line, results running well off plan, or a takeover or sale enquiry.
The detail and sources
Board adoption steps we build the valuation around
08What we need
What we need from you
We ask for this after engagement, through your private matter link, never a form on this site.
The detail and sources
Documents we typically need
- ASIC company extract and group structure chart, where more than one entity is involved
- Constitution and shareholders' agreement, including class rights and any valuation clause
- Full share register and fully diluted cap table, every class, option, warrant, SAFE and note
- ESS plan rules and proposed grant terms: exercise price, vesting and expiry
- Financial statements for the last two to three years and current management accounts
- Aggregated turnover for the prior income year and capital raised in the last 12 months
- Whether a financial report is prepared for the year, and whether a change of control is under consideration
The full list, organised by purpose, is on the start-up valuation readiness checklist.
09Fees
How much does ESS and share-class work cost?
An ESS grant puts you in our Standard start-up valuation: $3,495 + GST, whatever else your cap table looks like. It includes the signed valuation and the company's DCF model, delivery agreed before commencement. Delivery time starts once payment and all required information have been received. The Standard fee covers all three ESS jobs where your grant needs them: the start-up concession valuation, the ESS offer document valuation under s 1100X(3), and an options or rights valuation outside the concession. A retrospective valuation date adds $495 + GST per date, and each additional entity adds $795 + GST. Financial-reporting fair value (AASB 2 option values, AASB 13 fair value) is a different basis from market value for tax 10, and is offered, scoped and quoted separately. Where an ESS matter is in dispute or heading to court, we price it as its own dispute or court expert report, $4,495 + GST, delivery agreed before commencement. Delivery time starts once payment and all required information have been received. See pricing for all three start-up tiers and the add-ons in full.
Standard start-up valuation
ESS work, SAFEs or convertible notes, several share classes, or option-pool modelling.
$3,495 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
- The signed valuation
- The company’s DCF model
- A valuation engagement, as described in the APES 225 guidelines we follow
Request a valuationNothing starts until you accept it.
Dispute or court expert report
A start-up matter in dispute or heading to court.
$4,495 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
- The expert report
- Prepared for the court process
- A declaration of independence and conflicts
Request a valuationNothing starts until you accept it.
Add-ons
Retrospective valuation date+$495 + GST per date
Additional entity+$795 + GST per additional entity
Delivery time starts once payment and all required information have been received.
10FAQ
Frequently asked questions
Does the ATO pre-approve or certify a valuation?
No. The ATO does not approve individual valuations, and cannot give a private ruling confirming a value for a future event 10. LI 2025/19 offers a genuine safe harbour: where its conditions are met, a value under an approved method binds the Commissioner for the start-up concession market value test 1, 2, 9.
Do we need an independent valuer to use the safe harbour?
No. Method One can be prepared by the company's CFO or a suitable valuer with relevant skill and experience; the explanatory statement is explicit that the person need not be independent 9. What matters is a written valuation covering the four prescribed matters and the directors' resolution.
Does a recent funding round set the value of our ordinary shares?
Not on its own. A priced round is evidence, and the ATO cites a capital raising valuation as an example alternative method 1, but in our view the round price usually attaches to a preferred or converting instrument, and where it does, it is not automatically an ordinary share's value; the ATO has no rule equating the two 1, 10, 12.
Does the start-up concession remove all future tax, and does leaving the company trigger it?
No to both. The concession reduces the taxable discount to nil at acquisition; it is not a general exemption, as disposal gains and losses are still assessed under CGT 8, 6. Start-up concession interests have no deferred taxing point to trigger; for tax-deferred schemes, cessation of employment on or after 1 July 2022 is no longer a taxing point 6. Leaver clauses in your plan rules are a separate matter.
We prepare this for the company, its board or its advisers, not as advice to an employee or investor on whether to acquire, exercise, hold or accept an ESS interest.
Start-Up Valuations
Granting shares or options under an employee share scheme raises one question first: what is the market value of the share or right, and which rule sets it. Start-Up Valuations is a specialist division of Valuation Group Pty Ltd, and we prepare the written valuation your board adopts, sized to your job.
Sources (14)
- ESS, Safe-harbour valuation methods. Australian Taxation Office. Last updated 1 October 2025; QC45990. Accessed 27 Sep 2026. S002 abcdefg
- LI 2025/19 Legislative Instrument. Australian Taxation Office; Federal Register of Legislation. Made 9 Sep 2025; registered 11 Sep 2025 (F2025L01085); commenced 1 Oct 2025. Accessed 27 Sep 2026. S003 abcdefghijklmnopqr
- Corporations Act 2001, Compilation No. 148, Volume 5 (ss 1100W, 1100X, 1100Y, 1100ZA). Federal Register of Legislation. Compilation date 27 August 2026 (includes Act No. 69, 2026); ss 1100W to 1100ZB inserted by No 14 of 2022. Accessed 27 Sep 2026. S013 abcdef
- Income Tax Assessment (1997 Act) Regulations 2021, Compilation No. 16, ss 83A-315.01 to .09. Federal Register of Legislation (Office of Parliamentary Counsel). Compilation date 27 June 2026 (includes F2026L00831). Accessed 27 Sep 2026. S008 abcdef
- ESS, Market value of unlisted rights to acquire listed shares and stapled securities. Australian Taxation Office. Last updated 27 June 2022; QC23093. Accessed 27 Sep 2026. S007 abcde
- Key ESS changes in detail. Australian Taxation Office. Last updated 1 October 2025; QC45720. Accessed 27 Sep 2026. S005 abcdef
- Income Tax Assessment Act 1997, section 83A-33. Commonwealth (text via ATO Legal Database). Current text as displayed 27 Sep 2026; inserted by No 105 of 2015. Accessed 27 Sep 2026. S006 abcd
- Start-up concession (interests acquired after 30 June 2015). Australian Taxation Office. Last updated 21 December 2015; QC47627. Accessed 27 Sep 2026. S001 abc
- LI 2025/19, Explanatory Statement. Australian Taxation Office. 9 Sep 2025. Accessed 27 Sep 2026. S004 abcdefghij
- Market valuation for tax purposes (Guide). Australian Taxation Office. Current at February 2025. Accessed 27 Sep 2026. S009 abcdefghi
- Valuation Services (APES 225, APES GN 20, APES GN 21). Accounting Professional & Ethical Standards Board (APESB). APES 225 (2024) effective 1 Jan 2025; APES GN 20 (2025). Accessed 27 Sep 2026. S014
- Market value (ESS in detail hub). Australian Taxation Office. QC82046 (no date shown). Accessed 27 Sep 2026. S010 ab
- 22-370MR ASIC provides legislative relief to facilitate employee share schemes. ASIC. Media release 22-370MR (2022). Accessed 27 Sep 2026. S012 ab
- ASIC Corporations (Employee Share Schemes) Instrument 2022/1021, F2022L01686. Federal Register of Legislation. Registered 19 December 2022. Accessed 27 Sep 2026. S021
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