ESS valuations the board can adopt and the grant can rely on.

An employee share scheme (ESS) valuation establishes the market value of unlisted shares or options at grant for Division 83A purposes: it sets the taxable discount, the option exercise-price floor and start-up concession eligibility. Oliver Group prepares independent, signed ESS valuations across Australia, safe-harbour net tangible asset calculations and full market valuations, at fixed fees start-ups and their advisers can budget for.

When your share scheme needs a valuation

Division 83A of the ITAA 1997 taxes the discount an employee receives on shares or options: the gap between market value at grant and what the employee pays. In a taxed-upfront scheme the discount is assessable in the year of grant; in a tax-deferred scheme the taxing point is pushed out until restrictions lift or options are exercised, capped at 15 years after acquisition. Since 1 July 2022, ceasing employment is no longer a taxing point. Every one of those outcomes turns on one number: the market value of the underlying share at grant. It sets the assessable discount, it sets the exercise-price floor an option must clear to qualify for the start-up concession, and it determines whether a share grant sits within the concession's 15% discount limit. A valuation set too high inflates the strike price and blunts the incentive; one set too low and left unsupported puts the concession, and the employee's tax position, at risk. The valuation is the document the board adopts, the plan administrator relies on, and the first thing asked for if the scheme is reviewed.

The start-up concession and the safe harbour

The start-up concession takes the ESS discount out of the employee's assessable income entirely, leaving future growth to the CGT rules: provided the company is unlisted and has been incorporated for less than 10 years, aggregated turnover was no more than $50 million in the prior income year, the employing company is an Australian resident, and the interests carry a minimum three-year holding period. For shares, the discount must be no more than 15% of market value; for options, the exercise price must be at least the market value of an ordinary share at grant. The market value question therefore decides whether the concession works at all. The Commissioner has approved two safe-harbour valuation methods by legislative instrument: LI 2025/19, which commenced on 1 October 2025 and repealed the 2015 approval (ESS 2015/1) it replaced. Method One is a written valuation worked out by the company's CFO or a suitable valuer, meaning a person with the skill, knowledge and experience to value unlisted shares, who need not be independent of the company. It must take into account, on a reasonable basis, the company's tangible and intangible assets, the market value of similar businesses (including earnings multiples), uplifts and discounts for control, lack of marketability and key person risk, and the present value of anticipated future cash flows, and the directors must endorse both the methodology and the value by written resolution. Method Two is the net tangible assets method: net tangible assets, less the amount needed to discharge the company's preference share obligations, divided by the ordinary shares on issue together with any preference shares that participate with them in residual assets on a winding up. Method Two is only available where the company has raised no more than $10 million of capital (debt, equity or both) in the 12 months before the valuation, has been incorporated for not more than 7 years or is a small business entity, and has prepared or will prepare a financial report for the year of the valuation. Both methods require that, at the time of valuation, the directors reasonably anticipate no change of control within six months after the interests are provided. Where the conditions are met, a value worked out under an approved method is binding on the Commissioner, but only for the start-up concession's market value test in s 83A-33(5); it does not fix market value for any other tax purpose.

NTA method or full market valuation: how to choose

For companies eligible to use it, the NTA method is quick, inexpensive and mechanical: and that is both its appeal and its limit. It excludes goodwill and most internally generated intangibles, so for an early-stage company with a modest balance sheet it typically produces a low ordinary-share value, which in turn sets a low exercise-price floor for options. That is often exactly what the board wants. But the method is only usable while its conditions hold, and its output can be commercially awkward: a near-zero NTA figure may sit uncomfortably beside a recent priced round, and it tells the board nothing about what the equity is actually worth. A full market valuation, Method One under the instrument, or a market valuation under ordinary principles, is the right fork where the company has raised more than $10 million in the past year, is older than seven years and not a small business entity, has a priced funding round that establishes a benchmark the file cannot ignore, or has a preference stack that makes a simple per-share NTA figure misleading. We confirm which fork the facts support at engagement, before the fee is fixed.

When the safe harbour is not available

Outside the start-up concession, taxed-upfront schemes (where employees with adjusted income of $180,000 or less may access a $1,000 reduction), tax-deferred schemes, or a start-up whose grant fails a concession condition, there is no safe harbour. Market value must be established under ordinary valuation principles: the ATO's Market valuation for tax purposes guidance and the willing-but-not-anxious standard from Spencer v Commonwealth (1907). For unlisted options and rights, Division 83A also allows market value to be worked out under the valuation tables in the income tax regulations, which derive a value from the share value, the exercise price and the time to expiry; where the tables are unsuitable, a full option valuation applying an option-pricing model is prepared instead. The other mechanical point advisers ask about is discounts. The interest being valued is the employee's parcel: usually a small, non-controlling holding of ordinary shares sitting beneath preference shares that carry liquidation preferences and other priority rights. The price of the last preferred round is not the market value of an ordinary share, and a proportionate slice of headline equity value is not the market value of a 0.5% employee parcel. The report addresses whether discounts for lack of control and lack of marketability are supportable at the grant date, and documents the quantum and reasoning: because that is the first place a reviewer will look.

How long the valuation lasts: refresh triggers and board adoption

An ESS valuation is a point-in-time opinion, not a standing instruction. The safe-harbour conditions must hold at the time interests are provided, and the directors' no-change-of-control expectation runs only six months past grant: so most boards align grants to valuation cycles of no more than six months and refresh sooner when circumstances change. The clearest refresh triggers are a new priced funding round, a material contract won or lost, a significant acquisition or disposal, revenue moving well beyond forecast, and any approach about a sale of the company. On adoption: the board should resolve to adopt the valuation for a defined grant window, minute the method and instrument relied on (for Method One the instrument itself requires the directors to endorse both the methodology and the value by written resolution), and retain the report and calculation with the company's ESS records: the employer carries the reporting obligations that flow from the value. Whether a particular grant qualifies for the concession, and how the scheme is reported, is tax advice: that sits with the company's tax adviser, and we coordinate with them so the valuation answers the exact question the scheme documents ask.

Documents we need

• ·Cap table with all share classes and options on issue
• ·Constitution and shareholders' agreement (class rights and preferences)
• ·ESS plan rules and the proposed offer or grant letters
• ·Terms of the most recent funding round, including SAFEs or convertible notes
• ·Last 2–3 years of financial statements and current management accounts
• ·Forecast or budget, if one exists
• ·Option grant parameters: exercise price, vesting schedule, expiry
• ·Any prior ESS or other valuations of the company

Which package fits

Fees are fixed at engagement and never contingent on the value concluded. We prepare the valuation only: Oliver Group is not a registered tax agent and does not provide tax, legal or financial advice. Oliver Group's fees are set by the annual turnover of the business: a Small Business Valuation is $1,495 + GST for turnover under $2 million, a Medium Business Valuation is $2,495 + GST for turnover between $2 million and $10 million, and a Large Business Valuation is $3,495 + GST for turnover over $10 million. Small-business reports are delivered in 2 business days and medium-business reports in 3 business days; the delivery date for a Large Business Valuation is agreed before commencement. Delivery time starts once payment and all required information have been received. Retrospective valuation dates are +$495 each and additional entities are +$795 each. The fee is fixed in writing before work begins and never depends on the concluded value.